Halcón Resources Announces First Quarter 2018 Results, Provides an Operational Update and Revised 2018 Guidance

HOUSTON, May 02, 2018 (GLOBE NEWSWIRE) -- Halcón Resources Corporation (NYSE:HK) (“Halcón” or the “Company”) today announced its first quarter 2018 financial and operating results, provided an operational update and revised 2018 guidance.

Net production for the three months ended March 31, 2018 averaged 10,967 barrels of oil equivalent per day (Boe/d), which was a 75% increase from the fourth quarter of 2017 production level of 6,283 Boe/d.  Additionally, the first quarter production rate is more than 100% higher than Halcón’s fourth quarter 2017 production rate pro forma for the Williston Non-Op asset sale.  Production was comprised of 70% oil, 15% natural gas liquids (NGLs) and 15% natural gas for the first quarter.

Halcón generated total revenues of $49.3 million for the first quarter of 2018.  The Company reported a net loss available to common stockholders of $(2.6) million or a net loss per basic and diluted share of $(0.02) for the same period.  After adjusting for selected items (see Selected Item Review and Reconciliation table for additional information), the Company generated a net loss of $(8.7) million, or $(0.06) per diluted share for the first quarter of 2018.  Adjusted EBITDA (see EBITDA Reconciliation table for additional information) totaled $18.1 million for the first quarter of 2018 as compared to $2.2 million for the fourth quarter of 2017.

Excluding the impact of hedges, Halcón realized 99% of the average NYMEX oil price, 41% of the average NYMEX oil price for NGLs and 87% of the average NYMEX natural gas price during the first quarter of 2018.  Halcón realized hedge losses of approximately $5.2 million during the first quarter.

Liquidity and Capital Spending

The Company recently received approval on its senior secured revolving credit facility for a borrowing base of $200 million effective May 1, 2018.  This represents a 100% increase in Halcón’s borrowing base vs. its previous level of $100 million.  As of March 31, 2018, Halcón’s liquidity was $380 million pro forma for the closing of its West Quito Draw acquisition and the new borrowing base.  This liquidity consisted of $182 million of pro forma cash on hand plus $200 million of undrawn revolver availability, less letters of credit outstanding.

During the first quarter of 2018, Halcón incurred capital costs of approximately $116 million on drilling and completions, $112 million on acquisitions and $38 million on infrastructure, seismic and other.

Hedging Update

As of May 2, 2018, Halcón had 10,673 barrels per day (bbl/d) of oil hedged for the last nine months of 2018 at an average price of $52.92 per barrel.  For 2019, the Company has 14,000 bbl/d of oil hedged at an average price of $55.76 per barrel. 

As of May 2, 2018, Halcón had 7,500 MMBtu/d of natural gas hedged for the last nine months of 2018 at an average price of $3.16 per MMBtu.  For 2019, the Company has 5,000 MMBtu/d of gas hedged at an average price of $2.81 per MMBtu.

Operations Update

Halcón is currently producing in excess of 13,500 Boe/d net.  The Company expects second quarter 2018 production to average between 13,000 and 14,000 Boe/d net.  Halcón is currently running three operated rigs in the Delaware Basin with a fourth operated rig coming in the next few weeks.  These four rigs will spend most of the remainder of 2018 in Monument Draw and West Quito Draw. The Company also has one full-time frac crew operating and plans to source a spot frac crew in the second half of 2018.    

Halcón currently holds 22,479 net acres in its Monument Draw area.  The Company has five horizontal lower Wolfcamp wells producing in this area.  Additionally, Halcón has two wells waiting on completion and another three wells currently being drilled in this area.  Halcon’s average 30 day peak IP rate for its first five operated horizontal wells in Monument Draw was 1,575 Boe/d (average completed lateral length of 8,706 feet). This area is currently producing approximately 3,850 Boe/d, net.  

