Halcon Resources Announces Third Quarter 2016 Results

HOUSTON, Nov. 09, 2016 (GLOBE NEWSWIRE) -- Halcón Resources Corporation (NYSE:HK) ("Halcón" or the "Company") today announced its third quarter 2016 results.

Production for the three months ended September 30, 2016 averaged 34,185 barrels of oil equivalent per day (Boe/d).  Production was comprised of 76% oil, 13% natural gas liquids (NGLs) and 11% natural gas for the quarter.  The Company shut-in approximately 7,000 Boe/d of net production during the third quarter due to low commodity prices.  This production was brought back online in early October 2016.  Halcón expects fourth quarter net production to be between 39,000 and 41,000 Boe/d and D&C capex to be approximately $45 to $50 million. 

Halcón generated total revenues of $102.5 million for the third quarter of 2016.  In addition, Halcón realized a net gain on settled derivative contracts of $80.0 million during the quarter. 

Excluding the impact of hedges, Halcón realized 89% of the average NYMEX oil price, 18% of the average NYMEX oil price for NGLs and 54% of the average NYMEX natural gas price during the third quarter of 2016. 

Total operating costs per unit were $24.89 per Boe during the third quarter.  After adjusting for selected items, total operating costs per unit (see Selected Operating Data table for additional information), were $17.33 per Boe and $17.12 per Boe for the three and nine months ended September 30, 2016, respectively, a 5% decline from the nine month period ended a year earlier. 

Liquidity and Capital Spending

As of September 30, 2016 Halcón's liquidity was approximately $369 million, which consisted of $367 million of undrawn capacity on the Company's revolver plus $2 million in cash and cash equivalents.  The Company's senior revolving credit facility is scheduled for its next borrowing base redetermination in May of 2017.  Based on current strip pricing, Halcón is anticipated to generate positive cash flow for the remainder of 2016 and be approximately break-even for 2017 based on its preliminary 2017 drilling plan of one rig growing to two rigs in April of 2017. 

During the third quarter of 2016, the Company incurred capital costs of $36 million on drilling and completions, and $2 million on infrastructure, seismic and leasehold acquisitions.  In addition, Halcón incurred $18 million for capitalized interest, G&A and other in the third quarter.   

Hedging Update

Halcón has 26,000 Bbl/d of oil hedged for the last three months of 2016 at an average price of $76.60 per barrel.  For 2017, the Company has 14,750 Bbl/d of oil hedged at an average price of $55.02 per barrel.  Halcón estimates the pre-tax mark-to-market value of its hedge portfolio to be approximately $92 million as of November 7, 2016.

Operations Update

The Company is currently running 1 operated rig in the Fort Berthold area of the Williston Basin and plans to keep this rig running there through 2017.  Halcón is tentatively planning to add a second operated rig in the Williston Basin in April of 2017 depending on oil prices and other factors.  This second rig will initially drill a 5 well pad in the Company's Williams County area before moving to the Fort Berthold area.  Halcón currently has 16 wells in the Bakken being completed or waiting on completion.

Bakken/Three Forks

The Company operated an average of 1 rig in the Williston Basin during the third quarter of 2016.

Halcón spudded 6 wells and put 2 wells online in the Fort Berthold area of the Williston Basin during the three months ended September 30, 2016.  The Company participated in 15 non-operated wells with an average working interest of 9% during the third quarter.  Production averaged 25,231 Boe/d during the third quarter of 2016 in the Williston Basin including the impact of approximately 7,000 boe/d shut in during the quarter.   

Halcón currently has working interests in approximately 119,000 net acres prospective for the Bakken and Three Forks formations in the Williston Basin, substantially all of which is held by production (HBP).  With one operated rig running, the Company plans to spud 7 gross operated wells with an average working interest of approximately 89% and expects to put approximately 15 gross operated wells online over the remaining three months of 2016.  Halcón also expects to participate in 5 to 10 gross non-operated wells over the last three months of 2016 with an average working interest of approximately 5%. Halcón expects operated wells put online over the remainder of 2016 and 2017 in Fort Berthold to have an average EUR in excess of 900 MBoe.  The Company expects the wells it puts online in Williams County in 2017 to have average EURS in excess of 700 MBoe.  The Company estimates it has approximately 100 gross operated locations that are economic at current strip pricing in Williams County.  Current operated drilling and completion costs are anticipated to be $5.9 million in Fort Berthold and $5.2 million in Williams County.

Halcón is currently the operator of 216 producing Bakken wells and 68 Three Forks wells.

