Halcon Resources: High Debt Levels Make $77 WTI Oil Necessary For Breakeven Cash Flow Long Term
- Halcon Resources has a high debt level that results in interest costs of $20 per BOE at expected 2015 production levels.
- 2015 hedges allow it to be close to cash flow breakeven, while 2016 hedges indicate probable cash flow breakeven at $63 WTI oil.
- Longer term, it appears production can be maintained with $300 million per year capex.
- With that capex budget, Halcon requires $77 per barrel WTI oil to reach cash flow breakeven.
- Oil hedges cover 31,332 barrels of production per day.
- The company appears to finish 2015 cash flow positive.
- Debt covenants are safe from being breached for now.
Halcón Resources: November Eagle Ford Production Inches Higher
- Based on the aggregation analysis, Halcón’s Eagle Ford production held steady in November at ~24% above the Q3 2014 average.
- Latest well results are in line with the company’s average well performance in the area.
- Even though at $50 per WTI barrel El Halcón cannot compete for capital, a 2-rig drilling program is likely to be sustained due to lease retention requirements.
Halcon Resources And Tuscaloosa Marine Shale: Is This Goodbye Forever?
- Halcon's Tuscaloosa Marine Shale (TMS) fails to be Halcon's third core play.
- Based on the latest drilling results, Halcon's TMS wells do not pay out fast even if WTI stands at $90/bbl.
- Due to these slow payouts, Halcon will not return to the TMS in the foreseeable future.
- It will be a stock picker's market in 2015.
- Those investors who are scouring the beaten-down energy sector, they are advised to avoid Halcon because it will not reach its 2013 or its H1 2014 levels again.
Halcón Resources: Eagle Ford Production Regains Production Momentum
- Halcón’s latest (through October 2014) well performance data in the Eagle Ford is analyzed.
- El Halcón gross production increased ~21% in October month-on-month.
- Latest well results show continued improvement in the average IP-30 rate.
- In the event of a protracted oil price decline, El Halcón may be able to compete for capital above $60 per barrel of WTI, based on current well results.
Bakken Update: Halcon May Struggle To Find Economic Wells In 2015
- El Halcon and its western ND acreage well economics are in question at today's realized oil prices.
- Its recent cap ex cut may just be the beginning as decreases development outside the Bakken core.
- Poor results in the TMS have put the play on hold in 2015.
Halcón Resources: 'We Are A Two Core Play Company,' For Now
- The note discusses Halcón’s recent operating results in the TMS play.
- The company plans to focus its effort on its two de-risked plays, the Bakken and El Halcón.
- These two core plays are expected to drive 15%-20% year-on-year production growth in 2015.
- Halcón reported an in-line Q3 and indicated that production volumes for the full year will be at the high end of the guidance range.
- Positive commentary in the press release regarding Bakken and El Halcón wells performance.
- The reduction capital budget for 2015 is a logical development given commodity price uncertainties, but still implies outspending.
- 15%-20% production growth guidance for 2015.
Halcon Resources - Q3'14 Volume Beat With Conservative, Balance Sheet Friendly Guidance - A Pre Call Note
- Halcon reported above guidance and Street level 3Q volumes.
- Operations update continues to show strong momentum.
- 2015 guidance shows 35% reduction vs. 2014 levels but guidance remains a stout 15 to 20%.
- Halon Resources is more vulnerable to low oil prices than previously thought.
- Oil prices could fall lower and stay lower than previously thought.
- These two points combined mean that Halcon is not a bargain at $3.00/share. Tread carefully unless you are very bullish on oil prices.
Halcón Resources: East Texas Eagle Ford Update - November 2014
- Halcón’s latest (through September) well performance data in the Eagle Ford is analyzed.
- El Halcón production has remained approximately flat June through September; Q3 volumes may show ~10% decline from Q2.
- Based on completion activity in September, I expect October volumes to increase ~6%-10% month-on-month, even if no new wells are turned to sales in October.
- Given Halcón's acreage retention objectives and strong oil hedge portfolio in 2015, I do not expect significant slow-down of the company's drilling activity in El Halcón.
Halcón Resources: Is Testing The Upper Eagle Ford On The Agenda?
- Halcón’s latest (through August) well performance data in the Eagle Ford is analyzed.
- El Halcón production has remained approximately flat since June; Q3 volumes may show a slight decline from Q2.
