The volatility in commodities, particularly the energy market, has investors looking for oil plays. With earnings season just past, their is no shortage of candidates growing their production. We'll look at one company's progress and plans for 2011. Petrohawk Energy (NYSE:HK) announced an increase in production growth for 2011 and disclosed an acreage position in the Permian Basin as the company looks to accelerate its shift towards oil and liquid plays. (For more, see How Does Crude Oil Affect Gas Prices?)
TUTORIAL: The Industry Handbook: The Oil Services Industry

Permian Basin
Petrohawk Energy disclosed a position in the Permian Basin, and has acquired approximately 325,000 net acres at an average cost of $1,400 per acre. The Permian Basin is one of the oldest producing basin in the United States, but has attracted renewed interest from the exploration and production industry as companies try to increase oil and liquid production. Petrohawk Energy is targeting various formations across its acreage, including the Lower Wolfcamp Shale, Bone Springs Sands and Avalon Shale. The company plans to aggressively develop this new acreage and has allocated $75 million in 2011 to drill 15 wells. Other companies involved with the Permian Basin include El Paso (NYSE:EP), which has a 138,000 net acre position. The company recently reported the results of four wells into the Wolfcamp, with approximately 90% of the production composed of oil. (Changes in the price of oil are not arbitrary. For more, see What Determines Oil Prices?)

Production Growth
Petrohawk Energy also raised the company's outlook for production growth for 2011, and now expects daily production to average between 940 million and 960 million cubic feet of natural gas equivalents per day. The company expects 84% of this production to be natural gas, with the balance composed of oil and natural gas liquids. If the company achieves this production in 2011, it would represent year over year growth of approximately 41%.

Petrohawk Energy continued to divest assets in the first quarter of 2011 to help fund its capital program and reorient the company towards oil and liquid development. The company announced the sale of its remaining ownership in KinderHawk Field Services LLC, which provides gathering and other services in the Haynesville Shale. Petrohawk Energy also sold 25% of a similar set of assets that serve the Eagle Ford Shale. Kinder Morgan Energy Partners (NYSE:KMP) was the buyer of both assets and paid $855 million. Petrohawk Energy sold midstream assets in the Fayetteville Shale to Exxon Mobil (NYSE:XOM) earlier in 2011, and has now met its goal of divestitures for 2011. (For more, see A Guide To Investing in Oil Markets.)

Operations Update
Petrohawk Energy also reported progress on its operational activity in the Eagle Ford and Haynesville Shale areas during the first quarter of 2011. In the Eagle Ford Shale, the company was involved in 25 operated and three non-operated wells across its three project areas and reported increased drilling efficiencies during the quarter. Petrohawk Energy also signed three agreements during the quarter to help process and transport the company's production from the Eagle Ford Shale. In the Haynesville Shale, Petrohawk Energy is planning on reducing its rig count to six and also disclosed that the majority of its Haynesville Shale acreage will be held by production by the end of the second quarter of 2011.

Bottom Line
Petrohawk Energy moved to accelerate its shift towards oil and liquid development during the first quarter of 2011, as the company disclosed a new position in the Permian Basin. This is an oily area that has seen much interest from the industry over the last few years. (Concerns over oil prices and global warming are spurring investments. For more, see Meet OPEC, Manager of Oil Wealth.)

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