Halcón Resources Announces Fourth Quarter 2017 Results and Provides an Operational Update

HOUSTON, Feb. 28, 2018 (GLOBE NEWSWIRE) -- Halcón Resources Corporation (NYSE:HK) (“Halcón” or the “Company”) today announced its fourth quarter 2017 results and provided an update on recent well results and operations.

Net production for the three months ended December 31, 2017 averaged 6,283 barrels of oil equivalent per day (Boe/d).  Production was comprised of 70% oil, 15% natural gas liquids (NGLs) and 15% natural gas for the quarter. 

Halcón generated total revenues of $25.3 million for the fourth quarter of 2017.  The Company reported a net loss available to common stockholders of $(93.1) million or a net loss per basic and diluted share of $(0.63) for the fourth quarter of 2017.  After adjusting for selected items (see Selected Item Review and Reconciliation table for additional information), the Company generated a net loss of $(18.1) million, or $(0.12) per diluted share for the fourth quarter of 2017.  Adjusted EBITDA (see EBITDA Reconciliation table for additional information) totaled $2.2 million for the fourth quarter of 2017. 

Excluding the impact of hedges, Halcón realized 95% of the average NYMEX oil price, 47% of the average NYMEX oil price for NGLs and 71% of the average NYMEX natural gas price during the fourth quarter of 2017.  Realized hedge proceeds totaled approximately $0.6 million during the fourth quarter. 

Total operating costs per unit, after adjusting for selected items (see Selected Operating Data table for additional information), were $41.08 per Boe for the fourth quarter of 2017, compared to $19.30 per Boe for the third quarter of 2017.  This increase in per unit total operating costs was primarily driven by the loss of economies of scale related to reduced quarterly production driven by the Company’s divestiture of its Williston Basin assets.

Acquisitions

As previously reported, in December 2017, the Company acquired 4,413 net acres adjacent to its Monument Draw area for approximately $104 million.  In January 2018, Halcón closed on the acquisition of 8,320 net acres in its Monument Draw north option for $108 million (the “Monument Draw North Option”).  On February 6, 2018, the Company entered into a purchase and sale agreement to purchase 10,524 net acres and ~1,100 Boe/d of associated current production in Western Ward County for $200 million (the “West Quito Draw Acquisition”).  The West Quito Draw Acquisition is expected to close in early April 2018. 

Liquidity and Capital Spending

As of December 31, 2017, Halcón’s liquidity was $678 million pro forma for the January 2018 exercise of the Monument Draw North Option ($108 million) in addition to the Company’s net proceeds from the February 2018 offering of common stock ($61 million) and unsecured notes ($203 million).  This liquidity consists of $580 million of pro forma cash on hand plus an undrawn senior secured revolving credit facility with a borrowing base of $100 million less letters of credit outstanding. 

During the fourth quarter of 2017, Halcón incurred capital costs of approximately $94 million on drilling and completions and $37 million on infrastructure, seismic and other. 

Hedging Update

As of February 28, 2018, Halcón had 9,510 barrels per day (bbl/d) of oil hedged for 2018 at an average price of $52.65 per barrel.  For 2019, the Company has 8,247 bbl/d of oil hedged at an average price of $54.41 per barrel.  Halcón also has Midland vs. Cushing basis differential swaps in place for 10,526 bbl/d in 2018 at an average swap price of -$1.23 per barrel and 12,000 bbl/d in 2019 at an average swap price of -$1.02 per barrel.

As of February 28, 2018, Halcón had 7,500 MMBtu/d of natural gas hedged in 2018 at an average price of $3.16 per MMBtu.  The Company had WAHA vs. NYMEX basis differential swaps in place for 5,000 MMBtu/d for the second half of 2018 through year-end 2019 at an average swap price of -$1.05 per MMBtu/d.

Operations Update

Halcón is currently producing in excess of 12,000 Boe/d net.  The Company expects first quarter 2018 production to average between 10,500 and 11,500 Boe/d net.  Halcón is currently running three operated rigs in the Delaware Basin and is considering adding a fourth rig later in 2018 to focus on West Quito Draw once that acquisition closes.  The Company also has one full-time frac crew operating which will continue to work for Halcón for the remainder of 2018.  Halcón also plans to source a spot frac crew from time to time in 2018 to ensure its drilled but uncompleted well inventory stays at reasonable levels. 

