Drilling and completion capital expenditures for 2015 are being trimmed by about 6% to $350 million-$400 million (from $375 million-$425 million as initiated last month) to reflect ongoing reductions in service costs.
In the Bakken [North Dakota, Montana, Canada] and Three Forks [underlying the Bakken], authorizations for expenditures in its core Fort Berthold area have declined by over 20% from its fourth-quarter average to $8.5 million with expectations of another 10% savings by mid-2015. In the East Texas Eagle Ford, Halcon has seen about 20% savings in well costs from the fourth quarter to about $8.0 million (three-string well design) with expectations of another 10% or more by mid-2015 and another 10%-15% into 2016; 2015 production guidance was reaffirmed at 40-45 thousand barrels of oil equivalent per day (mboe/d). We’re upping our forecast to 42.5 mboe/d from 42.0; consensus is 42.7.
-- Chad Mabry
Halcon Resources (HK: NYSE)
By MLV & Co. ($2.01, Feb. 26, 2015)
We reiterate Halcon Resources at Buy and raise the price target to $3 from $2.50 on an improving outlook.
Halcon (ticker: HK HK 0.746268656716418%Halcon Resources Corp.U.S.: NYSE USD2.025 0.0150.746268656716418% /Date(1424979178201-0600)/ Volume (Delayed 15m) : 2281740 P/E Ratio N/AMarket Cap 849100352.41663 Dividend Yield N/ARev. per Employee 2852630More quote details and news »HK inYour ValueYour Change Short position ) has been on the defensive ever since the oil-price downturn exposed balance-sheet and liquidity concerns. But positive surprises in the form of a very strong reserve report and the reaffirmation of its borrowing base are helping to prove such concerns overdone. We expect Halcon to get back on offense as oil prices continue to recover.
Investor focus has been firmly on the balance sheet and liquidity, so the recent reaffirmation of its borrowing base at $1.050 billion is a significant event. We had been forecasting a nearly 15% reduction (to about $900 million) upon its spring redetermination as reserve growth was expected to be overcome by a lower price deck. The company’s liquidity was greater than $550 million at year-end 2014, which is more than sufficient to handle a forecast outspend of less than $50 million for 2015.
Halcon’s liquidity position is protected by one of the strongest hedge books in the sector, including 90% of 2015 estimated oil volumes hedged at a weighted average floor price of about $87 per barrel and two-thirds of 2016 estimated oil hedged at a weighted average floor of about $84 per barrel. For perspective, we expect this to translate into realized gains of greater than $350 million this year, or about one-third of revenue.
The company’s 2015 capital-expenditure budget has already been cut to the bone, yet it is still finding ways to squeeze savings. Drilling and completion capital expenditures for 2015 are being trimmed by about 6% to $350 million-$40
Can someone flesh out exactly what this means -
The Company estimates that it will record non-cash pre-tax impairment charges totaling $150 - $250 million in the fourth quarter of 2014.