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Ohio Utica Shale

Halcon Resources completes first four Utica wells

By Bob Downing Published: May 4, 2013

From the Marcellus Drilling News:

Halcón Resources, a Utica Shale driller, issued their first quarter financial and operational update yesterday. With regard to the Utica, the company reports they operated two drilling rigs in Ohio and Pennsylvania (yes, there is Utica in PA too!), drilling and completing four wells in 1Q13.

Select portions of the Halcón update:

Halcón Resources Corporation (“Halcón” or the “Company”) today announced its first quarter 2013 financial results and provided an operational update.

After adjusting for selected items (primarily related to the non-cash impact of derivatives and acquisition and merger related transaction costs), Halcón reported net income for the three months ended March 31, 2013 of $17.5 million, or $0.05 per diluted share, compared to a net loss of $2.7 million, or $0.04 per diluted share in the comparable quarter of 2012 (see Selected Item Review and Reconciliation table for additional information). Before adjusting for selected items, the Company reported net income available to common stockholders of $5.5 million, or $0.01 per diluted share for the quarter.

Cash flow from operations before changes in working capital, after adjusting for selected items (see Condensed Consolidated Statements of Cash Flows and Selected Item Review and Reconciliation table for additional information), was $106.4 million for the quarter, or $0.28 per diluted share, compared to $6.3 million, or $0.09 per diluted share for the same period of 2012. Halcón reported cash flow from operations before changes in working capital (see Condensed Consolidated Statements of Cash Flows for a reconciliation to net cash provided by operating activities), before adjusting for selected items, of $104.8 million, or $0.27 per diluted share for the three months ended March 31, 2013.

Revenues for the first quarter of 2013 increased to $190.7 million, compared to $26.9 million for the three months ended March 31, 2012. The increase is primarily attributable to increased production volumes related to the acquisitions of GeoResources, Inc. (“GeoResources”), certain producing assets in East Texas (“East Texas Assets”) and two entities owning certain producing assets in the Williston Basin (“Williston Basin Assets”) in 2012.

Net production for the period increased to an average of 26,022 barrels of oil equivalent per day (Boe/d), compared to 4,055 Boe/d for the three months ended March 31, 2012. First quarter 2013 production was comprised of 82% oil, 5% natural gas liquids (NGLs) and 13% natural gas.

The Company realized 99% of the average NYMEX oil price, 37% of the average NYMEX oil price for NGLs and 88% of the average NYMEX natural gas price during the first quarter of 2013, excluding the impact of derivatives.

Lease operating expense for the three month period ending March 31, 2013 decreased by 47% to $10.86 per Boe, versus the comparable period of 2012. During the first quarter of 2013, total operating costs per unit (including lease operating expense, workover and other expense, taxes other than income, and general and administrative expense), after adjusting for selected items (see Selected Operating Data table for additional information), decreased by 35% to $30.71 per Boe, compared to the first quarter of 2012.

Floyd C. Wilson, Chairman and Chief Executive Officer, stated, “We are making progress on all fronts — significant operational improvements in the Williston Basin, dramatic improvements in lease operating expense, the recent unveiling of a new core Eagle Ford play in East Texas and encouraging flowback data from our first well in the Utica/Point Pleasant play.”

Liquidity and Capital Spending

As of March 31, 2013, Halcón had liquidity of $716.5 million, which consisted of $0.8 million in cash and $715.7 million of borrowing capacity available on its senior revolving credit facility.

During the first quarter of 2013, the Company incurred capital costs of $398.0 million on drilling and completions, $57.7 million on leasehold acquisitions and $94.8 million on infrastructure, seismic and other.

Operational Update

Utica/Point Pleasant

The Company averaged two operated rigs, spud four wells and completed four wells in Ohio and Pennsylvania during the three months ended March 31, 2013.

Halcón is in the process of delineating its Utica/Point Pleasant acreage position and expects the process to be completed by the fourth quarter of 2013. Production testing has commenced on the Phillips 1H in Mercer County, Pennsylvania, and the Company anticipates that four wells will have been tested or will be in the testing phase by the end of May 2013.

The Phillips 1H commenced flow back on April 8, 2013 and measured first hydrocarbons on April 14, 2013. Halcón has maintained a continuous flowback on the well and rates continue to increase. While still recovering frac load, early stage flow rate data is encouraging. The oil being produced is 52 degree API and the natural gas being produced is 1,330 BTU/SCF.

The Company is focused on building an inventory of approved/permitted multi-well pads in preparation for a full scale development program to optimize drilling and completion costs.

There is currently one Utica/Point Pleasant well producing, four wells resting, one well being completed and two wells being drilled.*

Click the link below to read the entire update, including Halcon’s financial spreadsheets for 1Q13.

*Halcón Resources Corporation (May 2, 2013) – Halcón Resources Announces First Quarter 2013 Financial Results and Provides Operational Update

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Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

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Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

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Stop Fracking Ohio.

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Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.