Halcon Resources Corp. said Monday it was lowering its 2014 capital expenditures budget by 14%, bringing it from a previously announced $1.1 billion to approximately $950 million — most of which will be spent in the Bakken and Eagle Ford Shale plays.
Financial analysts greeted the news with little fanfare. Gordon Douthat, of Wells Fargo Securities, said the updated guidance implied greater capital efficiency at the company, but noted that with Halcon’s Bakken holdings largely de-risked and its continuing momentum in the Eagle Ford, the company will have much to prove in the year ahead.
Halcon also reaffirmed its 2014 production guidance, saying it would stand between 38,000-42,000 boe/d next year.
“We expect to fund our entire 2014 capital budget with a combination of cash flow from operations, borrowings under our credit facility and proceeds from additional non-core asset sales,” CEO Floyd C. Wilson said. “We are well positioned to deliver significant growth of reserves, production and cash flow while maintaining capital discipline. In addition, we are focused on capital efficiency and intend to achieve higher rates of return across our asset portfolio via a persistent emphasis on technological innovation.”
Halcon has struggled to gain traction in a competitive industry, working to delineate acreage in the Utica Shale, shift its focus to East Texas and de-risk its acreage in North Dakota in search of better production (see Shale Daily, Aug. 5; June 11). The company’s stock opened at $3.85/share on Monday, but was down to $3.76 in afternoon trading on the New York Stock Exchange.
In its third quarter report, Halcon said its 2014 drilling program would focus mostly on the Bakken, where it said it would average 4-5 rigs, and its El Halcon asset in East Texas, where it plans for an average of three rigs. In the Utica, the company will maintain one rig in 2014, as it did this year.
Up to $125 million will be spent on leasehold, infrastructure and other development efforts, the company said, with the rest dedicated to drilling activity. Two divestitures of conventional non-core assets have already closed for the company, and when a third closes near the end of this month, Halcon said the sales will generate $300 million. The company plans to sell another $300-$400 million of non-core assets next year.
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