After having been alerted to HK by Jim Cramer, I'm done. It's telling his own ratings firm downgraded it to sell, and incredible that people can shrug off a $1.2B loss, including $909m in book value for the quarter and remain so rah-rah throughout this message board.
It's not as if book value magically materialized. Halcon spent good money on unevaluated assets in Utica and Woodbine. If you go back to April company releases, HK had big plans. It's just that the Utica well ended up, to use Floyd's words, s****y, so HK had to write it off. If only HK could write off the debt to purchase those assets. That $909m isn't just paper, it has real consequences.
You heard during the CC how HK is much more levered than Wilson would like it to be. No joke. You just wrote off a billion in book value that you paid for with recently borrowed cash (and diluted shareholder equity). That's a lot of production at favorable prices that's going to have to happen to make that billion back just so you can pay back your creditors. Where does it show up on the balance sheet? As -$1.8B in accumulated depreciation which is going to have to be zeroed out against assets at some point, and -$1.09B in retained earnings as liability (compared to -$232m the previous quarter). If you're any kind of investor, you have to consider that + the present value of its future cash flow as part of figuring out what the company's fair market value is today. And that just took a massive honking hit. No wonder it's getting downgraded right and left. And it makes you wonder, just how badly could management have estimated the value of the rest of the assets purchased with borrowed cash? All of its numbers are supremely suspect. You can't reliably evaluate a company's worth like this.
Too much depends on unproven leases. Massive leverage is booked. Lots of eggs in few baskets. Further dilution to raise capital seems likely. Good luck to all of you on your roll of the dice
if you write a building down in value, does it affect cash flow, or the value later when you sell it ? no. all companies do this and they can write it off the taxes only to recoup it later when developed or sold
LOK AT THE FUTURE NOT THE PAST. LOOK AT THE SALES NEXT 1/4 not last year. Look at the pink house with broken windows. Paint it, fix the windows and up goes its value. A year from now this won't mean poop, if not next 1/4.
You're stating the obvious when you refer to the Utica. This was pretty well known since the Q2 report. In the cc, he said they were moving to the southern counties in this play where other co's were having much better success and infrastructure was already in place. He may sell the Woodbine, and some of the northern acreage in the Utica, but I would expect a much better result moving forward concerning the Utica. Time will tell, but I am certainly disappointed with the results to this point...shocked might be a better word. I'm feeling the pain as much as anyone, but all I can do is hold on and hope it gets better. I'm not gonna take a loss if I don't have to. It totally sucks that it's gonna take another year to see anything like a 'gain'. I wish I had got in at these levels, but I'm not gonna lie and say I did. I'm averaged in the low 6's. I'm saying all of that to say I'm not a cheerleader for this company - I'm just trying to stay positive. Not easy to do these days.