Morningstar

Morningstar, Inc.

Equity Bottom-Up

Halcon Resources' shares have plunged more than 75% in the last week due to cautionary management commentary on the firm's precarious liquidity. Halcon's bank credit was recently slashed by $50 million owing to concerns from lenders about the company's creditworthiness. Management has engaged advisory firms to evaluate strategic alternatives, including the outright sale of the business, asset divestitures, and securing external financing
In the hands of a well-capitalized midsize operator,…

After our first take on Halcon's first-quarter results we noted than the firm is on track to hit its production guidance, with just enough liquidity to keep drilling until achieving sustainable free cash flows around 2021 (assuming strip prices for oil and natural gas). That has not changed. However, management commentary on the May 10 conference call indicates that the liquidity situation is tighter than we thought. Specifically, the $50 million reduction in revolver availability was based on…

Halcon Resources completed a thorough portfolio overhaul in 2017, exiting the Bakken and El Halcon shale plays and pivoting to the southern Delaware Basin (Permian). Due to these transactions, the firm no longer bears much resemblance to its predecessor, which went bankrupt during the 2015-16 downturn in global crude prices (common shareholders were severely burned during the restructuring that followed, with 96% of the firm's equity being redistributed to creditors).The Delaware Basin…

Halcon delivered production of 17.1 mboe/d in the first quarter, which was 1% lower sequentially. The decrease was attributed to third-party sour gas takeaway constraints, which also marred the previous quarter’s operations. However, Halcon’s own sour gas treatment plant entered service during the period as expected, reducing its dependence on third party outlets. The firm is currently producing 20.4 mboe/d (57% oil), and we believe the firm’s annual target of 19-22 mboe/d is still within reach…

<p>Halcon Resources delivered production of 17.2 mboe/d in the fourth quarter, which was 6% higher sequentially but below the low end of guidance due to sour gas takeaway constraints in the Monument Draw area (which negatively impacted oil volumes as well as NGLs and natural gas). The constraint is likely to affect first quarter results, too, as it will not be alleviated until Halcon’s sour gas treatment plant is completed later this month. As a result, the firm’s financial results were also weaker…</p>

United States

Battalion Oil Corporation operates as an oil and gas energy company. The Company acquires, produces, explores, and develops on-shore liquid rich assets. Battalion Oil serves customers in the United States.

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