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Halcon Resources Announces Third Quarter 2013 Financial Results And Provides 2014 Outlook

Stocks in this article: HK

For more information contact Scott Zuehlke, Vice President of Investor Relations, at 832-538-0314 or szuehlke@halconresources.com.

Forward-Looking Statements

This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements, including, without limitation; relating to future plans or expectations, such as Halcón's 2014 Outlook,  constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects", "believes", "intends", "anticipates", "plans", "estimates", "potential", "possible", or "probable" or statements that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved. Additionally, initial production rates, average 60 day production rates and improvements mentioned herein are not necessarily indicative of future production rates or performance. Forward-looking statements are based on current beliefs and expectations and involve certain assumptions or estimates that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, Form 10-Q for the quarter ended September 30, 2013 and other filings submitted by the Company to the U.S. Securities and Exchange Commission (SEC), copies of which may be obtained from the SEC's website at www.sec.gov  or through the Company's website at  www.halconresources.com . Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. The Company has no duty, and assumes no obligation, to update forward-looking statements as a result of new information, future events or changes in the Company's expectations.

The photo is also available at Newscom, www.newscom.com , and via AP PhotoExpress.

HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share and per share amounts)
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
Operating revenues:        
Oil, natural gas and natural gas liquids sales:        
Oil   $ 288,850  $ 65,670  $ 672,167  $ 109,050
Natural gas  7,457  3,918  19,971  6,875
Natural gas liquids  7,894  3,230  15,976  7,080
Total oil, natural gas and natural gas liquids sales  304,201  72,818  708,114  123,005
Other  806  489  2,090  560
Total operating revenues  305,007  73,307  710,204  123,565
         
Operating expenses:        
Production:        
Lease operating  37,539  14,197  94,676  30,113
Workover and other  2,029  1,123  4,276  2,384
Taxes other than income  26,613  5,814  62,616  9,648
Gathering and other  3,766  167  6,901  274
Restructuring  --   725  507  1,732
General and administrative  33,762  33,124  98,885  66,327
Depletion, depreciation and accretion  143,091  22,726  320,264  34,661
Impairment charges  1,205,227  --   1,205,227  -- 
Total operating expenses  1,452,027  77,876  1,793,352  145,139
Income (loss) from operations  (1,147,020)  (4,569)  (1,083,148)  (21,574)
Other income (expenses):        
Net gain (loss) on derivative contracts  (54,427)  (9,575)  (38,749)  (849)
Interest expense and other, net  (13,663)  (5,074)  (24,245)  (22,250)
 Total other income (expenses)   (68,090)  (14,649)  (62,994)  (23,099)
Income (loss) before income taxes  (1,215,110)  (19,218)  (1,146,142)  (44,673)
Income tax benefit (provision)   360,283  (963)  333,868  (1,171)
Net income (loss)  (854,827)  (20,181)  (812,274)  (45,844)
Non-cash preferred dividend  --   --   --   (88,445)
Series A preferred dividends  (5,070)  --   (5,786)  -- 
Net income (loss) available to common stockholders  $ (859,897)  $ (20,181)  $ (818,060)  $ (134,289)
         
Net income (loss) per share of common stock:        
Basic  $ (2.19)  $ (0.11)  $ (2.22)  $ (1.01)
Diluted  $ (2.19)  $ (0.11)  $ (2.22)  $ (1.01)
         
Weighted average common shares outstanding:        
Basic  392,726  191,846  368,696  132,460
Diluted  392,726  191,846  368,696  132,460
         
