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Core Plays Established; Company Embarks on Exploitation Phase
Company Expects to Produce in Excess of 40,000 Boe/d in 2013 on Average
Net production for the third quarter increased to an average of 11,185 barrels of oil equivalent per day (Boe/d), of which 77% was oil and natural gas liquids (NGLs), compared to 3,924 Boe/d for the same period of 2011. The increase was primarily attributable to the acquisitions of
Revenues for the three months ended
Halcón reported a net loss for the quarter of
After adjusting for selected items, cash flow from operations before changes in working capital (see Condensed Consolidated Statements of Cash Flows and Selected Item Review and Reconciliation table for additional information) was
Cash operating costs per unit (including lease operating expense, workover expense, taxes other than income and general and administrative expense), after adjusting for selected items, were
Liquidity and Capital Spending
As of
During the third quarter, Halcón spent
Recent Developments
Halcón recently announced that it has entered into a privately negotiated definitive agreement with
The Company closed
The borrowing base under Halcón's senior secured revolving credit facility will be increased to
Additionally, Halcón previously disclosed that it has entered into an agreement pursuant to which
Woodbine/Eagle Ford
During the quarter, the Company averaged four operated rigs and spud six operated wells across
Halcón now has approximately 200,000 net acres leased or under contract in the Woodbine/Eagle Ford play. There are currently 15 horizontal wells producing, 6 wells being completed or waiting on completion and 6 wells being drilled. All six wells being completed or waiting on completion are expected to be online before the end of 2012. The Company expects to run five to six operated rigs in the play throughout 2013.
In an effort to lower drilling costs, Halcón has reduced the size of the intermediate hole in the wells it is drilling to 8.75 inches from 9.875 inches, eliminated intermediate casing in some areas and is utilizing pad drilling in all areas. The Company expects to experience cost savings of approximately
Bakken/
Halcón averaged three operated rigs and spud seven wells on its operated acreage in
Halcón has completed nine wells (seven in
Upon completion of the
During the quarter, the Company focused on positioning itself for a continuous drilling program and prepared to spud its first two wells in the play. The Allam 1H in
Halcón currently has approximately 130,000 net acres leased or under contract in the play. Plans are to add a third operated rig in early 2013 and a fourth operated rig later in 2013. The first three wells drilled in the play will be spread across the Company's acreage position and plans are to core and log each well. First production is planned for late in the first quarter of 2013 as a 60 day resting period after fracture stimulation will be implemented.
Drilling has commenced on Halcón's 70,000 net acre position prospective for the TMS in Louisiana. The Company spud its first well, the
The Company intends to drill three horizontal wells across its acreage position and evaluate the results prior to implementing a development strategy.
The Kollatschny 1 (95% working interest, 78% net revenue interest), located in
Eagle Ford
Halcón averaged two rigs and spud six operated wells in
Since
Due to a non-compete agreement, Halcón plans to divest its 24,000 net acre Eagle Ford position. The marketing process is underway.
