May 5, 2015

Halcón Resources Announces First Quarter 2015 Results

HOUSTON, May 5, 2015 (GLOBE NEWSWIRE) -- Halcón Resources Corporation (NYSE:HK) ("Halcón" or the "Company") today announced its first quarter 2015 results.

The Company generated revenues of $136.2 million for the three months ended March 31, 2015. Production increased 18% quarter over prior year quarter to an average of 43,078 barrels of oil equivalent per day (Boe/d). First quarter 2015 production was 80% oil, 9% natural gas liquids (NGLs) and 11% natural gas. 

Including the impact of hedges, Halcón realized 153% of the average NYMEX oil price, 24% of the average NYMEX oil price for NGLs and 114% of the average NYMEX natural gas price during the period.

Total operating costs per unit, after adjusting for selected items (see Selected Operating Data table for additional information), decreased by 31% to $19.60 per Boe in the first quarter of 2015, compared to the first quarter of 2014. 

After adjusting for selected items primarily related to a non-cash pre-tax full cost ceiling impairment charge (see Selected Item Review and Reconciliation table for additional information), the net loss available to common stockholders was $16.0 million, or $0.04 per diluted share, for the three months ended March 31, 2015. The Company reported a net loss available to common stockholders of $601.2 million, or $1.43 per diluted share for the quarter. 

Floyd C. Wilson, Chairman and Chief Executive Officer, commented, "Well performance improved and completed well costs trended down meaningfully in our core areas during the first quarter of the year. We have recently executed on certain initiatives towards the goal of improving our balance sheet and now have sufficient liquidity to fund operations and service our debt for the next several years, even in a low commodity price environment."

Recent Developments

As previously disclosed, Halcón recently negotiated with certain bondholders to exchange approximately $252 million in face value of various tranches of its senior unsecured notes into approximately 141 million common shares, which will reduce annual cash interest expense by approximately $24 million.  The Company also recently issued $700 million in senior secured second lien notes due 2020 and used the net proceeds to repay outstanding borrowings under its senior secured revolving credit facility.

On May 4, 2015, Halcón's Board of Directors declared a quarterly dividend on shares of its 5.75% Series A Cumulative Perpetual Convertible Preferred Stock equal to accrued dividends for the three months ending May 31, 2015.  The Company will pay the dividend on June 1, 2015 to holders of record on May 15, 2015.  The dividend payments on all of the outstanding 5.75% Series A Cumulative Perpetual Convertible Preferred Stock will total approximately $4.9 million, and will be paid in shares of Halcón's common stock having a fair market value (as determined under the certificate of designation governing such preferred stock) equal to the aggregate dividend amount.  The Company will pay cash in lieu of issuing any fractional shares.

Liquidity and Capital Spending

The Company's liquidity as of March 31, 2015 was approximately $384 million, which consisted of cash on hand plus undrawn capacity on its senior secured revolving credit facility.  Pro forma for the aforementioned $700 million senior secured second lien notes offering, and the related reduction to the borrowing base on Halcón's senior secured revolving credit facility to $900 million from $1.05 billion, liquidity as of March 31, 2015 was approximately $921 million.

During the first quarter of 2015, Halcón incurred capital costs of $105.2 million on drilling and completions, $3.8 million on infrastructure/seismic, $3.1 million for leasehold and $1.7 million for A&D activity. In addition, the Company incurred $32.1 million for capitalized interest, G&A and other.

2015 Guidance Update

Halcón is providing second quarter 2015 production guidance, which accounts for approximately 800 Boe/d of non-operated production in the Williston Basin that is currently shut-in and approximately 1,200 Boe/d of non-operated production in the Williston Basin that has been deferred due to low commodity prices. The Company is also lowering its 2015 drilling and completion budget by an additional $25 million to account for continued service cost reductions. The following table summarizes Halcón's current 2015 guidance:

   Full Year
 2Q15E 2015E
Production (Boe/d)39,500 - 41,500 40,000 - 45,000
% Oil     82 % 
% NGLs     8 % 
% Gas     10 % 
    
Drilling & Completion Capex ($ in millions) (1)  $325 - $375
    
Leasehold, Infrastructure, Seismic & Other Capex ($ in millions) (1)    $20    
    
Operating Costs and Expenses ($/Boe)   
Lease Operating & Workover  $8.00 - $10.00
    
Production Taxes  $4.00 - $6.00
    
Cash G&A  $4.00 - $6.00
    
Gathering, Transportation & Other  $1.50 - $2.50
    
(1) Excludes capitalized interest and G&A.   
    

