HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
99,095
|
|
$
|
158,110
|
|
$
|
174,062
|
|
$
|
282,523
|
|
Natural gas
|
|
|
3,159
|
|
|
5,578
|
|
|
6,901
|
|
|
12,537
|
|
Natural gas liquids
|
|
|
3,504
|
|
|
3,889
|
|
|
5,441
|
|
|
7,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil, natural gas and natural gas liquids sales
|
|
|
105,758
|
|
|
167,577
|
|
|
186,404
|
|
|
303,017
|
|
Other
|
|
|
389
|
|
|
447
|
|
|
1,092
|
|
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
106,147
|
|
|
168,024
|
|
|
187,496
|
|
|
304,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
16,981
|
|
|
25,233
|
|
|
37,559
|
|
|
59,018
|
|
Workover and other
|
|
|
7,915
|
|
|
3,731
|
|
|
15,706
|
|
|
6,845
|
|
Taxes other than income
|
|
|
9,753
|
|
|
12,903
|
|
|
17,011
|
|
|
25,144
|
|
Gathering and other
|
|
|
10,519
|
|
|
7,746
|
|
|
21,903
|
|
|
21,492
|
|
Restructuring
|
|
|
189
|
|
|
309
|
|
|
5,073
|
|
|
2,230
|
|
General and administrative
|
|
|
24,708
|
|
|
22,662
|
|
|
66,324
|
|
|
47,071
|
|
Depletion, depreciation and accretion
|
|
|
39,671
|
|
|
101,194
|
|
|
94,937
|
|
|
220,338
|
|
Full cost ceiling impairment
|
|
|
257,869
|
|
|
948,633
|
|
|
754,769
|
|
|
1,502,636
|
|
Other operating property and equipment impairment
|
|
|
|
|
|
|
|
|
28,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
367,605
|
|
|
1,122,411
|
|
|
1,041,338
|
|
|
1,884,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(261,458
|
)
|
|
(954,387
|
)
|
|
(853,842
|
)
|
|
(1,580,556
|
)
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivative contracts
|
|
|
(54,523
|
)
|
|
(87,564
|
)
|
|
(35,781
|
)
|
|
12,184
|
|
Interest expense and other, net
|
|
|
(58,322
|
)
|
|
(60,922
|
)
|
|
(106,113
|
)
|
|
(122,229
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
|
|
|
22,766
|
|
|
81,434
|
|
|
22,766
|
|
Gain (loss) on extinguishment of Convertible Note and modification of February 2012 Warrants
|
|
|
|
|
|
(8,219
|
)
|
|
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(112,845
|
)
|
|
(133,939
|
)
|
|
(60,460
|
)
|
|
(95,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(374,303
|
)
|
|
(1,088,326
|
)
|
|
(914,302
|
)
|
|
(1,676,054
|
)
|
Income tax benefit (provision)
|
|
|
|
|
|
(286
|
)
|
|
|
|
|
(199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(374,303
|
)
|
|
(1,088,612
|
)
|
|
(914,302
|
)
|
|
(1,676,253
|
)
|
Series A preferred dividends
|
|
|
(3,198
|
)
|
|
(4,902
|
)
|
|
(6,396
|
)
|
|
(9,803
|
)
|
Preferred dividends and accretion on redeemable noncontrolling interest
|
|
|
(4,852
|
)
|
|
(11,067
|
)
|
|
(28,517
|
)
|
|
(19,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(382,353
|
)
|
$
|
(1,104,581
|
)
|
$
|
(949,215
|
)
|
$
|
(1,705,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(3.17
|
)
|
$
|
(10.13
|
)
|
$
|
(7.89
|
)
|
$
|
(17.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(3.17
|
)
|
$
|
(10.13
|
)
|
$
|
(7.89
|
)
|
$
|
(17.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
120,708
|
|
|
109,063
|
|
|
120,360
|
|
|
96,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
120,708
|
|
|
109,063
|
|
|
120,360
|
|
|
96,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Table of Contents
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
7,173
|
|
$
|
8,026
|
|
Accounts receivable
|
|
|
112,855
|
|
|
173,624
|
|
Receivables from derivative contracts
|
|
|
135,455
|
|
|
348,861
|
|
Restricted cash
|
|
|
17,164
|
|
|
16,812
|
|
Inventory
|
|
|
1,498
|
|
|
4,635
|
|
Debt issuance costs, net
|
|
|
5,557
|
|
|
|
|
Prepaids and other
|
|
|
8,694
|
|
|
4,635
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
288,396
|
|
|
556,593
|
|
|
|
|
|
|
|
|
|
Oil and natural gas properties (full cost method):
|
|
|
|
|
|
|
|
Evaluated
|
|
|
7,679,917
|
|
|
7,060,721
|
|
Unevaluated
|
|
|
1,180,148
|
|
|
1,641,356
|
|
|
|
|
|
|
|
|
|
Gross oil and natural gas properties
|
|
|
8,860,065
|
|
|
8,702,077
|
|
Lessaccumulated depletion
|
|
|
(6,779,116
|
)
|
|
(5,933,688
|
)
|
|
|
|
|
|
|
|
|
Net oil and natural gas properties
|
|
|
2,080,949
|
|
|
2,768,389
|
|
|
|
|
|
|
|
|
|
Other operating property and equipment:
|
|
|
|
|
|
|
|
Gas gathering and other operating assets
|
|
|
100,355
|
|
|
130,090
|
|
Lessaccumulated depreciation
|
|
|
(23,155
|
)
|
|
(22,435
|
)
|
|
|
|
|
|
|
|
|
Net other operating property and equipment
|
|
|
77,200
|
|
|
107,655
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets:
|
|
|
|
|
|
|
|
Receivables from derivative contracts
|
|
|
5,642
|
|
|
16,614
|
|
Debt issuance costs, net
|
|
|
|
|
|
7,633
|
|
Equity in oil and natural gas partnership
|
|
|
11
|
|
|
209
|
|
Funds in escrow and other
|
|
|
1,613
|
|
|
1,599
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,453,811
|
|
$
|
3,458,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
242,189
|
|
$
|
295,085
|
|
Asset retirement obligations
|
|
|
412
|
|
|
163
|
|
Current portion of long-term debt, net
|
|
|
2,825,807
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,068,408
|
|
|
295,248
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
|
|
|
|
|
|
2,873,637
|
|
Other noncurrent liabilities:
|
|
|
|
|
|
|
|
Liabilities from derivative contracts
|
|
|
194
|
|
|
290
|
|
Asset retirement obligations
|
|
|
48,554
|
|
|
46,853
|
|
Other
|
|
|
9,283
|
|
|
6,264
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
Mezzanine equity:
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
212,503
|
|
|
183,986
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
Preferred stock: 1,000,000 shares of $0.0001 par value authorized; 222,454 and 244,724 shares of 5.75% Cumulative Perpetual Convertible Series A,
issued and outstanding at June 30, 2016 and December 31, 2015, respectively
|
|
|
|
|
|
|
|
Common stock: 1,340,000,000 shares of $0.0001 par value authorized; 122,647,511 and 122,523,559 shares issued and outstanding at June 30, 2016 and
December 31, 2015, respectively
|
|
|
12
|
|
|
12
|
|
Additional paid-in capital
|
|
|
3,288,371
|
|
|
3,283,097
|
|
Accumulated deficit
|
|
|
(4,173,514
|
)
|
|
(3,230,695
|
)
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(885,131
|
)
|
|
52,414
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
2,453,811
|
|
$
|
3,458,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
6
Table of Contents
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Balance at December 31, 2014
|
|
|
345
|
|
$
|
|
|
|
85,562
|
|
$
|
8
|
|
$
|
2,995,436
|
|
$
|
(1,223,275
|
)
|
$
|
1,772,169
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,922,621
|
)
|
|
(1,922,621
|
)
|
Dividends on Series A preferred stock
|
|
|
|
|
|
|
|
|
1,354
|
|
|
1
|
|
|
9,801
|
|
|
(17,979
|
)
|
|
(8,177
|
)
|
Conversion of Series A preferred stock
|
|
|
(100
|
)
|
|
|
|
|
3,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,614
|
)
|
|
(12,614
|
)
|
Accretion of redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,561
|
)
|
|
(53,561
|
)
|
Change in fair value of redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(645
|
)
|
|
(645
|
)
|
Common stock issuance
|
|
|
|
|
|
|
|
|
1,888
|
|
|
|
|
|
15,356
|
|
|
|
|
|
15,356
|
|
Common stock issuance on conversion of senior notes
|
|
|
|
|
|
|
|
|
28,955
|
|
|
3
|
|
|
231,380
|
|
|
|
|
|
231,383
|
|
Modification of February 2012 Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,129
|
|
|
|
|
|
14,129
|
|
Offering costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,871
|
)
|
|
|
|
|
(1,871
|
)
|
Long-term incentive plan grants
|
|
|
|
|
|
|
|
|
2,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term incentive plan forfeitures
|
|
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in shares to cover individuals' tax withholding
|
|
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
(947
|
)
|
|
|
|
|
(947
|
)
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,813
|
|
|
|
|
|
19,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015
|
|
|
245
|
|
|
|
|
|
122,524
|
|
|
12
|
|
|
3,283,097
|
|
|
(3,230,695
|
)
|
|
52,414
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(914,302
|
)
|
|
(914,302
|
)
|
Conversion of Series A preferred stock
|
|
|
(23
|
)
|
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,655
|
)
|
|
(6,655
|
)
|
Accretion of redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,862
|
)
|
|
(21,862
|
)
|
Reverse stock split rounding
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
(10
|
)
|
Long-term incentive plan forfeitures
|
|
|
|
|
|
|
|
|
(499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in shares to cover individuals' tax withholding
|
|
|
|
|
|
|
|
|
(106
|
)
|
|
|
|
|
(50
|
)
|
|
|
|
|
(50
|
)
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,334
|
|
|
|
|
|
5,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2016
|
|
|
222
|
|
$
|
|
|
|
122,648
|
|
$
|
12
|
|
$
|
3,288,371
|
|
$
|
(4,173,514
|
)
|
$
|
(885,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
7
Table of Contents
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(914,302
|
)
|
$
|
(1,676,253
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Depletion, depreciation and accretion
|
|
|
94,937
|
|
|
220,338
|
|
Full cost ceiling impairment
|
|
|
754,769
|
|
|
1,502,636
|
|
Other operating property and equipment impairment
|
|
|
28,056
|
|
|
|
|
Share-based compensation, net
|
|
|
3,652
|
|
|
8,210
|
|
Unrealized loss (gain) on derivative contracts
|
|
|
224,281
|
|
|
183,713
|
|
Amortization and write-off of deferred loan costs
|
|
|
3,024
|
|
|
4,092
|
|
Non-cash interest and amortization of discount and premium
|
|
|
1,269
|
|
|
1,709
|
|
Loss (gain) on extinguishment of debt
|
|
|
(81,434
|
)
|
|
(22,766
|
)
|
Loss (gain) on extinguishment of Convertible Note and modification of February 2012 Warrants
|
|
|
|
|
|
8,219
|
|
Accrued settlements on derivative contracts
|
|
|
(23,072
|
)
|
|
(26,781
|
)
|
Other income (expense)
|
|
|
3,973
|
|
|
5,008
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
72,286
|
|
|
45,320
|
|
Inventory
|
|
|
(449
|
)
|
|
(5
|
)
|
Prepaids and other
|
|
|
(4,086
|
)
|
|
1,037
|
|
Accounts payable and accrued liabilities
|
|
|
(20,161
|
)
|
|
(36,947
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
142,743
|
|
|
217,530
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Oil and natural gas capital expenditures
|
|
|
(170,258
|
)
|
|
(407,751
|
)
|
Other operating property and equipment capital expenditures
