Halcón Resources: High Potential in Low-Priced Oil


Bill Mathews Image Bill Mathews Editor & Founder, The Cheap Investor

With crude oil prices falling from $54 per barrel to the $40s, we wanted to find a quality oil-related stock that is selling near its low. Halcón Resources (HK) meets those criteria, observes Bill Mathews, editor of The Cheap Investor.

The independent energy company holds interests in 116,000 net acres, as well as 300 producing wells in the Bakken/Three Forks formations in North Dakota, and 20,901 net acres in the Southern Delaware Basin in Pecos and Reeves Counties, Texas.

As of December 31, 2016, it had estimated proved reserves of approximately 148.6 million barrels of oil equivalent comprising 119.6 million barrels of crude oil, 15.6 million barrels of natural gas liquids, and 80.2 billion cubic feet of natural gas.

The company weathered a couple of tough years and filed for reorganization under Chapter 11 of the bankruptcy code in July 2016. It was a pre-packaged bankruptcy, in which the Company had creditor support to reorganize.

Halcón exited bankruptcy on September 9, 2016 and started trading on the NYSE on September 12, after a 1 for 34 reverse stock split. The stock closed at $10.85 on September 12 and has been falling ever since.

You may be shaking your head, muttering, "Why are you recommending this stock?" We are doing so because the Company has $62 million ($0.68 per share) in cash and a book value of $7.66 per share.

It has also greatly increased its revenues and earnings. There are a total of 112 million shares outstanding, and 149 institutions own about 79% of the float.