Halcón Resources Corporation (NYSE:HK) (“Halcón” or the “Company”) today announced it has recently acquired or entered into definitive agreements to acquire 22,617 net acres in Ward County, Texas for approximately $381 million. The properties are currently producing ~1,325 boe/d which equates to a purchase price of ~$14,674/acre (after adjusting for production using an estimated value of $35,000 per Boe/d). The Company also provided an update on recent well results in the Delaware Basin.
The largest acquisition is comprised of 10,524 net acres in central and western Ward County in an area Halcón calls West Quito Draw. The Company expects the acquisition to close in early April 2018, subject to satisfaction of customary closing conditions. The West Quito Draw acquisition is located in an actively developed area of the Delaware Basin and adds 251 additional gross operated drilling locations in the Wolfcamp and 3rd Bone Spring Sand zones with an average lateral length of ~7,300 ft. However, Halcón expects that near-term drilling will be predominantly comprised of 10,000 ft. laterals. The Company estimates that 10,000 ft. laterals in the Wolfcamp on this acreage will generate 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. Many of the additional landing zones have been successfully drilled by offset operators in the area. This property is approximately 47% held by production and is 91% operated with an average working interest of 72%. The Company is considering bringing an operated rig to this area in the second quarter of 2018.
Halcón also recently closed on the acquisition of 4,413 net acres contiguous to its existing Monument Draw area (the “Monument Draw Tack-On”). This acquisition increases the Company’s Monument Draw base case location inventory by 48 operated locations with an average lateral length of 10,833 ft. (assuming two Wolfcamp zones and one Bone Spring zone). Well results and type curves on this acreage are expected to be consistent with the Company’s existing Wolfcamp wells on its Monument Draw acreage (i.e. 1.9 MMboe 2-stream EURs for a 10,000 ft. lateral comprised of 80% oil). Including additional target zones (additional Bone Spring, an additional Wolfcamp zone, etc.) Halcón estimates there are 104 potential horizontal operated locations on the Monument Draw Tack-On acreage. The Company plans to actively de-risk these targets with its 2018 drilling program. This property is 96% operated with an average working interest of 88%.
Halcón also has an option agreement in place to purchase 7,680 net acres on the eastern side of its existing Monument Draw area (the “Monument Draw East Option”). The Company has until March 31, 2018 to elect to exercise this option at $10,000/acre. The Monument Draw East Option would increase the Company’s Monument Draw base case inventory by 72 operated locations, all with a lateral length of 10,000 ft. (assuming one Wolfcamp zone and one Bone Spring zone). Halcón estimates there are more than 144 potential operated horizontal locations on this acreage if other potential landing zones are included. Well results and type curves on this acreage are expected to be consistent with the Company’s existing Monument Draw acreage (i.e. 1.9 MMboe 2-stream EURs for a 10,000 ft. lateral Wolfcamp well comprised of 80% oil). This property is 100% operated with an average working interest of 100%. The Company recently completed frac’ing a 10,000 ft. horizontal well in the lower Wolfcamp zone on the southern portion of the Monument Draw East Option acreage (the Sealy Ranch 5902H well). Halcón ran a horizontal “shuttle log” in this well and expects this well to be highly productive based on the log results. This well was put online in late January 2018 and is currently flowing back.
In early January 2018, the Company exercised the previously disclosed option it had to acquire 8,946 net acres in the northern area of Monument Draw for $108 million ($13,000/acre).
Pro forma for these acquisitions (including the exercise of the Monument Draw East Option), Halcón will have acquired ~66,500 net acres in the Delaware Basin over the last year at an average acquisition cost of ~$17,800/acre (after adjusting for production using an estimated value of $35,000 per Boe/d and considering the estimated value of infrastructure acquired).