|
|
|
(886
|
)
|
|
(7,478
|
)
|
Funds held in escrow and other
|
|
|
(233
|
)
|
|
3,012
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(171,377
|
)
|
|
(412,217
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
425,000
|
|
|
1,296,000
|
|
Repayments of borrowings
|
|
|
(395,648
|
)
|
|
(1,129,000
|
)
|
Debt issuance costs
|
|
|
(1,186
|
)
|
|
(18,612
|
)
|
Common stock issued
|
|
|
|
|
|
15,354
|
|
Restricted cash
|
|
|
(325
|
)
|
|
(352
|
)
|
Offering costs and other
|
|
|
(60
|
)
|
|
(2,443
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
27,781
|
|
|
160,947
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(853
|
)
|
|
(33,740
|
)
|
Cash at beginning of period
|
|
|
8,026
|
|
|
43,713
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
7,173
|
|
$
|
9,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Accrued capitalized interest
|
|
$
|
(2,387
|
)
|
$
|
(2,614
|
)
|
Asset retirement obligations
|
|
|
919
|
|
|
1,754
|
|
Series A preferred dividends paid in common stock
|
|
|
|
|
|
9,803
|
|
Preferred dividends on redeemable noncontrolling interest paid-in-kind
|
|
|
6,655
|
|
|
6,131
|
|
Accretion of redeemable noncontrolling interest
|
|
|
21,862
|
|
|
12,942
|
|
Change in fair value of redeemable noncontrolling interest
|
|
|
|
|
|
645
|
|
Common stock issued on conversion of senior notes
|
|
|
|
|
|
231,383
|
|
Accrued debt issuance costs
|
|
|
904
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
Basis of Presentation and Principles of Consolidation
Halcón Resources Corporation (Halcón or the Company) is an independent energy company focused on the
acquisition, production, exploration and development of onshore liquids-rich assets in the United States. The unaudited condensed consolidated financial statements include the accounts of all
majority-owned, controlled subsidiaries and an equity method investment. The Company operates in one segment which focuses on oil and natural gas acquisition, production, exploration and development.
The Company's oil and natural gas properties are managed as a whole rather than through discrete operating areas. Operational information is tracked by operating area; however, financial performance
is assessed as a whole. Allocation of capital is made across the Company's entire portfolio without regard to operating area. All intercompany accounts and transactions have been eliminated. These
unaudited condensed consolidated financial statements reflect, in the opinion of the Company's management, all adjustments, consisting of normal and recurring adjustments, necessary to present fairly
the financial position as of, and the results of operations for, the periods presented. During interim periods, Halcón follows the accounting policies disclosed in its
2015 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission (SEC) on February 26, 2016. Please refer to the notes in the 2015 Annual Report on
Form 10-K when reviewing interim financial results.
On
December 28, 2015, the Company completed a one-for-five reverse stock split. As a result, all share and per share information included for all periods presented in these
unaudited condensed consolidated financial statements reflect the reverse stock split.
Ability to Continue as a Going Concern
On July 27, 2016, the Company and certain of its subsidiaries (the Halcón Entities) filed voluntary petitions for
relief under chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court in the District of Delaware (the Bankruptcy Court) to pursue a pre-packaged plan of reorganization. The
Company expects to continue operations in the normal course during the pendency of the chapter 11 proceedings. Prior to filing the bankruptcy petitions, on June 9, 2016, the
Halcón Entities entered into a restructuring support agreement (the Restructuring Support Agreement) with certain holders of the Company's 13% senior secured notes due 2022 (the Third
Lien Holders), the Company's 8.875% senior unsecured notes due 2021, 9.25% senior unsecured notes due 2022 and 9.75% senior unsecured notes due 2020 (collectively, the Unsecured Noteholders), the
holder of the Company's 8% senior unsecured convertible note due 2020 (the Convertible Noteholder), and certain holders of the Company's 5.75% Series A Convertible Perpetual Preferred Stock
(the Preferred Holders and together with the Third Lien Holders, Unsecured Noteholders and Convertible Noteholder, referred to collectively herein as, the Stakeholders). See Note 2,
"Restructuring Support Agreement,
"
for more information. On June 20, 2016, the Halcón Entities commenced a solicitation for
acceptance of the plan of reorganization (the Plan) contemplated in the Restructuring Support Agreement from the holders of impaired claims and interests entitled to vote under the Plan. At the
conclusion of the Company's thirty day solicitation period, the Plan received sufficient votes to satisfy the voting conditions set forth in Section 1126(c) of the Bankruptcy Code. The
Restructuring Support Agreement contains certain covenants on the part of the Halcón Entities and the Stakeholders, including that the Stakeholders vote in favor of the Plan
contemplated in the Restructuring Support Agreement and otherwise facilitate and support the restructuring transaction, subject to the achievement of certain milestones and various conditions.
9
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. FINANCIAL STATEMENT PRESENTATION (Continued)
The
Company's debt agreements provide that the commencement of a voluntary proceeding in bankruptcy is an event of default leading to the automatic acceleration of the associated
obligations. Accordingly, the filing of the voluntary petitions for relief under chapter 11 of the Bankruptcy Code
accelerated the Company's obligations under all of its outstanding debt instruments, although any efforts to enforce payment obligations thereunder have been automatically stayed by, and the
creditors' rights of enforcement are subject to, the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Accordingly, the Company classified all of its outstanding debt as
a current liability on its unaudited condensed consolidated balance sheet as of June 30, 2016.
The
significant risks and uncertainties related to the Halcón Entities' chapter 11 proceeding raise substantial doubt about the Company's ability to continue as a
going concern. The unaudited condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets,
and satisfaction of liabilities and commitments in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the
outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported
amounts of income and expenses could be required and could be material.
Use of Estimates
The preparation of the Company's unaudited condensed consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities, if any, at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods.
Estimates and assumptions that, in the opinion of management of the Company, are significant include oil and natural gas revenue, capital and operating expense accruals, oil and natural gas reserves,
depletion relating to oil and natural gas properties, asset retirement obligations, fair value estimates and income taxes. The Company bases its estimates and judgments on historical experience and on
various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty
and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Actual
results may differ from the estimates and assumptions used in the preparation of the Company's unaudited condensed consolidated financial statements.
Interim
period results are not necessarily indicative of results of operations or cash flows for the full year and accordingly, certain information normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United States, has been condensed or omitted. The Company has evaluated events or transactions through the date
of issuance of these unaudited condensed consolidated financial statements.
Accounts Receivable and Allowance for Doubtful Accounts
The Company's accounts receivable are primarily receivables from joint interest owners and oil and natural gas purchasers. Accounts
receivable are recorded at the amount due, less an allowance for
10
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. FINANCIAL STATEMENT PRESENTATION (Continued)
doubtful
accounts, when applicable. The Company establishes provisions for losses on accounts receivable if it determines that collection of all or part of the outstanding balance is doubtful. The
Company regularly reviews collectability and establishes or adjusts the allowance for doubtful accounts as necessary using the specific identification method. There were no material allowances for
doubtful accounts as of June 30, 2016 or December 31, 2015.
Other Operating Property and Equipment
Gas gathering systems and equipment are recorded at cost. Depreciation is calculated using the straight-line method over a 30-year or
10-year estimated useful life applicable to gas gathering systems and a compressed natural gas facility, respectively. Upon disposition, the cost and accumulated depreciation are removed and any gains
or losses are reflected in current operations. Maintenance and repair costs are charged to operating expense as incurred. Material expenditures which increase the life or productive capacity of an
asset are capitalized and depreciated over the estimated remaining useful life of the asset. The Company capitalized $57.8 million and $87.2 million as of June 30, 2016 and
December 31, 2015, respectively, related to the construction of its gas gathering systems, after any amounts impaired.
Other
operating assets are recorded at cost. Depreciation is calculated using the straight-line method over the following estimated useful lives: automobiles and computers, three years;
computer software, fixtures, furniture and equipment, five years or the lesser of the lease term; trailers, seven years; heavy equipment, ten years; buildings, twenty years and leasehold improvements,
lease term. Upon disposition, the cost and accumulated depreciation are removed and any gains or losses are reflected in current operations. Maintenance and repair costs are charged to operating
expense as incurred. Material expenditures which increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset.
