Halcon Resources Corp (NYSE:HK) announced its third quarter 2015 results.
The Company generated revenues of $129.9 million for the three months ended September 30, 2015. In addition, Halcón realized a net gain on settled derivative contracts of $114.9 million during the quarter.
The Company produced an average of 40,739 barrels of oil equivalent per day (Boe/d) during the period. Third quarter 2015 production was 80% oil, 10% natural gas liquids (NGLs) and 10% natural gas. Including the impact of hedges, Halcón realized 168% of the average NYMEX oil price, 15% of the average NYMEX oil price for NGLs and 111% 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 27% to$17.04 per Boe in the third quarter of 2015, compared to the third quarter of 2014.
After adjusting for selected items primarily related to a non-cash gain on the extinguishment of debt and a non-cash pre-tax full cost ceiling impairment charge (see Selected Item Review and Reconciliation table for additional information), net income available to common stockholders was $21.2 million, or $0.04 per diluted share, for the three months ended September 30, 2015. The Company reported net income available to common stockholders of$123.5 million, or $0.18 per diluted share for the quarter.
Floyd C. Wilson, Chairman and Chief Executive Officer, commented, “Our operational staff continues to exceed expectations. Efficiency gains combined with lower costs are driving results. We remain focused on initiatives that will strengthen our balance sheet and remain confident in our ability to emerge from this downturn a much stronger company.”
As previously disclosed, the borrowing base on Halcón’s senior secured revolving credit facility was recently reaffirmed at $850 million in conjunction with the Company’s regularly scheduled semi-annual redetermination.
Liquidity and Capital Spending
Halcón’s liquidity as of September 30, 2015 was approximately $827 million, which consisted of cash on hand plus undrawn capacity on its senior secured revolving credit facility.
During the third quarter of 2015, the Company incurred capital costs of $83.8 million on drilling and completions, $5.0 million on infrastructure/seismic and $3.7 million for leasehold acquisitions. In addition, Halcón incurred $34.7 million for capitalized interest, G&A and other.
The Company is currently operating three rigs across its asset base and has 12 wells being completed or waiting on completion.
Halcón operated an average of two rigs in the Williston Basin during the quarter. The Company spudded 13 wells and put 9 wells online in the Fort Berthold area (“FBIR”) during the period. Halcón also participated in 34 non-operated wells with an average working interest of approximately 1% during the three months ended September 30, 2015. On average, operated wells put online in 2015 are outperforming the Company’s 801 MBoe FBIR type curve.
Average drill times (surface spud to rig release) in FBIR decreased to 15.81 days per well during the third quarter of 2015, 29% faster than the average drill times during the third quarter of 2014. In addition, Halcón set the following new FBIR drilling records during the period:
|Halcón 3Q15 FBIR Drilling Records|
|Current HK Record||Previous HK Record||% Improvement|
|Surface Spud to Rig Release (days) – Bakken||14.65||15.65||6||%|
|Surface Spud to Rig Release (days) – Three Forks||14.71||16.94||13||%|
|24 Hour Footage (feet)||5,104||4,731||8||%|
During the quarter, the average time from the start of completion to production was approximately 19 days, representing an improvement of 32% compared to the third quarter of 2014. This improvement was primarily driven by modifying the well clean out process. Year-to-date, completion costs on all Company-operated wells have come in under their authorization for expenditure (AFE).
Completed well costs remained consistent throughout most of the third quarter of 2015 at approximately $7.2 million; however, Halcón has experienced additional service cost reductions and estimates that completed well costs in FBIR are currently approximately $6.8 million.
The Company has made significant progress increasing gas capture in the Williston Basin and is currently selling approximately 95% of its gas production.
Halcón is the operator of 199 producing Bakken wells and 60 Three Forks wells. The Company currently has 5 Bakken wells and 4 Three Forks wells being completed or waiting on completion on its operated acreage.
“El Halcón” – East Texas Eagle Ford
Halcón operated one rig in El Halcón during the third quarter. The Company spudded four wells and put three wells online during the period. On average, wells put online year-to-date are outperforming Halcón’s 452 MBoe type curve for the area on a per lateral foot basis.
The Company’s operational performance continues to improve in El Halcón. Drilling days (spud to total depth) averaged 11.41 days per 3-string well during the third quarter of 2015, or 1,439 feet per day, representing an improvement of 32% compared to the third quarter of 2014. Halcón set a new drilling record during the period by drilling a 3-string well in 9.70 days (spud to total depth), or 1,562 feet per day.
The Company completed an average of four stages per day on wells completed during the three months ended September 30, 2015, a 40% improvement compared to the same period of 2014. Halcón set a new record during the period by completing an average of five stages per day on a single well.
The drilling program at El Halcón is in development mode and the Company expects to drill two to four wells per pad throughout the remainder of this year and in 2016.
The current estimated completed well cost is approximately $6.8 million for a three-string well. This completed well cost estimate accounts for a 500 foot increase in average lateral length to approximately 7,500 feet and a 33% increase in the amount of proppant used during completion operations (~2,000 pounds per lateral foot), all of which is expected to result in more reserves per well.
There are currently 102 Halcón-operated East Texas Eagle Ford wells producing and 3 Company-operated wells being completed or waiting on completion.
Fourth Quarter 2015 Production Guidance
Halcón expects to produce an average of 39 – 41 Mboe/d during the fourth quarter of 2015.
The Company has 30,500 barrels per day of oil hedged from October 1, 2015 to December 31, 2015 at an average price of $90.21 per barrel. For 2016, Halcón has 25,497 barrels per day of oil hedged at an average price of $80.59 per barrel, and for 2017, Halcón has 3,750 barrels per day of oil hedged at an average price of $65.75 per barrel. The Company estimates the pre-tax mark-to-market value of its hedge portfolio to be approximately $350 million as of November 4, 2015. (Original Source)
Shares of Halcon Resources opened today at $0.72 and are currently trading down at $0.71. HK has a 1-year high of $3.47 and a 1-year low of $0.52. The stock’s 50-day moving average is $0.79 and its 200-day moving average is $1.05.
On the ratings front, Roth Capital analyst John M. White maintained a Buy rating on HK, with a price target of $2.75, in a report issued on August 31. The current price target implies an upside of 287.3% from current levels. According to TipRanks.com, White has a total average return of -0.3%, a 60.0% success rate, and is ranked #2693 out of 3824 analysts.
Halcon Resources Corp is an oil and natural gas company, which is engaged in the acquisition, production, exploration and development of onshore liquids-rich oil and natural gas assets in the United States.