Friday, January 17, 2014


A reader asked me if I had any ideas why Halcon shares were down 50%. I normally don't get into this stuff, but I am really, really bored this evening. I hate going into long weekends. Maybe it was getting up at 4:30 a.m. this morning, and I'm just tired....but I hate to waste a perfectly good evening, so against my better judgement --

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

This was how I responded to the query about Halcon:
I haven't looked at the market in the past two weeks (not individual stocks, for the most part; some exceptions). I have not looked at any of the Bakken operators in the past two weeks that I can recall (there are probably exceptions) -- I mentioned on one of my posts that I generally don't look at individual Bakken stocks when the market is down or when oil is down, unless I have a specific reason, like to buy more shares in some company.

Having said that ... too much to write I will do a stand-alone post.
So, here goes. 

1. The best general information about investing in the Bakken might be found at SeekingAlpha, especially Mike Filloon, Bret Jensen, and Michael Fitzsimmons. 

2. I am investor, not a trader. I accumulate shares. I seldom sell. MDU was one of the first companies I ever invested in and probably held for 20 years before I finally sold. Another one of my very first holdings was BNI and I never would have sold, except Warren Buffett bought the railroad. I did trade KOG and no longer hold any shares in KOG, so I suppose that's an exception. I probably hold shares in about six Bakken operators and plan to hold them "forever." Even if they go bust, I will have something to write off. Smile.

3. Why would Halcon be down 50%? I don't know what it's trading at today -- I mentioned above I haven't looked at any of the Bakken operators since the beginning of the year when the market dropped and the price of oil fell to $92 pretty quickly. So I don't know where Halcon is trading. 

4. I think the better question from an investor's point of view is this: is Halcon still a good company to invest in, despite being 50% down? If it is down that much, and one thinks it is a good company to invest it, one certainly starts to think about entry points.

5. Here are some thoughts, in the spirit of the blog as noted at the "welcome/disclaimer":
a. Sector rotation: a lot of companies have had tremendous runs; if movers and shakers are still investing (not selling), they may simply be moving to new sectors, moving out of energy into something else
b. The Bakken is under huge pressure right now with concern about CBR, fracking regulations
c. The weather in the Bakken has scared a fair number of folks; there are warnings from other operators in other plays that the severe weather in December will affect 4Q13 earnings
d. Oil companies in general are under pressure; the TV crawler shows WTI has dropped from almost $100/bbl late last year to almost $92/bbl this past week
e. Investors are concerned about the cash flow required in the Bakken; it's a huge challenge for small operators
f. Recent articles from SeekingAlpha, elsewhere, suggest that the big Bakken operators will put pricing pressure on the smaller operators 
g. I would love to check HK and see how it's doing, do some calculations, but as noted earlier, I don't do that in this kind of market; I don't need the anxiety -- I say that because the first thing I would do is figure out the value of their acreage vs their key financial statistics -- however, if I have cash next week to invest, I would look at the smaller operators in the Bakken: HK, TPLM, AMZG, EOX. 
I think (b), (c), (d), and (e) are the primary reasons companies like HK might be down significantly from their highs. Again, just idle rambling. I'm not the one you want to ask when it comes to investing. I do the blog because I wanted to learn about the Bakken, not for investing. I assume 95% of my investments are managed by others (pensions, IRAs, etc); the other 5% that I manage probably has less than 10% in the Bakken. Again, search articles by Filloon, Jensen, and Fitzsimmons over at SeekingAlpha to see what they have to say about the Bakken.


  1. As soon as i read that he holds six Bakken operators and dumped KOG, i quite reading. :)

    1. I know you are joking; but it is interesting how folks see things I never even thought about. One of my "six" Bakken operators will probably be a loss for me and I would have been better off holding KOG. But such is life. Thank you for taking time to write. The expert to follow for investing purposes in the Bakken is Mike Filloon. Have a great weekend.