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Halcon Resources’ Performance Year-to-Date

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Halcon Resources: The worst-performing upstream stock in 2018

Year-to-date in 2018, Halcon Resources (HK) is turning out to be the worst-performing energy stock from the US oil and gas production, or upstream, sector. Halcon Resources is primarily a crude oil producer with operations in the liquids-rich Delaware Basin. In 2018, HK fell from its 2017 close of $7.57 to $5.45—a big decrease of more than 28%.

In comparison, the SPDR S&P Oil and Gas Exploration & Production ETF (XOP) decreased ~6% in 2018. XOP represents an index of stocks across the energy industry. It has ~79.3% exposure to the oil and gas exploration and production industry. Halcon Resources is also underperforming the Energy Select Sector SPDR Fund (XLE)—which represents an index of stocks across the energy sector. In 2018, XLE is down ~5%.

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Halcon Resources’ revenues and earnings

In 2017, Halcon Resources reported revenues of ~$378 million, which is ~10% lower than its revenues of ~$420 million in 2016. In 2017, Halcon Resources turned non-profitable after reporting profits in 2016. In 2017, HK posted an adjusted loss of ~$19 million versus a profit of ~$186 million in 2016. On a per-share basis, Halcon Resources posted an adjusted loss of -$0.15 per share in 2017 versus its profit of $1.55 per share in 2016.

Apart from lower earnings, HK had been on an asset-buying spree since December 2017. In the last three months, HK announced or closed acquisitions of more than $400 million. To fund these acquisitions, in 1Q18, HK completed a public offering of ~8 million common shares for gross proceeds of ~$55 million and also issued additional unsecured notes for an aggregate amount of ~$200 million. HK’s growth strategy isn’t going over well with investors, as the stock peaked in the third week of January and is down more than ~40% since then.

Next in this series, we’ll compare 2018 returns for Carrizo Oil & Gas (CRZO) with various energy ETFs and energy commodities and analyze its fundamental metrics.

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