Halcon Resources (NYSE:HK) is counting on success in the emerging Tuscaloosa Marine shale. But while it begins to delineate that shale, the company is also registering solid improvements at its other two core plays -- the Bakken in North Dakota and the El Halcon in Texas -- that could provide meaningful boosts to its returns and asset value.

Let's look at the huge improvements the Houston-based company has made in accelerating production, reducing costs, and improving returns in the Bakken and El Halcon.

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Progress in the Bakken
The Bakken and Three Forks formations in the Williston Basin, where the company has working interests in approximately 134,000 net acres, account for about three-quarters of Halcon's total production. Despite weather-related downtime and associated drilling and completion delays that began late in the fourth quarter of 2013, Halcon's first-quarter Bakken performance was quite impressive.

Production surged 73% year over year to 23,313 BOE/d, while average initial and 30-day production rates rose 9% and 32% year over year, respectively. Halcon's returns from the play are also getting better thanks to continued improvements in drilling costs and other efficiencies.

During the first quarter, the company lowered its Bakken drilling costs by roughly 9% and increased the number of feet drilled per day by approximately 13% compared to last year's average. Halcon's Fort Berthold acreage in the Bakken represents the strongest drilling economics across its portfolio, earning a 100% internal rate of return, or IRR, with a well cost of $11 million.

Going forward, returns should continue to improve as the company reduces drilling costs by an additional 5%-10% by year-end and improves production rates through new completions methods and tighter spacing between wells. For instance, wells drilled using slickwater fracs in the first quarter outperformed the company's type curve for the area, while a well that was drilled as part of a six-well pad spaced 660 feet apart delivered a record initial production rate of 4,225 BOE/d.  

Improvements at El Halcon
In the Eagle Ford's El Halcon play, where the company commands roughly 100,000 net acres, first-quarter production averaged 7,018 BOE/d, up more than 800% year over year, and continues to grow rapidly. As of May 7, it had already surged to 10,400 BOE/d. Crucially, the company believes it has now de-risked its entire El Halcon position.

This basically means future results will be repeatable and allows it to proceed with drilling as it sees fit, without the pressure to prove up additional acreage. This will allow the company to allocate more capital toward the Tuscaloosa Marine shale, which is in a much earlier stage of development. Indeed, Halcon actually plans to reduce its rig count in the El Halcon from an average of four rigs during the first quarter to an average of two to three rigs over the rest of the year.

The company is also making good progress toward optimizing its well design at El Halcon through testing longer-stage lengths, "tighter perforation cluster spacing, increasing the percentage of resin coated sand relative to total proppant volume, using different surfactants and installing large bore frac plugs."

If Halcon can reduce its average well cost from $9 million per well to about $8 million, its IRR should improve markedly from roughly 45% currently to nearly 60%. These improvements could provide a material boost to the company's returns and PV-10 value.

Investor takeaway
Following an initial period of subpar returns, Halcon Resources' focus on technological innovation and strong execution has helped meaningfully improve its returns from the El Halcon and Bakken plays. While the company's near-term share price performance will likely depend largely on its success in the Tuscaloosa Marine, continued improvements in the Bakken and El Halcon could also be positive catalysts.