Halcon: 1Q16 Presentation

This is not an investment site. Do not make any investment, financial, travel, relationship, or work-related decisions based on what you read here or what you think you may have read here. This is for my own use to help me understand the Bakken. If this is important to you, go to the linked source. I often round numbers without indicating that the numbers have been rounded. I often intersperse personal observations/comments without indicating that the comments are opinion. There are no hidden agendas. I honestly have not checked to see if I am still invested in Halcon. In fact, I can't remember if I ever invested in Halcon in the first place. [Later: I believe I have; I can't remember if I ever sold or if it is still languishing in some on-line account somewhere.] Having said that, among the operators in the Bakken, Halcon has always impressed fascinated me, along with Slawson, EOG, and about ten others.  In a long note like this there are likely to be typographical and factual errors. No animals were injured in the process of putting this post together.

I track Halcon and other Bakken operators over time at this post.

Note:  I added this later:

• By the way, Halcon did not address the Austin chalk in their 1Q16 presentation. 
• Here is the 1Q16 transcript.

Two biggest takeaways from this presentation:

• comparing HK reserves in Texas vs ND; quite an eye-opener and is a reminder how good the Bakken really is
• the fact that Williams County is the key for Halcon and most of Williams County, right now, is probably outside the core area of the Bakken

Halcon presentation, May, 2016.

27 slides.

Same theme as we've seen in most other E & P presentations: very little on actual operations; focus on survival; financial information

Quick overview:

• Bakken/TF: 120,000 net acres; 122 million boe proved reserves; = 1,000 boe/net acre
• El Halcon (Texas): 88,000 net acres; 22 million boe provide reserves; = 250 boe/net acre
• Production: 2016E -- 40,000 boepd on high end; 80% oil
• D & C Capex: $150 million
• 2016 budget: 55% decrease from 2015 budget; $150 million D&C, 2016
• modest reduction in production year over year (about 8 percent)
• only one active rig in ND: running in FBIR area of the Bakken
• EURs will average >900,000 boe

Historical $ LOE / boe

• 2012: $15.63
• 2013: $11.49
• 2014: $9.52
• 2015: $8.21
• 2016: $8.00E

Historical $ G&A / boe

• 2012: $15.81
• 2013: $58.99
• 2014: $5.98
• 2015: $4.82
• 2016: $4.00E

Drilling inventory:

• 1,000 economic gross operated locations in core areas at $60 WTI
• 5+ years of drilling inventory w/10 rigs running (18 wells/rig/year)
• Assumptions:
• middle Bakken: 4 - 7 wells/DSU
• Three Forks: 4 - 7 wells DSU in FBIR
• El Halcon (Texas): 1,000' spacing

Bakken/Three Forks acreage

• 100% of acreage is HBP
• all existing gas production tied into pipeline
• expect to spud 15 gross operated wells with 1 rig; average working interest, 64%
• acreage: appears about 75% in northwestern Williams County
• acreage: appears about 25% in FBIR, Mountrail
• most of Williams County company-operated
• most outside Williams County: non-company operated

Slide 11: 100% of acreage is economic at today's oil prices and costs
Years of inventory in FBIR (assumes 18 wells drilled/rig/year)

• one rig: 11
• two rigs: 5
• three rigs: 4
• Cost well completion
• 4Q14: $11 million
• current AFE: $6.2 million

The key for Halcon: Williams County
Years of inventory in Williams County

• one rig: as many as 33 years
• two rigs: 17 years
• three rigs: 11 years

This correlates with what I've read elsewhere: HK won't drill in Texas for remainder of 2016 at these prices

Last line last slide before appendix: HK will be an attractive acquisition target post-restructuring 

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Blowing bubbles (or not) waiting for HK to restructure --

 

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Notes to the Granddaughters

Years ago, I forget exactly when, perhaps in 2000 I began a very, very aggressive reading program. I started with the Greek and Roman classics and moved forward, ending with the novels in the early 20th century (Virginia Woolf).

Somewhere along the way, I read Clarissa by Samuel Richardson. I saw it as a challenge; and although I remember few details, one will not forget having read it. I often wondered whether it was worth reading it outside the fact that it was a challenge "conquered."

Yesterday I had my answer. Yes, it was worth it. In this week's New Yorker issue there is a 5-page essay (and a sixth with a full artist's rendering of Samuel Richardson's bust) by Adelle Waldman, "critic at large," titled: "The Man Who Made The Novel."

Some data points from the essay (and elsewhere):

• Richardson, an accidental novelist
• his first novel after the age of 50
• three novels (I had remembered only the first two: Pamela and Clarissa; a third was  Sir Charles Grandison)
• little formal schooling
• epistolatory novels
• 1739 began; 1740 published, Pamela
• many consider Pamela the first modern English novel
• quick recap:
• progenitor of modern novel: Cervantes, Don Quixote
• father of historical novel: Sir Walter Scott
• first journalist: Daniel Defoe, The Journal of the Plague Year
• Lawrence Sterne
• Samuel Richardson
• Pamela became the first novel printed in America when Benjamin Franklin reprinted it from the fourth London edition
• Clarissa's most notorious feature: it's length; it is by far the longest novel in the English canon; Clarissa runs some nine hundred seventy thousand (970,000) words. War and Peace: 560,000 words
• Grandison was a particular touchstone for Jane Austen according to her nephew
• it's hard to think of a work of fiction so exclusively internal as Clarissa until Dostoyevsky's The Idiot and harder still to think of a romance
• Harold Bloom: "The finest novel in the English language. The only novel that can rival even Proust."