Halcón Resources Corporation (NYSE:HK) (“Halcón” or the “Company”)
today announced it has closed on the previously announced West
Quito Draw Acquisition for a purchase price of $200 million and,
separately, has elected not to exercise its previously disclosed
Monument Draw East Option. The Company also provided an update on
its recent well results in addition to its current liquidity and
hedge positions.
The West Quito Draw Acquisition is comprised of
10,524 net acres and related assets in central and western Ward
County, Texas and is currently producing approximately 1,200 boe/d
(56% oil). Halcón plans to bring a rig to this area in the
second quarter of 2018 to begin drilling 10,000 foot Wolfcamp
laterals, which the Company anticipates will generate estimated
ultimate recoveries (“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. This
property is approximately 47% held by production and is 91%
operated with an average working interest of 72%.
Halcón has decided not to exercise its option to
purchase 7,680 net acres on the eastern side of its existing
Monument Draw area for $10,000/acre (the “Monument Draw East
Option”). Halcón will retain ownership of the Sealy Ranch
5902H well and 160 net acres on which this ~10,000’ lateral length
well was drilled.
Halcón now has ~59,152 net acres in the Delaware
Basin comprised of 21,839 net acres in Monument Draw, 10,524 net
acres in West Quito Draw and 26,790 net acres in Hackberry
Draw. Collectively, these properties are currently producing
in excess of 13,500 boe/d net to the Company (70% oil).
Floyd Wilson, CEO of Halcón, commented, “We are
excited to close on this important acquisition which we have named
West Quito Draw. This is a great complement to our other Ward
County holdings at Monument Draw. Our technical review plus
impressive results from offset operators have solidified our plan
to station a drilling rig here throughout 2018 and beyond.”
“Our decision to not exercise the Monument Draw
East Option was driven by our technical review of all payzones
across the entire Monument Draw area plus our focus on our balance
sheet and liquidity. The success of our Sealy Ranch 5902H
well (30-day IP of 1,653 boe/d, 88% oil) de-risks the entirety of
our southern Monument Draw area where we have hundreds of Wolfcamp
and Bone Spring locations. We will continue to develop this
world class asset through the balance of 2018 and beyond with at
least two rigs assigned to this development program which includes
both horizontal and vertical spacing tests in all intervals.”
“Our business plan, supported by a strong
balance sheet, ample liquidity and our hedge book will result in
significant growth for years to come while driving leverage down
and keeping liquidity strong throughout.”
Operated Well Results
In Monument Draw, Halcón’s three most recently
completed wells, the Sealy Ranch 7902H, 7903H and 5902H, reached an
average peak 30 day rate of 1,680 boe/d (83% oil). This
equates to an average 30 day rate, per 1,000 feet of lateral, of
177 boe/d which is significantly higher than the Company’s type
curve of 143 boe/d per 1,000 feet of lateral. The Company
plans to put an additional three wells online in Monument Draw
during the second quarter of 2018.
In Hackberry Draw, Halcón’s two most recently
completed wells, the Jose Katie East 1H and Jose Katie West 1H,
reached an average peak 30 day rate of 1,010 boe/d (86% oil).
This equates to an average 30 day rate, per 1,000 feet of lateral,
of 103 boe/d which exceeds the Company’s type curve of 94 boe/d per
1,000 feet of lateral. The Company recently began flowing
back the Geneva West Joanne 1H well and plans to put an additional
four wells online in Hackberry Draw during the second quarter of
2018.
Liquidity & Hedging
Update
Halcón’s liquidity as of 12/31/17 pro forma for
recent acquisitions and financings was $478 million as set forth
below.
|
|
|
Exercise of the |
|
|
West |
|
|
|
Face Value |
|
Monument Draw |
6.75% HY |
Common Equity |
Quito Draw |
Adjusted HK |
|
|
Capitalization ($MM) |
12/31/2017 |
North Option (1) |
Tack-on |
Issuance |
Acquisition |
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
Cash & Cash
Equivalents |
$ |
424 |
|
$ |
(108 |
) |
$ |
203 |
$ |
61 |
$ |
(200 |
) |
$ |
380 |
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured
Revolving Credit Facility |
|
- |
|
|
|
|
|
|
- |
|
|
|
6.75% Senior Unsecured
Notes due 2025 |
|
425 |
|
|
|
200 |
|
|
|
625 |
|
|
|
Total Debt |
$ |
425 |
|
|
|
|
|
$ |
625 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Debt / (Cash) |
$ |
1 |
|
|
|
|
|
$ |
245 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity |
|
1,072 |
|
|
|
|
61 |
|
|
1,133 |
|
|
|
Total Capitalization |
$ |
1,497 |
|
|
|
|
|
$ |
1,758 |
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing Base |
$ |
100 |
|
|
|
|
|
$ |
100 |
|
|
|
Less: Borrowings |
|
- |
|
|
|
|
|
|
- |
|
|
|
Less: Letters of
Credit |
|
(2 |
) |
|
|
|
|
|
(2 |
) |
|
|
Plus: Cash |
|
424 |
|
|
|
|
|
|
380 |
|
|
|
Total Liquidity |
$ |
522 |
|
|
|
|
|
$ |
478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Exercised option in
January 2018. |
|
|
|
|
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|
|
|
|
|
|
|
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|
Halcón expects the borrowing base on its senior secured
revolving credit facility to increase with the upcoming spring
redetermination and will announce the results of the
redetermination in conjunction with Q1 ’18 earnings in early May.
The Company has ample current liquidity to execute on its
business plan over the next several years and is committed to
maintaining a strong balance sheet.
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 12,247 barrels of oil per day hedged in 2019 at an
average price of $55.30/Bbl. The Company has also been active
in hedging basis differentials to mitigate the impact of any basis
widening that may occur through 2019. Halcón currently has
MidCush basis swaps in place for 10,526 bbl/d in 2018 at an average
price of -$1.23/Bbl and another 13,000 bbl/d in place for 2019 at
an average price of -$1.12/Bbl. The Company also has
10,000 Mmbtu/d of Waha basis swaps in place from July 2018 to
December 2019 at an average price of -$1.05/Mmbtu.
Halcón plans to issue updated 2018 production
and cost guidance, including the impact of West Quito Draw, as part
of its first quarter 2018 earnings release in early May.
About Halcón Resources
Halcón Resources Corporation is an independent
energy company focused on the acquisition, production, exploration
and development of liquids-rich assets in the Delaware Basin.
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, 2017 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.
“Drilling locations” represent the number of
locations that we currently estimate could potentially be drilled
in a particular area using well spacing assumptions applicable to
that area. The actual number of locations drilled and quantities
that may be ultimately recovered from the Company’s interests will
differ substantially. There is no commitment by the Company to
drill the drilling locations which have been attributed to any
area.
Factors affecting ultimate recovery include: (1)
the scope of our on-going drilling program, which will be directly
affected by factors that include the availability of capital,
drilling and production costs, availability of drilling services
and equipment, drilling results, lease expirations, transportation
constraints, regulatory approvals and other factors; and (2) actual
drilling results, including geological and mechanical factors
affecting recovery rates. In addition, our production forecasts and
expectations for future periods are dependent upon many
assumptions, including estimates of production decline rates from
existing wells and the undertaking and outcome of future drilling
activity, which will be affected by changes in commodity prices and
costs.
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