"El Halcón" - East Texas Eagle Ford

The Company did not run an operated rig in El Halcón during the third quarter of 2016 and no wells were put online during the quarter.  Halcón anticipates adding a rig back to this area when oil prices improve.  Halcón is currently evaluating the impact of enhanced frac designs on its El Halcón acreage with the goal of improving ultimate recoveries and economics. 

Halcón currently has working interests in approximately 80,000 net acres prospective for the Eagle Ford formation in East Texas, approximately 82% of which is HBP.  The Company currently operates 112 El Halcón wells. Production for the quarter averaged 6,693 Boe/d in the El Halcón area.

Fresh Start Accounting

Halcón adopted fresh-start accounting as of September 9, 2016, the effective date of its emergence from chapter 11 bankruptcy proceedings, resulting in the Company becoming a new entity for financial reporting purposes.  Upon the adoption of fresh-start accounting, Halcón's assets and liabilities were recorded at their fair values as of the fresh-start reporting date, and as a result the Company's unaudited condensed consolidated financial statements subsequent to September 9, 2016 may not be comparable to its financial statements prior to September 9, 2016.  Please review Halcón's Form 10-Q for the third quarter of 2016 for further details regarding fresh-start accounting and the financial information presented at the end of this release.

Conference Call Information

Halcón Resources Corporation has scheduled a conference call for Thursday, November 10, 2016, at 10:00 a.m. EST (9:00 a.m. CST).  Investors may participate in the conference call via telephone by dialing (877) 810-3368 for domestic callers or (914) 495-8561 for international callers, in both cases using conference ID 94707346, and asking for the Halcón call a few minutes prior to the start time.

The conference call will also be webcast live over the Internet on the Company's website at http://www.halconresources.com in the Investor Relations section under Events & Presentations. 

About Halcón Resources

Halcón Resources Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.

For more information contact Quentin Hicks, Senior Vice President of Finance & Investor Relations, at 832-538-0557 or qhicks@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 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.  This release may also use the term "EUR" to describe estimates of potentially recoverable hydrocarbons that the SEC rules prohibit from being included in filings with the SEC. These are based on the Company's internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. These quantities do not constitute "reserves" within the meaning of the Society of Petroleum Engineer's Petroleum Resource Management System or SEC rules and are subject to substantially greater uncertainties relating to recovery than reserves. "EUR," or Estimated Ultimate Recovery, refers to our management's internal estimates based on per well hydrocarbon quantities that may be potentially recovered from a hypothetical future well completed as a producer in the area. For areas where the Company has no or very limited operating history, EURs are based on publicly available information relating to operations of producers operating in such areas.  For areas where the Company has sufficient operating data to make its own estimates, EURs are based on internal estimates by the Company's management and reserve engineers. 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, effects on market price of the Company's common stock and on the Company's ability to access the capital markets, and the risks set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and other filings submitted by the Company to the 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.
                   
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
                   
        Successor     Predecessor
        Period from September 10, 2016     Period from July 1, 2016   Three Months  
        through September 30, 2016     through September 9, 2016   Ended September 30, 2015
Operating revenues:              
  Oil, natural gas and natural gas liquids sales:              
    Oil   $ 21,260       $ 74,002     $ 121,845  
    Natural gas     823         2,610       5,058  
    Natural gas liquids     798         2,488       2,615  
    Total oil, natural gas and natural gas liquids sales     22,881         79,100       129,518  
  Other     226         247       421  
    Total operating revenues     23,107         79,347       129,939  
                   
Operating expenses:              
  Production:              
    Lease operating     3,791         12,473       22,248  
    Workover and other     1,565         6,801       4,769  
    Taxes other than income     2,173         7,442       12,102  
  Gathering and other     2,637         7,376       9,091  
  Restructuring     -         95       434  
  General and administrative     16,681         17,317       21,027  
  Depletion, depreciation and accretion     9,051         25,618       77,071  
  Full cost ceiling impairment     420,934         -       511,882  
    Total operating expenses     456,832         77,122       658,624  
Income (loss) from operations     (433,725 )       2,225       (528,685 )
Other income (expenses):              
  Net gain (loss) on derivative contracts     (7,575 )       17,783       204,621  
  Interest expense and other, net     (5,479 )       (16,136 )     (57,977 )
  Reorganization items     (556 )       913,722       -  
  Gain (loss) on extinguishment of debt     -         -       535,141  
    Total other income (expenses)     (13,610 )       915,369       681,785  
Income (loss) before income taxes     (447,335 )       917,594       153,100  
Income tax benefit (provision)     (3,357 )       8,666       (6,025 )
Net income (loss)     (450,692 )       926,260       147,075  
Series A preferred dividends     -         (2,451 )     (4,196 )
Preferred dividends and accretion on redeemable noncontrolling interest   (791 )       (7,388 )     (19,351 )
Net income (loss) available to common stockholders   $ (451,483 )     $ 916,421     $ 123,528  
                   