- Evaluating Upper Eagle Ford potential, versus the Lower Eagle Ford results, may be the next step for Halcón.
- The article presents Halcón’s latest (through July, 2014) well performance data in the Eagle Ford play.
- El Halcón production decline in July relative to the Q2 2014 average was expected and is driven by a trough in the completions schedule.
- Halcon’s Eagle Ford drilling program will remain HBP-driven for at least another year. Significant well cost savings are expected thereafter.
- El Halcón may prove to be a two-bench play.
Halcon Resources: The Future Remains Questionable And Unclear
- Halcon's recent speculative rise due to the Tuscaloosa Marine Shale has been gradually coming to an end.
- Halcon's valuation remains very high although the gradual fundamental deterioration is obvious.
- There are much cheaper E&P companies out there with low debt ratios and a stellar balance sheet.
Halcón Resources: The Second TMS Well Comes In Strong
- Halcón made public test results for its second TMS East well, the Black Stone 4H-2.
- On a per lateral foot basis, the result is in line with the play's cutting-edge IP rate.
- Two additional wells, the Fassman 9H-1 and SD Smith 1H, have been successfully drilled and are now in the completion stage.
- Halcón made a strong case for the TMS' potential to evolve into a highly successful play.
Halcón Resources: Eagle Ford Update And Latest TMS Data Points
- The article presents Halcón’s latest (through June, 2014) well performance in the Eagle Ford.
- The month-on-month decline in gross production in June was driven by a trough in completions schedule.
- July Eagle Ford volumes are expected to stabilize as at least three strong new wells were brought online during the month.
- The most recent TMS results by Encana and Goodrich are strong and indicate that the TMS thesis as it relates to Halcón remains intact.
Halcón Resources: Solid Second Quarter Driven By The Bakken
- Halcón just reported a solid operational quarter driven by the FBIR area in the Bakken.
- The company commented that Fort Berthold wells completed in Q2 are performing above the 801 Mboe type curve.
- A slight shortfall in El Halcón volumes relative to my earlier estimate is the result of a slow completions schedule in June.
- The reported mechanical problem in the Black Stone 4H-2 well in the TMS is a disappointment but does not change the TMS thesis.
- The company increased the midpoint of its 2014 production guidance by 2.5%.
Update: Halcón Resources - What To Expect From The Q2 Report
- Halcón will report its Q2 results after the market’s close on Wednesday.
- I expect Halcón to report at least one well result and provide progress report on two additional wells in its TMS operational update.
- I estimate the company to post net production of 26,000 boe/d in the Bakken and 10,000 boe/d in El Halcón.
Dec. 26, 2014, 4:23 PM
- Though most large-cap energy stocks closed the day with modest gains or losses, a slew of small-cap and mid-cap U.S. oil and gas plays sold off on a day that saw WTI crude once more fall below $55/barrel, and Henry Hub natural gas drop below $3/mmBtu for the first time since 2012, before bouncing a little.
- Decliners: EXXI -4.4%. SGY -4.5%. HK -4.1%. EVEP -2.3%. NFX -3.2%. SDR -3.3%. SN -5.2%. SD -5.9%. LGCY -2.2%. CHKR -3.3%.
Dec. 1, 2014, 3:32 PM
- Prices of bonds issued by low-rated energy companies are falling sharply despite today's rebound in oil prices, amid worries that this year’s slump in oil markets will lead to a cash crunch.
- The most actively traded junk bonds at midday were Linn Energy’s (LINE -5.8%) two B-rated notes due 2019, which fell 9% to $0.82 on the dollar, pushing yields up to ~11.5%; Halcon Resources' (HK -1.3%) 2021 bond, which started weakening Friday, has dropped 10% today to $0.69 on the dollar, pushing up the yield to 17%.
- Energy XXI’s (EXXI -15.8%) debt which matures in 2017 fell 5.5% to $0.85 on the dollar and yielding 15.5%; Quicksilver Resources' (KWK +38.3%) bonds due 2016 have rebounded slightly but still trade ~$0.22 on the dollar.
- Should oil prices fall below $65/bbl and stay there for the next three years, J.P. Morgan high-yield energy analyst Tarek Hamid estimates that up to 40% of all energy junk bonds could default over the next several years.
Dec. 1, 2014, 9:13 AM
Nov. 28, 2014, 10:28 AM
- Ladenburg Thalman throws in the towel on Oasis Petroleum (OAS -30%), Denbury Resources (DNR -14.9%), Resolute Energy (REN -18.3%) following OPEC's decision yesterday to hold production levels and the resulting tumble in crude oil, with WTI crude -6.4% to $69.95 per barrel.
