Halcon's Lordstown well impresses analysts

By Jamison Cocklin



Halcon Resources Corp. impressed energy analysts Thursday when it reported some of the best test results yet seen in the northern portion of the Utica Shale play at its Kibler 1H well in Lordstown.

That’s not good news for the Westwood Lake Mobile Home Park, where about 335 homes sit within 800 feet of the site, however. More than 700 residents call the park home, and the site has rankled many of them since the beginning of the year.

Bright lights, loud noise and fumes are among a litany of complaints logged with public officials from residents who said drilling operations were a nuisance.

Halcon’s Utica operational update, released Thursday, along with its second-quarter earnings report, stood in sharp contrast with results it reported in late May at two wells in Pennsylvania’s Mercer and Venango counties, where reservoirs turned up an abundance of dry gas, which missed analyst’s expectations and disappointed many of them.

At the time, though, those analysts were banking on some of the latest results from nearby wells such as the Kibler. Halcon has about 142,000 net acres leased or under contract in the Utica, with much of it in Mahoning and Trumbull counties and in northwestern Pennsylvania.

What surprised analysts the most was a high gas-to-oil ratio in an unproven area of the play that many thought would simply churn out disappointing production.

“It’s a pretty strong well. The difference is, geographically, we haven’t seen strong results like that that far north. Even in the midpart of the play, we’ve seen subpar results, and the wells haven’t been that strong — even there,” said Will Green, an energy analyst with the investment bank Stephens.

Investors have been cooling to the Utica after Ohio regulators released a production report earlier this year that showed more dry than wet gas and oil.

Investors want more natural-gas liquids and oil because they fetch a higher price in the open market than does dry natural gas.

“Chesapeake, Gulfport and PDC have all seen phenomenal results in the South,” Green said of the Utica. “That has yet to be replicated up North. The acreage could open up to be stronger up there.”

Halcon said the Kibler tested at a rate of 2,233 barrels of oil equivalent, with liquids accounting for 75 percent of the total. In all, the well tested at 860 barrels of condensate per day and 4.5 million cubic feet of natural gas per day. The company estimates that it can extract an additional 821 barrels of natural-gas liquids per day.

The company is focusing on building an inventory of approved and permitted multiwell pads in preparation for full-scale development. It said its acreage in Mahoning and Trumbull counties eventually could host “hundreds of wells.”

Halcon has filed a request for unit operations at the Kibler 1H well, which would allow it to drill multiple wells from one pad there if approved by regulators. It had said during testimony on the unit request that if test results were positive and early production remained steady, it would begin work on a second well at the Kibler site.

After adjusting for expenses and other items, the company reported a profit of $16.8 million, or 4 cents per share, in the second quarter.

Gordon Douthat, an energy analyst at Wells Fargo Securities, said in a research note the company’s earnings per share and profit were disappointing, adding that investors will need to see more production results in the quarters ahead.

But he called results at the Kibler well “very encouraging” and pointed to the high gas-to-oil ratio as a reason.

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