Net income (loss) per share of common stock:              
    Basic   $ (4.96 )     $ 7.58     $ 1.05  
    Diluted   $ (4.96 )     $ 6.06     $ 0.88  
Weighted average common shares outstanding:              
    Basic     91,071         120,905       117,211  
    Diluted     91,071         151,876       150,958  
                   
     
                   
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Continued)
(In thousands, except per share amounts)
                   
                   
        Successor     Predecessor
        Period from September 10, 2016     Period from January 1, 2016   Nine Months
        through September 30, 2016     through September 9, 2016   Ended September 30, 2015
Operating revenues:              
  Oil, natural gas and natural gas liquids sales:              
    Oil   $ 21,260       $ 248,064     $ 404,368  
    Natural gas     823         9,511       17,595  
    Natural gas liquids     798         7,929       10,572  
    Total oil, natural gas and natural gas liquids sales     22,881         265,504       432,535  
  Other     226         1,339       1,622  
    Total operating revenues     23,107         266,843       434,157  
                   
Operating expenses:              
  Production:              
    Lease operating     3,791         50,032       81,266  
    Workover and other     1,565         22,507       11,614  
    Taxes other than income     2,173         24,453       37,246  
  Gathering and other     2,637         29,279       30,583  
  Restructuring     -         5,168       2,664  
  General and administrative     16,681         83,641       68,098  
  Depletion, depreciation and accretion     9,051         120,555       297,409  
  Full cost ceiling impairment     420,934         754,769       2,014,518  
  Other operating property and equipment impairment     -         28,056       -  
    Total operating expenses     456,832         1,118,460       2,543,398  
Income (loss) from operations     (433,725 )       (851,617 )     (2,109,241 )
Other income (expenses):              
  Net gain (loss) on derivative contracts     (7,575 )       (17,998 )     216,805  
  Interest expense and other, net     (5,479 )       (122,249 )     (180,206 )
  Reorganization items     (556 )       913,722       -  
  Gain (loss) on extinguishment of debt     -         81,434       557,907  
  Gain (loss) on extinguishment of Convertible Note and              
  modification of February 2012 Warrants     -         -       (8,219 )
    Total other income (expenses)     (13,610 )       854,909       586,287  
Income (loss) before income taxes     (447,335 )       3,292       (1,522,954 )
Income tax benefit (provision)     (3,357 )       8,666       (6,224 )
Net income (loss)     (450,692 )       11,958       (1,529,178 )
Series A preferred dividends     -         (8,847 )     (13,999 )
Preferred dividends and accretion on redeemable noncontrolling interest   (791 )       (35,905 )     (39,069 )
Net income (loss) available to common stockholders   $ (451,483 )     $ (32,794 )   $ (1,582,246 )
                   
Net income (loss) per share of common stock:              
    Basic   $ (4.96 )     $ (0.27 )   $ (15.28 )
    Diluted   $ (4.96 )     $ (0.27 )   $ (15.28 )
Weighted average common shares outstanding:              
    Basic     91,071         120,513       103,525  
    Diluted     91,071         120,513       103,525  
                   

 
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
           
    Successor     Predecessor
    September 30, 2016     December 31, 2015
Current assets:        
  Cash $ 2,011       $ 8,026  
  Accounts receivable   125,244         173,624  
  Receivables from derivative contracts   70,835         348,861  
  Restricted cash   165         16,812  
  Prepaids and other   7,713         9,270  
  Total current assets   205,968         556,593  
Oil and natural gas properties (full cost method):        
  Evaluated   1,202,727         7,060,721  
  Unevaluated   329,218         1,641,356  
  Gross oil and natural gas properties   1,531,945         8,702,077  
  Less - accumulated depletion   (429,361 )       (5,933,688 )
  Net oil and natural gas properties   1,102,584         2,768,389  
Other operating property and equipment:        
  Gas gathering and other operating assets   38,097         130,090  
  Less - accumulated depreciation   (203 )       (22,435 )
  Net other operating property and equipment   37,894         107,655  
Other noncurrent assets:        
  Receivables from derivative contracts   2,816         16,614  
  Debt issuance costs, net   -         7,633  
  Funds in escrow and other   1,786         1,808  
Total assets $ 1,351,048       $ 3,458,692  
           