Outlook
In anticipation of the completion of the
| Full Year | ||
| 4Q12E | 2013E | |
| Production (Boe/d) | ||
| Low | 17,000 | 40,000 |
| High | 20,000 | 45,000 |
| % Oil | 80% | |
| % NGLs | 5% | |
| % Gas | 15% | |
| Operating Costs and Expenses ($/Boe) | ||
| Lease Operating | ||
| Low |
|
|
| High |
|
|
| Production Taxes | ||
| Low |
|
|
| High |
|
|
| Cash G&A | ||
| Low |
|
|
| High |
|
|
| Drilling & Completion Capex - Excluding A&D ($ in billions) (1) |
|
|
|
(1) Includes approximately |
||
Note: Fourth quarter 2012 guidance is provided on an
Conference Call and Webcast Information
Halcón
About Halcón Resources
Halcón
For more information contact
The
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. Additionally, initial production rates, average 30 day production rates and improvements mentioned herein are not necessarily indicative of future production rates or performance. 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. 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
| HALCÓN RESOURCES CORPORATION | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
| (In thousands, except per share amounts) | ||||
|
Three Months Ended |
Nine Months Ended |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Operating revenues: | ||||
| Oil, natural gas and natural gas liquids sales | ||||
| Oil | $ 65,662 | $ 18,955 | $ 109,042 | $ 62,150 |
| Natural gas | 3,775 | 2,548 | 6,683 | 8,252 |
| Natural gas liquids | 3,214 | 2,644 | 7,006 | 7,582 |
| Total oil, natural gas and natural gas liquids sales | 72,651 | 24,147 | 122,731 | 77,984 |
| Other | 489 | 39 | 560 | 124 |
| Total operating revenues | 73,140 | 24,186 | 123,291 | 78,108 |
| Operating expenses: | ||||
| Production: | ||||
| Lease operating | 15,511 | 7,363 | 32,121 | 23,016 |
| Workovers | 1,123 | 136 | 2,384 | 1,032 |
| Taxes | 4,432 | 1,391 | 7,354 | 4,280 |
| Restructuring | 725 | -- | 1,732 | -- |
| General and administrative | 33,192 | 3,972 | 66,613 | 13,140 |
| Depletion, depreciation and accretion | 22,726 | 5,594 | 34,661 | 16,877 |
| Total operating expenses | 77,709 | 18,456 | 144,865 | 58,345 |
| Income (loss) from operations | (4,569) | 5,730 | (21,574) | 19,763 |
| Other income (expenses): | ||||
| Interest expense and other, net | (5,074) | (3,455) | (22,250) | (14,318) |
| Net gain (loss) on derivative contracts | (9,575) | 22,617 | (849) | 16,635 |
| Total other income (expenses) | (14,649) | 19,162 | (23,099) | 2,317 |
| Income (loss) before income taxes | (19,218) | 24,892 | (44,673) | 22,080 |
| Income tax provision | 963 | 13,116 | 1,171 | 11,279 |
| Net income (loss) | (20,181) | 11,776 | (45,844) | 10,801 |
| Non-cash preferred dividend | -- | -- | (88,445) | -- |
| Net income (loss) available to common stockholders | $ (20,181) | $ 11,776 | $ (134,289) | $ 10,801 |
| Net income (loss) per common share: | ||||
| Basic | $ (0.11) | $ 0.45 | $ (1.01) | $ 0.41 |
| Diluted | $ (0.11) | $ 0.45 | $ (1.01) | $ 0.41 |
| Weighted average common shares outstanding: | ||||
| Basic | 191,846 | 26,362 | 132,460 | 26,254 |
| Diluted | 191,846 | 26,362 | 132,460 | 26,254 |
| HALCÓN RESOURCES CORPORATION | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||
| (in thousands, except share and per share amounts) | ||
|
|
|
|
| 2012 | 2011 | |
| Current assets: | ||
| Cash and cash equivalents | $ 18,126 | $ 49 |
| Accounts receivable | 105,288 | 10,288 |
| Receivables from derivative contracts | 4,324 | 260 |
| Income tax receivable | 9,850 | -- |
| Deferred income taxes | 533 | 2,601 |
| Inventory | 8,621 | 4,310 |
| Prepaids and other | 4,061 | 2,729 |
| Total current assets | 150,803 | 20,237 |
