Halcon Buys
Sale of 81,000 net producing acres in the Williston Basin for $700 million in cash and $750 million in equity.
Halcon Resources Corp. (NYSE: HK) plans to buy about 81,000 net producing acres in the Williston Basin from Petro-Hunt LLC for $1.45 billion in cash and stock.
The transaction price includes $700 million in cash and $750 million in equity. The assets are producing and prospective for the Bakken and Three Forks formations, primarily in Williams, Montrail, McKenzie and Dunn counties, North Dakota.
Current average net production from these assets is in excess of 10,500 barrels of oil equivalent (BOE) per day and total proved reserves, as estimated by third party reserve engineers, are approximately 42.4 million BOE, 88% oil, with an internally estimated resource potential of greater than 100 million BOE.
Currently there are five operated drilling rigs running on the properties.
On a pro forma basis for this transaction, the Halcon has over 135,000 net acres in the Williston Basin and company-wide current average net production is approximately 26,500 BOE per day.
Additionally, Halcon has entered into an agreement pursuant to which Canada Pension Plan Investment Board ("CPPIB") has agreed to purchase $300 million of its common stock at $7.16 per share, subject to customary closing conditions and the successful closing of the acquisition of the Williston Basin assets.
Halcon has secured financing commitments from Wells Fargo, J.P. Morgan, Goldman Sachs and Barclays to increase its senior secured revolving credit facility to $850 million in addition to a $500 million bridge loan commitment.
Floyd C. Wilson, Halcon's chairman and chief executive, said, "This acquisition is immediately accretive on all measures and is consistent with our strategy of building an oil company with a multi-year drilling inventory in several liquids-rich basins. The assets we are acquiring are located in what is arguably the most attractive oil producing basin in the lower 48, on a risk adjusted basis. This transaction improves our leverage profile and will effectively increase our estimated proved reserves on a pro forma basis by over 58% to approximately 115 million barrels of oil equivalent, 79% of which is liquids."
Bruce W. Hunt, president of Petro-Hunt LLC, said, "We are pleased to become a significant Halcon shareholder through this transaction. The track record of Halcon's management team speaks for itself and we are confident they will do a great job of developing these solid assets.”
“Petro-Hunt has a long history of operating oil and gas properties in the Williston Basin. We will continue to operate production of approximately 24,000 BOE per day and develop our 600,000 plus acres of oil and gas leasehold in the Williston Basin with the full attention of our existing staff," he said.
R. Scott Lawrence, CPPIB's vice-president, head of relationship investments, said "CPPIB's investment aligns with our strategy to provide strategic, long-term capital to well-positioned companies like Halcon and work with management to help create value now and in the future."
The $750 million equity consideration will initially be issued as preferred stock that will automatically convert into common stock at $7.45 per share following an increase in Halcon's authorized common shares to accommodate conversion and obtaining certain regulatory approvals.
Halcon, meanwhile, announced that it intends to raise $700 million in senior unsecured notes, due in 2021, to fund its pending acquisition in the Williston Basin.