Current liabilities:        
  Accounts payable and accrued liabilities $ 170,992       $ 295,085  
  Liabilities from derivative contracts   1,415         -  
  Other   4,938         163  
  Total current liabilities   177,345         295,248  
Long-term debt, net   1,004,524         2,873,637  
Other noncurrent liabilities:        
  Liabilities from derivative contracts   1,122         290  
  Asset retirement obligations   31,082         46,853  
  Other   4,139         6,264  
Commitments and contingencies        
Mezzanine equity:        
  Redeemable noncontrolling interest   -         183,986  
Stockholders' equity:        
  Predecessor Preferred stock: 1,000,000 shares of $0.0001 par value authorized; 244,724        
  shares of 5.75% Cumulative Perpetual Convertible Series A, issued and outstanding   -         -  
  Predecessor Common stock: 1,340,000,000 shares of $0.0001 par value authorized; 122,523,559        
  shares issued and outstanding   -         12  
  Predecessor Additional paid-in capital   -         3,283,097  
  Successor Common stock: 1,000,000,000 shares of $0.0001 par value authorized; 92,638,093        
  shares issued and outstanding   9         -  
  Successor Additional paid-in capital   584,310         -  
  Retained earnings (accumulated deficit)   (451,483 )       (3,230,695 )
  Total stockholders' equity   132,836         52,414  
Total liabilities and stockholders' equity $ 1,351,048       $ 3,458,692  
                   

 
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
                   
        Successor     Predecessor
        Period from September 10, 2016     Period from July 1, 2016   Three Months
        through September 30, 2016     through September 9, 2016   Ended September 30, 2015
Cash flows from operating activities:              
Net income (loss)   $ (450,692 )     $ 926,260     $ 147,075  
Adjustments to reconcile net income (loss) to net cash              
provided by (used in) operating activities:              
  Depletion, depreciation and accretion     9,051         25,618       77,071  
  Full cost ceiling impairment     420,934         -       511,882  
  Share-based compensation, net     13,196         1,224       3,035  
  Unrealized loss (gain) on derivative contracts     30,338         39,451       (89,741 )
  Amortization and write-off of deferred loan costs     -         3,347       1,910  
  Non-cash interest and amortization of discount and premium     377         246       320  
  Reorganization items     560         (929,084 )    
  Loss (gain) on extinguishment of debt     -         -       (535,141 )
  Accrued settlements on derivative contracts     (22,695 )       23,072       (11,022 )
  Other income (expense)     (94 )       (8,206 )     797  
Cash flow from operations before changes in working capital     975         81,928       106,186  
Changes in working capital     11,347         (49,323 )     8,478  
Net cash provided by (used in) operating activities     12,322         32,605       114,664  
                   
Cash flows from investing activities:              
  Oil and natural gas capital expenditures     (10,289 )       (56,359 )     (123,990 )
  Other operating property and equipment capital expenditures     (231 )       (64 )     (2,435 )
  Funds held in escrow and other     (1,721 )       26       (24 )
Net cash provided by (used in) investing activities     (12,241 )       (56,397 )     (126,449 )
                   
Cash flows from financing activities:              
  Proceeds from borrowings     30,000         461,000       283,000  
  Repayments of borrowings     (32,000 )       (332,000 )     (263,000 )
  Cash payments to Noteholders and Preferred Holders     (10,013 )       (97,521 )     -  
  Debt issuance costs     -         (791 )     (7,091 )
  Series A preferred dividends     -         -       (4,656 )
  Offering costs and other     -         (126 )     (187 )
Net cash provided by (used in) financing activities     (12,013 )       30,562       8,066  
                   
Net increase (decrease) in cash       (11,932 )       6,770       (3,719 )
                   
Cash at beginning of period     13,943         7,173       9,973  
Cash at end of period   $ 2,011       $ 13,943     $ 6,254  
                   
Supplemental cash flow information:              
  Cash paid (received) for reorganization items   $ (4 )     $ 15,362     $ -  
                   
Disclosure of non-cash investing and financing activities:              
  Accrued capitalized interest   $ -       $ (21,579 )   $ 2,172  
  Asset retirement obligations     8         20       651  
  Preferred dividends on redeemable noncontrolling interest              
  paid-in-kind     791         2,674       3,209  
  Accretion of redeemable noncontrolling interest     -         4,714       16,142  
  Accrued debt issuance costs     -         272       -  
  Third Lien Notes issued on conversion of senior notes     -         -       1,017,994  
                   
