Halcón Resources Corporation (NYSE:HK) ("Halcón" or the "Company")
today announced it has recently acquired or entered into definitive
agreements to acquire 22,617 net acres in Ward County, Texas for
approximately $381 million. The properties are currently producing
~1,325 boe/d which equates to a purchase price of ~$14,674/acre
(after adjusting for production using an estimated value of $35,000
per Boe/d). The Company also provided an update on recent well
results in the Delaware Basin.
Acquisitions
The largest acquisition is comprised of 10,524
net acres in central and western Ward County in an area Halcón
calls West Quito Draw. The Company expects the acquisition to close
in early April 2018, subject to satisfaction of customary closing
conditions. The West Quito Draw acquisition is located in an
actively developed area of the Delaware Basin and adds 251
additional gross operated drilling locations in the Wolfcamp and
3rd Bone Spring Sand zones with an average lateral length of ~7,300
ft. However, Halcón expects that near-term drilling will be
predominantly comprised of 10,000 ft. laterals. The Company
estimates that 10,000 ft. laterals in the Wolfcamp on this acreage
will generate EURs in excess of 1.1 MMbo of oil and a total EUR of
oil and gas (2-stream) of approximately 2.2 MMboe. Including
additional landing zones (Bone Spring, Avalon, etc.), Halcón
estimates there are 383 potential operated horizontal locations
within this acreage position. Many of the additional landing zones
have been successfully drilled by offset operators in the area.
This property is approximately 47% held by production and is 91%
operated with an average working interest of 72%. The Company is
considering bringing an operated rig to this area in the second
quarter of 2018.
Halcón also recently closed on the acquisition
of 4,413 net acres contiguous to its existing Monument Draw area
(the "Monument Draw Tack-On"). This acquisition increases the
Company's Monument Draw base case location inventory by 48 operated
locations with an average lateral length of 10,833
ft. (assuming two Wolfcamp zones and one Bone
Spring zone). Well results and type curves on this acreage are
expected to be consistent with the Company's existing Wolfcamp
wells on its Monument Draw acreage (i.e. 1.9 MMboe 2-stream EURs
for a 10,000 ft. lateral comprised of 80% oil). Including
additional target zones (additional Bone Spring, an additional
Wolfcamp zone, etc.) Halcón estimates there are 104 potential
horizontal operated locations on the Monument Draw Tack-On acreage.
The Company plans to actively de-risk these targets with its 2018
drilling program. This property is 96% operated with an average
working interest of 88%.
Halcón also has an option agreement in place to
purchase 7,680 net acres on the eastern side of its existing
Monument Draw area (the "Monument Draw East Option"). The Company
has until March 31, 2018 to elect to exercise this option at
$10,000/acre. The Monument Draw East Option would
increase the Company's Monument Draw base case inventory by 72
operated locations, all with a lateral length of 10,000 ft.
(assuming one Wolfcamp zone and one Bone Spring zone). Halcón
estimates there are more than 144 potential operated horizontal
locations on this acreage if other potential landing zones are
included. Well results and type curves on this acreage are expected
to be consistent with the Company's existing Monument Draw acreage
(i.e. 1.9 MMboe 2-stream EURs for a 10,000 ft. lateral Wolfcamp
well comprised of 80% oil). This property is 100% operated with an
average working interest of 100%. The Company recently completed
frac'ing a 10,000 ft. horizontal well in the lower Wolfcamp zone on
the southern portion of the Monument Draw East Option acreage (the
Sealy Ranch 5902H well). Halcón ran a horizontal "shuttle log" in
this well and expects this well to be highly productive based on
the log results. This well was put online in late January 2018 and
is currently flowing back.
In early January 2018, the Company exercised the
previously disclosed option it had to acquire 8,946 net acres in
the northern area of Monument Draw for $108 million
($13,000/acre).
