Upstart onshore operator Halcon Resources Corp. expects to produce 17,000-20,000 boe/d in the final three months of this year and should produce 40,000-45,000 boe/d in 2013, management said Thursday.
The Houston-based producer suffered an earnings loss year/year in 3Q2012 of $20.18 million (minus 11 cents/share) versus profits of $11.8 million (45 cents). The losses were attributed to merger and acquisition costs; Halcon has been on a spending spree over the last year as it bulks up its portfolio. The company also took a $900,000 hit (1 cent/share) from one-time derivatives losses. Wall Street had expected the independent to break even in the latest quarter.
Revenues stood at $73.1 million, matching consensus and well ahead of $24.2 million a year ago. Increased volumes from newly acquired properties contributed to the gains.
“We have achieved our goal of building an oil company with a multi-year drilling inventory in several liquids-rich basins,” said CEO Floyd C. Wilson. “Now we turn to exploitation. The drillbit is spinning to the right in all three of our core plays, plus a few others. We have the knowledge, people and capital necessary to execute on our growth initiatives.”
Halcon also has a toolbox of unconventional U.S. opportunities, with leaseholds in the Utica/Point Pleasant, Bakken, Tuscaloosa Marine Shale (TMS) and Woodbine/Eagle Ford, as well as the tight oil and gas prospects in Midway/Navarro, Wilcox and Mississippian Lime formations.
The portfolio’s strength came through in the latest quarter, with net production in 3Q2012 jumping to 11,185 boe/d from 3,924 boe/d a year ago, despite some impacts from Hurricane Isaac.
From July through September, output was weighted 77% to oil and natural gas liquids, with the gains mostly attributed to the acquisitions of GeoResources Inc. and some Woodbine Shale acreage, which both were completed in August (see Shale Daily, Aug. 24; April 26). Last month Halcon paid $1.45 billion to Petro-Hunt LLC for Williston Basin assets, the results of which would impact 4Q2012 operations (see Shale Daily, Oct. 23).
In the Woodbine/Eagle Ford, Halcon averaged four operated rigs and spud six operated wells in the Texas counties of Leon, Madison and Grimes. It now has about 200,000 net acres leased or under contract in the play where there currently are 15 horizontal wells producing, six wells being completed or waiting on completion, and six wells being drilled. Halcon plans to run five to six operated rigs in the play throughout 2013.
Halcon’s Bakken leasehold in 3Q2012 averaged three operated rigs and it spud seven wells in Williams County, ND, and spud three wells on operated acreage in Roosevelt County, MT. Halcon also participated in 16 nonoperated wells in Mountrail County, ND and six nonoperated wells in North Dakota’s Dunn, McKenzie and Williams counties.
Since August, Halcon has completed six wells in Williams County and two in Montana’s Roosevelt County.
“Four of the wells have been online for less than 30 days and the other five wells have an average 30-day rate of 347 boe/d,” which was 91% oil, Wilson said. “These five wells flowed up casing during the initial 30-day period and performed 11% better than the company’s 30-day type curve forecast. There are currently 33 wells producing, one well being completed, five wells waiting on completion and three wells being drilled on Halcon’s operated acreage.”
Once Halcon completes its Petro-Hunt acquisition, it would own “in excess of 135,000 net acres across the play with eight operated rigs drilling.” The company also has identified “several opportunities for operational and infrastructure improvements on the newly acquired properties and intends to shift one or two rigs from the Williams County area to the higher interest and more prolific Fort Berthold area in the first quarter of 2013.”
The Utica/Point Pleasant operations from July through September were “focused on positioning” Halcon “for a continuous drilling program” as it prepared to spud its first two wells in the play, said the CEO. Halcon has about 130,000 net acres leased or under contract in the play; plans are to add a third operated rig in early 2013 and a fourth operated rig later in the year.
Wilson told analysts that results from the play, as in others, won’t be announced until Halcon has solid 90-day results from the wells. “As in the past, we tend to put out a lot of information at a time and not single well results. It’s not our style to hold our breath about one well.”
Drilling has ramped up at Halcon’s 70,000 net acres in the TMS, where it spud its first well in Rapides Parish, LA, in the latest quarter. Three horizontal wells are planned, then Halcon plans to evaluate the results before implementing a development strategy.
Since August Halcon has completed eight wells in the Woodbine/Eagle Ford and has spud six operated wells in Texas’ Fayette and Gonzales counties. The wells averaged 545 boe/d, 93% weighted to oil, in the first 30 days of production, “which represents a 47% improvement when compared to the first three wells completed on this acreage position,” said the company.” Currently 20 wells are producing, three are waiting on completion and two wells are being drilled.
“Due to a noncompete agreement, Halcon plans to divest its 24,000 net acre Eagle Ford position,” Wilson said. The marketing process is under way.
Cash operating costs per unit in the latest period, which includes lease operating and workover expenses, were $34.10/boe, versus $33.22 a year earlier. Lease operating expenses fell by more than one-quarter (26%) to $15.07/boe, versus $20.40. Workover costs were $1.09/boe, well ahead of 38 cents in 3Q2011, because of new additions to the portfolio. In 3Q2012 Halcon spent $156.6 million on leasehold acquisitions, $85.7 million on drilling and completions and $31.9 million on infrastructure.
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