Halcon Resources to acquire Williston Basin assets

Halcón Resources Corp.

Halcón Resources Corp. has entered into a privately negotiated definitive agreement with Petro-Hunt LLC and an affiliated entity, to acquire producing and undeveloped oil and gas assets in the Williston Basin for an aggregate purchase price of approximately $1.45 billion, consisting of $700 million in cash and $750 million in equity.

The Williston Basin Assets are comprised of approximately 81,000 net acres (~95% operated) prospective for the Bakken and Three Forks formations primarily located in Williams, Mountrail, McKenzie and Dunn Counties, North Dakota.  Current average net production from these assets is in excess of 10,500 barrels of oil equivalent per day (Boe/d) and total proved reserves, as estimated by third party reserve engineers, are approximately 42.4 million barrels of oil equivalent (MMBoe), 88% oil, with an internally estimated resource potential of greater than 100 MMBoe.  Currently there are five operated drilling rigs running on the properties. 

On a pro forma basis for this transaction, the company has over 135,000 net acres in the Williston Basin and company-wide current average net production is approximately 26,500 Boe/d.

Additionally, Halcón has entered into an agreement pursuant to which Canada Pension Plan Investment Board (CPPIB) has agreed to purchase $300 million of the company's common stock at $7.16 per share, subject to customary closing conditions and the successful closing of the acquisition of the Williston Basin Assets. 

Halcón has secured financing commitments from Wells Fargo, J.P. Morgan, Goldman Sachs and Barclays pursuant to which the borrowing base under the company's senior secured revolving credit facility will be increased to $850 million and such banks have agreed to provide a $500 million bridge loan commitment.

Floyd C. Wilson, Halcón's chairman and CEO, stated, "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, commented, "We are pleased to become a significant Halcón shareholder through this transaction.  The track record of Halcón'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/d and develop our 600,000 plus acres of oil and gas leasehold in the Williston Basin with the full attention of our existing staff."

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 Halcón's authorized common shares to accommodate conversion and obtaining certain regulatory approvals. 

The company's board of directors has unanimously approved the transaction, which is subject to customary closing conditions, including approval of listing of the Halcón common stock to be issued in the transaction on the New York Stock Exchange and regulatory clearance.  The effective date of the transaction is June 1, 2012, and Halcón anticipates completing the transaction in December 2012.

Mitchell Energy Advisors acted as financial advisor to Halcón. Tudor, Pickering, Holt & Co. acted as financial advisor to CPPIB.

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