                   
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
(In thousands)
                   
        Successor     Predecessor
        Period from September 10, 2016     Period from January 1, 2016   Nine Months
        through September 30, 2016     through September 9, 2016   Ended September 30, 2015
Cash flows from operating activities:              
Net income (loss)   $ (450,692 )     $ 11,958     $ (1,529,178 )
Adjustments to reconcile net income (loss) to net cash              
provided by (used in) operating activities:              
  Depletion, depreciation and accretion     9,051         120,555       297,409  
  Full cost ceiling impairment     420,934         754,769       2,014,518  
  Other operating property and equipment impairment     -         28,056       -  
  Share-based compensation, net     13,196         4,876       11,245  
  Unrealized loss (gain) on derivative contracts     30,338         263,732       93,972  
  Amortization and write-off of deferred loan costs     -         6,371       6,002  
  Non-cash interest and amortization of discount and premium     377         1,515       2,029  
  Reorganization items     560         (929,084 )     -  
  Loss (gain) on extinguishment of debt     -         (81,434 )     (557,907 )
  Loss (gain) on extinguishment of Convertible Note and              
    modification of February 2012 Warrants     -         -       8,219  
  Accrued settlements on derivative contracts     (22,695 )       -       (37,803 )
  Other income (expense)     (94 )       (4,233 )     5,805  
Cash flow from operations before changes in working capital     975         177,081       314,311  
Changes in working capital     11,347         (1,733 )     17,883  
Net cash provided by (used in) operating activities     12,322         175,348       332,194  
                   
Cash flows from investing activities:              
  Oil and natural gas capital expenditures     (10,289 )       (226,617 )     (531,741 )
  Other operating property and equipment capital expenditures     (231 )       (950 )     (9,913 )
  Funds held in escrow and other     (1,721 )       (207 )     2,988  
Net cash provided by (used in) investing activities     (12,241 )       (227,774 )     (538,666 )
                   
Cash flows from financing activities:              
  Proceeds from borrowings     30,000         886,000       1,579,000  
  Repayments of borrowings     (32,000 )       (727,648 )     (1,392,000 )
  Cash payments to Noteholders and Preferred Holders     (10,013 )       (97,521 )     -  
  Debt issuance costs     -         (1,977 )     (25,703 )
  Series A preferred stock issuance     -         -       -  
  Series A preferred dividends     -         -       (4,656 )
  Common stock issued     -         -       15,354  
  Offering costs and other     -         (511 )     (2,982 )
Net cash provided by (used in) financing activities     (12,013 )       58,343       169,013  
                   
Net increase (decrease) in cash       (11,932 )       5,917       (37,459 )
                   
Cash at beginning of period     13,943         8,026       43,713  
Cash at end of period   $ 2,011       $ 13,943     $ 6,254  
                   
Supplemental cash flow information:              
  Cash paid (received) for reorganization items   $ (4 )     $ 15,362     $ -  
                   
Disclosure of non-cash investing and financing activities:              
  Accrued capitalized interest   $ -       $ (23,966 )   $ (442 )
  Asset retirement obligations     8         939       2,405  
  Series A preferred dividends paid in common stock     -         -       9,803  
  Preferred dividends on redeemable noncontrolling interest              
  paid-in-kind     791         9,329       9,340  
  Accretion of redeemable noncontrolling interest     -         26,576       29,084  
  Change in fair value of redeemable noncontrolling interest     -         -       645  
  Accrued debt issuance costs     -         1,176       -  
  Common stock issued on conversion of senior notes     -         -       231,383  
  Third Lien Notes issued on conversion of senior notes     -         -       1,017,994  
                             

 
HALCÓN RESOURCES CORPORATION
SELECTED OPERATING DATA
(Unaudited)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016 (3)     2015     2016 (3)     2015  
                 
Production volumes:                
Crude oil (MBbls)     2,377       2,993       7,651       9,096  
Natural gas (MMcf)     2,239       2,300       7,081       7,444  
Natural gas liquids (MBbls)     395       371       1,176       1,046  
Total (MBoe)     3,145       3,748       10,007       11,383  
Average daily production (Boe/d)     34,185       40,739       36,522       41,696  
                 