 
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
     
  September 30, December 31,
  2013 2012
Current assets:    
Cash  $ 461  $ 2,506
Accounts receivable  292,278  262,809
Receivables from derivative contracts  3,246  7,428
Current portion of deferred income taxes  10,992  5,307
Inventory  6,370  3,116
Prepaids and other  16,142  6,691
Total current assets  329,489  287,857
Oil and natural gas properties (full cost method):    
Evaluated  4,806,377  2,669,245
Unevaluated  1,982,188  2,326,598
Gross oil and natural gas properties  6,788,565  4,995,843
Less - accumulated depletion  (1,809,963)  (588,207)
Net oil and natural gas properties  4,978,602  4,407,636
Other operating property and equipment:    
Gas gathering and other operating assets  110,940  59,748
Less - accumulated depreciation  (10,330)  (8,119)
Net other operating property and equipment  100,610  51,629
Other noncurrent assets:    
Goodwill   --   227,762
Receivables from derivative contracts  5,629  371
Debt issuance costs, net  63,258  51,609
Deferred income taxes  171,000  -- 
Equity in oil and natural gas partnerships  10,821  11,137
Funds in escrow  847  2,090
Other  11,182  934
Total assets  $ 5,671,438  $ 5,041,025
   $ --   
Current liabilities:    
Accounts payable and accrued liabilities  $ 695,052  $ 590,551
Liabilities from derivative contracts  30,387  10,429
Asset retirement obligations  1,391  2,319
Current portion of long-term debt  695  -- 
Promissory notes  --   74,669
Total current liabilities  727,525  677,968
Long-term debt  3,003,855  2,034,498
Other noncurrent liabilities:    
Liabilities from derivative contracts  1,146  2,461
Asset retirement obligations  86,646  72,813
Deferred income taxes  --   160,055
Other  2,510  10
Commitments and contingencies    
Mezzanine equity:    
Preferred stock: 1,000,000 shares of $0.0001 par value authorized; none and 10,880 shares of 8% Automatically Convertible, issued and outstanding as of September 30, 2013 and December 31, 2012, respectively  --   695,238
Stockholders' equity:    
Preferred stock: 1,000,000 shares of $0.0001 par value authorized; 345,000 and none shares of 5.75% Cumulative Perpetual Convertible Series A, issued and outstanding as of September 30, 2013 and December 31, 2012, respectively  --   -- 
Common stock: 670,000,000 and 336,666,666 shares of $0.0001 par value authorized; 414,616,509 and 259,802,377 shares issued; 414,616,509 and 258,152,468 outstanding at September 30, 2013 and December 31, 2012, respectively   41  26
Additional paid-in capital  2,940,585  1,681,717
Treasury stock: none and 1,649,909 shares at September 30, 2013 and December 31, 2012, respectively, at cost  --   (9,298)
Accumulated deficit  (1,090,870)  (274,463)
Total stockholders' equity  1,849,756  1,397,982
Total liabilities and stockholders' equity  $ 5,671,438  $ 5,041,025
     
 
HALCÓN RESOURECS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
Cash flows from operating activities:        
Net income (loss)  $ (854,827)  $ (20,181)  $ (812,274)  $ (45,844)
Adjustments to reconcile net income (loss) to net cash        
provided by (used in) operating activities:        
Depletion, depreciation and accretion  143,091  22,726  320,264  34,661
Impairment charges  1,205,227  --  1,205,227  --
Deferred income tax provision (benefit)  (356,186)  894  (334,881)  1,030
Share-based compensation, net  5,019  1,401  11,994  3,866
Unrealized loss (gain) on derivative contracts  38,095  11,233  18,956  3,197
Amortization and write-off of deferred loan costs  835  (52)  1,343  6,247
Non-cash interest and amortization of discount and premium  341  887  1,395  8,620
Other income (expense)  (2,329)  487  (5,241)  470
Cash flow from operations before changes in working capital  179,266  17,395  406,783  12,247
Changes in working capital, net of acquisitions  (19,027)  (12,889)  (15,178)  (10,369)
Net cash provided by (used in) operating activities  160,239  4,506  391,605  1,878
         
Cash flows from investing activities:        
Oil and natural gas capital expenditures  (802,979)  (247,835)  (1,828,969)  (716,112)
Other operating property and equipment capital expenditures  (39,379)  (14,560)  (120,071)  (18,133)
Proceeds received from sales of oil and gas assets  160,268  --  160,268  --
Acquisition of GeoResources, Inc., net of cash acquired  --  (579,497)  --  (579,497)
Acquisition of East Texas Assets  --  (296,139)  --  (296,139)
Acquisition of Williston Basin Assets  (2,442)  --  (32,181)  --
Funds held in escrow and other  25,258  26,604  (5,547)  (2,435)
Net cash provided by (used in) investing activities  (659,274)  (1,111,427)  (1,826,500)  (1,612,316)
         