The
Company reviews its gas gathering systems and equipment and other operating assets for impairment in accordance with ASC 360,
Property, Plant, and
Equipment
(ASC 360). ASC 360 requires the Company to evaluate gas gathering systems and equipment and other operating assets for impairment as events occur or circumstances
change that would more likely than not reduce the fair value below the carrying amount. If the carrying amount is not recoverable from an asset's undiscounted cash flows, then the Company recognizes
an impairment loss for the difference between the carrying amount and the current fair value. The Company also evaluates the remaining useful lives of its gas gathering systems and other operating
assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods. For the three months ended March 31, 2016, the Company
recorded a non-cash impairment charge of $28.1 million in
"Other operating property and equipment impairment"
in the Company's unaudited
condensed consolidated statements of operations and in
"Gas gathering and other operating assets"
in the Company's unaudited condensed consolidated
balance sheets. The impairment primarily relates to the Company's gross investments of $32.8 million in gas gathering infrastructure that will not likely be economically recoverable due to its
shift in exploration, drilling and developmental plans to its most economic areas as a result of the low commodity price environment.
In
accordance with ASC 820,
Fair Value Measurements and Disclosures
(ASC 820), a financial instrument's level within the fair value
hierarchy is based on the lowest level of input that is significant to the fair value measurement. The estimate of the fair value of the Company's gas gathering systems
11
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. FINANCIAL STATEMENT PRESENTATION (Continued)
was
based on an income approach that estimated future cash flows associated with those assets, which resulted in negative net cash flows due to insufficient throughput of natural gas volumes and
certain fixed costs necessary to operate and maintain the assets. This estimation includes the use of unobservable inputs, such as estimated future production, and gathering and compression revenues
and operating expenses. The use of these unobservable inputs results in the fair value estimate of the Company's gas gathering systems being classified as Level 3.
Recently Issued Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09,
CompensationStock
Compensation
(ASU 2016-09). For public business entities, ASU 2016-09 is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2016 and early adoption is permitted. The areas for simplification in this ASU involve several aspects of the accounting
for share-based payment
transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification
apply only to nonpublic entities. As there are multiple amendments in this ASU, the FASB has issued guidance on how an entity should apply each amendment, either prospectively or retrospectively. The
Company is in the process of assessing the effects of the application of the new guidance.
In
March 2016, the FASB issued ASU No. 2016-06,
Contingent Put and Call Options in Debt Instruments
(ASU 2016-06).
For public business entities, ASU 2016-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 and early adoption is permitted.
ASU 2016-06 provides new guidance that simplifies the analysis of whether a contingent put or call option in a debt instrument qualifies as a separate derivative. An entity should apply the
amendments in this ASU on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. The Company is in the process of
assessing the effects of the application of the new guidance.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
(ASU 2016-02). For public business entities,
ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and early adoption is permitted. The FASB issued
ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing
arrangements. An entity should apply the amendments in this ASU on a modified retrospective basis. The transition will require application of the new guidance at the beginning of the earliest
comparative period presented in the financial statements. The Company is in the process of assessing the effects of the application of the new guidance.
In
November 2015, the FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
(ASU 2015-17) to
simplify the presentation of deferred income taxes. Under ASU 2015-17, all deferred tax assets and liabilities, along with any related valuation allowance, are required to be classified as
noncurrent on the balance sheet. Effective December 31, 2015, the Company early adopted ASU 2015-17, on a prospective basis, which resulted in the reclassification of its current
deferred tax assets and liabilities as a non-current deferred tax asset and liability, net of the valuation allowance, in the accompanying unaudited condensed consolidated balance sheets. No prior
periods were retrospectively adjusted.
12
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. FINANCIAL STATEMENT PRESENTATION (Continued)
In
September 2015, the FASB issued ASU No. 2015-16,
Business CombinationsSimplifying the Accounting for Measurement-Period
Adjustments
(ASU 2015-16). For public business entities, ASU 2015-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2015 and early adoption is permitted. The amendments in this ASU require that an acquirer, in a business combination, recognize adjustments to provisional amounts that are
identified
during the measurement period in the reporting period in which the adjustment amounts are determined. To simplify the accounting for adjustments made to provisional amounts recognized in a business
combination, the amendments in this ASU eliminate the requirement to retrospectively account for those adjustments, and instead present separately on the face of the income statement or disclose in
the footnotes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods. The adoption of ASU 2015-16 did not have an
impact to the Company's financial statements or disclosures.
In
July 2015, the FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
(ASU 2015-11).
ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal, and transportation. For public entities, ASU 2015-11 is effective for fiscal years beginning after December 15, 2016,
including interim periods within those fiscal years. The amendments in this update should be applied prospectively and early application is permitted. The Company does not expect the adoption of
ASU 2015-11 to have a material impact to its financial statements or disclosures.
In
April 2015, the FASB issued ASU No. 2015-05,
IntangiblesGoodwill and OtherInternal-Use Software
(ASU 2015-05). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software
license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not
include a software license, the customer should account for the arrangement as a service contract. For public business entities, the guidance is effective for annual periods, including interim periods
within those annual periods, beginning after December 15, 2015. An entity can elect to adopt the guidance either (1) prospectively to all arrangements entered into or materially modified
after the effective date or (2) retrospectively. Early adoption is permitted. The Company adopted prospectively and it did not have a material impact to the Company's financial statements or
disclosures.
In
February 2015, the FASB issued ASU No. 2015-02,
Amendments to the Consolidation Analysis
(ASU 2015-02). The
amendments in ASU 2015-02 eliminate the previous presumption that a general partner controls a limited partner. ASU 2015-02 may impact the Company's accounting for its general partner
interest in SBE Partners LP (SBE Partners), which is currently accounted for as an equity method investment. ASU 2015-02 is effective for public entities for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. Entities may apply the guidance using a modified retrospective approach by recording a
cumulative-effect adjustment to equity as of the beginning of the first fiscal year adopted or it may apply the amendment retrospectively. The adoption of ASU 2015-02 did not have an impact on
the Company's accounting for its general partner interest in SBE Partners, LP.
In
August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial StatementsGoing Concern
(ASU 2014-15). ASU 2014-15 is effective for annual reporting periods (including interim
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. FINANCIAL STATEMENT PRESENTATION (Continued)
periods
within those periods) ending after December 15, 2016. Early application is permitted with companies applying the guidance prospectively. The amendments in ASU 2014-15 create a
new ASC Sub-topic 205-40,
Presentation of Financial StatementsGoing Concern
and require management to assess for each annual and
interim reporting period if conditions exist that raise substantial doubt about an entity's ability to continue as a going concern. The rule requires various disclosures depending on the facts and
circumstances surrounding an entity's ability to continue as a going concern. Effective June 30, 2016, the Company early adopted ASU 2014-15, on a prospective basis, which resulted in
additional disclosures as discussed above.
In
May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
(ASU 2014-09). ASU 2014-09
states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in
exchange for those goods or services. The standard provides five steps an entity should apply in determining its revenue recognition. In March 2016, ASU 2014-09 was updated with
ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net)
(ASU 2016-08), which provides further clarification on the principal versus agent evaluation. ASU 2014-09 is required to be adopted using either the full
retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet and is
effective for annual reporting periods, and interim periods within that reporting period, beginning after December 15, 2016, or after December 2017, if companies choose to elect the deferred
adoption date approved by the FASB. Early adoption is not permitted. The Company is in the process of assessing the effects of the application of the new guidance.
2. RESTRUCTURING SUPPORT AGREEMENT
On June 9, 2016, the Halcón Entities entered into a Restructuring Support Agreement with the Stakeholders. On July 27, 2016, the Halcón
Entities filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court in the District of Delaware to effect an accelerated
pre-packaged bankruptcy restructuring as contemplated in the Restructuring Support Agreement.
Pursuant
to the terms of the Plan contemplated by the Restructuring Support Agreement, Stakeholders and other claim and interest holders will receive the following treatment in full and
final satisfaction of their claims and interests:
-
-
the Halcón Entities' Second Lien Notes (consisting of $700.0 million in aggregate principal amount outstanding
of 8.625% senior secured notes due 2020 and $112.8 million in aggregate principal amount outstanding of 12% senior secured notes due 2022) shall be unimpaired and reinstated;
-
-
the Third Lien Holders will receive their pro rata share of 76.5% of the common stock of reorganized Halcón, together
with a cash payment of $33.8 million, and accrued and unpaid interest on their notes through May 15, 2016;
-
-
the Unsecured Noteholders will receive their pro rata share of 15.5% of the common stock of reorganized Halcón,
together with a cash payment of $37.6 million and warrants to purchase 4% of the common stock of reorganized Halcón with a four year term and an exercise price based
14
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. RESTRUCTURING SUPPORT AGREEMENT (Continued)
Each
of the foregoing percentages of equity in the reorganized company is subject to dilution from the exercise of the new warrants described above and a management incentive plan.
The
Restructuring Support Agreement contains certain covenants on the part of the Halcón Entities and the Stakeholders, including that the Stakeholders vote in favor of
the Plan contemplated in the Restructuring Support Agreement and otherwise facilitate and support the restructuring transaction. The Restructuring Support Agreement also provides for termination by
each party upon the occurrence of certain events, including without limitation, the failure of the Halcón Entities to achieve certain milestones, including having the Plan confirmed and
effective by certain dates, and requires the satisfaction of certain conditions, such as that the Halcón Entities obtain a credit facility pursuant to an amendment or an amendment and
restatement of its existing Senior Credit Agreement, defined below, (or any replacement financing) in an aggregate principal amount of not less than $600.0 million (the Amended Revolving Credit
Agreement), which Amended Revolving Credit Agreement shall be (a) in form and substance reasonably satisfactory to the Requisite Unsecured Noteholders (as defined in the Restructuring Support
Agreement), and (b) in form and substance satisfactory to the Requisite Third Lien Noteholders (as defined in the Restructuring Support Agreement).