| Oil and natural gas properties (full cost method): | ||
| Evaluated | 1,710,797 | 715,666 |
| Unevaluated | 1,197,764 | -- |
| Gross oil and natural gas properties | 2,908,561 | 715,666 |
| Less : accumulated depletion and impairment | (534,134) | (501,993) |
| Net oil and natural gas properties | 2,374,427 | 213,673 |
| Other operating property and equipment: | ||
| Other operating assets and equipment | 32,502 | 9,979 |
| Less : accumulated depreciation | (7,463) | (7,133) |
| Net other operating property and equipment | 25,039 | 2,846 |
| Other non-current assets: | ||
| Receivables from derivative contracts | 1,023 | -- |
| Debt issuance costs, net of amortization | 23,531 | 5,966 |
| Deferred income taxes | -- | 24,102 |
| Equity in oil and gas partnerships | 11,207 | -- |
| Funds in escrow | 3,550 | 560 |
| Goodwill | 160,918 | -- |
| Other | 939 | 418 |
| Total assets | $ 2,751,437 | $ 267,802 |
| Current liabilities: | ||
| Accounts payable and accrued liabilities | $ 202,344 | $ 25,061 |
| Liabilities from derivative contracts | 1,654 | 265 |
| Asset retirement obligations | 1,968 | 1,010 |
| Total current liabilities | 205,966 | 26,336 |
| Long-term debt | 1,175,000 | 202,000 |
| Other non-current liabilities: | ||
| Liabilities from derivative contracts | 254 | 805 |
| Asset retirement obligations | 42,651 | 32,703 |
| Deferred income taxes | 213,742 | -- |
| Other | 10 | 10 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
|
Preferred stock: 1,000,000 shares of |
-- | -- |
|
Common stock: 336,666,666 and 33,333,333 shares of |
22 | 3 |
| Additional paid-in capital | 1,385,244 | 229,414 |
|
Treasury stock: 1,649,909 and 1,450,131 shares at |
(9,298) | (7,159) |
| Accumulated deficit | (262,154) | (216,310) |
| Total stockholders' equity | 1,113,814 | 5,948 |
| Total liabilities and stockholders' equity | $ 2,751,437 | $ 267,802 |
| HALCÓN RESOURCES CORPORATION | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||
| (In thousands) | ||||
|
Three Months Ended |
Nine Months Ended |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Cash flows from operating activities: | ||||
| Net income (loss) | $ (20,181) | $ 11,776 | $ (45,844) | $ 10,801 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
| Depletion, depreciation and accretion | 22,726 | 5,594 | 34,661 | 16,877 |
| Deferred income tax provision | 894 | 13,082 | 1,030 | 11,129 |
| Share-based compensation | 1,401 | 872 | 3,866 | 2,227 |
| Unrealized gain (loss) on derivative contracts | 11,233 | (22,283) | 3,197 | (16,391) |
| Amortization and write-off of deferred loan costs | (52) | 335 | 6,247 | 3,325 |
| Non-cash interest and amortization of discount | 887 | -- | 8,620 | 362 |
| Other expense (income) | 487 | -- | 470 | (22) |
| Cash flow from operations before changes in working capital | 17,395 | 9,376 | 12,247 | 28,308 |
| Changes in working capital, net of acquisitions | (1,119) | 1,394 | 1,321 | (4,495) |
| Net cash provided by operating activities | 16,276 | 10,770 | 13,568 | 23,813 |
| Cash flows from investing activities: | ||||
| Evaluated oil and natural gas capital expenditures | (78,077) | (6,100) | (93,073) | (19,600) |
| Unevaluated oil and natural gas capital expenditures | (181,421) | -- | (634,622) | -- |
|
Acquisition of |
(579,497) | -- | (579,497) | -- |
| Acquisition of East Texas Assets | (296,139) | -- | (296,139) | -- |
| Other operating property and equipment capital expenditures | (14,667) | (34) | (18,240) | (503) |
| Proceeds received from sales of property and equipment | 208 | -- | 554 | 473 |
| Funds held in escrow | 26,396 | -- | (2,989) | -- |