Cash flows from financing activities:        
Proceeds from borrowings  1,232,000  1,044,845  2,760,000  1,282,255
Repayments of borrowings  (943,000)  (120,000)  (1,858,400)  (328,000)
Debt issuance costs  (7,775)  (18,604)  (19,302)  (23,657)
Offering costs  (7,655)  (402)  (17,313)  (18,535)
Common stock repurchased  --  --  --  (2,139)
Series A preferred stock issued  --  --  345,000  --
Preferred stock issued  --  --  --  311,556
Preferred beneficial conversion feature  --  --  --  88,445
Common stock issued  222,870  --  222,870  275,000
Warrants issued  --  --  --  43,590
Other  (5)  --  (5)  --
Net cash provided by (used in) financing activities  496,435  905,839  1,432,850  1,628,515
         
Net increase (decrease) in cash   (2,600)  (201,082)  (2,045)  18,077
         
Cash at beginning of period  3,061  219,208  2,506  49
Cash at end of period  $ 461  $ 18,126  $ 461  $ 18,126
         
Disclosure of non-cash investing and financing activities:      
Accrued capitalized interest  $ 12,025  $ 11,771  $ 10,549  $ 11,690
Asset retirement obligations  4,684  643  10,077  689
Non-cash preferred dividend  --   --   --   88,445
Series A preferred dividends paid in common stock  4,133  --   4,133  -- 
Payment-in-kind interest  --   5,804  --   14,669
Common stock issued for GeoResources, Inc.  --   321,416  --   321,416
Common stock issued for the East Texas Assets  --   130,623  --   130,623
         
 
HALCÓN RESOURCES CORPORATION
SELECTED OPERATING DATA
(Unaudited)
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
         
Production volumes:        
Oil (MBbls) 2,885 704 7,028 1,151
Natural gas (Mmcf) 2,195 1,441 5,887 2,640
Natural gas liquids (MBbls) 218 85 456 163
Total (MBoe) 3,469 1,029 8,465 1,754
Average daily production (Boe) 37,707 11,185 31,007 6,401
         
Average prices:        
Oil (per Bbl)  $ 100.12  $ 93.28  $ 95.64  $ 94.74
Natural gas (per Mcf)  3.40  2.72  3.39  2.60
Natural gas liquids (per Bbl)  36.21  38.00  35.04  43.44
Total per Boe  87.69  70.77  83.65  70.13
         
Cash effect of derivative contracts:        
Oil (per Bbl)  $ (6.03)  $ 0.65  $ (3.03)  $ 0.04
Natural gas (per Mcf)  0.48  0.83  0.26  1.09
Natural gas liquids (per Bbl)  --   --   --   -- 
Total per Boe  (4.71)  1.61  (2.34)  1.67
         
Average prices computed after cash effect of settlement of derivative contracts:        
Oil (per Bbl)  $ 94.09  $ 93.93  $ 92.61  $ 94.78
Natural gas (per Mcf)  3.88  3.55  3.65  3.69
Natural gas liquids (per Bbl)  36.21  38.00  35.04  43.44
Total per Boe  82.98  72.38  81.31  71.80
         
Average cost per Boe:        
Production:        
Lease operating, as adjusted (1)  $ 10.82  $ 13.80  $ 11.18  $ 16.87
Workover and other  0.58  1.09  0.51  1.36
Taxes other than income  7.67  5.65  7.40  5.50
Gathering and other  1.09  0.16  0.82  0.16
General and administrative, as adjusted (1)  8.14  13.56  9.95  17.11
Restructuring costs  --   0.70  0.06  0.99
Depletion  40.31  20.99  36.94  18.32
         
(1) Represents lease operating and general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
         
General and administrative:        
General and administrative, as reported  $ 9.74  $ 32.19  $ 11.68  $ 37.81
Share-based compensation:        
Cash   --   --   --   (1.03)
Non-cash  (1.45)  (1.36)  (1.42)  (2.41)
Recapitalization and change in control:        
Cash   --   --   --   (5.05)
Non-cash  --   --   --   -- 
Acquisition and merger transaction costs:        
Cash   (0.15)  (17.27)  (0.31)  (12.21)
General and administrative, as adjusted  $ 8.14  $ 13.56  $ 9.95  $ 17.11
         
Lease operating costs, as reported  $ 10.82  $ 13.80  $ 11.18  $ 17.17
Recapitalization and change in control:        
Cash   --   --   --   (0.30)
Lease operating costs, as adjusted  $ 10.82  $ 13.80  $ 11.18  $ 16.87
         
Total operating costs, as reported  $ 29.90  $ 52.89  $ 31.59  $ 62.00
 Total adjusting items  (1.60)  (18.63)  (1.73)  (21.00)
Total operating costs, as adjusted (2)  $ 28.30  $ 34.26  $ 29.86  $ 41.00
(2) Represents lease operating, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in reconciliation above.
 