Pro forma for these acquisitions (including the
exercise of the Monument Draw East Option), Halcón will have
acquired ~66,500 net acres in the Delaware Basin over the last year
at an average acquisition cost of ~$17,800/acre (after adjusting
for production using an estimated value of $35,000 per Boe/d and
considering the estimated value of infrastructure acquired). A map
of the acquired properties in Ward County is available
here.
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/06072a80-87b4-4266-bd63-7b8f5826895f
Operated Well Results
In Monument Draw, Halcón has two operated
horizontal wells on production, two vertical wells on production
and three more horizontal wells flowing back after frac. In
addition to the previously disclosed producing Sealy Ranch 7901H
well, the Company recently put the Sealy Ranch 9301H well on
production. The Sealy Ranch 9301H, located in the northwest portion
of Halcón's Monument Draw position, was completed with a 9,912 ft.
effective lateral length and had a peak 24 hour IP rate of 1,700
boe/d in addition to a 30 day peak 2-stream IP rate of 1,489 boe/d
(80% oil) which is exceeding the Company's 1.9 MMboe Wolfcamp type
curve EUR for this area. This well is continuing to produce in
excess of 1,250 boe/d after more than 60 days online. The
Sealy Ranch 7902H and Sealy Ranch 7903H wells, located in the
southwestern area of Monument Draw are currently flowing back after
frac and recently began cutting oil. The most recent 24 hour IP
rate for each well is in excess of 1,450 boe/d (81% oil) and 1,050
boe/d (80% oil), respectively, and continues to increase
hourly.
In the Hackberry Draw area in Pecos County,
Texas, Halcón now has eight operated horizontal wells on production
and two more wells flowing back after frac. Seven of the producing
horizontal wells are Wolfcamp wells and one is a 3rd Bone Spring
well. These eight wells had an average completed lateral length of
9,418 ft. and an average peak 24 hour IP rate of 1,170 boe/d and a
30 day peak IP rate of 897 boe/d (76% oil) which is in line with
the Company's 1.5 MMboe Wolfcamp type curve EUR for this area.
In addition to the successful horizontal 3rd
Bone Spring test in its Hackberry Draw area, the Company also
successfully frac'd the 3rd Bone Spring interval in the Sealy Ranch
6901 vertical pilot well on its Northern acreage in Monument Draw.
This well reached a peak IP24 of 117 boe/d (61% oil), which is a
strong rate for a vertical frac and indicates the 3rd Bone Spring
is a viable horizontal target in this area. Halcon also recently
frac'd the 2nd Bone Spring interval in the Sealy Ranch 7901
vertical pilot well on its southern acreage in Monument Draw. This
well reached a peak IP24 of 115 boe/d (41% oil), which is also a
strong rate for a vertical frac and indicated the 2nd Bone Spring
is a viable horizontal target in Monument Draw.
Halcón's operated wells put online to date in
both Monument Draw and Hackberry Draw are on average performing in
line or better than expectations. The tables below summarize the
Company's operated horizontal well results to date in both its
Monument Draw and Hackberry Draw areas as compared to the Company's
updated type curves for each area.
A photo accompanying this announcement is
available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/79448f4e-34eb-493a-8aff-a4b32938ea40
Infrastructure
Halcón continues to build out infrastructure in
both Monument Draw and Hackberry Draw including water handing, oil
and gas gathering systems, gas treatment facilities, power lines
and compression. The Company currently has 160,000 bw/d of
recycling capacity for produced water in addition to 65,000 bw/d of
saltwater injection capacity in Monument Draw and Hackberry Draw.
Halcón also has 100,000 bw/d of fresh water sourcing capacity. The
Company has produced water storage capacity of 3.6 million barrels
in addition to 3.5 million barrels of fresh water storage capacity.
Halcón's infrastructure in place and in progress today will allow
it to accommodate the Company's growth over the next several years.
After closing the West Quito Draw acquisition, Halcón expects to
immediately begin build-out of infrastructure in this area.
Financing Plan & Hedging
Update
Halcón plans to use balance sheet cash to fund
the acquisitions. However, the Company may access equity and debt
capital markets to ensure additional financial flexibility. Halcón
is committed to maintaining a strong balance sheet with reasonable
leverage and substantial liquidity to fund its development and
growth over the next several years.
