Published: April 9, 2018 |

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Independent energy company Halcón Resources has acquired West Quito Draw for a purchase price of $200m.

Halcón has elected not to exercise its previously disclosed Monument Draw East Option, and also provided an update on its recent well results in addition to its current liquidity and hedge positions.

The Company also provided an update on its recent well results in addition to its current liquidity and hedge positions.

The West Quito Draw Acquisition is comprised of 10,524 net acres and related assets in central and western Ward County, Texas and is currently producing approximately 1,200 boe/d (56 percent oil).  Halcón plans to bring a rig to this area in the second quarter of 2018 to begin drilling 10,000 foot Wolfcamp laterals, which the Company anticipates will generate estimated ultimate recoveries (“EURs”) in excess of 1.1 MMbo of oil and a total EUR of oil and gas (2-stream) of approximately 2.2 MMboe.  Including additional landing zones (Bone Spring, Avalon, etc.), Halcón estimates there are 383 potential operated horizontal locations within this acreage position.  This property is approximately 47 percent held by production and is 91 percent operated with an average working interest of 72 percent.

Halcón has decided not to exercise its option to purchase 7,680 net acres on the eastern side of its existing Monument Draw area for $10,000/acre (the “Monument Draw East Option”).  Halcón will retain ownership of the Sealy Ranch 5902H well and 160 net acres on which this ~10,000’ lateral length well was drilled.

Halcón now has ~59,152 net acres in the Delaware Basin comprised of 21,839 net acres in Monument Draw, 10,524 net acres in West Quito Draw and 26,790 net acres in Hackberry Draw.  Collectively, these properties are currently producing in excess of 13,500 boe/d net to the Company (70 percent oil).

“We are excited to close on this important acquisition which we have named West Quito Draw.  This is a great complement to our other Ward County holdings at Monument Draw.  Our technical review plus impressive results from offset operators have solidified our plan to station a drilling rig here throughout 2018 and beyond,” commented Floyd Wilson, CEO of Halcón.

“Our decision to not exercise the Monument Draw East Option was driven by our technical review of all payzones across the entire Monument Draw area plus our focus on our balance sheet and liquidity.  The success of our Sealy Ranch 5902H well (30-day IP of 1,653 boe/d, 88 percent oil) de-risks the entirety of our southern Monument Draw area where we have hundreds of Wolfcamp and Bone Spring locations.  We will continue to develop this world class asset through the balance of 2018 and beyond with at least two rigs assigned to this development program which includes both horizontal and vertical spacing tests in all intervals.”

“Our business plan, supported by a strong balance sheet, ample liquidity and our hedge book will result in significant growth for years to come while driving leverage down and keeping liquidity strong throughout.”

OPERATED WELL RESULTS

In Monument Draw, Halcón’s three most recently completed wells, the Sealy Ranch 7902H, 7903H and 5902H, reached an average peak 30 day rate of 1,680 boe/d (83 percent oil).  This equates to an average 30 day rate, per 1,000 feet of lateral, of 177 boe/d which is significantly higher than the Company’s type curve of 143 boe/d per 1,000 feet of lateral.  The Company plans to put an additional three wells online in Monument Draw during the second quarter of 2018.

In Hackberry Draw, Halcón’s two most recently completed wells, the Jose Katie East 1H and Jose Katie West 1H, reached an average peak 30 day rate of 1,010 boe/d (86 percent oil).  This equates to an average 30 day rate, per 1,000 feet of lateral, of 103 boe/d which exceeds the Company’s type curve of 94 boe/d per 1,000 feet of lateral.  The Company recently began flowing back the Geneva West Joanne 1H well and plans to put an additional four wells online in Hackberry Draw during the second quarter of 2018.

Halcón expects the borrowing base on its senior secured revolving credit facility to increase with the upcoming spring redetermination and will announce the results of the redetermination in conjunction with Q1 ’18 earnings in early May.  The Company has ample current liquidity to execute on its business plan over the next several years and is committed to maintaining a strong balance sheet.

Halcón currently has 9,510 barrels of oil per day hedged in 2018 at an average price of $52.65/Bbl.  This represents approximately 75 percent of its 2018 oil production based on the Company’s previously issued 2018 production guidance.  Halcón also has 12,247 barrels of oil per day hedged in 2019 at an average price of $55.30/Bbl.  The Company has also been active in hedging basis differentials to mitigate the impact of any basis widening that may occur through 2019.  Halcón currently has MidCush basis swaps in place for 10,526 bbl/d in 2018 at an average price of -$1.23/Bbl and another 13,000 bbl/d in place for 2019 at an average price of -$1.12/Bbl.  The Company also has 10,000 Mmbtu/d of Waha basis swaps in place from July 2018 to December 2019 at an average price of -$1.05/Mmbtu.

Halcón plans to issue updated 2018 production and cost guidance, including the impact of West Quito Draw, as part of its first quarter 2018 earnings release in early May.

Source: Energy Business Review

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