Halcón currently holds 21,679 net acres in its Monument Draw area in addition to an option to acquire an additional 7,680 net acres on the eastern side of its acreage (the “East Option Acreage”).  The Company has five horizontal lower Wolfcamp wells producing in this area with two additional wells currently being drilled.  Halcón recently put the SR7902H and SR7903H lower Wolfcamp wells online. These wells are located in the southern portion of Halcón’s Monument Draw acreage and were completed with an average lateral length of 9,524 feet. These two wells averaged a peak 24 hour IP rate of 1,817 Boe/d and have a current average 20 day IP rate of 1,593 Boe/d (81% oil) which continues to increase. This well is located on the Company’s East Option Acreage and was completed with a lateral length of 9,267 feet. This well had a peak 24 hour IP rate of 1,863 Boe/d and has a current 10 day IP rate of 1,100 Boe/d (87% oil) which continues to increase. 

Halcón currently holds 27,035 net acres in its Hackberry Draw area. Since acquiring most of this acreage in early 2017, the Company has drilled and completed 10 horizontal wells (nine Wolfcamp and one 3rd Bone Spring). Halcón currently has one well waiting on completion and three additional wells currently being drilled in Hackberry Draw (two Wolfcamp and one 2nd Bone Spring well). The Company’s two most recent Wolfcamp wells put online, the Jose Katie East 1H and the Jose Katie West 1H, were completed with an average lateral length of 9,817 feet. These two wells averaged a peak 24 hour IP rate of 1,341 Boe/d and have a current 20 day IP rate of 1,071 Boe/d (86% oil) which continues to increase. The early time production of these wells is greater than Halcón’s Wolfcamp type curve for this area. These two wells are spaced at 660' in the Wolfcamp B interval. Early time results here also indicate a positive test at this spacing interval. 

Conference Call and Webcast Information

Halcón Resources Corporation (NYSE:HK) has scheduled a conference call for Thursday, March 1, 2018, at 11:00 a.m. EST (10:00 a.m. CST).  To participate in the conference call, dial (888) 394-8218 for domestic callers, and (323) 701-0225 for international callers a few minutes before the call begins and reference Halcón Resources conference ID 7054105.  The conference call will also be webcast live over the Internet on Halcón Resources’ website at http://www.halconresources.com in the Investors section under Events and Presentations.    

About Halcón Resources

Halcón Resources Corporation is an independent energy company focused on the acquisition, production, exploration and development of liquids-rich onshore oil and natural gas assets in the United States.

For more information contact Quentin Hicks, Executive Vice President of Finance, Capital Markets & Investor Relations, at 832-538-0557 or qhicks@halconresources.com.

Forward-Looking Statements

This release contains 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.  Forward-looking statements include, among others, statements about anticipated production, divestitures, liquidity, capital spending, drilling and completion plans, and option exercises.  Forward-looking statements may often, but not always, be identified by the use of such words such as "expects", "believes", "intends", "anticipates", "plans", "estimates", “projects”, "potential", "possible", or "probable" or statements that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved.  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, 2017 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.

“EUR,” or Estimated Ultimate Recovery, refers to our management’s internal estimates based on per well hydrocarbon quantities that may be potentially recovered from a hypothetical future well completed as a producer in the area.  These quantities do not constitute “reserves” within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or SEC rules and are subject to substantially greater uncertainties relating to recovery than reserves.  For areas where the Company has no or very limited operating history, EURs are based on publicly available information relating to operations of producers operating in such areas.  For areas where the Company has sufficient operating data to make its own estimates, EURs are based on internal estimates by the Company’s management and reserve engineers.

           
HALCÓN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
           
  Successor Successor Predecessor
        Period from Period from
        September 10, 2016 January 1, 2016
  Three Months Ended December 31, Year Ended  through through
   2017   2016  December 31, 2017 December 31, 2016 September 9, 2016
Operating revenues:          
Oil, natural gas and natural gas liquids sales:          
Oil  $  21,202  $  118,526  $  340,674  $  139,786  $  248,064 
Natural gas    1,143     5,933     16,194     6,756     9,511 
Natural gas liquids    2,190     5,220     18,969     6,018     7,929 
Total oil, natural gas and natural gas liquids sales    24,535     129,679     375,837     152,560     265,504 
Other    742     576     2,128     802     1,339 
Total operating revenues    25,277     130,255     377,965     153,362     266,843 
           