On
June 20, 2016, the Halcón Entities commenced a solicitation for acceptance of the Plan. As a result of the solicitation, 99.997% in aggregate principal amount of
the Third Lien Notes (defined below), that voted, 99.860% in aggregate principal amount of the Unsecured Notes (consisting of the Company's 8.875% senior unsecured notes due 2021, 9.25% senior
unsecured notes due 2022 and 9.75% senior unsecured notes due 2020) that voted, 100.000% of the aggregate principal amount of the Convertible Note (defined below), and 99.300% in aggregate amount of
the shares of the Series A Preferred Stock (defined below) that voted, voted to support the Plan, which exceeded the voting condition under the Restructuring Support Agreement. In addition, the
Company entered into an agreement dated as of July 22, 2016 with holders of more than 51% in aggregate principal amount of its 8.625% and 12.0% Second Lien Notes due 2020 and 2022 regarding
certain amendments to the indentures governing such notes in exchange for the commitment of such holders to support the Plan (the Second Lien Support Agreement). Under the terms of the Second Lien
Support Agreement, each holder of the Second Lien Notes that agrees to the proposed amendments and is either party to the Second Lien Support Agreement or otherwise does not object to the Plan will,
subject to the occurrence of the effective date of the Plan (and, in the case of the Second Lien Notes, the effectiveness of the proposed amendment) receive a consent fee equal to 1.25% of the
aggregate principal amount of such holder's outstanding second lien notes. To effect the treatment of claims and
15
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. RESTRUCTURING SUPPORT AGREEMENT (Continued)
interests
set forth above in accordance with the Plan, the Company withheld the regularly scheduled July 15, 2016 interest payment on its 2020 Notes, defined below. The Company also withheld
the regularly scheduled June 30, 2016 interest payment on its Convertible Note, defined below, which was waived by the holder of the Convertible Note in the Restructuring Support Agreement. The
Company made the payments of accrued and unpaid interest through May 15, 2016 on the Third Lien Notes and Unsecured Notes prior to its chapter 11 filing. Also, to provide financial
flexibility until such time as an
Amended Revolving Credit Agreement is finalized and approved, prior to its chapter 11 filing, the Company drew approximately $338.0 million on July 25, 2016 under its Senior
Credit Agreement, bringing its outstanding borrowings up to approximately $444.0 million.
See
Note 4, "
Debt
," and Note 10, "
Stockholders' Equity
," for information
regarding the Company's debt and equity instruments.
3. OIL AND NATURAL GAS PROPERTIES
The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and
development of oil and natural gas reserves (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal
costs) are capitalized as the cost of oil and natural gas properties when incurred. To the extent capitalized costs of evaluated oil and natural gas properties, net of accumulated depletion, exceed
the discounted future net revenues of proved oil and natural gas reserves, net of deferred taxes, such excess capitalized costs are charged to expense.
The
Company assesses all properties classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. The Company assesses properties on an
individual basis or as a group, if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term;
geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period
in which these factors indicate impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost
pool and are then subject to depletion and the full cost ceiling test limitation.
Investments
in unevaluated oil and natural gas properties and exploration and development projects for which depletion expense is not currently recognized, and for which exploration or
development activities are in progress, qualify for interest capitalization. The capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average
amount of qualifying costs incurred that are excluded from the full cost pool; however, the amount of capitalized interest cannot exceed the amount of gross interest expense incurred in any given
period. The capitalized interest amounts are recorded as additions to unevaluated oil and natural gas properties on the unaudited condensed consolidated balance sheets. As the costs excluded are
transferred to the full cost pool, the associated capitalized interest is also transferred to the full cost pool. For the six months ended June 30, 2016 and 2015, the Company capitalized
interest costs of $52.9 million and $51.2 million, respectively.
At
June 30, 2016, the ceiling test value of the Company's reserves was calculated based on the first-day-of-the-month average for the 12-months ended June 30, 2016 of the
West Texas
16
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. OIL AND NATURAL GAS PROPERTIES (Continued)
Intermediate (WTI)
crude oil spot price of $43.12 per barrel, adjusted by lease or field for quality, transportation fees, and regional price differentials, and the first-day-of-the-month
average for the 12-months ended June 30, 2016 of the Henry Hub natural gas price of $2.24 per million British thermal units (MMBtu), adjusted by lease or field for energy content,
transportation fees, and regional price differentials. Using these prices, the Company's net book value of oil and natural gas properties at June 30, 2016 exceeded the ceiling amount by
$257.9 million ($163.1 million after taxes, before valuation allowance) which resulted in a ceiling test impairment of that amount for the quarter. The impairment at June 30, 2016
primarily reflects a 7% decrease in the first-day-of-the-month average price for crude oil used in the ceiling test calculation, which was $46.26 per barrel at March 31, 2016. At
March 31, 2016, the Company recorded a full cost ceiling impairment before income taxes of $496.9 million ($315.1 million after taxes, before valuation allowance). The impairment
at March 31, 2016 reflects additional transfers of the remaining unevaluated Utica / Point Pleasant (Utica) and Tuscaloosa Marine Shale (TMS) properties of approximately $330.4 million
and $74.8 million, respectively, to the full cost pool and, to a lesser extent, an 8% decrease in the first-day-of-the-month average price for crude oil used in the ceiling test calculation,
which was $50.28 per barrel at December 31, 2015. As discussed above, the Company considers the facts and circumstances around its unevaluated properties that may indicate impairment on a
quarterly basis. Management concluded that it is no longer probable that capital will be available or approved to continue exploratory drilling activities in the Company's Utica or TMS acreage
positions in advance of the related lease expirations due to the Company's evaluation of strategic alternatives to reduce its debt while preserving liquidity in light of continued low commodity
prices, together with a reduction of the Company's exploration department and the Company's intent to expend capital only on its most economical and proven areas.
At
June 30, 2015, the ceiling test value of the Company's reserves was calculated based on the first-day-of-the-month average for the 12-months ended June 30, 2015 of the
WTI spot price of $71.68 per barrel, adjusted by lease or field for quality, transportation fees, and regional price differentials, and the first-day-of-the-month average for the 12-months
ended June 30, 2015 of the
Henry Hub price of $3.39 per MMBtu, adjusted by lease or field for energy content, transportation fees, and regional price differentials. Using these prices, the Company's net book value of oil and
natural gas properties at June 30, 2015 exceeded the ceiling amount by $948.6 million ($597.3 million after taxes, before valuation allowance) which resulted in a ceiling test
impairment of that amount for the quarter. At March 31, 2015, the Company recorded a full cost ceiling impairment before income taxes of $554.0 million ($348.8 million after
taxes, before valuation allowance). The ceiling test impairments were driven by decreases in the first-day-of-the-month average prices for crude oil used in the ceiling test calculations since
December 31, 2014, when the first-day-of-the-month average price for crude oil was $94.99 per barrel and $82.71 per barrel at March 31, 2015.
The
Company recorded the full cost ceiling test impairments in "
Full cost ceiling impairment
" in the Company's unaudited condensed
consolidated statements of operations and in "
Accumulated depletion
" in the Company's unaudited condensed consolidated balance sheets. Changes in
commodity prices, production rates, levels of reserves, future development costs, transfers of unevaluated properties, capital spending, and other factors will determine the Company's ceiling test
calculations and impairment analyses in future periods.
17
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT
As of June 30, 2016 and December 31, 2015, the Company's current and long-term debt, respectively, consisted of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2016
(1)
|
|
December 31,
2015
|
|
|
|
(In thousands)
|
|
Senior revolving credit facility
|
|
$
|
101,000
|
|
$
|
62,000
|
|
8.625% senior secured second lien notes due 2020
(2)
|
|
|
689,064
|
|
|
687,797
|
|
12.0% senior secured second lien notes due 2022
(3)
|
|
|
111,408
|
|
|
111,598
|
|
13.0% senior secured third lien notes due 2022
(4)
|
|
|
1,010,048
|
|
|
1,009,585
|
|
9.25% senior notes due 2022
(5)
|
|
|
36,660
|
|
|
51,887
|
|
8.875% senior notes due 2021
(6)
|
|
|
296,184
|
|
|
347,671
|
|
9.75% senior notes due 2020
(7)
|
|
|
312,522
|
|
|
336,470
|
|
8.0% convertible note due 2020
(8)
|
|
|
268,921
|
|
|
266,629
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,825,807
|
|
$
|
2,873,637
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
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|
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|
|
-
(1)
-
The Company's debt balance as of June 30, 2016 was classified as current. See "Senior Revolving Credit Facility" below for more details.
-
(2)
-
Amounts are net of $10.9 million and $12.2 million unamortized debt issuance costs at June 30, 2016 and December 31, 2015,
respectively.
-
(3)
-
Amounts are net of $1.4 million and $1.2 million unamortized debt issuance costs at June 30, 2016 and
December 31, 2015,
respectively.
-
(4)
-
Amounts are net of $7.9 million and $8.4 million unamortized debt issuance costs at June 30, 2016 and
December 31, 2015,
respectively.
-
(5)
-
Amounts are net of $0.5 million and $0.8 million unamortized debt issuance costs at June 30, 2016 and
December 31, 2015,
respectively.
-
(6)
-
Amounts are net of a $0.8 million and a $1.0 million unamortized discount at June 30, 2016 and
December 31, 2015, respectively,
related to the issuance of the original 2021 Notes. The unamortized premium related to the additional 2021 Notes was approximately $4.3 million and $5.5 million at June 30, 2016
and December 31, 2015, respectively. Amounts are net of $4.5 million and $5.8 million unamortized debt issuance costs at June 30, 2016 and December 31, 2015,
respectively. See "8.875% Senior Notes" below for more details.
-
(7)
-
Amounts are net of a $1.6 million and a $1.9 million unamortized
discount at June 30, 2016 and December 31, 2015, respectively,
related to the issuance of the original 2020 Notes. The unamortized premium related to the additional 2020 Notes was approximately $2.2 million and $2.6 million at
June 30, 2016 and December 31, 2015, respectively. Amounts are net of $3.6 million and $4.3 million unamortized debt issuance costs at June 30, 2016 and
December 31, 2015, respectively. See "9.75% Senior Notes" below for more details.
-
(8)
-
Amounts are net of a $20.7 million and a
$23.0 million unamortized discount at June 30, 2016 and December 31, 2015,
respectively. See "8.0% Convertible Note" below for more details.
