From Texas-based Halcon Resources today:
Halcón generated revenues of
Production for the three months and full year ended
Including the impact of hedges, the Company realized 88% of the average
Total operating costs per unit (including lease operating expense, workover and other expense, taxes other than income, gathering and other expense, and general and administrative expense), after adjusting for selected items (see Selected Operating Data table for additional information), decreased by 17% to
After adjusting for selected items primarily related to non-cash impairment charges and the non-cash impact of derivatives (see Selected Item Review and Reconciliation table for additional information), net income was
Agrees to Divest Non-Core Assets for
The Company has entered into a purchase and sale agreement to divest non-core assets in
The assets subject to the purchase and sale agreement include approximately 83,000 net acres primarily located in
The closing of this sale would essentially conclude Halcón's planned 2014 divestiture program. The Company plans to continue to evaluate all remaining non-core properties for future divestment opportunities.
Liquidity and Capital Spending
During the fourth quarter of 2013, the Company incurred capital costs of
Halcón incurred capital costs of
Proved Reserves - 609% Organic Reserve Replacement; 61% Organic Reserve Growth
Halcón's estimated proved reserves as of
The present value of Halcón's estimated future oil and gas revenues, net of estimated expenses, discounted at an annual rate of 10% (PV10) was approximately
|Proved Reserves Reconciliation||Oil (MBbls)||Gas (MMcf)||NGL (MBbls)||Total MBoe|
|Extensions, discoveries and additions||61,160||25,364||4,344||69,731|
|Revisions of previous estimates and pricing||(9,233)||(19,832)||2,237||(10,301)|
Pro forma for sales and purchases, the Company replaced 609% of production including revisions, and reported a net increase in proved reserves of 60.7 MMBoe over year-end 2012, representing an organic growth rate of 61%. A pro forma summary of year-over-year changes in estimated proved reserves is as follows:
|Pro Forma Proved Reserves Reconciliation||Proved||PF Proved|
|Extensions, discoveries and additions||69.7||69.7|
|Revisions of previous estimates and pricing||(10.3)||(9.0)|
|Organic Reserve Additions, including revisions (MMBoe)||60.7|
|Organic Reserve Growth||61%|
|Organic Reserve Replacement||609%|
The Company's estimated proved reserves at
Estimated Net Unrisked Resource Potential of ~1.4 BBoe
Halcón estimates current net unrisked resource potential at 1.4 billion barrels of oil equivalent (BBoe), which is comprised of 75% oil, 11% NGLs and 14% gas. Net unrisked resource potential calculations were estimated by the Company's internal reserve group and consist of a horizontal drilling inventory of approximately 3,270 net locations.
Halcón has established the TMS as a third core area. In aggregate, the Company currently has approximately 307,000 net acres leased or under contract in the play. Approximately 77% of the acreage is located in
The proceeds from the pending sale of non-core assets are expected to provide Halcón the ability to internally fund the TMS program. However, the Company is evaluating joint venture options for its entire TMS position and is engaged in ongoing discussions with several potential partners.
Halcón employs an experienced exploration staff that has been working the TMS for more than a year with access to hundreds of well logs and core data from a number of wells. As a result, geologic mapping from these efforts have allowed for the acquisition of land within a well-defined area believed to be the geologic core.
The Company plans to operate an average of 2 rigs for the remainder of 2014 and spud 10 to 12 gross operated wells in the TMS. Halcón also expects to participate in several non-operated wells in 2014. Expectations are to spud the next operated well in March of 2014 near producing TMS wells in
Operational Update -
The Company's 2014 capital budget is primarily focused on its three, oil-biased core resource plays: the
Halcón operated an average of five rigs in the
The Company continues to modify its drilling and completions techniques in an effort to improve recoveries and reduce costs. Based on improved results to date, Halcón has revised the EUR estimates higher for its type curves. Note that the Company is now using one average type curve for all Bakken and Three Forks wells drilled in the Fort Berthold area, and one average type curve for all Bakken wells drilled in Williams County. In the Fort Berthold area, the average Bakken/Three Forks type curve increased by 39% to 801 thousand barrels of oil equivalent (MBoe), while the average Bakken type curve EUR in Williams County was revised higher by 43% to 477 MBoe.
Data suggests that wells completed with slickwater fracs in the
The Company has identified several cost reduction opportunities and anticipates well costs will trend down throughout 2014 by 5% to 10%. Efficiencies related to pad drilling/simultaneous operations and additional completion modifications (proppant type, fluid type, pumping services) are expected to lead to lower well costs.
Early stage downspacing tests continue to yield positive results, and indicate the potential for up to 16 locations per drilling spacing unit (DSU) in the Fort Berthold area, which would more than triple the Company's drilling inventory in this area alone compared to the previous development plan.
Halcón currently has working interests in approximately 142,000 net acres prospective for the Bakken and Three Forks formations in the
There are currently 141 Bakken wells producing, 12 Bakken wells being completed or waiting on completion and 2 Bakken wells being drilled on Halcón's operated acreage. Similarly, there are currently 39 Three Forks wells producing, 7 Three Forks wells being completed or waiting on completion and 2 Three Forks wells being drilled on the Company's operated acreage.
"El Halcón" - East Texas Eagle Ford
Halcón operated an average of four rigs in El Halcón during the fourth quarter. The Company spudded 13 wells and put 9 wells online in the play during the three months ended
The Company has made meaningful progress toward identifying an optimal well design and continues to modify its completion techniques. Testing is underway on a number of completion design variations to reduce cost and increase performance, some of which include modifying perforated cluster density, varying proppant types and altering the fluid systems. Based on historical well results, lateral length directly correlates to EUR for wells completed with a sufficient volume of proppant. As such, Halcón continues to work to find the most economic completed lateral length and currently expects to drill wells with an average lateral length of 7,500 feet in 2014.
Based on improved well results, the Company has revised its El Halcón type curve EUR estimate higher by 22% to 452 MBoe. The new type curve is based on wells that were spaced a minimum of 750 feet apart and completed with 1,200 pounds, or more, of proppant per lateral foot. Well spacing pilot tests are ongoing.
Halcón currently has working interests in approximately 100,000 net acres prospective for the Eagle Ford formation in
There are currently 45 Eagle Ford wells producing, 10 wells being completed or waiting on completion and 4 wells being drilled.
2014 Production Guidance
Based on improved well performance in core areas, the Company is reaffirming full year 2014 production guidance, despite the impact related to the pending sale of the non-core assets in
Note: Guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Company's control. See "Forward-Looking Statements" section below.
An updated slide presentation can be accessed on Halcón's website at http://www.halconresources.com in the Investor Relations section under Events & Presentations.
Conference Call and Webcast Information
About Halcón Resources
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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.
The Ohio Environmental Council, a statewide eco-group based in Columbus.
Earthjustice, a national eco-group.
People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.
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.
Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.
Allegheny Front, environmental public radio for Western Pennsylvania.