Hedging Update

The Company continues to target a hedge portfolio in which approximately 80% of expected production is hedged for the next 18 to 24 months. Halcón has 31,410 barrels per day of oil hedged from April 1, 2015 to December 31, 2015 at an average price of $90.28 per barrel. For 2016, the Company has 24,497 barrels per day of oil hedged at an average price of $81.12 per barrel. Halcón plans to opportunistically layer in additional hedges to attain targeted levels and recently began adding hedges for 2017. The Company estimates the pre-tax mark-to-market value of its hedge portfolio to be approximately $334 million as of May 4, 2015

An updated slide presentation containing detailed information on Halcón's hedge portfolio can be accessed on its website at http://www.halconresources.com in the Investor Relations section under Events & Presentations.

Conference Call and Webcast Information

Halcón Resources Corporation (NYSE:HK) has scheduled a conference call for Wednesday, May 6, 2015, at 10:00 a.m. EDT (9:00 a.m. CDT). To participate in the conference call, dial (877) 810-3368 for domestic callers, and (914) 495-8561 for international callers a few minutes before the call begins and reference Halcón Resources conference ID 20710637.  The conference call will also be webcast live over the Internet on Halcón Resources' website at http://www.halconresources.com in the Investor Relations section under Events & Presentations.  A telephonic replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through May 13, 2015.  To access the replay, dial (855) 859-2056 for domestic callers or (404) 537-3406 for international callers, in both cases referencing conference ID 20710637. 

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 Scott Zuehlke, Vice President of Investor Relations, at 832-538-0314 or szuehlke@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.  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 December 31, 2014 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.

HALCÓN RESOURCES CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 
(In thousands, except per share amounts) 
        
        
    Three Months Ended March 31, 
     2015   2014  
Operating revenues:     
 Oil, natural gas and natural gas liquids sales:     
 Oil   $  124,413  $  256,029  
 Natural gas     6,959     9,409  
 Natural gas liquids     4,068     8,759  
 Total oil, natural gas and natural gas liquids sales     135,440     274,197  
 Other    754     952  
 Total operating revenues     136,194     275,149  
        
Operating expenses:     
 Production:     
 Lease operating     33,785     36,638  
 Workover and other      3,114     2,789  
 Taxes other than income      12,241     24,160  
 Gathering and other    13,746     5,073  
 Restructuring    1,921     987  
 General and administrative    24,409     32,798  
 Depletion, depreciation and accretion    119,144     119,908  
 Full cost ceiling impairment    554,003     61,165  
 Total operating expenses     762,363     283,518  
Income (loss) from operations    (626,169)    (8,369) 
Other income (expenses):     
 Net gain (loss) on derivative contracts    99,748     (33,656) 
 Interest expense and other, net    (61,307)    (30,939) 
 Total other income (expenses)      38,441     (64,595) 
Income (loss) before income taxes    (587,728)    (72,964) 
Income tax benefit (provision)     87     -  
Net income (loss)    (587,641)    (72,964) 
Series A preferred dividends    (4,901)    (4,959) 
Preferred dividends and accretion on redeemable noncontrolling interest   (8,651)    -  
Net income (loss) available to common stockholders $  (601,193) $  (77,923) 
         
Net income (loss) per share of common stock:     
 Basic   $  (1.43) $  (0.19)  
 Diluted  $  (1.43) $  (0.19) 
        
Weighted average common shares outstanding:     
 Basic     419,684     413,521  
 Diluted     419,684     413,521  
        

 

HALCÓN RESOURCES CORPORATION 
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) 
(In thousands, except share and per share amounts) 
      
  March 31,  December 31, 
   2015   2014  
Current assets:    
 Cash$  18,611  $  43,713  
 Accounts receivable   219,790     276,559  
 Receivables from derivative contracts   351,785     352,530  
 Restricted cash   16,322     16,131  
 Inventory   4,379     4,693  
 Prepaids and other   10,235     9,079  
 Total current assets   621,122     702,705  
Oil and natural gas properties (full cost method):    
 Evaluated   6,526,440     6,390,820  
 Unevaluated   1,838,093     1,829,786  
 Gross oil and natural gas properties   8,364,533     8,220,606  
 Less - accumulated depletion   (3,623,652)    (2,953,038) 
 Net oil and natural gas properties   4,740,881     5,267,568  
Other operating property and equipment:    
 Gas gathering and other operating assets   129,116     126,804  
 Less - accumulated depreciation   (16,779)    (14,798) 
 Net other operating property and equipment   112,337     112,006  
Other noncurrent assets:    
 Receivables from derivative contracts   135,428     151,324  
 Debt issuance costs, net   53,659     55,904  
 Deferred income taxes   136,627     136,826  
 Equity in oil and natural gas partnership   4,315     4,309  
 Funds in escrow and other   2,094     3,833  
Total assets$  5,806,463  $  6,434,475  
      
