Halcon chief says company has 'plenty of money' to accomplish goals, $621 million liquidity

By Paul Deckelman

New York, Sept. 5 - Halcon Resources Corp. has been doing a lot of wheeling and dealing - but the Houston-based energy exploration and production company's chief executive officer says that after a series of capital markets deals, his company can easily afford it.

"We're very liquid right now," Floyd C. Wilson, who also doubles as the company's chairman, told investors at the Barclays CEO Energy Power Conference on Wednesday in New York.

"We've been active in the markets with a couple of deals in raising some money this year because we've been buying a lot of land.

"We've got plenty of money on hand to do what we're doing."

It was less than a year ago that Halcon Resources LLC - newly organized by Wilson after his successful $15 billion sale of his former company, Petrohawk Energy Corp., to Australian mining and energy giant BHP Billiton in the summer of 2011 - made its first, and biggest deal.

The company - named for the Spanish word for "hawk" - swooped down and gained control of the more established but cash-hungry Ram Energy Resources, Inc. in a $550 million recapitalization transaction announced last December. Ram changed its name to Halcon Resources Corp., with Wilson taking over as chairman and CEO from Ram co-founder Larry E. Lee and moving the company's base of operations to Houston from Tulsa.

Hitting the capital markets

Concurrent with the closing of the Ram transaction in February of this year, Halcon then began an aggressive campaign of capital markets transactions.

The company announced a new $500 million senior secured revolving credit facility due 2017, with a $225 million borrowing base, replacing Ram's existing $250 million revolver due 2016, with a $150 million borrowing base, that the company had entered into in March 2011. The new revolver carried better pricing terms - ranging from Libor plus 150 basis points to 250 bps based on utilization, versus the previous revolver's Libor plus 250 bps to 325 bps range, also based on the percentage of borrowing base used.

The company went back to the bank debt market this summer, announcing on Aug. 2 that it had amended the revolver, raising the overall size to $1.5 billion and the borrowing base to $525 million. The pricing terms remained the same. As of that time, the revolver was undrawn.

In March, the company announced that it had done a $400 million private placement of convertible preferred stock, with plans to use the proceeds for general corporate purposes, including leasing or acquiring acreage, seismic data, drilling and completion, and the acquisition of assets or existing operating companies.

And Halcon visited the junk bond market in late June, with an upsized $750 million issue of 9¾% notes due 2020. That deal - increased from an originally shopped $500 million - priced at 98.646 on June 29 to yield 10%.

Shopping spree

The $725 million of net proceeds from the junk bond deal were used to fund the $532 million cash consideration portion of the company's approximately $1 billion acquisition of GeoResources, Inc., another energy company, as well as to partially fund the roughly $300 million cash consideration portion of its acquisition of certain leasehold positions in properties in the Woodbine formation in eastern Texas potentially containing large deposits of oil and natural gas liquids.

The company announced its agreement to acquire GeoResources in April; besides the $532 million in cash financed through the bond sale, it agreed to give GeoResources shareholders some 51.3 million shares of Halcon common stock.

The East Texas assets transaction, disclosed in regulatory filings earlier in the year, was valued at $300 million in cash plus the issuance of some 20.8 million shares of common stock to a consortium of private oil and gas companies.

Both of those acquisitions closed on Aug. 1, with an effective date of April 1 for the East Texas assets transaction.

In June, the company also acquired development rights for 27,000 acres of property in the Utica shale formation in eastern Ohio from NCL Natural Resources LLC, paying $164 million out of cash on hand.

During his presentation, Wilson indicated that for now, the company had completed its goals as far as leasehold acquisitions, and would henceforth dedicate the bulk of its anticipated $1 billion of capital expenditures to drilling operations.

According to data provided by the company as part of Wilson's presentation, pro forma for the various debt transactions and acquisitions, Halcon's balance of cash and equivalents stands at $96 million, with $525 million of undrawn revolver availability for total liquidity of $621 million. Long-term debt stood at $982 million - most of it from the junk bond issue.

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