Halcón currently holds 10,622 net acres in its West Quito Draw area.  The Company plans to spud its first operated horizontal Wolfcamp well in this area this summer.  This area is currently producing approximately 1,350 Boe/d, net.  

Halcón currently holds 27,115 net acres in its Hackberry Draw area.  The Company has drilled and completed 14 horizontal wells (twelve Wolfcamp, one 2nd Bone Spring and one 3rd Bone Spring).  Additionally, Halcón has three wells flowing back after frac, one well being drilled out and another well currently being frac’d in this area.  Halcon’s average 30 day peak IP rate for its first 9 operated Wolfcamp horizontal wells with 30 day rates available in Hackberry Draw was 936 Boe/d.  The Company’s first 2nd Bone Spring horizontal well in Hackberry Draw, the Berkley State West 2H, is one of the three wells currently flowing back after frac.   This area is currently producing approximately 8,250 Boe/d, net.  

Revised 2018 Guidance

The guidance table below has been updated from previous 2018 guidance to reflect the addition of a fourth operated rig in May, 2018 as well as the inclusion of the Company’s recently acquired West Quito Draw properties.  This guidance also assumes a second spot frac crew is operating from mid-August to October, 2018.

 

    
 2Q 20184Q 2018Full Year 2018
Production (Boe/d)   
Total13,000 - 14,00023,000 - 25,00015,000 – 20,000
% Oil  68% - 72%
% Gas  14% - 16%
% NGL  14% - 16%
    
Capex ($MM)   
D&C Capex (1)  $425 - $475
Infrastructure, Seismic and Other Capex  $70 - $90
    
Operating Costs and Expenses   
Lease Operating & Workover ($/Boe)  $4.25 – $5.25
Gathering, Transportation & Other ($/Boe)  $3.00 – $4.00
Cash G&A ($MM)  $40 - $45
Production Taxes (% of Revenue)  6% – 7%
    
(1) Excludes capitalized G&A.   
    

Floyd C. Wilson commented “Our revised 2018 guidance includes the impact of our recently acquired West Quito properties and the addition of a fourth rig in May. It’s important to note that our revised 2018 production guidance assumes we don’t bring a second spot frac crew in until Mid-August of 2018. This timing results in back-end weighted production growth for us in 2018 with a fourth quarter production rate expected to be around 24,000 boe/d. This sets us up nicely as we head into 2019. I also want to emphasize that our 2018 drilling plan consists of almost entirely long laterals in excess of 9,000 feet. Although long lateral development results in longer cycle times, long laterals are a more capital efficient way to develop assets over the long-run. We are well positioned to withstand any takeaway issues in the Permian through 2019 with takeaway contracts in place for oil and gas. We are evaluating ways to create value and have options available to us including joint venture and infrastructure divestiture opportunities. We continue to focus on execution and efforts to control costs while optimizing drilling and completion programs.”

Conference Call and Webcast Information

Halcón Resources Corporation (NYSE:HK) has scheduled a conference call for Thursday, May 3, 2018, at 11:00 a.m. EDT (10:00 a.m. CDT).  To participate in the conference call, dial (800) 239-9838 for domestic callers, and (323) 794-2551 for international callers a few minutes before the call begins and reference Halcón Resources conference ID 9312036.  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 and drilling and completion plans.  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.

        
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
        
    Three Months Ended  
    March 31, 
     2018   2017  
Operating revenues:     
 Oil, natural gas and natural gas liquids sales:     
 Oil $43,069  $122,521  
 Natural gas  2,319   6,219  
 Natural gas liquids  3,712   6,025  
 Total oil, natural gas and natural gas liquids sales  49,100   134,765  
 Other  155   833  
 Total operating revenues  49,255   135,598  
        