Average prices:                
Crude oil (per Bbl)   $ 40.08     $ 40.71     $ 35.20     $ 44.46  
Natural gas (per Mcf)     1.53       2.20       1.46       2.36  
Natural gas liquids (per Bbl)     8.32       7.05       7.42       10.11  
Total per Boe     32.43       34.56       28.82       38.00  
                 
Cash effect of derivative contracts:                
Crude oil (per Bbl)   $ 33.56     $ 37.73     $ 34.97     $ 33.54  
Natural gas (per Mcf)     0.10       0.85       0.13       0.77  
Natural gas liquids (per Bbl)     -       -       -       -  
Total per Boe     25.44       30.65       26.83       27.30  
                 
Average prices computed after cash effect of settlement of derivative contracts:              
Crude oil (per Bbl)   $ 73.64     $ 78.44     $ 70.17     $ 78.00  
Natural gas (per Mcf)     1.63       3.05       1.59       3.13  
Natural gas liquids (per Bbl)     8.32       7.05       7.42       10.11  
Total per Boe     57.87       65.21       55.65       65.30  
                 
Average cost per Boe:                
Production:                
Lease operating   $ 5.17     $ 5.94     $ 5.38     $ 7.14  
Workover and other     2.66       1.27       2.41       1.02  
Taxes other than income     3.06       3.23       2.66       3.27  
Gathering and other, as adjusted (1)     2.23       2.02       2.24       1.94  
Restructuring     0.03       0.12       0.52       0.23  
General and administrative, as adjusted (1)     4.21       4.58       4.43       4.70  
                 
(1) Represents gathering and other and general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
                 
General and administrative:                
General and administrative, as reported   $ 10.82     $ 5.61     $ 10.03     $ 5.98  
Share-based compensation:                
Non-cash     (4.59 )     (0.81 )     (1.81 )     (0.99 )
Transaction costs, key employee retention agreements and other:                
Cash     (2.02 )     (0.22 )     (3.79 )     (0.29 )
General and administrative, as adjusted   $ 4.21     $ 4.58     $ 4.43     $ 4.70  
                 
Gathering and other, as reported   $ 3.18     $ 2.43     $ 3.19     $ 2.69  
Rig termination / stacking charges     (0.95 )     (0.41 )     (0.95 )     (0.75 )
Gathering and other, as adjusted   $ 2.23     $ 2.02     $ 2.24     $ 1.94  
                 
Total operating costs, as reported   $ 24.89     $ 18.48     $ 23.67     $ 20.10  
Total adjusting items     (7.56 )     (1.44 )     (6.55 )     (2.03 )
Total operating costs, as adjusted (2)   $ 17.33     $ 17.04     $ 17.12     $ 18.07  
                 
(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.
(3) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the three and nine-month periods ended September 30,  2016. The combination was generated by addition of comparable financial statement line items. However, because of various adjustments to the consolidated financial statements in  connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor may not be comparable to those of the Predecessor. The financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods. The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company's financial results for the applicable periods.
                 

 
HALCÓN RESOURCES CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
               
    Successor     Predecessor
    Period from September 10, 2016     Period from July 1, 2016   Three Months
    through September 30, 2016     through September 9, 2016   Ended September 30, 2015
As Reported:              
Net income (loss) available to common stockholders, as reported   $ (451,483 )     $ 916,421     $ 123,528  
Series A preferred dividends     -         2,451       4,196  
Preferred dividends and accretion on redeemable noncontrolling interest     791         7,388       19,351  
Net income (loss), as reported     (450,692 )       926,260       147,075  
               
Impact of Selected Items:              
Unrealized loss (gain) on derivatives contracts:              
Crude oil   $ 30,323       $ 39,271     $ (90,760 )
Natural gas     15         180       1,019  
Total mark-to-market non-cash charge     30,338         39,451       (89,741 )
Full cost ceiling impairment     420,934         -       511,882  
Loss (gain) on extinguishment of debt     -         -       (535,141 )
Deferred financing costs expensed, net (1)     -         2,917       324  
Reorganization items     556         (913,722 )     -  
Restructuring     -         95       434  
Rig termination / stacking charges, key employee retention agreements, transaction costs and other     924         (333 )     3,186  
Selected items, before income taxes     452,752         (871,592 )     (109,056 )
Income tax effect of selected items (2)     -         -       (16,843 )
Selected items, net of tax     452,752         (871,592 )     (125,899 )
               
As Adjusted:              
Net income (loss) available to common stockholders, excluding selected items   $ 2,060       $ 54,668     $ 21,176  
Interest on convertible debt, net     -         1,523       -  
Net income (loss) available to common stockholders after assumed conversions, excluding selected items (3)   $ 2,060       $ 56,191     $ 21,176  
               