Operating expenses:          
Production:          
Lease operating    2,921     18,591     61,743     22,382     50,032 
Workover and other    (474)    8,945     21,739     10,510     22,507 
Taxes other than income    1,608     10,191     30,757     12,364     24,453 
Gathering and other    6,143     12,040     40,783     14,677     29,279 
Restructuring    5,455     -     7,535     -     5,168 
General and administrative    24,385     24,714     111,351     41,395     83,641 
Depletion, depreciation and accretion    9,419     37,848     110,207     46,899     120,555 
Full cost ceiling impairment    -     -     -     420,934     754,769 
(Gain) loss on sale of oil and natural gas properties    5,947     -     (721,573)    -     - 
Other operating property and equipment impairment    -     -     -     -     28,056 
Total operating expenses    55,404     112,329     (337,458)    569,161     1,118,460 
           
Income (loss) from operations    (30,127)    17,926     715,423     (415,799)    (851,617)
           
Other income (expenses):          
Net gain (loss) on derivative contracts    (26,848)    (20,165)    1,291     (27,740)    (17,998)
Interest expense and other, net    (7,289)    (23,382)    (71,097)    (28,861)    (122,249)
Reorganization items    -     (1,493)    -     (2,049)    913,722 
Gain (loss) on extinguishment of debt    (28,866)    -     (114,931)    -     81,434 
Total other income (expenses)    (63,003)    (45,040)    (184,737)    (58,650)    854,909 
Income (loss) before income taxes    (93,130)    (27,114)    530,686     (474,449)    3,292 
Income tax benefit (provision)    -     (1,387)    5,000     (4,744)    8,666 
Net income (loss)    (93,130)    (28,501)    535,686     (479,193)    11,958 
Non-cash preferred dividend    -     -     (48,007)    -     - 
Series A preferred dividends    -     -     -     -     (8,847)
Preferred dividends and accretion on redeemable noncontrolling interest    -     -     -     (791)    (35,905)
Net income (loss) available to common stockholders $  (93,130) $  (28,501) $  487,679  $  (479,984) $  (32,794)
           
Net income (loss) per share of common stock:          
Basic $  (0.63) $  (0.31) $  3.67  $  (5.26) $  (0.27)
Diluted $  (0.63) $  (0.31) $  3.65  $  (5.26) $  (0.27)
Weighted average common shares outstanding:          
Basic    148,504     91,251     132,763     91,228     120,513 
Diluted    148,504     91,251     133,576     91,228     120,513 
           


       
HALCÓN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
       
    Successor
    December 31, 2017 December 31, 2016
Current assets:    
 Cash and cash equivalents $  424,071  $  24 
 Accounts receivable    36,416     147,762 
 Receivables from derivative contracts    677     5,923 
 Prepaids and other    10,628     6,940 
   Total current assets    471,792     160,649 
Oil and natural gas properties (full cost method):    
 Evaluated    877,316     1,269,034 
 Unevaluated    765,786     316,439 
   Gross oil and natural gas properties    1,643,102     1,585,473 
 Less - accumulated depletion    (570,155)    (465,849)
   Net oil and natural gas properties    1,072,947     1,119,624 
Other operating property and equipment:    
 Other operating property and equipment    101,282     38,617 
 Less - accumulated depreciation    (4,092)    (1,107)
   Net other operating property and equipment    97,190     37,510 
Other noncurrent assets:    
 Funds in escrow and other    1,691     1,887 
Total assets $  1,643,620  $  1,319,670 
       
Current liabilities:    
 Accounts payable and accrued liabilities $  131,087  $  186,184 
 Liabilities from derivative contracts    19,248     16,434 
 Other    -     4,935 
   Total current liabilities    150,335     207,553 
Long-term debt, net    409,168     964,653 
Other noncurrent liabilities:    
 Liabilities from derivative contracts    7,751     486 
 Asset retirement obligations    4,368     31,985 
 Other    -     2,305 
Commitments and contingencies     
Stockholders' equity:    
 Common stock: 1,000,000,000 shares of $0.0001 par value    
   authorized; 149,379,491 and 92,991,183 shares issued and outstanding     
   as of December 31, 2017 and 2016, respectively    15     9 
 Additional paid-in capital    1,016,281     592,663 
 Retained earnings (accumulated deficit)    55,702     (479,984)
   Total stockholders' equity    1,071,998     112,688 
Total liabilities and stockholders' equity $  1,643,620  $  1,319,670 

 