Operating expenses:     
 Production:     
 Lease operating   4,915   20,644  
 Workover and other  1,361   11,441  
 Taxes other than income  3,029   11,576  
 Gathering and other  6,422   11,942  
 Restructuring  101   755  
 General and administrative  15,210   20,849  
 Depletion, depreciation and accretion  15,991   32,886  
 (Gain) loss on sale of oil and natural gas properties  3,679   (231,190) 
 Total operating expenses  50,708   (121,097) 
Income (loss) from operations  (1,453)  256,695  
Other income (expenses):     
 Net gain (loss) on derivative contracts  5,903   26,398  
 Interest expense and other  (7,048)  (24,843) 
 Gain (loss) on extinguishment of debt  -   (56,898) 
 Total other income (expenses)   (1,145)  (55,343) 
Income (loss) before income taxes  (2,598)  201,352  
Income tax benefit (provision)  -   (12,000) 
Net income (loss)  (2,598)  189,352  
Non-cash preferred dividend  -   (801) 
Net income (loss) available to common stockholders $(2,598) $188,551  
        
Net income (loss) per share of common stock:     
 Basic $(0.02) $2.07  
 Diluted $(0.02) $1.69  
Weighted average common shares outstanding:     
 Basic  153,884   91,274  
 Diluted  153,884   112,084  
        

 

      
HALCÓN RESOURCES CORPORATION 
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) 
(In thousands, except share and per share amounts) 
      
  March 31, 2018 December 31, 2017 
Current assets:    
 Cash and cash equivalents$  382,075  $  424,071  
 Accounts receivable   41,608     36,416  
 Receivables from derivative contracts   13,465     677  
 Prepaids and other   10,520     10,628  
   Total current assets   447,668     471,792  
Oil and natural gas properties (full cost method):    
 Evaluated   984,861     877,316  
 Unevaluated   898,515     765,786  
   Gross oil and natural gas properties   1,883,376     1,643,102  
 Less - accumulated depletion   (584,616)    (570,155) 
   Net oil and natural gas properties   1,298,760     1,072,947  
Other operating property and equipment:    
 Other operating property and equipment   130,820     101,282  
 Less - accumulated depreciation   (5,424)    (4,092) 
 Net other operating property and equipment   125,396     97,190  
Other noncurrent assets:    
 Receivables from derivative contracts   4,590     -  
 Funds in escrow and other   21,658     1,691  
Total assets$  1,898,072  $  1,643,620  
      
Current liabilities:    
 Accounts payable and accrued liabilities$  113,606  $  131,087  
 Liabilities from derivative contracts   26,448     19,248  
   Total current liabilities   140,054     150,335  
Long-term debt, net   612,055     409,168  
Other noncurrent liabilities:    
 Liabilities from derivative contracts   7,097     7,751  
 Asset retirement obligations   4,641     4,368  
Commitments and contingencies    
Stockholders' equity:    
 Common stock: 1,000,000,000 shares of $0.0001 par value authorized;     
 160,468,799 and 149,379,491 shares issued and outstanding as of March 31, 2018     
 and December 31, 2017, respectively   16     15  
 Additional paid-in capital   1,081,105     1,016,281  
 Retained earnings (accumulated deficit)   53,104     55,702  
   Total stockholders' equity   1,134,225     1,071,998  
Total liabilities and stockholders' equity$  1,898,072  $  1,643,620  
          

 

         
HALCÓN RESOURCES CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 
(In thousands) 
         
    Three Months Ended   
    March 31,  
     2018   2017   
Cash flows from operating activities:      
Net income (loss) $  (2,598) $  189,352   
Adjustments to reconcile net income (loss) to net cash      
provided by (used in) operating activities:      
 Depletion, depreciation and accretion    15,991     32,886   
 (Gain) loss on sale of oil and natural gas properties    3,679     (231,190)  
 Stock-based compensation, net    3,581     8,347   
 Unrealized loss (gain) on derivative contracts    (11,113)    (24,214)  
 Amortization of deferred loan costs    292     185   
 Amortization of discount and premium    132     1,644   
 Loss (gain) on extinguishment of debt    -     56,898   
 Accrued settlements on derivative contracts    1,492     (1,265)  
 Other income (expense)    (1,386)    (883)  
Cash flow from operations before changes in working capital    10,070     31,760   
Changes in working capital    (22,652)    13,800   
Net cash provided by (used in) operating activities    (12,582)    45,560   
         