| Net cash used in investing activities | (1,123,197) | (6,134) | (1,624,006) | (19,630) |
| Cash flows from financing activities: | ||||
| Proceeds from borrowings | 1,044,845 | 7,000 | 1,282,255 | 238,166 |
| Repayments of borrowings | (120,000) | (12,037) | (328,000) | (235,222) |
| Debt issuance costs | (18,604) | -- | (23,657) | (7,003) |
| Offering costs | (402) | -- | (18,535) | -- |
| Common stock repurchased | -- | (9) | (2,139) | (117) |
| Preferred stock issued | -- | -- | 311,556 | -- |
| Preferred beneficial conversion feature | -- | -- | 88,445 | -- |
| Common stock issued | -- | -- | 275,000 | -- |
| Warrants issued | -- | -- | 43,590 | -- |
| Net cash provided by (used in) financing activities | 905,839 | (5,046) | 1,628,515 | (4,176) |
| Net increase (decrease) in cash | (201,082) | (410) | 18,077 | 7 |
| Cash at beginning of period | 219,208 | 454 | 49 | 37 |
| Cash at end of period | $ 18,126 | $ 44 | $ 18,126 | $ 44 |
| Supplemental cash flow information: | ||||
| Cash paid for income taxes | $ 162 | $ 50 | $ 361 | $ 531 |
| Cash paid for interest, net of capitalized interest | 486 | 3,330 | 3,931 | 12,036 |
| Disclosure of non-cash investing and financing activities: | ||||
| Asset retirement obligations | $ 643 | $ 106 | $ 689 | $ (23) |
| Preferred dividend | -- | -- | 88,445 | -- |
| Payment-in-kind interest | 5,804 | -- | 14,669 | 362 |
|
Common stock issued for |
321,416 | -- | 321,416 | -- |
| Common stock issued for the East Texas Assets | 130,623 | -- | 130,623 | -- |
| HALCÓN RESOURCES CORPORATION | ||||
| SELECTED OPERATING DATA | ||||
| (Unaudited) | ||||
|
Three Months Ended |
Nine Months Ended |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Production volumes: | ||||
| Oil (MBbls) | 704 | 213 | 1,151 | 661 |
| Natural gas (MMcf) | 1,441 | 615 | 2,640 | 1,985 |
| Natural gas liquids (MBbls) | 85 | 45 | 163 | 136 |
| Total (MBoe) | 1,029 | 361 | 1,754 | 1,128 |
| Average daily production (Boe) | 11,185 | 3,924 | 6,401 | 4,132 |
| Average prices: | ||||
| Oil (per Bbl) | $ 93.27 | $ 88.99 | $ 94.74 | $ 94.02 |
| Natural gas (per Mcf) | 2.62 | 4.14 | 2.53 | 4.16 |
| Natural gas liquids (per Bbl) | 37.81 | 58.76 | 42.98 | 55.75 |
| Total per Boe | 70.60 | 66.89 | 69.97 | 69.13 |
| Cash effect of derivative contracts: | ||||
| Oil (per Bbl) | $ 0.65 | $ -- | $ 0.04 | $ (2.70) |
| Natural gas (per Mcf) | 0.83 | 0.65 | 1.09 | 1.09 |
| Natural gas liquids (per Bbl) | -- | -- | -- | -- |
| Total per Boe | 1.61 | 1.11 | 1.67 | 0.34 |
| Average prices computed after cash effect of settlement of derivative contracts: | ||||
| Oil (per Bbl) | $ 93.92 | $ 88.99 | $ 94.78 | $ 91.32 |
| Natural gas (per Mcf) | 3.45 | 4.79 | 3.62 | 5.25 |
| Natural gas liquids (per Bbl) | 37.81 | 58.76 | 42.98 | 55.75 |
| Total per Boe | 72.21 | 68.00 | 71.64 | 69.47 |
| Average cost per Boe: | ||||
| Production: | ||||
| Lease operating | $ 15.07 | $ 20.40 | $ 18.31 | $ 20.40 |
| Workovers | 1.09 | 0.38 | 1.36 | 0.91 |
| Taxes | 4.31 | 3.85 | 4.19 | 3.79 |
| General and administrative, as adjusted (1) | 13.63 | 8.59 | 17.28 | 9.68 |
| Restructuring costs | 0.70 | -- | 0.99 | -- |
| Depletion | 20.99 | 13.69 | 18.32 | 13.22 |
| (1) Represents general and administrative costs per boe, adjusted for items noted in the reconciliation below: | ||||
| General and administrative: | ||||
| General and administrative, as reported | $ 32.26 | $ 11.00 | $ 37.98 | $ 11.65 |
| Share-based compensation: | ||||
| Cash | -- | -- | (0.21) | -- |
| Non-cash | (1.36) | (2.41) | (0.79) | (1.97) |
| Recapitalization and change in control: | ||||
| Cash | -- | -- | (6.07) | -- |