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
Senior Revolving Credit Facility
On February 8, 2012, the Company entered into a senior secured revolving credit agreement (the Senior Credit Agreement) with
JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto. The Senior Credit Agreement provides for a $1.5 billion facility with a borrowing base of
$700.0 million. However, pursuant to the Waiver Agreement, defined below, the Company agreed not to request borrowings in excess of $450.0 million for a specified period of time. On
July 25, 2016, the Company borrowed approximately $338.0 million, resulting in the Company having an aggregate $444.0 million of indebtedness outstanding under the Senior Credit
Agreement. The borrowing base is redetermined semi-annually, with the lenders and the Company each having the right to one interim unscheduled redetermination between any two consecutive semi-annual
redeterminations. The borrowing base takes into account the estimated value of the Company's oil and natural gas properties, proved reserves, total indebtedness, and other relevant factors consistent
with customary oil and natural gas lending criteria. Amounts outstanding under the Senior Credit Agreement bear interest at specified margins over the base rate of 1.50% to 2.50% for ABR-based loans
or at specified margins over LIBOR of 2.50% to 3.50% for Eurodollar-based loans. These margins fluctuate based on the Company's utilization of the facility. At June 30, 2016, the weighted
average interest rate on the Company's variable rate debt was 3.2% per year. Advances under the Senior Credit Agreement are secured by liens on substantially all of the Company's and its restricted
subsidiaries' properties and assets. The Senior Credit Agreement contains customary representations, warranties and covenants including, among others, restrictions on the payment of dividends on the
Company's capital stock and financial covenants, including minimum working capital levels (the ratio of current assets plus the unused commitment under the Senior Credit Agreement to current
liabilities) of not less than 1.0 to 1.0 and a ratio of total secured debt (excluding the Third Lien Notes) to EBITDA of no greater than 2.75 to 1.0.
On
May 26, 2016, the Company entered into a waiver to its Senior Credit Agreement (the Waiver Agreement), which, among other things, temporarily limited the borrowings under its
senior credit facility in connection with the Company's chapter 11 reorganization plans. The Company agreed that for a specified period of time it would not request, nor will it be permitted to
request, a borrowing which would result in the aggregate exposure on the Senior Credit Agreement to exceed $450.0 million. Refer to Note 2,
"Restructuring Support
Agreement,"
for further details regarding the Company's chapter 11 reorganization plans.
On
March 17, 2016, the Company entered into the Thirteenth Amendment to its Senior Credit Agreement (the Thirteenth Amendment), which, among other things, reduced the borrowing
base to $700.0 million and scheduled the Company's next borrowing base redetermination for September 1, 2016.
Additionally, the Thirteenth Amendment changed the Company's interest margins under the facility to those described above.
At
June 30, 2016, the Company had $101.0 million of indebtedness outstanding, $5.2 million letters of credit outstanding and was in compliance with the financial
covenants under the Senior Credit Agreement.
The
filing of the voluntary petitions for relief under chapter 11 of the Bankruptcy Code described in Note 1, "
Financial Statement
Presentation
," constituted an event of default under the Senior Credit Agreement that accelerated the Company's obligations and terminated the lenders' commitments under the
Senior Credit Agreement.
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
In
connection with the chapter 11 proceedings, the Company entered into a commitment letter pursuant to which the lenders party thereto committed to provide, subject to certain
conditions, a $600.0 million debtor-in-possession senior secured, super-priority revolving credit facility (the DIP Facility) and a $600.0 million exit senior secured reserve-based
revolving credit facility. Proceeds from the DIP Facility will, among other things, be used to refinance borrowings under the Company's current Senior Credit Agreement. Availability under the DIP
Facility will be $500.0 million upon interim approval by the Bankruptcy Court, rising to $600.0 million upon entry of a final order. The DIP Facility will be converted into or otherwise
refinanced by the exit credit facility following confirmation of the Plan. The DIP Facility will mature in three (3) months, subject to three-month extensions at the request of the borrower,
but not beyond twelve (12) months from the commencement of the bankruptcy proceedings or the effective date of a plan of reorganization confirmed by the Bankruptcy Court. Loans under the DIP
Facility will bear interest at a rate per annum equal to, as selected by the Company, an alternative base rate plus an applicable margin of 1.75% to 2.75% or adjusted LIBOR plus an applicable margin
of 2.75% to 3.75%, in each case based on utilization. The DIP Facility will contain certain customary affirmative and negative covenants, including limitations on indebtedness; liens; dividends and
distributions; investments; sale or discount of receivables; mergers; sale of properties; termination of swap agreements and transactions with affiliates, as well as compliance with an approved
bi-weekly budget, subject to minor variances. The DIP Facility will also contain specified events of default, including non-payment; non-compliance with covenants or other agreements; default in other
material indebtedness; certain adverse judgments; change of control; dismissal (or conversion to chapter 7) of the chapter 11 proceedings; and failure to satisfy certain bankruptcy
milestones.
8.625% Senior Secured Second Lien Notes
On May 1, 2015, the Company issued $700.0 million aggregate principal amount of its 8.625% senior secured second lien
notes due 2020 (the 2020 Second Lien Notes) in a private placement. The 2020 Second Lien Notes were issued at par. The net proceeds from the sale of the 2020 Second Lien Notes were approximately
$686.2 million (after deducting offering fees and expenses). The Company used the net proceeds from the offering to repay the majority of the then outstanding borrowings under its Senior Credit
Agreement.
The
2020 Second Lien Notes bear interest at a rate of 8.625% per annum, payable semi-annually on February 1 and August 1 of each year, beginning on August 1, 2015.
The 2020 Second Lien Notes will mature on February 1, 2020. The 2020 Second Lien Notes are secured by second-priority liens on substantially all of the Company's and its guarantors' assets to
the extent such assets secure the Company's Senior Credit Agreement, its 2022 Second Lien Notes (defined below) and its Third Lien Notes (defined below) (the Collateral). Pursuant to the terms of an
Intercreditor Agreement, dated May 1, 2015, as amended by those certain Priority Confirmation Joinders, dated September 10, 2015 and December 21, 2015, in connection with the
issuance of the Third Lien Notes and the 2022 Second Lien Notes, respectively (the Intercreditor Agreement), the security interest in those assets that secure the 2020 Second Lien Notes and the
guarantees are contractually subordinated to liens that secure the Company's Senior Credit Agreement and certain other permitted indebtedness. Consequently, the 2020 Second Lien Notes and the
guarantees are effectively subordinated to the Senior Credit Agreement and such other indebtedness to the extent of the value of such assets. The Collateral does not include any of the assets of HK
TMS, LLC, a wholly owned subsidiary of the Company, or any of the Company's future unrestricted subsidiaries.
20
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
12.0% Senior Secured Second Lien Notes
On December 21, 2015, the Company completed the issuance in a private placement of approximately $112.8 million aggregate
principal amount of new 12.0% senior secured second lien notes due 2022 (the 2022 Second Lien Notes) in exchange for approximately $289.6 million principal amount of its senior unsecured notes,
consisting of $116.6 million principal amount of 9.75% senior notes due 2020, $137.7 million principal amount of 8.875% senior notes due 2021 and $35.3 million principal amount of
9.25% senior notes due 2022. At closing, the Company paid all accrued and unpaid interest since the respective interest payment dates of the unsecured notes surrendered in the exchange. The Company
recorded the issuance of the 2022 Second Lien Notes at par.
Interest
on the 2022 Second Lien Notes accrues at a rate of 12.0% per annum, payable semi-annually on February 15 and August 15 of each year, beginning on
February 15, 2016. The 2022 Second Lien Notes will mature on February 15, 2022. The 2022 Second Lien Notes are secured by second-priority liens on the Collateral. Pursuant to the terms
of the Intercreditor Agreement, dated December 21, 2015, the security interest in the Collateral securing the 2022 Second Lien Notes and the guarantees are contractually equal with the liens
that secure the 2020 Second Lien Notes and contractually subordinated to liens that secure the Company's Senior Credit Agreement and certain other permitted indebtedness. Consequently, the 2022 Second
Lien Notes and the guarantees are effectively subordinated to the Senior Credit Agreement and such other indebtedness and effectively equal to the 2020 Second Lien Notes, in each case to the extent of
the value of the Collateral.
13.0% Senior Secured Third Lien Notes
On September 10, 2015, the Company issued approximately $1.02 billion aggregate principal amount of new 13.0% senior
secured third lien notes due 2022 (the Third Lien Notes) in a private placement in exchange for approximately $497.2 million principal amount of its 9.75% senior notes due 2020,
$774.7 million principal amount of its 8.875% senior notes due 2021 and $294.4 million principal amount of its 9.25% senior notes due 2022 in privately negotiated transactions with
certain holders of its outstanding senior unsecured notes. At closing, the Company paid all accrued and unpaid interest since the respective interest payment dates of the notes surrendered in the
exchange. The Company recorded the issuance of the Third Lien Notes at par.
The
Third Lien Notes bear interest at a rate of 13.0% per annum, payable semi-annually on February 15 and August 15, commencing on February 15, 2016. The Third Lien
Notes mature on February 15, 2022. The Third Lien Notes are secured by third-priority liens on the Collateral. The Third Lien Notes are governed by an Indenture dated September 10, 2015,
which contains affirmative and
negative covenants substantially similar to those governing the Company's outstanding 2020 Second Lien Notes and the 2022 Second Lien Notes. Pursuant to the terms of the Intercreditor Agreement, the
security interest in those assets that secure the Third Lien Notes and the guarantees are contractually subordinated to liens that secure the Company's Senior Credit Agreement, the 2020 Second Lien
Notes, the 2022 Second Lien Notes and certain other permitted indebtedness. Consequently, the Third Lien Notes and the guarantees are effectively subordinated to the Senior Credit Agreement, the 2020
Second Lien Notes, the 2022 Second Lien Notes and such other indebtedness to the extent of the value of the Collateral.
21
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HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
9.25% Senior Notes
On August 13, 2013, the Company issued at par $400.0 million aggregate principal amount of 9.25% senior notes due 2022
(the 2022 Notes). The net proceeds from the offering of approximately $392.1 million (after deducting offering fees and expenses) were used to repay a portion of the then outstanding borrowings
under the Company's Senior Credit Agreement.