 
HALCÓN RESOURCES CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
         
Unrealized loss (gain) on derivatives contracts:        
 Crude oil  $ 37,935  $ 10,717  $ 23,108  $ 2,670
 Natural gas   160  1,100  (2,729)  1,971
 Interest rate  --   --   --   (518)
Total mark-to-market non-cash charge  38,095  11,817  20,379  4,123
Impairment charges  1,205,227  --   1,205,227  -- 
Deferred financing costs expensed, net (1)  891  --   891  -- 
Recapitalization expenditures (2)  --   --   --   21,980
Restructuring (3)  --   725  507  1,732
Acquisition and merger transaction costs and other  533  17,773  2,585  21,412
Selected items, before income taxes and preferred dividend  1,244,746  30,315  1,229,589  49,247
Income tax effect of selected items (4)  (373,536)  (11,004)  (367,963)  (17,877)
Selected items, net of tax and before preferred dividends  871,210  19,311  861,626  31,370
Non-cash preferred dividend  --   --   --   88,445
Series A Preferred dividends  5,070  --   5,786  -- 
Selected items, net of tax  876,280  19,311  867,412  119,815
Net income (loss) available to common stockholders, as reported  (859,897)  (20,181)  (818,060)  (134,289)
Net income (loss) available to common stockholders, excluding selected items  16,383  (870)  49,352  (14,474)
Interest on convertible debt, net   1,698  --   3,671  -- 
Net income (loss) available to common stockholders after assumed conversions, excluding selected items  $ 18,081  $ (870)  $ 53,023  $ (14,474)
         
         
Basic net income (loss) per common share, as reported  $ (2.19)  $ (0.11)  $ (2.22)  $ (1.01)
Impact of selected items  2.23  0.10  2.35  0.90
Basic net income (loss) per common share, excluding selected items  $ 0.04  $ (0.01)  $ 0.13  $ (0.11)
         
Diluted net income (loss) per common share, as reported  $ (2.19)  $ (0.11)  $ (2.22)  $ (1.01)
Impact of selected items  2.23  0.10  2.34  0.90
Diluted net income (loss) per common share, excluding selected items (5)  $ 0.04  $ (0.01)  $ 0.12  $ (0.11)
         
         
Cash flow from operations before changes in working capital  $ 179,266  $ 17,395  $ 406,783  $ 12,247
Cash components of selected items  533  18,498  3,092  36,810
Income tax effect of selected items  (196)  (6,715)  (1,137)  (13,362)
Cash flow from operations before changes in working capital, adjusted for selected items  $ 179,603  $ 29,178  $ 408,738  $ 35,695
         
Cash flow from operations before changes in working capital per diluted share (5)  $ 0.39  $ 0.09  $ 0.90  $ 0.09
Impact of selected items  --   0.06  0.01  0.18
Cash flow from operations before changes in working capital per diluted share, adjusted for selected items (5)  $ 0.39  $ 0.15  $ 0.91  $ 0.27
(1) Represents charges related to the write-off of debt issuance costs associated with decreases in the Company's borrowing base under its senior revolving credit facility. 
(2) Represents costs related to the recapitalization, change in control and credit facility refinancing.
(3) Represents costs related to relocating key administrative functions to corporate headquarters.
(4) Represents tax impact using an estimated tax rate of 36.77%. Also included in this line item is $84.2 million associated with the writeoff of goodwill which is non-deductible for income tax purposes.
(5) The impact of selected items for the three months and nine months ended September 30, 2013 was calculated based upon weighted average diluted shares of 462.8 million and 450.7 million, respectively, due to the net income available to common stockholders, excluding selected items.
CONTACT: For more information contact
         Scott Zuehlke,
         Vice President of Investor Relations,
         832-538-0314 
         szuehlke@halconresources.com

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