Basic net income (loss) per common share, as reported   $ (4.96 )     $ 7.58     $ 1.05  
Impact of selected items     4.98         (7.13 )     (0.87 )
Basic net income (loss) per common share, excluding selected items (3)   $ 0.02       $ 0.45     $ 0.18  
               
Diluted net income (loss) per common share, as reported   $ (4.96 )     $ 6.06     $ 0.88  
Impact of selected items     4.98         (5.69 )     (0.70 )
Diluted net income (loss) per common share, excluding selected items (3)(4)   $ 0.02       $ 0.37     $ 0.18  
               
               
Net cash provided by (used in) operating activities   $ 12,322       $ 32,605     $ 114,664  
Changes in working capital     (11,347 )       49,323       (8,478 )
Cash flow from operations before changes in working capital     975         81,928       106,186  
Cash components of selected items     23,615         806       13,830  
Income tax effect of selected items (2)     -         -       (1,040 )
Cash flow from operations before changes in working capital, adjusted for selected items (4)   $ 24,590       $ 82,734     $ 118,976  
               
(1) Represents charges related to the write-off of debt issuance costs associated with the Predecessor Credit Agreement.
               
(2) For the 2016 (Successor) columns, this represents tax impact using an estimated tax rate of 0.0% due to the Company maintaining a full valuation allowance.
For the 2015 (Predecessor) column, this represents tax impact using an estimated tax rate of 37.04%. This column also includes an adjustment for the change in valuation allowance of  $(57.2 million) the three months ended September 30, 2015 (Predecessor).
               
(3) Net income (loss) and earnings per share excluding selected items and cash flow from operations before changes in working capital adjusted for selected items are non-GAAP measures  presented based on management's belief that they will enable a user of the financial information to understand the impact of these items on reported results.   Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flow from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón's performance.
               
(4) The impact of selected items for the period of September 10, 2016 through September 30, 2016 (Successor) and the period of July 1, 2016 through September 9, 2016 (Predecessor) was calculated based upon weighted average diluted shares of 91.1 million and 151.9 million, respectively, due to the net income available to common stockholders, excluding  selected items. The impact of selected items for the three months ended September 30, 2015 (Predecessor) was calculated based upon weighted average diluted shares of 117.2 million due to the net income available to Predecessor common stockholders excluding selected items.
               
               
               
HALCÓN RESOURCES CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited) (Continued)
(In thousands, except per share amounts)
               
    Successor     Predecessor
    Period from September 10, 2016     Period from January 1, 2016   Nine Months
    through September 30, 2016     through September 9, 2016   Ended September 30, 2015
As Reported:              
Net income (loss) available to common stockholders, as reported   $ (451,483 )     $ (32,794 )   $ (1,582,246 )
Series A preferred dividends     -         8,847       13,999  
Preferred dividends and accretion on redeemable noncontrolling interest     791         35,905       39,069  
Net income (loss), as reported     (450,692 )       11,958       (1,529,178 )
               
Impact of Selected Items:              
Unrealized loss (gain) on derivatives contracts:              
Crude oil   $ 30,323       $ 262,813     $ 90,150  
Natural gas     15         919       3,822  
Total mark-to-market non-cash charge     30,338         263,732       93,972  
Full cost ceiling impairment     420,934         754,769       2,014,518  
Other operating property and equipment impairment     -         28,056       -  
Loss (gain) on extinguishment of debt     -         (81,434 )     (557,907 )
Loss (gain) on extinguishment of Convertible Note and modification of February 2012 Warrants     -         -       8,219  
Deferred financing costs expensed, net (1)     -         3,582       1,203  
Reorganization items     556         (913,722 )     -  
Restructuring     -         5,168       2,664  
Rig termination / stacking charges, key employee retention agreements, transaction costs and other     924         40,689       20,083  
Selected items, before income taxes     452,752         100,840       1,582,752  
Income tax effect of selected items (2)     -         -       (39,517 )
Selected items, net of tax     452,752         100,840       1,543,235  
               
As Adjusted:              
Net income (loss) available to common stockholders, excluding selected items   $ 2,060       $ 112,798     $ 14,057  
Interest on convertible debt, net     -         10,778       -  
Net income (loss) available to common stockholders after assumed conversions, excluding selected items (3)   $ 2,060       $ 123,576     $ 14,057  
               