- Some others: Bonanza Creek (BCEI -21.5%), Northern Oil & Gas (NOG -16.2%), Warren Resources (WRES -16.3%), Halcon Resources (HK -22%), Triangle Petroleum (TPLM -21%), Emerald Oil (EOX -26.4%), Kodiak Oil & Gas (KOG -19.3%).
Nov. 28, 2014, 9:17 AM| 13 Comments
Nov. 14, 2014, 5:38 PM
Nov. 10, 2014, 5:59 PM
- Halcon Resources (NYSE:HK) -5.8% AH after reporting Q3 earnings and revenues that were short of analyst expectations, as it says it will cut nearly half the rigs it originally planned to operate next year due to sliding crude oil prices.
- HK says it expects to operate six rigs next year, five rigs less than originally planned, and reduces its 2015 capex budget to $750M-$800M from $950M in 2014.
- Despite the reduced capital budget, HK believes the Williston Basin and El Halcón assets should drive Y/Y production growth of 15%-20% in 2015.
- HK says it currently operates eight rigs across its holdings and expects to deliver annual production towards the high end of previously disclosed FY 2014 production guidance of 40K-42K boe/day.
Nov. 4, 2014, 9:15 AM
Jul. 30, 2014, 4:24 PM
Jun. 25, 2014, 2:55 PM
- Halcon Resources (HK +4.4%) is higher after Miller Tabak initiates coverage of the energy E&P company with a Buy rating and a $9 price target, believing HK will significantly outperform the E&P sector in 2014 as investors begin to realize the massive upside of the company's divisions.
- The firm says HK offers growth with a top-tier management team, and foresees multiple expansion in the stock price over the next 12 months as the company executes on its developmental drilling program and its balance sheet improves.
Jun. 17, 2014, 3:59 PM
- Halcon Resources (HK +2.1%) hits a new 52-week high as Canaccord raises its price target for the shares to $6 from $5.50, despite a stretched valuation and high financial leverage.
- HK has built positions in two of the leading U.S. liquids-rich resource plays, the Williston Basin and Eagle Ford, but it has established the Tuscaloosa Marine Shale as a third core area, and the firm says HK's new partnership should speed development there.
Jun. 9, 2014, 2:18 PM
- Halcon Resources (HK -2.2%) says Apollo Global Management (APO -1.2%) will invest up to $400M in one of its wholly owned subsidiaries that will hold all of its 314K acres in the Tuscaloosa Marine Shale, which stretches across Louisiana and Mississippi.
- Apollo will contribute $150M for 150K preferred shares of the subsidiary, with an option to buy 250K additional shares, and will receive up to 4% overriding royalty interest from 75 wells to be drilled and completed on the Tuscaloosa acreage.
- HK also says its Horseshoe Hill 11-22-H-1 well in Mississippi had an initial daily production rate of 1,208 bbl of oil and 1.1M cf of natural gas.
- HK already had said it plans to begin drilling 10-12 wells in the TMS this year and expects to participate in 15-20 non-operated wells.
Jun. 5, 2014, 2:58 PM
- Halcon Resources (HK +3.8%) is maintained at Buy but with a $9 price target, raised from $7, at Wunderlich, which notes shares have climbed due to continued growth of HK's Tuscaloosa Marine Shale acreage position and initial activity.
- Upcoming initial well results and the potential for a Tuscaloosa joint venture could begin to show the value in the play while also allowing HK to boost its production and liquidity positions, the firm says, adding that it believes these potential catalysts are not priced into the stock.
Apr. 14, 2014, 2:56 PM
- Goodrich Petroleum (GDP +28.9%) soars nearly 30% after reporting strong results from a well drilled in the emerging Tuscaloosa Marine shale play at a cheaper cost than any previous successful well.
- The Blades well is the first confirming data point on the acreage acquired from Devon and helps de-risk this acreage, according to Wells Fargo, and goes a long way towards addressing issues with drilling out plugs - "a very positive development."
- GDP's results are cause for excitement among investors in Halcon Resources (HK +8.5%), whose first Tuscaloosa well is expected next month with another five wells planned to be spudded by July.
Feb. 27, 2014, 9:09 AM
Feb. 26, 2014, 5:37 PM
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