Halcon Resources' Recent Deal: Great for the Company, Not So Great for Investors

One thing that Halcon Resources (NYSE: HK  ) needs more than anything else is capital to develop its massive acreage holdings in the Tuscaloosa Marine Shale, and the recent deal it struck with Apollo Global Management (NYSE: APO  ) for up to $400 million in preferred shares was so helpful. Recent successful well results from Halcon that are even better than the best result from Tuscaloosa neighbor Encana (NYSE: ECA  ) suggests that the region should be a much bigger part of the company's capital program, and this recent deal does just that. 

For those that own shares in Halcon might not want to be jumping for joy because of the deal, though. Find out why this deal isn't as helpful at generating returns for investors as it is helping the company grow by tuning into the video below. 

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  • Report this Comment On June 19, 2014, at 11:37 AM, tmerrif wrote:

    1. Fact check: Apollo gets a royalty interest not a working interest. There is a MAJOR difference.

    2. TMS

    a. Well costs are the issue, TMS will produce but can you drill it and complete it cheap enough to have a reasonable enough return to cover the mechanical risk of the occasional problem well.

    b. The zone is extremely consistent over large areas. Geology is not the risk, economics are.

    c. The more wells you drill the greater the chance you have of learning how to handle the drilling/completion problems that arise and with this experience you lower your costs.

    d. Leases have expiration terms, drill them or lose them and upside potential and investment in them.

    e. How is something good for the company but not the investors?

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