Cash flows from investing activities:      
 Oil and natural gas capital expenditures    (127,885)    (43,803)  
 Proceeds received from sale of oil and natural gas properties    (4,034)    477,306   
 Acquisition of oil and natural gas properties    (132,464)    (707,304)  
 Acquisition of other operating property and equipment    -     (25,538)  
 Other operating property and equipment capital expenditures    (30,721)    (502)  
 Proceeds received from sale of other operating property and equipment    1,899     10,286   
 Funds held in escrow and other    157     -   
Net cash provided by (used in) investing activities    (293,048)    (289,555)  
         
Cash flows from financing activities:      
 Proceeds from borrowings    206,000     1,029,000   
 Repayments of borrowings    -     (1,065,000)  
 Cash payments to Noteholders    -     (30,917)  
 Debt issuance costs    (3,371)    (15,508)  
 Preferred stock issued    -     400,055   
 Common stock issued    63,480     -   
 Offering costs and other    (2,475)    (11,502)  
Net cash provided by (used in) financing activities    263,634     306,128   
         
Net increase (decrease) in cash and cash equivalents    (41,996)    62,133   
         
Cash and cash equivalents at beginning of period    424,071     24   
Cash and cash equivalents at end of period $  382,075  $  62,157   
         

   

     
HALCÓN RESOURCES CORPORATION 
SELECTED OPERATING DATA (Unaudited) 
      
  Three Months Ended March 31,
   2018   2017 
     
Production volumes:    
Crude oil (MBbls)    693     2,631 
Natural gas (MMcf)    886     2,439 
Natural gas liquids (MBbls)    146     425 
Total (MBoe)    987     3,463 
Average daily production (Boe/d)    10,967     38,478 
     
Average prices:    
Crude oil (per Bbl) $  62.15  $  46.57 
Natural gas (per Mcf)    2.62     2.55 
Natural gas liquids (per Bbl)    25.42     14.18 
Total per Boe    49.75     38.92 
     
Cash effect of derivative contracts:    
Crude oil (per Bbl) $  (7.63) $  0.79 
Natural gas (per Mcf)    0.09     0.05 
Natural gas liquids (per Bbl)    -      -  
Total per Boe    (5.28)    0.63 
     
Average prices computed after cash effect of settlement of derivative contracts:    
Crude oil (per Bbl) $  54.52  $  47.36 
Natural gas (per Mcf)    2.71     2.60 
Natural gas liquids (per Bbl)    25.42     14.18 
Total per Boe    44.47     39.55 
     
Average cost per Boe:    
Production:    
Lease operating $  4.98  $  5.96 
Workover and other    1.38     3.30 
Taxes other than income    3.07     3.34 
Gathering and other, as adjusted (1)    5.55     2.66 
Restructuring    0.10     0.22 
General and administrative, as adjusted (1)    11.35     3.44 
Depletion    14.65     9.07 
     
(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 $  15.41  $  6.02 
Stock-based compensation:    
Non-cash    (3.63)    (2.41)
Transaction costs and other:    
Cash    (0.43)    (0.17)
General and administrative, as adjusted(2) $  11.35  $  3.44 
     
Gathering and other, as reported $  6.51  $  3.45 
 Rig stacking charges     (0.96)    (0.79)
Gathering and other, as adjusted(3) $  5.55  $  2.66 
     
Total operating costs, as reported $  31.35  $  22.07 
Total adjusting items    (5.02)    (3.37)
Total operating costs, as adjusted(4) $  26.33  $  18.70 
     
(2) General and administrative, as adjusted, is a non-GAAP measure that excludes non-cash stock-based compensation charges relating to equity awards under our incentive stock plans, as well as other cash charges associated with certain transactions. The Company believes that it is useful to understand the effects that these charges have on general and administrative expenses and total operating costs and that exclusion of such charges is useful for comparison to prior periods.


