Bob Cavnar's privately held Milagro Development I LP, Houston, company plans to buy the Gulf Coast division of Petrohawk Energy Corp., Houston, (NYSE: HK) for $825 million in cash and a note.

The assets include properties on the Texas, Louisiana and Mississippi Gulf coasts that include major discoveries in the Nabors, Colson and Winchester fields. Production is 100 million cu. ft. of gas equivalent per day. Proved reserves are 204 billion equivalent and proved and probable reserves are 434 billion equivalent as of year-end 2006.

Petrohawk will receive $700 million in cash and a $125-million note. The company will use the proceeds to finance acquisitions, accelerate development in the Fayetteville shale and Cotton Valley tight-gas plays and pay a portion of its revolving credit facility. Merrill Lynch Petrie Divestiture Advisors was advisor to Petrohawk.

Petrohawk chairman and chief executive Floyd C. Wilson says, "Our resource-development program is moving swiftly, and the sale of our Gulf Coast division is a significant step in our continuing efforts to build a high-margin, resource-rich asset base."

The sale is expected to close by year-end with an effective date of July 1.

Standard & Poor's Ratings Services raised Petrohawk's corporate credit rating from B to B+ and its senior unsecured issue rating from B- to B. The outlook is stable. Pro forma Petrohawk should have $1- to $1.1 billion in long-term debt.

Along with the Gulf Coast division sale, the new ratings reflect an increasing focus on areas such as northern Louisiana and the Fayetteville shale in the company's operations and capital spending and the potential formation of an MLP containing mature assets.

Houston-based MLP HK Energy Partners LP has filed an S-1 to IPO 9.3 million units at approximately $23 each for a total raise of up to $212.8 million on the New York Stock Exchange as HKE. Lehman Brothers and Wachovia Securities are underwriters.

Petrohawk Energy Corp. is parent and will provide assets, HK Energy Partners GP LP is general partner and HK Management will oversee daily operations. The MLP will use the proceeds to purchase securities to secure its credit facility and fund working capital.

Floyd C. Wilson is chairman, president and chief executive of HK Management and Petrohawk. Mark J. Mize is executive vice president, chief financial officer and treasurer of each.

The assets include properties in the Permian Basin, which feature 111,000 gross acres (43,000 net) in Waddell Ranch, Sawyer and TXL North fields in West Texas, and 9,400 gross acres (8,900 net) in Jalamat Field in southeastern New Mexico. Production is approximately 26 million cu. ft. of gas equivalent per day. Proved reserves are 145 billion cu. ft. equivalent (72% gas, 79% proved developed).