             
HALCÓN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
             
    Successor Successor Predecessor
          Period from Period from
          September 10, 2016 January 1, 2016
    Three Months Ended December 31, Year Ended  through through
     2017   2016  December 31, 2017 December 31, 2016 September 9, 2016
Cash flows from operating activities:          
Net income (loss) $  (93,130) $  (28,501) $  535,686  $  (479,193) $  11,958 
Adjustments to reconcile net income (loss) to net cash provided by (used          
in) operating activities:          
 Depletion, depreciation and accretion    9,419     37,848     110,207     46,899     120,555 
 Full cost ceiling impairment    -     -     -     420,934     754,769 
 (Gain) loss on sale of oil and natural gas properties    5,947     -     (721,573)    -     - 
 Other operating property and equipment impairment    -     -     -     -     28,056 
 Stock-based compensation, net    3,209     8,323     36,757     21,519     4,876 
 Unrealized loss (gain) on derivative contracts    27,478     82,111     16,468     112,449     263,732 
 Amortization and write-off of deferred loan costs    489     -     1,795     -     6,371 
 Amortization of discount and premium    239     2,129     2,597     2,506     1,515 
 Reorganization items     -     (16,523)    (739)    (15,963)    (929,084)
 Loss (gain) on extinguishment of debt    28,866     -     114,931     -     (81,434)
 Accrued settlements on derivative contracts    697     4,197     24     (18,498)    - 
 Other expense (income)    38     173     (3,355)    79     (4,233)
Cash flow from operations before changes in working capital    (16,748)    89,757     92,798     90,732     177,081 
Changes in working capital    29,117     1,057     21,793     12,404     (1,733)
Net cash provided by (used in) operating activities    12,369     90,814     114,591     103,136     175,348 
             
Cash flows from investing activities:          
 Oil and natural gas capital expenditures    (112,377)    (51,100)    (331,257)    (61,389)    (226,741)
 Proceeds received from sales of oil and natural gas assets    102,316     888     2,003,894     888     (407)
 Acquisition of oil and natural gas properties    (101,870)    (70)    (1,018,546)    (70)    124 
 Acquisition of other operating property and equipment    -     -     (25,538)    -     - 
 Other operating property and equipment capital expenditures    (27,740)    (519)    (53,214)    (750)    (950)
 Proceeds received from sale of other operating property and equipment    507     -     21,798     -     138 
 Funds held in escrow and other    (4)    -     1,455     (1,721)    62 
Net cash provided by (used in) investing activities    (139,168)    (50,801)    598,592     (63,042)    (227,774)
             
Cash flows from financing activities:          
 Proceeds from borrowings    -     85,000     1,349,000     115,000     886,000 
 Repayments of borrowings    (425,000)    (127,000)    (1,922,826)    (159,000)    (727,648)
 Cash payments to Noteholders and Preferred Holders    (12,750)    -     (83,653)    (10,013)    (97,521)
 Debt issuance costs    (579)    -     (17,799)    -     (1,977)
 Preferred stock issued    -     -     400,055     -     - 
 Offering costs and other    (148)    -     (13,913)    -     (511)
Net cash provided by (used in) financing activities    (438,477)    (42,000)    (289,136)    (54,013)    58,343 
             
Net increase (decrease) in cash and cash equivalents    (565,276)    (1,987)    424,047     (13,919)    5,917 
             
Cash and cash equivalents at beginning of period    989,347     2,011     24     13,943     8,026 
Cash and cash equivalents at end of period $  424,071  $  24  $  424,071  $  24  $  13,943 

 

          
HALCÓN RESOURCES CORPORATION 
SELECTED OPERATING DATA 
(Unaudited) 
          
  Three Months Ended December 31, Years Ended December 31, 
   2017   2016   2017  2016(3) 
          
Production volumes:         
Crude oil (MBbls)    403     2,717     7,511     10,368  
Natural gas (MMcf)    547     2,490     7,439     9,571  
Natural gas liquids (MBbls)    84     421     1,249     1,597  
Total (MBoe)    578     3,553     10,000     13,560  
Average daily production (Boe/d)    6,283     38,620     27,397     37,049  
          
Average prices:         
Crude oil (per Bbl) $  52.61  $  43.62  $  45.36  $  37.41  
Natural gas (per Mcf)    2.09     2.38     2.18     1.70  
Natural gas liquids (per Bbl)    26.07     12.40     15.19     8.73  
Total per Boe    42.45     36.50     37.58     30.83  
          