Current liabilities:    
 Accounts payable and accrued liabilities$  415,378  $  607,750  
 Asset retirement obligations   142     106  
 Current portion of deferred income taxes   136,627     136,826  
 Total current liabilities   552,147     744,682  
Long-term debt   3,892,321     3,746,736  
Other noncurrent liabilities:    
 Liabilities from derivative contracts   747     9,387  
 Asset retirement obligations   39,895     38,371  
 Other   5,755     5,964  
Commitments and contingencies    
Mezzanine equity:    
 Redeemable noncontrolling interest    125,817     117,166  
Stockholders' equity:    
 Preferred stock: 1,000,000 shares of $0.0001 par value authorized; 340,960 and 345,000    
 shares of 5.75% Cumulative Perpetual Convertible Series A, issued and outstanding     
 at March 31, 2015 and December 31, 2014, respectively   -     -  
 Common stock: 1,340,000,000 shares of $0.0001 par value authorized;    
 436,192,820 and 427,808,306 shares issued and outstanding    
 at March 31, 2015 and December 31, 2014, respectively   42     42  
 Additional paid-in capital   3,014,207     2,995,402  
 Accumulated deficit    (1,824,468)    (1,223,275) 
 Total stockholders' equity   1,189,781     1,772,169  
Total liabilities and stockholders' equity$  5,806,463  $  6,434,475  
    

 

HALCÓN RESOURCES CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 
(In thousands) 
        
    Three Months Ended March 31, 
     2015   2014  
Cash flows from operating activities:     
Net income (loss) $  (587,641) $  (72,964) 
Adjustments to reconcile net income (loss) to net cash     
provided by (used in) operating activities:     
 Depletion, depreciation and accretion     119,144     119,908  
 Full cost ceiling impairment    554,003     61,165  
 Share-based compensation, net    4,772     4,332  
 Unrealized loss (gain) on derivative contracts     8,001     26,021  
 Amortization and write-off of deferred loan costs     1,559     842  
 Non-cash interest and amortization of discount and premium    1,107     554  
 Accrued settlements on derivative contracts    (37,592)    -  
 Other income (expense)    2,541     354  
Cash flow from operations before changes in working capital    65,894     140,212  
Changes in working capital, net of acquisitions    28,041     19,288  
Net cash provided by (used in) operating activities    93,935     159,500  
        
Cash flows from investing activities:      
 Oil and natural gas capital expenditures    (264,626)    (432,783) 
 Proceeds received from sale of oil and natural gas assets    964     1,533  
 Advance on carried interest    -     (62,500) 
 Other operating property and equipment capital expenditures    (4,345)    (16,036) 
 Funds held in escrow and other    (5)    288  
Net cash provided by (used in) investing activities    (268,012)    (509,498) 
        
Cash flows from financing activities:     
 Proceeds from borrowings    361,000     614,000  
 Repayments of borrowings    (217,000)    (266,000) 
 Debt issuance costs    -     (126) 
 Common stock issued    6,019     -  
 Restricted cash    (191)    -  
 Offering costs and other    (853)    (344) 
Net cash provided by (used in) financing activities    148,975     347,530  
        
Net increase (decrease) in cash     (25,102)    (2,468) 
        
Cash at beginning of period    43,713     2,834  
Cash at end of period $  18,611  $  366  
        
Disclosure of non-cash investing and financing activities:     
 Accrued capitalized interest $  (8,270) $  (4,763) 
 Asset retirement obligations    1,120     (730) 
 Series A preferred dividends paid in common stock    4,901     4,959  
 Accretion of redeemable noncontrolling interest    5,632     -   
 Preferred dividends on redeemable noncontrolling interest paid-in-kind   3,019     -   
 Common stock issued    2,182     -   
 Offering costs    (78)    -   

 

HALCÓN RESOURCES CORPORATION
SELECTED OPERATING DATA
(Unaudited)
      
  Three Months Ended March 31, 
   2015   2014  
       
Production volumes:     
Crude oil (MBbls)  3,096   2,806  
Natural gas (MMcf)  2,635   1,792  
Natural gas liquids (MBbls)  342   191  
Total (MBoe)  3,877   3,296  
Average daily production (Boe/d)  43,078   36,622  
      
Average prices:     
Crude oil (per Bbl) $  40.19  $  91.24  
Natural gas (per Mcf)     2.64     5.25  
Natural gas liquids (per Bbl)    11.89     45.86  
Total per Boe    34.93     83.19  
      