The
2022 Notes bear interest at a rate of 9.25% per annum, payable semi-annually on February 15 and August 15 of each year, beginning on February 15, 2014. The 2022
Notes will mature on February 15, 2022. The 2022 Notes are senior unsecured obligations of the Company and are effectively subordinate to its secured debt, including secured debt under the
Senior Credit Agreement, the 2020 Second Lien Notes, the 2022 Second Lien Notes and the Third Lien Notes and rank equally with all of its current and future senior indebtedness. The 2022 Notes are
jointly and severally, fully and unconditionally guaranteed on a senior unsecured basis by the Company's existing 100% owned subsidiaries, except for the subsidiary, HK TMS, LLC.
Halcón, the issuer of the 2022 Notes, has no material independent assets or operations apart from the assets and operations of its subsidiaries.
During
the first quarter of 2016, the Company repurchased $15.5 million principal amount of 2022 Notes for cash at prevailing market prices at the time of the transactions and
recognized an $11.1 million net gain on the extinguishment of debt. At closing, the Company paid all accrued and unpaid interest since the prior interest payment date of the 2022 Notes. As of
June 30, 2016, $37.2 million principal amount of the Company's 2022 Notes remained outstanding.
8.875% Senior Notes
On November 6, 2012, the Company issued $750.0 million aggregate principal amount of its 8.875% senior notes due 2021
(the 2021 Notes), at a price to the initial purchasers of 99.247% of par. The net proceeds from the offering of approximately $725.6 million (after deducting offering fees and expenses) and
were used to fund a portion of the cash consideration paid in the Williston Basin Acquisition.
On
January 14, 2013, the Company issued an additional $600.0 million aggregate principal amount of the 2021 Notes at a price to the initial purchasers of 105% of par. The
net proceeds from the sale of the additional 2021 Notes of approximately $619.5 million (after offering fees and expenses) were used to repay all of the then outstanding borrowings under the
Senior Credit Agreement and for general corporate purposes, including funding a portion of the Company's 2013 capital expenditures program. These notes were issued as "additional notes" under the
indenture governing the 2021 Notes and under the indenture are treated as a single series with substantially identical terms as the 2021 Notes previously issued.
The
2021 Notes bear interest at a rate of 8.875% per annum, payable semi-annually on May 15 and November 15 of each year, beginning on May 15, 2013. The 2021 Notes
will mature on May 15, 2021. The 2021 Notes are senior unsecured obligations of the Company and are effectively subordinate to its secured debt, including secured debt under the Senior Credit
Agreement, the 2020 Second Lien Notes, the 2022 Second Lien Notes and the Third Lien Notes and rank equally with all of its current and future senior indebtedness. The 2021 Notes are jointly and
severally, fully and unconditionally guaranteed on a senior unsecured basis by the Company's existing 100% owned subsidiaries, except for
22
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
the
subsidiary, HK TMS, LLC. Halcón, the issuer of the 2021 Notes, has no material independent assets or operations apart from the assets and operations of its subsidiaries.
In
conjunction with the issuance of the 2021 Notes, the Company recorded a discount of approximately $5.7 million to be amortized over the remaining life of the 2021 Notes using
the effective interest method. The remaining unamortized discount was $0.8 million at June 30, 2016. In conjunction with the issuance of the additional 2021 Notes, the Company recorded a
premium of approximately $30.0 million to be amortized over the remaining life of the additional 2021 Notes using the effective interest method. The remaining unamortized premium was
$4.3 million at June 30, 2016.
During
the first quarter of 2016, the Company repurchased $51.8 million principal amount of the 2021 Notes for cash at prevailing market prices at the time of the transactions and
recognized a $47.5 million net gain on the extinguishment of debt. At closing, the Company paid all accrued and unpaid interest since the prior interest payment date of the 2021 Notes. As of
June 30, 2016, $297.2 million principal amount of the Company's 2021 Notes remained outstanding.
9.75% Senior Notes
On July 16, 2012, the Company issued $750.0 million aggregate principal amount of 9.75% senior notes due 2020 issued at
98.646% of par (the 2020 Notes). The net proceeds from the offering were approximately $723.1 million (after deducting offering fees and expenses) and were used to fund a portion of the cash
consideration paid in the merger with GeoResources, Inc., and the acquisition of certain oil and gas leaseholds located in East Texas.
On
December 19, 2013, the Company issued an additional $400.0 million aggregate principal amount of the 2020 Notes at a price to the initial purchasers of 102.750% of par.
The net proceeds from the sale of the additional 2020 Notes of approximately $406.3 million (after deducting offering fees and expenses) were used to repay a portion of the then outstanding
borrowings under the Senior Credit Agreement. These notes were issued as "additional notes" under the indenture governing the 2020 Notes and under the indenture are treated as a single series with
substantially identical terms as the 2020 Notes previously issued.
The
2020 Notes bear interest at a rate of 9.75% per annum, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2013. The 2020
Notes will mature on July 15, 2020. The 2020 Notes are senior unsecured obligations of the Company and are effectively subordinate to its secured debt, including secured debt under the Senior
Credit Agreement, the 2020 Second Lien Notes, the 2022 Second Lien Notes and the Third Lien Notes and rank equally with all of its current and future senior indebtedness. The 2020 Notes are jointly
and severally, fully and unconditionally guaranteed on a senior unsecured basis by the Company's existing 100% owned subsidiaries, except for the subsidiary, HK TMS, LLC. Halcón,
the issuer of the 2020 Notes, has no material independent assets or operations apart from the assets and operations of its subsidiaries.
In
conjunction with the issuance of the 2020 Notes, the Company recorded a discount of approximately $10.2 million to be amortized over the remaining life of the 2020 Notes using
the effective interest method. The remaining unamortized discount was $1.6 million at June 30, 2016. In conjunction with the issuance of the additional 2020 Notes, the Company recorded a
premium of approximately $11.0 million to be amortized over the remaining life of the additional 2020 Notes using
23
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
the
effective interest method. The remaining unamortized premium was approximately $2.2 million at June 30, 2016.
During
the first quarter of 2016, the Company repurchased $24.5 million principal amount of the 2020 Notes for cash at prevailing market prices at the time of the transactions and
recognized a $22.8 million net gain on the extinguishment of debt. At closing, the Company paid all accrued and unpaid interest since the prior interest payment date of the 2020 Notes. As of
June 30, 2016, $315.5 million principal amount of the Company's 2020 Notes remained outstanding.
8.0% Convertible Note
On February 8, 2012, the Company issued to HALRES, LLC (HALRES), a note in the principal amount of $275.0 million
due 2017 (the Convertible Note) together with five year warrants (February 2012 Warrants) for an aggregate purchase price of $275.0 million. The Convertible Note bears interest at a rate of 8%
per annum, payable quarterly on March 31, June 30, September 30 and December 31 of each year. Through the March 31, 2014 interest payment date, the Company was
permitted to elect to pay the interest in kind, by adding to the principal of the Convertible Note, all or any portion of the interest due on the Convertible Note. The Company elected to pay the
interest in kind on March 31, June 30 and September 30, 2012, and added $3.2 million, $5.7 million and $5.8 million of interest incurred, respectively, to the
Convertible Note, increasing the principal amount to $289.7 million. The Company did not elect to pay-in-kind interest for the subsequent quarterly payments. The Convertible Note is a senior
unsecured obligation of the Company.
On
March 9, 2015, the Company entered into an amendment (the HALRES Note Amendment) to its Convertible Note. The HALRES Note Amendment extended the maturity date of the
Convertible Note by three years, from February 8, 2017 to February 8, 2020. The Convertible Note originally provided for prepayment without premium or penalty at any time after
February 8, 2014, at which time it also became convertible into shares of the Company's common stock at a conversion price of $22.50 per share. These dates have been extended pursuant to the
HALRES Note Amendment and the conversion price has been adjusted, such that at any time after March 9, 2017, the Company may prepay the Convertible Note without premium or penalty, and HALRES
may elect to convert all or any portion of unpaid principal and interest outstanding under the Convertible Note to shares of the Company's common stock at a conversion price of $12.20 per share,
subject to adjustments for stock splits and other customary anti-dilution provisions as set forth in the Convertible Note. At the same time, the Company also entered into an amendment to the February
2012 Warrants (the Warrant Amendment) which extended the term of the February 2012 Warrants from February 8, 2017 to February 8, 2020 and adjusted the exercise price of the February 2012
Warrants from $22.50 to $12.20 per share. The HALRES Note Amendment and the Warrant Amendment were approved by the Company's
stockholders on May 6, 2015, in accordance with the rules of the New York Stock Exchange. In conjunction with the HALRES Note Amendment, the Company recorded a discount of $25.9 million
to be amortized over the remaining life of the Convertible Note using the effective interest method. As of June 30, 2016, the remaining unamortized discount was $20.7 million.
Debt Issuance Costs
The Company capitalizes certain direct costs associated with the issuance of debt and amortizes such costs over the lives of the
respective debt. For the six months ended June 30, 2016, the Company
24
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DEBT (Continued)
expensed
$2.5 million of debt issuance costs in conjunction with the debt repurchases and a decrease in the borrowing base under the Senior Credit Agreement. At June 30, 2016 and
December 31, 2015, the Company had approximately $34.5 million and $40.3 million, respectively, of unamortized debt issuance costs. The debt issuance costs for the Company's
Senior Credit Agreement are presented in
"Debt issuance costs, net"
within total assets on the unaudited condensed consolidated balance sheets, and the
debt issuance costs for the Company's senior secured and unsecured debt are presented in
"Current portion of long-term debt, net"
and
"Long-term debt, net"
within total liabilities on the unaudited condensed consolidated balance sheets.
5. FAIR VALUE MEASUREMENTS
Pursuant to ASC 820,
Fair Value Measurements
(ASC 820), the Company's determination of fair value incorporates not only the credit
standing of the counterparties involved in transactions with the Company resulting in receivables on the Company's unaudited condensed consolidated balance sheets, but also the impact of the Company's
nonperformance risk on its own liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2
measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1. The Company utilizes market data or
assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be
readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs.