Cash effect of derivative contracts:         
Crude oil (per Bbl) $  1.20  $  22.73  $  2.26  $  31.76  
Natural gas (per Mcf)    0.27     0.08     0.11     0.12  
Natural gas liquids (per Bbl)    -      -      -      -   
Total per Boe    1.09     17.43     1.78     24.37  
          
Average prices computed after cash effect of settlement of derivative contracts:         
Crude oil (per Bbl) $  53.81  $  66.35  $  47.62  $  69.17  
Natural gas (per Mcf)    2.36     2.46     2.29     1.82  
Natural gas liquids (per Bbl)    26.07     12.40     15.19     8.73  
Total per Boe    43.54     53.93     39.36     55.20  
          
Average cost per Boe:         
Production:         
Lease operating $  5.05  $  5.23  $  6.17  $  5.34  
Workover and other    (0.82)    2.52     2.17     2.43  
Taxes other than income    2.78     2.87     3.08     2.72  
Gathering and other, as adjusted (1)    8.96     2.54     3.40     2.32  
Restructuring    9.44     -      0.75     0.38  
General and administrative, as adjusted (1)    25.11     3.90     5.29     4.29  
Depletion    14.13     10.27     10.43     11.80  
          
(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 $  42.19  $  6.95  $  11.14  $  9.22  
Stock-based compensation:         
Non-cash    (5.55)    (2.34)    (3.68)    (1.95) 
Transaction costs, key employee retention agreements and other:         
Cash     (11.53)    (0.71)    (2.17)    (2.98) 
General and administrative, as adjusted $  25.11  $  3.90  $  5.29  $  4.29  
          
Gathering and other, as reported $  10.63  $  3.39  $  4.08  $  3.24  
  Rig termination / stacking charges     (1.67)    (0.85)    (0.68)    (0.92) 
Gathering and other, as adjusted $  8.96  $  2.54  $  3.40  $  2.32  
          
Total operating costs, as reported $  59.83  $  20.96  $  26.64  $  22.95  
  Total adjusting items     (18.75)    (3.90)    (6.53)    (5.85) 
Total operating costs, as adjusted (2) $  41.08  $  17.06  $  20.11  $  17.10  
          
(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. 
          
(3) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the year ended December 31, 2016.  The combination was generated by addition of comparable financial statement line items. However, because of various adjustments to the consolidated financial statements in connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor may not be comparable to those of the Predecessor. The financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods.  The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company’s financial results for the applicable periods.
 
  

 

HALCÓN RESOURCES CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
            
            
  Successor Successor Predecessor
        Period from Period from 
        September 10, 2016 January 1, 2016 
  Three Months Ended December 31, Year Ended  through through 
   2017   2016  December 31, 2017 December 31, 2016 September 9, 2016 
As Reported:           
Net income (loss) available to common stockholders, as reported $  (93,130) $  (28,501) $  487,679  $  (479,984) $  (32,794) 
Non-cash preferred dividend    -     -     48,007     -      -   
Series A preferred dividends    -     -     -     -     8,847  
Preferred dividends and accretion on redeemable noncontrolling interest    -     -     -     791     35,905  
Net income (loss) $  (93,130) $  (28,501) $  535,686  $  (479,193) $  11,958  
            
Impact of Selected Items:           
Unrealized loss (gain) on derivatives contracts:           
Crude oil $  27,844  $  81,335  $  17,740  $  111,658  $  262,813  
Natural gas    (366)    776     (1,272)    791     919  
Total mark-to-market non-cash charge    27,478     82,111     16,468     112,449     263,732  
Full cost ceiling impairment    -     -     -     420,934     754,769  
(Gain) loss on sale of oil and natural gas properties    5,947     -     (721,573)    -     -  
Other operating property and equipment impairment    -     -     -     -     28,056  
Loss (gain) on extinguishment of debt    28,866     -     114,931     -     (81,434) 
Deferred financing costs expensed, net(1)    232     -     537     -     3,582  
Reorganization items    -     1,493     -     2,049     (913,722) 
Restructuring    5,455     -     7,535     -     5,168  
Rig termination / stacking charges, key employee retention agreements, transaction costs and other    7,099     5,519     26,973     6,443     40,689  
Selected items, before income taxes    75,077     89,123     (555,129)    541,875     100,840  
Income tax effect of selected items(2)     -     -     -     -     -  
Selected items, net of tax $  75,077  $  89,123  $  (555,129) $  541,875  $  100,840  
            
