Petrohawk Energy Corp., Houston, (Nasdaq: HAWK) and KCS Energy Inc., Houston, (NYSE: KCS) plan to merge into an onshore oil and gas producer with an enterprise value of approximately $3.7 billion. Petrohawk will pay KCS shareholders $9 in cash and 1.65 Petrohawk shares per KCS shares, totaling 84 million Petrohawk shares and $450 million of cash, representing a total offer value of $1.46 billion. The package represents $31.41 per share, or a 10% premium to KCS' preannouncement closing price. At closing, KCS stockholders will own about 50% of the combined company, which will hold the Petrohawk Energy name. On a pro forma basis, Petrohawk will have estimated proved reserves of approximately 1 trillion cu. ft. of gas equivalent (68% proved developed; 82% gas). The transaction concentrates Petrohawk's assets in East Texas, North Louisiana, and the Permian and Anadarko-Arkoma regions. KCS had 463 billion cu. ft. equivalent of proved reserves at year-end 2005 (73% proved developed; 88% gas; 74% operated). Production currently is approximately 156 million cu. ft. equivalent per day. Its reserve life is 8.2 years. Petrohawk had 517 billion cu. ft. equivalent of proved reserves at year-end 2005 (64% proved developed; 76% gas; 60% operated). Production is currently approximately 135 million equivalent per day. Its reserve life is 10.5 years. Floyd Wilson will remain chairman, president and chief executive, KCS' James Christmas will be vice chairman and William Hahne will be executive vice president and chief operating officer. The company will have nine directors, five nominated by Petrohawk, and four nominated by KCS. "By combining KCS, which has grown rapidly through drilling, and Petrohawk, we are creating an even stronger company with proved oil and gas reserves of nearly 1 trillion cu. ft. equivalent, current production of over 290 million cu. ft. equivalent per day, and very significant additional potential in our core operating areas," says Christmas, chairman and chief executive of KCS. Sterne Agee & Leach analyst Curtis R. Trimble says, "Based on the 463 billion cu. ft. equivalent of proved reserves KCS had on its books for 2005, the purchase price translates to a robust $4.10 per thousand cu. ft. equivalent of proved reserves. "However, in our opinion, the KCS reserve report appears very conservative; we note that the reserve base for KCS was 73% proved developed and that the company posted 20%-plus production growth the last two years. With minimal contributions from acquisitions, it would be very difficult for KCS to achieve 20%-plus growth with no more reserve inventory than it reports, especially given the company's 92% rate of drilling success during the last four years." Harris Nesbitt is financial advisor and Petrie Parkman & Co. provided a fairness opinion to Petrohawk. Morgan Stanley is financial advisor and gave a fairness opinion to KCS. Griffis & Associates LLC is technical advisor to KCS.