(3) Gathering and other, as adjusted, is a non-GAAP measure that excludes rig stacking charges incurred as a result of reductions in our drilling activities due to a dramatic decline in oil and natural gas prices beginning in 2014. The Company believes that it is useful to understand the effects that these charges have on gathering and other expense and total operating costs and that exclusion of such charges is useful for comparison to prior periods.


(4) 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, 
   2018   2017  
As Reported:     
Net income (loss) available to common stockholders, as reported $  (2,598) $  188,551  
Non-cash preferred dividend    -      801  
Net income (loss), as reported    (2,598)    189,352  
      
Impact of Selected Items:     
Unrealized loss (gain) on derivatives contracts:     
  Crude oil $  (10,125) $  (23,560) 
  Natural gas     (988)    (654) 
Total mark-to-market non-cash charge    (11,113)    (24,214) 
(Gain) loss on sale of oil and natural gas properties    3,679     (231,190) 
Loss (gain) on extinguishment of debt    -      56,898  
Restructuring    101     755  
Rig stacking charges, transaction costs and other    1,219     3,330  
Selected items, before income taxes    (6,114)    (194,421) 
Income tax effect of selected items (1)     -      12,000  
Selected items, net of tax    (6,114)    (182,421) 
      
As Adjusted:     
Net income (loss) available to common stockholders, excluding selected items (2) $  (8,712) $  6,931  
      
Basic net income (loss) per common share, as reported $  (0.02) $  2.07  
Impact of selected items    (0.04)    (1.99) 
Basic net income (loss) per common share, excluding selected items (2) $  (0.06) $  0.08  
      
      
Diluted net income (loss) per common share, as reported $  (0.02) $  1.69  
Impact of selected items    (0.04)    (1.63) 
Diluted net income (loss) per common share, excluding selected items (2)(3) $  (0.06) $  0.06  
      
      
Net cash provided by (used in) operating activities $  (12,582) $  45,560  
Changes in working capital    22,652     (13,800) 
Cash flow from operations before changes in working capital    10,070     31,760  
Cash components of selected items    (24)    5,271  
Income tax effect of selected items (1)    -      12,000  
Cash flow from operations before changes in working capital, adjusted for selected items (2) $  10,046  $  49,031  
      
 
(1) For the 2017 column, this represents the tax impact from the estimated alternative minimum tax generated primarily by the gain from the sale of the El Halcón Assets.

(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 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 31,2018 was calculated based upon weighted average diluted shares of 153.9 million due to the net loss available to common stockholders, excluding selected  items. The impact of selected items for the three months ended March 31, 2017 was calculated based upon weighted average diluted shares of 112.1 million due to the net income available to common stockholders, excluding selected items.
          


      
HALCÓN RESOURCES CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited) 
(In thousands)
      
  Three Months Ended March 31, 
   2018   2017  
      
Net income (loss), as reported $  (2,598) $  189,352  
Impact of adjusting items:     
Interest expense     9,602     25,190  
Depletion, depreciation and accretion    15,991     32,886  
Income tax provision (benefit)    -      12,000  
Stock-based compensation    3,581     8,347  
Interest income    (1,165)    (99) 
(Gain) loss on sale of other assets    (1,241)    68  
Restructuring     101     755  
Loss (gain) on extinguishment of debt    -      56,898  
(Gain) loss on sale of oil and natural gas properties    3,679     (231,190) 
Unrealized loss (gain) on derivatives contracts    (11,113)    (24,214) 
Rig stacking charges    945     2,743  
Transaction costs and other    274     587  
Adjusted EBITDA(1) $  18,056  $  73,323  
      
(1)  Adjusted EBITDA is a non-gaap measure, which is presented based on management's belief that it 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. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP. This financial measure 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.  
  

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