Cash effect of derivative contracts:     
Crude oil (per Bbl) $  34.27   $  (2.35) 
Natural gas (per Mcf)    0.62     (0.58) 
Natural gas liquids (per Bbl)    -      -   
Total per Boe    27.79     (2.32) 
      
Average prices computed after cash effect of settlement of derivative contracts:    
Crude oil (per Bbl) $  74.46  $  88.89  
Natural gas (per Mcf)    3.26     4.67  
Natural gas liquids (per Bbl)    11.89     45.86  
Total per Boe    62.72     80.87  
       
Average cost per Boe:     
Production:     
Lease operating $  8.71  $  11.12  
Workover and other    0.80     0.85  
Taxes other than income    3.16     7.33  
Gathering and other (1)    2.00     1.54  
Restructuring    0.50     0.30  
General and administrative, as adjusted (1)    4.93     7.56  
Depletion    30.08     35.57  
      
(1) Represents gathering and other and general and administrative costs per Boe, adjusted for items noted in the reconciliation below: 
      
General and administrative:     
General and administrative, as reported $  6.29  $  9.95  
Share-based compensation:     
Non-cash    (1.23)    (1.31) 
Acquisition and merger transaction costs and other:     
Cash     (0.13)     (1.08) 
General and administrative, as adjusted $  4.93  $  7.56  
       
Gathering and other, as reported $  3.55  $  1.54  
Rig termination / stacking charges     (1.55)    -   
Gathering and other, as adjusted $  2.00  $  1.54  
      
Total operating costs, as reported $  22.51  $  30.79  
Total adjusting items    (2.91)    (2.39) 
Total operating costs, as adjusted(2) $  19.60  $  28.40  
      
(2) Represents lease operating, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in reconciliation above.
       

 

HALCÓN RESOURCES CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
     
     
  Three Months Ended March 31,
   2015   2014 
As Reported:    
Net income (loss) available to common stockholders, as reported $  (601,193) $  (77,923)
Series A preferred dividends    4,901     4,959 
Preferred dividends and accretion on redeemable noncontrolling interest    8,651     -  
Net income (loss)    (587,641)    (72,964)
     
Impact of Selected Items:    
Unrealized loss (gain) on derivatives contracts:    
Crude oil $  7,581  $  25,347 
Natural gas     420      1,569 
Total mark-to-market non-cash charge    8,001     26,916 
Full cost ceiling impairment    554,003     61,165 
Restructuring    1,921     987 
Rig termination / stacking charges and other    11,548     3,857  
Selected items, before income taxes    575,473     92,925 
Income tax effect of selected items(1)     (3,855)    (8,045)
Selected items, net of tax    571,618     84,880 
     
As Adjusted:    
Net income (loss) available to common stockholders, excluding selected items $  (16,023) $  11,916 
Net income (loss) from assumed conversions    -      -  
Net income (loss) available to common stockholders after assumed conversions, excluding selected items(2) $  (16,023) $  11,916 
     
Basic net income (loss) per common share, as reported $  (1.43) $  (0.19)
Impact of selected items    1.39     0.22 
Basic net income (loss) per common share, excluding selected items(2) $  (0.04) $  0.03 
     
Diluted net income (loss) per common share, as reported $  (1.43 ) $  (0.19)
Impact of selected items    1.39     0.22 
Diluted net income (loss) per common share, excluding selected items(2)(3) $  (0.04) $  0.03 
     
     
Net cash provided by (used in) operating activities $  93,935  $  159,500 
Changes in working capital, net of acquisitions    (28,041)    (19,288)
Cash flow from operations before changes in working capital    65,894     140,212 
Cash components of selected items    48,530     4,379 
Income tax effect of selected items    (4,051)    (1,583)
Cash flow from operations before changes in working capital, adjusted for selected items(2) $  110,373  $  143,008 
     
   
(1) For the 2015 columns this represents tax impact using an estimated tax rate of 37.04%. These columns include a $209.3 million adjustment for the change in valuation allowance. For the 2014 columns this represents tax impact using an estimated tax rate of 36.16%. These columns include a $25.6 million adjustment for the change in valuation allowance.
(2) Net income (loss) and earnings per share excluding selected items and cash flow from operations before changes in working capital adjusted for selected items are non-GAAP measures. These financial measures are presented based on management's belief that they will enable a user of the financial information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods.  These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flow from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón's performance.
 (3) The impact of selected items for the three months ended  March 31, 2015 and 2014 was calculated based upon weighted average diluted shares of 419.7 million and 413.6 million, respectively, due to the net income (loss) available to common stockholders, excluding selected items.
     
     

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