As Adjusted:           
Net income (loss) available to common stockholders, excluding selected items $  (18,053) $  60,622  $  (19,443) $  62,682  $  112,798  
Net income (loss) from assumed conversions    -     -     -     -     10,778  
Net income (loss) available to common stockholders after assumed conversions, excluding selected items(3) $  (18,053) $  60,622  $  (19,443) $  62,682  $  123,576  
            
            
Basic net income (loss) per common share, as reported $  (0.63) $  (0.31) $  3.67  $  (5.26) $  (0.27) 
Impact of selected items    0.51     0.97     (3.82)    5.95     1.21  
Basic net income (loss) per common share, excluding selected items(3) $  (0.12) $  0.66  $  (0.15) $  0.69  $  0.94  
            
Diluted net income (loss) per common share, as reported $  (0.63) $  (0.31) $  3.65  $  (5.26) $  (0.27) 
Impact of selected items    0.51     0.97     (3.80)    5.95     1.13  
Diluted net income (loss) per common share, excluding selected items(3)(4) $  (0.12) $  0.66  $  (0.15) $  0.69  $  0.86  
            
            
Net cash provided by (used in) operating activities $  12,369  $  90,814  $  114,591  $  103,136  $  175,348  
Changes in working capital, net of acquisitions    (29,117)    (1,057)    (21,793)    (12,404)    1,733  
Cash flow from operations before changes in working capital    (16,748)    89,757     92,798     90,732     177,081  
Cash components of selected items    13,125     19,338     36,679     42,953     66,092  
Income tax effect of selected items(2)    -     -     -     -     -  
Cash flow from operations before changes in working capital, adjusted for selected items(3) $  (3,623) $  109,095  $  129,477  $  133,685  $  243,173  
            
(1) Represents charges related to the write-off of debt issuance costs associated with the revolving credit facility.  
            
(2) For the 2017 and 2016 columns, this represents tax impact using an estimated tax rate of 0.0% due to the Company maintaining a full valuation allowance. 
            
(3) 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 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. 
            
(4) The impact of selected items for the three months ended and year ended December 31, 2017 was calculated based upon weighted average diluted shares of 148.5 million and 132.8 million, respectively, due to the net loss available to common stockholders excluding selected items. The impact of selected items for the three months ended December 31, 2016, the period of September 10, 2016 through December 31, 2016 and the period of January 1, 2016 through September 9, 2016 was calculated based upon weighted average diluted shares of 91.5 million, 91.3 million and 144.3 million, respectively, due to the net income available to common stockholders, excluding selected items. 
       

 

         
HALCÓN RESOURCES CORPORATION
EBITDA RECONCILIATION (Unaudited) 
(In thousands)
         
  Three Months Ended December 31, Years Ended December 31,
   2017   2016   2017  2016(2)
         
Net income (loss), as reported $  (93,130) $  (28,501) $  535,686  $  (467,235)
Impact of adjusting items:        
Interest expense     8,383     23,126     74,524     152,477 
Depletion, depreciation and accretion    9,419     37,848     110,207     167,454 
Full cost ceiling impairment    -      -      -      1,175,703 
Other operating property and equipment impairment    -      -      -      28,056 
Income tax provision (benefit)    -      1,387     (5,000)    (3,922)
Stock-based compensation    3,209     8,323     36,757     26,395 
Interest income    (1,404)    (3)    (2,255)    (36)
(Gain) loss on sale of other assets    102     276     (253)    706 
Restructuring     5,455     -      7,535     5,168 
Reorganization items    -      1,493     -      (911,673)
Loss (gain) on extinguishment of debt    28,866     -      114,931     (81,434)
(Gain) loss on sale of oil and natural gas properties    5,947     -      (721,573)    -  
Loss (gain) on mark-to-market of embedded derivative and tranche rights    -      -      -      (5,734)
Unrealized loss (gain) on derivatives contracts    27,478     82,111     16,468     376,181 
Write-off of deferred loan costs     232     -      537     3,582 
Rig termination / stacking charges    966     3,003     6,825     12,467 
Transaction costs, key employee retention agreements and other    6,662     2,516     20,677     40,399 
Adjusted EBITDA(1) $  2,185  $  131,579  $  195,066  $  518,554 
         
(1)  Adjusted EBITDA 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 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.
         
(2) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the year ended December 31, 2016. The combination was generated by addition of comparable financial statement line items. However, because of various adjustments to the consolidated financial statements in connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor may not be comparable to those of the Predecessor. The financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods. The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company’s financial results for the applicable periods.


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