Basic net income (loss) per common share, as reported   $ (4.96 )     $ (0.27 )   $ (15.28 )
Impact of selected items     4.98         1.21       15.42  
Basic net income (loss) per common share, excluding selected items (3)   $ 0.02       $ 0.94     $ 0.14  
               
Diluted net income (loss) per common share, as reported   $ (4.96 )     $ (0.27 )   $ (15.28 )
Impact of selected items     4.98         1.13       15.42  
Diluted net income (loss) per common share, excluding selected items (3)(4)   $ 0.02       $ 0.86     $ 0.14  
               
               
Net cash provided by (used in) operating activities   $ 12,322       $ 175,348     $ 332,194  
Changes in working capital     (11,347 )       1,733       (17,883 )
Cash flow from operations before changes in working capital     975         177,081       314,311  
Cash components of selected items     23,615         66,092       54,849  
Income tax effect of selected items (2)     -         -       (6,314 )
Cash flow from operations before changes in working capital, adjusted for selected items (4)   $ 24,590       $ 243,173     $ 362,846  
               
(1) Represents charges related to the write-off of debt issuance costs associated with the Predecessor Credit Agreement.
               
(2) For the 2016 (Successor) columns, this represents tax impact using an estimated tax rate of 0.0% due to the Company maintaining a full valuation allowance.
For the 2015 (Predecessor) column, this represents tax impact using an estimated tax rate of 37.04%. This column also includes an adjustment for the change in valuation allowance  of $546.7 million for the nine months ended September 30, 2015 (Predecessor).
               
(3) Net income (loss) and earnings per share excluding selected items and cash flow from operations before changes in working capital adjusted for selected items are non-GAAP measures  presented based on management's belief that they will enable a user of the financial information to understand the impact of these items on reported results.   Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flow from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón's performance.
               
(4) The impact of selected items for the period of September 10, 2016 through September 30, 2016 (Successor) and the period of   January 1, 2016 through September 9, 2016 (Predecessor) was calculated based upon weighted average diluted shares of 91.1 million and 144.3 million, respectively, due to the net income available to common stockholders, excluding selected items. The impact of selected items for the nine months ended September 30, 2015 (Predecessor) was calculated based upon weighted average diluted shares of 103.6 million, due to the net income available to Predecessor common stockholders excluding selected items.
               

HALCÓN RESOURCES CORPORATION
EBITDA RECONCILIATION (Unaudited)  
(In thousands)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016 (2)     2015     2016 (2)     2015  
                 
Net income (loss), as reported   $ 475,568     $ 147,075     $ (438,734 )   $ (1,529,178 )
Interest expense     29,780       57,259       132,933       174,666  
Depletion, depreciation and accretion     34,669       77,071       129,606       297,409  
Full cost ceiling impairment     420,934       511,882       1,175,703       2,014,518  
Other operating property and equipment impairment     -       -       28,056       -  
Income tax provision (benefit)     (5,309 )     6,025       (5,309 )     6,224  
Share-based compensation     14,420       3,035       18,072       11,245  
Interest income     (13 )     (17 )     (33 )     (89 )
(Gain) loss on sale of other assets     592       50       430       1,380  
EBITDA (1)   $ 970,641     $ 802,380     $ 1,040,724     $ 976,175  
Impact of non-recurring items:                
Restructuring     95       434       5,168       2,664  
Reorganization items     (913,166 )     -       (913,166 )     -  
Loss (gain) on extinguishment of debt     -       (535,141 )     (81,434 )     (557,907 )
Loss (gain) on extinguishment of Convertible Note and modification of February 2012 Warrants     -       -       -       8,219  
Loss (gain) on mark-to-market of embedded derivative and tranche rights     (8,754 )     762       (5,734 )     3,814  
Unrealized loss (gain) on derivatives contracts     69,789       (89,741 )     294,070       93,972  
Transaction costs, key employee retention agreements and other     6,342       822       37,883       3,609  
Rig termination / stacking charges     3,003       1,551       9,464       8,585  
Adjusted EBITDA (1)   $ 127,950     $ 181,067     $ 386,975     $ 539,131  
                 
(1)   EBITDA and Adjusted EBITDA are non-GAAP measures. These financial measures are presented based on management's belief that they will enable a user of the financial  information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón's performance.
                 
(2) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the three and nine-month periods ended September  30, 2016. The combination was generated by addition of comparable financial statement line items. However, because of various adjustments to the consolidated financial statements in connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor may not be comparable to those of the Predecessor. The financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods.  The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company's financial results for the applicable periods.

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