For Investors Only -- Halcon

I may be jumping the gun because it could always be a typographical error, but right now NDIC is reporting an IP of almost 4,000 bopd for a producing Halcon well that was completed in the Bakken and announced today. The sundry form is not yet available at the file.

For an XOM or a COP, this well would hardly be noteworthy; but for a small company like Halcon, coming on the heels of a great earnings report, and their play in the Tuscaloosa Marine Shale, this could be a big deal. If the overall market tomorrow is NOT a factor, it will be interesting to see what HK does tomorrow.

Two things happened last month: a) GDP reported a huge well in Tuscaloosa Marine Shale where Halcon has a big position; and, b) Halcon tested this well on April 12, 2014. Although still not officially released by that time it was off the confidential list and it would have been hard to keep a Halcon well of that magnitude a secret, especially with all the activity going on out there. Take your pick: it was something that caused HK to surge more than 11% on May 8, about the time all this was happening.

Regular readers note that I've been posting a few notes about Halcon lately.

In passing, I noted the significantly better EURs Halcon is reporting. Halcon seemed to suggest it was having to revise (upward) EURs every time they mapped out a new well once they had the first four months of production.

Last week I posted a screen shot of something I seldom do (this might have been the first time); a screen shot of an individual stock, Halcon when it surged more than 11%.

WKRB13 is reporting:

Research analysts at KLR Group boosted their target price on shares of Halcon Resources Corp from $0.25 to $3.50 in a report released on Tuesday, AnalystRatingsNetwork reports. KLR Group’s price target indicates a potential downside of 39.13% from the stock’s previous close.

Several other analysts have also recently commented on the stock. Analysts at RBC Capital raised their price target on shares of Halcon Resources Corp from $3.50 to $4.50 in a research note on Friday. Separately, analysts at Canaccord Genuity raised their price target on shares of Halcon Resources Corp from $4.75 to $5.50 in a research note on Friday.

Finally, analysts at BMO Capital Markets raised their price target on shares of Halcon Resources Corp from $6.00 to $7.00 in a research note on Friday. Five analysts have rated the stock with a hold rating and two have issued a buy rating to the company’s stock. The stock presently has a consensus rating of “Hold” and a consensus target price of $5.56.

Halcon Resources Corp traded up 4.17% on Tuesday, hitting $5.99. 10,317,939 shares of the company’s stock traded hands. Halcon Resources Corp has a 1-year low of $3.16 and a 1-year high of $6.75. The stock’s 50-day moving average is $4.90 and its 200-day moving average is $4.19. The company’s market cap is $2.519 billion.

For those interested, Zeits had a column on Halcon's 1Q14 earnings. The transcript is here.

Motley Fool had a short puff piece suggesting Tuscaloosa Marine Shale might be the "best of the lot," where Halcon has a lot of acreage, and GDP just reported a fantastic well. Another article on Halcon and TMS here.

Coincidentally, this SeekingAlpha article discussed Halcon today, comparing Halcon wells with those of EOG and CLR.

Saving the best for last? I generally don't care for Motley Fool all that much but periodically they do have a "free" column that is very, very good. Today was one of those days, and coincidentally it was a great article on Halcon. The article is full of great data points, but for investors, this may be the most important:

Halcon is growing production at an impressive clip, but can the company manage? The company's debt, which is 4.4 times EBITDA, is all in the form of senior notes or bonds. All rates are fixed, so interest rate fluctuations will not effect them.

Furthermore, few bond obligations are due until 2020 and 2021. This means that Halcon has about six years to turn itself significantly cash-positive and either pay off that debt or roll the debt over in a refinance according to whatever rates may be in 2020.

While predicting conditions six years from now is difficult, Halcon is successfully developing its Eagle Ford and Bakken acreage and is positioning itself so that this debt will not be a problem down the line. One other thing worth noting is that Halcon does have a revolving credit facility of $800 million, and it is entirely untapped.

Financial data, selected:

• Halcon: market cap, $2.46 billion; debt, $3.53 billion; cash on hand, $370 million; operating cash flow, $600 million; shares outstanding, 420 million (half owned by insiders)
• KOG: market cap, $3.3 billion; debt, $2.25 billion; cash on hand, $16 million; operating cash flow, $600 million; shares outstanding, 266 million (2% held by insiders)
• OAS: market cap, $4.82 billion; debt, $2.6 billion; cash on hand, $56 million; operating cash flow, $735 million; shares outstanding, 101 million (5% held by insiders)

I cannot stress enough: 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. My intentions when I started the blog was not to incorporate the stock market, but it soon became obvious, that to follow the Bakken, one had to follow the money. Unlike politics, where talk is cheap, when investors, operators, and venture capitalists plunk down $10 million for a well, someone is putting money where there mouth is. Following the money helps me understand the Bakken.