Halcon Resources Put on Notice by NYSE; Refi Debt at Higher Rate
Halcon Resources, with with some 140,000 net acres in the Ohio Utica Shale, said in January they would not do any Utica drilling in 2015 (see Halcon Resources: Slashes Drilling Budget 50%, No Utica for 2015). In February on an analyst call, Halcon’s colorful CEO, Floyd Wilson, responded to a question from one of the analysts asking about the company’s Utica program by responding with a wisecrack (see Halcon CEO Floyd Wilson: “What’s the Utica?”). Halcon guessed wrong about the Utica and leased acreage in the northern part of the play where production is not as great. Also in February, Halcon appeared on David Fessler’s oil and gas company “death list” of companies that a debt ratio of 4 times or higher earnings (see 19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica). Halcon issued a press release yesterday to say: (a) they’ve refinanced $1.02 billion worth of outstanding IOUs with a third lien, forced to pay 13% interest on notes that previously had interest rates ranging from 8.875% to 9.75%; and (b) Halcon has been put on notice by the New York Stock Exchange that because the company’s stock has slipped below $1 per share, they are in danger of being de-listed by the exchange. That is, Halcon’s stock will have to trade on the Pink Sheets as a penny stock unless they can, in the next few months, get the average per share price above $1 again…
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David Fessler is energy and infrastructure strategist (i.e. stock analyst/researcher) with The Oxford Club–a publisher based in Baltimore, Maryland that publishes the Oxford Resource Explorer, among other financial publications. Fessler spends his days immersed in the energy industry and in the stocks of companies in that industry. Fessler and The Oxford Club have produced a special report called “The Oil Company Death List” which is a list of 19 publicly-traded oil and gas companies that, according to a formula worked out by Fessler, will “die soon.” That is, they’ll go bankrupt if they don’t sell themselves or otherwise sell off major assets. Why? They’re “swimming in debt” and way over leveraged with “ugly balance sheets.” Fessler’s simple formula is all about a company’s debt ratio. When a company’s debts reach 4 times or higher its earnings (EBITDA), that’s a huge red flag. Below we have the list of 19 on the “death list” along with a copy of Fessler’s full report (describing his methodology). The interesting/troubling aspect is that 8 of the 19 are Marcellus/Utica operators–one of which is #1 for highest debt-to-earnings ratios. Some companies in the list surprised us–others did not. Is your favorite Marcellus/Utica driller in the list?…
Debtwire is an interesting service. They keep an eye on publicly traded companies to give subscribers to their service a heads-up on which companies are potentially carrying too much debt–companies that may, due to changing economic circumstances, have a hard time paying back that debt. Think of Debtwire as an early warning system to let you know BEFORE Moodys or Fitch Ratings downgrades a company’s credit rating. Later this month Debtwire will issue a new Distressed Watchlist with 176 companies on it. Some 55 new companies will be added to the list from the energy industry alone. With the addition of the 55 new companies, the Distressed Watchlist will have 70 (of 176) companies from the energy industry–making 40% of the list top heavy with energy companies. We have what we believe is an MDN exclusive–Debtwire has sent us the top 20 energy-related companies on the list. Of the top 20, four of them have operations in the Marcellus/Utica region…
Just last November in response to a question from an analyst about Halcon Resources’ plans for the Utica, CEO Floyd Wilson said, “Well, we won’t drill any more wells near the shitty ones we drilled already. That’s one major initiative.” (See