Seeking Alpha

Alexander Prindle

 
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  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    Hey,

    Not exactly sure what you are asking. The assets will sell for $302 mil (not half?), but the divesture won't close until ~4Q13, so don't expect HK to receive the increased liquidity until then.

    In terms of cash generated from production, I can only speculate, but I anticipate margins and production to generally increase from this time. However, margins in some areas will be better than others, as some are further along the development curve. For instance, the Eagle Ford and the Bakken should see increases as Halcon transitions to pad drilling, while the Utica will likely lose money for a bit longer.

    Hopefully that answered your questions.

    Thanks,
    Alexander
    Sep 23 01:00 PM | Likes Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    To get back to you:

    HK hedges ~80% of their current production, and the percentage that is hedged is not fixed price.

    Therefore, it is clear that higher oil prices *do* have an impact on their cash flow.

    Thanks,
    Alexander
    Sep 23 12:55 PM | Likes Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    JF,

    Valuing O&G is always a bit dicey. With HK I feel comfort with the equity, even valuing them at a discount.

    For instance, using approximate numbers: if we take HK's book value at around a 25% discount, the P/B is still less than one. It would take approximately a 70% asset discount to get to the same P/B of KOG. Or, another way to get there would be for HK to trade at close to $20.00 per share. Also realize that these loose calculations are based on 2Q13 values. Since then HK has gone down a good bit, and KOG has gone up a good bit; therefore, the percentages I mentioned are likely to be even higher.

    The market seems to think KOG is worth that sort of inflated valuation (despite slower recent production increases!). Personally I think HK is the better deal today for a long-term shareholder. Maybe KOG is closer to a LBO--I'm not sure.

    Glad to hear you liked my article--thanks for reading!

    Best,
    Alexander
    Sep 11 02:57 PM | 2 Likes Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    govols,

    Margins will likely be a slower improvement, but having operations and EPS remain positive would be an excellent sign.

    In any case, production is my focus--as is usually the case in a small E&P growth story.

    Thanks for reading!

    Best,
    Alexander
    Sep 10 08:39 PM | 1 Like Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    Anne,

    Thanks for reading!

    Best,
    Alexander
    Sep 10 08:37 PM | Likes Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    vforde,

    This is a volatile equity, indeed. I think the story is sufficiently compelling to tune out most of the fluctuations.

    Best,
    Alexander
    Sep 10 08:36 PM | 1 Like Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    rah55,

    Thank you! You can safely expect updates, so please check back.

    Best,
    Alexander
    Sep 10 08:34 PM | 1 Like Like |Link to Comment
  • Halcon Resources Looks Playable: Increasing Production, Oil Prices [View article]
    Thank you for reading mickeyp--great observation, and one that I am aware of. Allow me to share my thoughts:

    1) I am yet to uncover a satisfactory (i.e. complete) explication of HK's hedging strategy--nor am I able to find a complete layout of purchasers' percentage of total production, each of which would have unique contracts.

    2) Hedging contracts in the O&G industry are generally more complicated than a fixed rate for a fixed time--as you may well know. These contracts often act as more of a "mini" futures market, complete with puts/calls/call collars.

    Combining 1 and 2 leaves me dissatisfied (obviously), but I think it is safe to expect that higher oil prices are generally good for O&G companies. For instance, if HK has a put/call futures contract, they will certainly be operating at the ceiling in the short-term. I highly doubt that was the case in Q1Q2 of 2013; therefore, better profit margins in the short-term, as I argue.

    In any case, I have been told to expect more details on their hedging contracts at the 9/12/13 Barclays conference mentioned in my article. I will update the community with relevant information, so please check back.

    Thanks again,
    Alexander
    Sep 10 07:59 PM | Likes Like |Link to Comment
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