In an SEC filing dated October 5, Halcon reported that, effective September 30, 2016, certain wholly-owned subsidiaries of Halcón Resources Corp. executed an agreement with an affiliate of Apollo Global Management pursuant to which the sellers assigned to the buyer 100% of the common shares of HK TMS LLC.
HK TMS was previously a wholly-owned subsidiary of the Halcon Resources and held all of the company’s oil and gas properties in the Tuscaloosa Marine Shale in Louisiana and Mississippi.
Halcon Resources has no further rights or material obligations related to HK TMS or the buyer other than certain customary indemnities set forth in the agreement. Halcon has also agreed to manage the operation of HK TMS’s oil and gas properties for a specified period of time for a monthly fee. The company has no right to or interest in any future production, income or proved reserves associated with HK TMS’s assets.
Accordingly, the $212.5 million of mezzanine equity reported on the company’s consolidated balance sheet as of June 30, 2016 will no longer be reported on the company’s balance sheet from September 30, 2016 and going forward. HK TMS generated net production of approximately 530 Boe/d during the second quarter of 2016 and 1.1 MMBoe of proved reserves as of December 31, 2015 using SEC pricing as of such date.
“This move makes good sense given the low oil price environment, HK's solid properties in the Williston and Eagle Ford, and helps HK further simplify its balance sheet,” said Wunderlich Securities analysts following the filing.
“While we are Hold rated, we do see some value in the name given our $12 price target and its lower-than-peer multiples. We expect this to change as the company emerges from its restructuring and expands operations in its core areas while also looking at M&A possibilities,” the analysts continued.