The
following tables set forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as of June 30, 2016
and December 31, 2015. As required by ASC 820, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value
measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and
their placement within the fair value hierarchy levels. There were no transfers between fair value hierarchy levels for the six months ended June 30, 2016 or the year ended December 31,
2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from derivative contracts
|
|
$
|
|
|
$
|
141,097
|
|
$
|
|
|
$
|
141,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from derivative contracts
|
|
$
|
|
|
$
|
42
|
|
$
|
152
|
|
$
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. FAIR VALUE MEASUREMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from derivative contracts
|
|
$
|
|
|
$
|
365,475
|
|
$
|
|
|
$
|
365,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from derivative contracts
|
|
$
|
|
|
$
|
105
|
|
$
|
185
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
contracts listed above as Level 2 include collars, swaps and swaptions that are carried at fair value. The Company records the net change in the fair value of these
positions in
"Net gain (loss) on derivative contracts"
in the Company's unaudited condensed consolidated statements of operations. The Company is able
to value the assets and liabilities based on observable market data for similar instruments, which resulted in the Company reporting its derivatives as Level 2. This observable data includes
the forward curves for commodity prices based on quoted market prices and implied volatility factors related to changes in the forward curves. See Note 6,
"Derivative
and Hedging Activities"
for additional discussion of derivatives.
Derivative
contracts listed above as Level 3 include extendable collars that are carried at fair value. The significant unobservable inputs for these Level 3 contracts
include unpublished forward strip prices and market volatilities. The following table sets forth a reconciliation of changes in the fair value of the Company's extendable collar contracts classified
as Level 3 in the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
Significant Unobservable
Inputs (Level 3)
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
|
|
(In thousands)
|
|
Beginning Balance
|
|
$
|
(185
|
)
|
$
|
(1,319
|
)
|
Net gain (loss) on derivative contracts
|
|
|
33
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
(152
|
)
|
$
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) included in earnings related to derivatives still held at June 30, 2016 and December 31, 2015
|
|
$
|
33
|
|
$
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company's derivative contracts are with major financial institutions with investment grade credit ratings which are believed to have minimal credit risk. As such, the Company is
exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts; however, the Company does not anticipate such nonperformance.
The
following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of ASC 825,
Financial
Instruments
. The estimated fair value amounts have been determined at discrete points in time based on relevant market information. These estimates involve uncertainties and
cannot be determined with precision. The estimated fair value of cash, accounts receivables and accounts payables approximate their carrying value due to their short-term nature. The estimated fair
value of the Company's Senior Credit Agreement approximates carrying value because the interest rates approximate current market rates. The following table presents the estimated fair
26
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. FAIR VALUE MEASUREMENTS (Continued)
values
of the Company's fixed interest rate debt instruments as of June 30, 2016 and December 31, 2015 (excluding discounts, premiums and debt issuance costs):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
Debt
|
|
Principal
Amount
|
|
Estimated
Fair Value
|
|
Principal
Amount
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
8.625% senior secured second lien notes
|
|
$
|
700,000
|
|
$
|
659,120
|
|
$
|
700,000
|
|
$
|
479,500
|
|
12.0% senior secured second lien notes
|
|
|
112,826
|
|
|
106,237
|
|
|
112,826
|
|
|
77,286
|
|
13.0% senior secured third lien notes
|
|
|
1,017,970
|
|
|
539,524
|
|
|
1,017,970
|
|
|
333,385
|
|
9.25% senior notes
|
|
|
37,194
|
|
|
8,276
|
|
|
52,694
|
|
|
14,422
|
|
8.875% senior notes
|
|
|
297,193
|
|
|
66,125
|
|
|
348,944
|
|
|
95,506
|
|
9.75% senior notes
|
|
|
315,535
|
|
|
70,207
|
|
|
340,035
|
|
|
93,068
|
|
8.0% convertible note
|
|
|
289,669
|
|
|
69,926
|
|
|
289,669
|
|
|
87,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,770,387
|
|
$
|
1,519,415
|
|
$
|
2,862,138
|
|
$
|
1,180,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair value of the Company's fixed interest rate debt instruments was calculated using Level 2 criteria. The fair value of the Company's senior notes is based on quoted market
prices from trades of such debt. The fair value of the Company's Convertible Note is based on published market prices and risk-free rates.
During
the three months ended March 31, 2016, the Company recorded a non-cash impairment charge of $28.1 million related to its gas gathering systems. See Note 1,
"Financial Statement Presentation,"
for a discussion of the valuation approach used and the classification of the estimate within the fair value
hierarchy.
As
discussed in Note 4, "
Debt
" and in Note 10, "
Stockholders' Equity
," on
May 6, 2015, the HALRES Note Amendment and the Warrant Amendment became effective. The fair value estimates for the Convertible Note and the February 2012 Warrants include the use of observable
inputs such as the Company's stock price, expected volatility, and credit spread and the risk-free rate. The use of these observable inputs results in the fair value estimates being classified as
Level 2.
The
Company follows the provisions of ASC 820 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. These provisions apply to the Company's initial
recognition of asset retirement obligations for which fair value is used. The asset retirement obligation estimates are derived from historical costs and management's expectation of future cost
environments; consequently, the Company has designated these liabilities as Level 3. See Note 7, "
Asset Retirement Obligations
," for a
reconciliation of the beginning and ending balances of the liability for the Company's asset retirement obligations.
6. DERIVATIVE AND HEDGING ACTIVITIES
The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk and interest rate risk. Derivative contracts are utilized to
economically hedge the Company's exposure to price fluctuations and reduce the variability in the Company's cash flows associated with anticipated sales of future oil and natural gas production. When
derivative contracts are available at terms (or prices) acceptable to the Company, it generally hedges a substantial, but varying,
27
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DERIVATIVE AND HEDGING ACTIVITIES (Continued)
portion
of anticipated oil and natural gas production for future periods. Derivatives are carried at fair value on the unaudited condensed consolidated balance sheets as assets or liabilities, with
the changes in the fair value included in the unaudited condensed consolidated statements of operations for the period in which the change occurs. The Company's hedge policies and objectives may
change significantly as its operational profile changes and/or commodities prices change. The Company does not enter into derivative contracts for speculative trading purposes.
It
is the Company's policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive
market makers. The Company did not post collateral under any of its derivative contracts as they are secured under the Company's Senior Credit Agreement or are uncollateralized trades.
At
June 30, 2016 and December 31, 2015, the Company's crude oil and natural gas derivative positions consisted of swaps, swaptions, costless put/call "collars," and
extendable costless collars. Swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for crude oil and natural gas. Swaptions are
swap contracts that may be extended annually at the option of the counterparty on a designated date. A costless collar consists of a sold call, which establishes a maximum price the Company will
receive for the volumes under contract and a purchased put that establishes a minimum price. Extendable collars are costless put/call contracts that may be extended annually at the option of the
counterparty on a designated date. The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market
valuation of these derivative contracts, as well as payments and receipts on settled derivative contracts, in
"Net gain (loss) on derivative contracts"
on the unaudited condensed consolidated statements of operations.
At
June 30, 2016, the Company had 34 open commodity derivative contracts summarized in the following tables: one natural gas collar arrangement, 14 crude oil collar arrangements,
13 crude oil swaps, five crude oil swaptions and one crude oil extendable collar.
At
December 31, 2015, the Company had 36 open commodity derivative contracts summarized in the following tables: one natural gas collar arrangement, 16 crude oil collar
arrangements, 13 crude oil swaps, five crude oil swaptions and one crude oil extendable collar.
All
derivative contracts are recorded at fair market value in accordance with ASC 815 and ASC 820 and included in the unaudited condensed consolidated balance sheets as assets or
liabilities.