Halcón currently has 9,510 barrels of oil per
day hedged in 2018 at an average price of $52.65/Bbl. This
represents approximately 75% of its 2018 oil production based on
the Company's previously issued 2018 production guidance. Halcón
also has 8,247 barrels of oil per day hedged in 2019 at an average
price of $54.41/Bbl. The Company is continuing to look to layer in
hedges for 2019 as appropriate.
Production
Halcón estimates fourth quarter 2017 production
was approximately 6,300 boe/d. Fourth quarter production was below
the Company's previous guidance range due to fewer wells put online
in November and early December than previously forecast. Fewer
wells were put online primarily because of a delay in sourcing a
spot frac crew early in the quarter. However, Halcón was able to
contract two spot completion crews by mid-December to fully work
through the Company's drilled but uncompleted well backlog. As a
result, current production is approximately 11,000 boe/d. The
spot frac crews have been released and Halcón is currently
operating with three drilling rigs and one completion crew on its
Monument and Hackberry Draw acreage.
Halcón continues to expect 2018 full year
production to average between 15,000 and 19,000 boe/d, excluding
the impact of the West Quito Draw acquisition. Halcón expects to
update its full year 2018 financial guidance in the future to
include the impact of the West Quito Draw acquisition and any
updates to its rig count. Over the longer term, the Company expects
production to grow in excess of 50% annually in 2019 and 2020
assuming five rigs are running in 2019 and beyond.
About Halcón Resources
Halcón Resources Corporation is an independent
energy company engaged in the acquisition, production, exploration
and development of onshore oil and natural gas properties in the
United States.
For more information contact Quentin Hicks,
Executive Vice President, Finance, Capital Markets & Investor
Relations, at 832-538-0557 or qhicks@halconresources.com.
Forward-Looking Statements
This release may contain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Statements that are not strictly historical
statements constitute forward-looking statements and may often, but
not always, be identified by the use of such words such as
"expects", "believes", "intends", "anticipates", "plans",
"estimates", "potential", "possible", or "probable" or statements
that certain actions, events or results "may", "will", "should", or
"could" be taken, occur or be achieved. Forward-looking statements
are based on current beliefs and expectations and involve certain
assumptions or estimates that involve various risks and
uncertainties that could cause actual results to differ materially
from those reflected in the statements. Estimates of future
production levels are based on the Company's current drilling
program, which may be subject to revision, suspension or delay
based on well results, significant acquisitions and significant
changes in commodity prices and/or drilling and completion costs.
These risks include, but are not limited to, those set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2016 and other filings submitted by the Company to the
U.S. Securities and Exchange Commission (SEC), copies of which may
be obtained from the SEC's website at www.sec.gov or through the
Company's website at www.halconresources.com. Readers should not
place undue reliance on any such forward-looking statements, which
are made only as of the date hereof. The Company has no duty, and
assumes no obligation, to update forward-looking statements as a
result of new information, future events or changes in the
Company's expectations.
We may use the terms "resource potential", "EUR"
and "type curves" in this press release to describe estimates of
potentially recoverable hydrocarbons. These are based on the
Company's internal estimates of hydrocarbon quantities that may be
potentially discovered through exploratory drilling or recovered
with additional drilling or recovery techniques. These quantities
do not constitute "reserves" within the meaning of the Society of
Petroleum Engineer's Petroleum Resource Management System or SEC
rules and are subject to substantially greater uncertainties
relating to recovery than reserves. "EUR," or Estimated Ultimate
Recovery, refers to our management's internal estimates based on
per well hydrocarbon quantities that may be potentially recovered
from a hypothetical future well completed as a producer in the
area. For areas where the Company has a very limited operating
history, EURs and related type curves are based in large part on
publicly available information relating to operations of producers
operating in such areas. For areas where the Company has sufficient
operating data to make its own estimates, EURs and related type
curves are based on internal estimates by the Company's management
and reserve engineers.
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