| Non-cash | -- | -- | (1.42) | -- |
| Acquisition and merger transaction costs: | ||||
| Cash | (17.27) | -- | (12.21) | -- |
| General and administrative, as adjusted | $ 13.63 | $ 8.59 | $ 17.28 | $ 9.68 |
| HALCÓN RESOURCES CORPORATION | ||||
| SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited) | ||||
| (In thousands, except per share amounts) | ||||
|
Three Months Ended |
Nine Months Ended |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Unrealized loss (gain) on derivatives:(1) | ||||
| Crude oil | $ 10,717 | $ (22,333) | $ 2,670 | $ (19,606) |
| Natural gas | 1,100 | (411) | 1,971 | 1,087 |
| Interest rate | -- | 138 | (518) | 556 |
| Total mark-to-market non-cash charge | 11,817 | (22,606) | 4,123 | (17,963) |
| Recapitalization expenditures(2) | -- | -- | 21,980 | 2,718 |
| Restructuring(3) | 725 | -- | 1,732 | -- |
| Acquisition and merger transaction costs and other(4) | 17,773 | -- | 21,412 | -- |
| Selected items, before income taxes and preferred dividend | 30,315 | (22,606) | 49,247 | (15,245) |
| Income tax effect of selected items(5) | (11,004) | 8,206 | (17,877) | 5,534 |
| Selected items, net of tax and before preferred dividend | 19,311 | (14,400) | 31,370 | (9,711) |
| Non-cash preferred dividend(6) | -- | -- | 88,445 | -- |
| Total selected items | 19,311 | (14,400) | 119,815 | (9,711) |
| Net income (loss) available to common, as reported | (20,181) | 11,776 | (134,289) | 10,801 |
| Net income (loss) available to common, excluding selected items | $ (870) | $ (2,624) | $ (14,474) | $ 1,090 |
| Basic net income (loss) per common share, as reported | $ (0.11) | $ 0.45 | $ (1.01) | $ 0.41 |
| Impact of selected items | 0.10 | (0.55) | 0.90 | (0.37) |
| Basic net income (loss) per common share, excluding selected items | $ (0.01) | $ (0.10) | $ (0.11) | $ 0.04 |
| Diluted net income (loss) per common share, as reported | $ (0.11) | $ 0.45 | $ (1.01) | $ 0.41 |
| Impact of selected items | 0.10 | (0.55) | 0.90 | (0.37) |
| Diluted net income (loss) per common share, excluding selected items | $ (0.01) | $ (0.10) | $ (0.11) | $ 0.04 |
| Cash flow from operations before changes in working capital | $ 17,395 | $ 9,376 | $ 12,247 | $ 28,308 |
| Cash components of selected items | 18,498 | -- | 36,810 | -- |
| Income tax effect of selected items(5) | (6,715) | -- | (13,362) | -- |
| Cash flow from operations before changes in working capital, adjusted for selected items | $ 29,178 | $ 9,376 | $ 35,695 | $ 28,308 |
| Cash flow from operations before changes in working capital per diluted share | $ 0.09 | $ 0.36 | $ 0.09 | $ 1.08 |
| Impact of selected items | 0.06 | -- | 0.18 | -- |
| Cash flow from operations before changes in working capital per diluted share, adjusted for selected items | $ 0.15 | $ 0.36 | $ 0.27 | $ 1.08 |
| (1) Represents the non-cash unrealized loss (gain) associated with the mark-to-market valuation of outstanding derivative contracts. | ||||
| (2) Represents costs related to the recapitalization, change in control and credit facility refinancing. | ||||
| (3) Represents costs related to relocating key administrative functions to corporate headquarters. | ||||
| (4) Represents costs primarily related to acquisitions of producing properties and mergers. | ||||
| (5) Represents tax impact using an estimated tax rate of 36.3%. | ||||
| (6) Represents amortization of the non-cash preferred dividend as a result of the beneficial conversion feature of convertible preferred stock. | ||||
CONTACT:Scott M. Zuehlke VP, Investor RelationsHalcon Resources (832) 538-0314
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