A must-know update on Halcon Resources’ El Halcon

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Dec. 5 2014, Updated 8:00 a.m. ET

Halcon Resources’ El Halcon

In the previous section of the series, we discussed Halcon Resources’ (HK) Bakken production. In this article, we’ll discuss the rapid rise in HK’s production in El Halcon.

The increased production in El Halcon is a result of higher drilling and increased volumes associated with the company’s acquisition in the Bakken/Three Forks, Woodbine, and the Eagle Ford formation in East Texas. These areas, collectively known as El Halcon, accounted for an increase of approximately 17,000 boe/d (barrels of oil equivalent per day) in September 2014.

El Halcom Map

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El Halcon update

HK’s most prolific region in 2013 and 2014 is the El Halcón area, which consists of Brazos, Burleson, and Lee counties in Texas. In 2013, HK used four rigs to drill ~40 wells the region.

By the end of September 2014, HK had 101,000 net acres in El Halcon. In 3Q14, Halcon’s average initial production rate in El Halcon was 726 thousand boe/d, 17% higher than in 2Q14.

HK is working on reducing costs per well through increasing efficiencies associated with pad drilling/simultaneous operations and completion modifications like proppant type, fluid type, and pumping services. The company has also targeted increasing depth at El Halcon from 7,000 feet to 10,000 feet. The company expects completed well costs to decrease by up to $1 million per well after HK starts developing oil and gas in this region.

HK’s acreage in Texas increased from 34% of its net acreage in 2012 to 44% in 2013, primarily as a result of the El Halcon acquisition targeting the Eagle Ford formation.

Halcon Resources’ plans in El Halcon

During 4Q14, HK plans to spud 10 to 12 gross wells in the region, but HK operated rigs are expected to fall to three from four last year. In 2014, the company expects to spend approximately 49% of its $950 million drilling and completions capex in the Eagle Ford area.

The two upstream energy giants in the Eagle Ford shale, Chesapeake Energy (CHK) and Anadarko Petroleum (APC), have current energy production of 669.59 thousand boe/d and 781 thousand boe/d, respectively. The other key producers Cabot Oil & Gas (COG) and Range Resources’ (RRC) have a current production rate of 188.92 thousand boe/d and 156.63 thousand boe/d, respectively. Some of these companies are components of the Energy Sector Select SPDR ETF (XLE).

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