28
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DERIVATIVE AND HEDGING ACTIVITIES (Continued)
The
following table summarizes the location and fair value amounts of all derivative contracts in the unaudited condensed consolidated balance sheets as of June 30, 2016 and December 31,
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset derivative contracts
|
|
|
|
Liability derivative
contracts
|
|
Derivatives not
designated as
hedging contracts
under ASC 815
|
|
Balance sheet
location
|
|
June 30,
2016
|
|
December 31,
2015
|
|
Balance sheet
location
|
|
June 30,
2016
|
|
December 31,
2015
|
|
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
Commodity contracts
|
|
Current assetsreceivables from derivative contracts
|
|
$
|
135,455
|
|
$
|
348,861
|
|
Current liabilitiesliabilities from derivative contracts
|
|
$
|
|
|
$
|
|
|
Commodity contracts
|
|
Other noncurrent assetsreceivables from derivative contracts
|
|
|
5,642
|
|
|
16,614
|
|
Other noncurrent liabilitiesliabilities from derivative contracts
|
|
|
(194
|
)
|
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging contracts under ASC 815
|
|
|
|
$
|
141,097
|
|
$
|
365,475
|
|
|
|
$
|
(194
|
)
|
$
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes the location and amounts of the Company's realized and unrealized gains and losses on derivative contracts in the Company's unaudited condensed
consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain or
(loss) recognized in
income on derivative
contracts for the
Three Months Ended
June 30,
|
|
Amount of gain or
(loss) recognized in
income on derivative
contracts for the
Six Months Ended
June 30,
|
|
|
|
Location of gain or (loss)
recognized in income on derivative
contracts
|
|
Derivatives not designated as
hedging contracts under ASC 815
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
(In thousands)
|
|
(In thousands)
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on commodity contracts
|
|
Other income (expenses)net gain (loss) on derivative contracts
|
|
$
|
(135,303
|
)
|
$
|
(175,712
|
)
|
$
|
(224,281
|
)
|
$
|
(183,713
|
)
|
Realized gain (loss) on commodity contracts
|
|
Other income (expenses)net gain (loss) on derivative contracts
|
|
|
80,780
|
|
|
88,148
|
|
|
188,500
|
|
|
195,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net gain (loss) on derivative contracts
|
|
|
|
$
|
(54,523
|
)
|
$
|
(87,564
|
)
|
$
|
(35,781
|
)
|
$
|
12,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DERIVATIVE AND HEDGING ACTIVITIES (Continued)
At June 30, 2016 and December 31, 2015, the Company had the following open crude oil and natural gas derivative contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
Floors
|
|
Ceilings
|
|
Period
|
|
Instrument
|
|
Commodity
|
|
Volume in
Mmbtu's/
Bbl's
|
|
Price /
Price Range
|
|
Weighted
Average
Price
|
|
Price /
Price Range
|
|
Weighted
Average
Price
|
|
July 2016 - December 2016
|
|
Collars
|
|
Natural Gas
|
|
|
368,000
|
|
$4.00
|
|
$
|
4.00
|
|
$4.22
|
|
$
|
4.22
|
|
July 2016 - December 2016
(1)(3)
|
|
Collars
|
|
Crude Oil
|
|
|
2,024,000
|
|
60.00 - 90.00
|
|
|
73.00
|
|
64.00 - 95.10
|
|
|
78.87
|
|
July 2016 - December 2016
(2)(3)
|
|
Swaps
|
|
Crude Oil
|
|
|
2,392,000
|
|
62.00 - 91.73
|
|
|
85.43
|
|
|
|
|
|
|
January 2017 - December 2017
|
|
Collars
|
|
Crude Oil
|
|
|
1,368,750
|
|
50.00 - 60.00
|
|
|
57.33
|
|
70.00 - 76.84
|
|
|
74.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
Floors
|
|
Ceilings
|
|
Period
|
|
Instrument
|
|
Commodity
|
|
Volume in
Mmbtu's/
Bbl's
|
|
Price /
Price Range
|
|
Weighted
Average
Price
|
|
Price /
Price Range
|
|
Weighted
Average
Price
|
|
January 2016 - June 2016
|
|
Collars
|
|
Crude Oil
|
|
|
182,000
|
|
$90.00
|
|
$
|
90.00
|
|
$96.85
|
|
$
|
96.85
|
|
January 2016 - December 2016
|
|
Collars
|
|
Natural Gas
|
|
|
732,000
|
|
4.00
|
|
|
4.00
|
|
4.22
|
|
|
4.22
|
|
January 2016 - December 2016
(1)
|
|
Collars
|
|
Crude Oil
|
|
|
4,392,000
|
|
60.00 - 90.00
|
|
|
71.91
|
|
64.00 - 95.10
|
|
|
77.71
|
|
January 2016 - December 2016
(2)
|
|
Swaps
|
|
Crude Oil
|
|
|
4,758,000
|
|
62.00 - 91.73
|
|
|
85.43
|
|
|
|
|
|
|
January 2017 - December 2017
|
|
Collars
|
|
Crude Oil
|
|
|
1,368,750
|
|
50.00 - 60.00
|
|
|
57.33
|
|
70.00 - 76.84
|
|
|
74.16
|
|
-
(1)
-
Includes an outstanding crude oil collar which may be extended by the counterparty at a floor of $60.00 per Bbl and a ceiling of $75.00 per Bbl for a total
of 365,000 Bbls for the year ended December 31, 2017.
-
(2)
-
Includes an outstanding crude oil swap which may be extended by the counterparty at a price of $88.25 per Bbl for a total of 730,000 Bbls for the year ended
December 31, 2017. Also includes certain outstanding crude oil swaps which may be extended by the counterparty at a price of $88.00 per Bbl totaling 912,500 Bbls for the year ended
December 31, 2017. Includes an outstanding crude oil swap which may be extended by the counterparty at a price of $88.87 per Bbl totaling 547,500 Bbls for the year ended December 31,
2017.
-
(3)
-
Subsequent to June 30, 2016, crude oil collars totaling 184,000 Bbls and crude oil swaps totaling 184,000 Bbls for the remainder of 2016 were
terminated resulting in proceeds of $9.6 million to the Company.
The
Company presents the fair value of its derivative contracts at the gross amounts in the unaudited condensed consolidated balance sheets. The following table shows the potential
effects of master netting arrangements on the fair value of the Company's derivative contracts at June 30, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Offsetting of Derivative Assets and Liabilities
|
|
June 30,
2016
|
|
December 31,
2015
|
|
June 30,
2016
|
|
December 31,
2015
|
|
|
|
(In thousands)
|
|
Gross Amounts Presented in the Consolidated Balance Sheet
|
|
$
|
141,097
|
|
$
|
365,475
|
|
$
|
(194
|
)
|
$
|
(290
|
)
|
Amounts Not Offset in the Consolidated Balance Sheet
|
|
|
(21
|
)
|
|
(53
|
)
|
|
20
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Amount
|
|
$
|
141,076
|
|
$
|
365,422
|
|
$
|
(174
|
)
|
$
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company enters into an International Swap Dealers Association Master Agreement (ISDA) with each counterparty prior to a derivative contract with such counterparty. The ISDA is a
standard contract that governs all derivative contracts entered into between the Company and the respective
30
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DERIVATIVE AND HEDGING ACTIVITIES (Continued)
counterparty.
The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date
and in the same currency.
The
filing of the voluntary petitions for relief under chapter 11 of the Bankruptcy Code described in Note 1, "
Financial Statement
Presentation
," constituted an event of default under the Company's derivatives contracts that gives the counterparties the option to terminate such contracts. If terminated,
the contracts would be net settled in cash. The Company obtained a waiver from its hedge counterparties indicating that they will not exercise their option to terminate their contracts so long as the
Restructuring Support Agreement is not terminated, the DIP Facility commitment letter is not terminated and the Company meet its various obligations thereunder, among other things.
7. ASSET RETIREMENT OBLIGATIONS
The Company records an asset retirement obligation (ARO) on oil and natural gas properties when it can reasonably estimate the fair value of an obligation to perform site reclamation,
dismantle facilities or plug and abandon costs. For gas gathering systems and equipment, the Company records an ARO when the system is placed in service and it can reasonably estimate the fair value
of an obligation to perform site reclamation and other necessary work when it is required. The Company records the ARO liability on the unaudited condensed consolidated balance sheets and capitalizes
a portion of the cost in "
Oil and natural gas properties
" or "
Other operating property and equipment
"
during the period in which the obligation is incurred. The Company records the accretion of its ARO liabilities in "
Depletion, depreciation and
accretion
" expense in the unaudited condensed consolidated statements of operations. The additional capitalized costs are depreciated on a unit-of-production basis or
straight-line basis.
The
Company recorded the following activity related to its ARO liability for the six months ended June 30, 2016 (in thousands, inclusive of the current portion):
|
|
|
|
|
Liability for asset retirement obligations as of December 31, 2015
|
|
$
|
47,016
|
|
Liabilities settled and divested
|
|
|
(180
|
)
|
Additions
|
|
|
1,024
|
|
Acquisitions
|
|
|
75
|
|
Accretion expense
|
|
|
1,031
|
|
|
|
|
|
|
Liability for asset retirement obligations as of June 30, 2016
|
|
$
|
48,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases corporate office space in Houston, Texas; and Denver, Colorado as well as a number of other field office locations.
Rent expense was approximately $4.3 million for the six months ended June 30, 2016 and 2015. As of June 30, 2016, the amount of commitments under office and equipment lease
agreements is consistent with the levels at December 31, 2015, as disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, approximating
$46.8 million in the aggregate, and containing various expiration dates through 2024.
31
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. COMMITMENTS AND CONTINGENCIES (Continued)
In
addition, the Company has commitments for certain equipment under long-term operating lease agreements, namely drilling rigs as well as pipeline and well equipment, with various
expiration dates through 2018. In the first quarter of 2016, the Company entered into an amendment to one of its drilling rig contracts with an original term ending date of August 31, 2016,
whereby, as of April 5, 2016, the Company early terminated the rig contract, incurred a termination fee of approximately $1.2 million and reduced its 2016 drilling commitments by
extending part of the contract term on another of its drilling rig contracts out further in 2018. In January 2015, the Company made the decision to early terminate a drilling rig contract in response
to the decline in crude oil prices, and the Company incurred an early termination fee of $6.0 million, paid over the first half of 2015. If certain requirements are not met by two separate
trigger dates, the first being January 1, 2017 and the second being
January 12, 2020, the Company may incur up to an additional $3.0 million in connection with this drilling rig contract. Rig termination fees are expensed as incurred within
"Gathering and other"
on the unaudited condensed consolidated statements of operations.
In
addition, the Company has two drilling rig commitments, for which the Company is incurring a stacking fee of $16,000 and $17,000 per day. The contract terms for these drilling rig
commitments extends through the second quarter of 2017 and 2018, respectively. Rig stacking fees are expensed as incurred within "
Gathering and other
"
on the unaudited condensed consolidated statements of operations. Early termination of the Company's additional drilling rig commitments would result in termination penalties approximating
$14.8 million, which would be in lieu of the remaining $20.8 million of drilling rig commitments as of June 30, 2016.
The
Company has entered into various long-term gathering, transportation and sales contracts with respect to production from the Bakken/Three Forks formations in North Dakota. As of
June 30, 2016, the Company had in place nine long-term crude oil contracts and five long-term natural gas contracts in this area. Under the terms of these contracts, the Company has committed a
substantial portion of its Bakken/Three Forks production for periods ranging from one to ten years from the date of first production. The sales prices under these contracts are based on posted market
rates. Historically, the Company has been able to meet its delivery commitments.
On
June 16, 2014, the Company entered into a transaction to develop its TMS assets with funds and accounts managed by affiliates of Apollo Global Management, LLC and on
June 1, 2015 amended this agreement. See Note 9, "
Mezzanine Equity
," for a discussion of the drilling obligation associated with the
transaction.
Contingencies
From time to time, the Company may be a plaintiff or defendant in a pending or threatened legal proceeding arising in the normal course
of its business. While the outcome and impact of currently pending legal proceedings cannot be determined, the Company's management and legal counsel believe that the resolution of these proceedings
through settlement or adverse judgment will not have a material effect on the Company's unaudited condensed consolidated operating results, financial position or cash flows.
9. MEZZANINE EQUITY
On June 16, 2014, funds and accounts managed by affiliates of Apollo Global Management, LLC (Apollo) contributed $150 million in cash to HK TMS, LLC, a
Delaware limited liability company
32
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. MEZZANINE EQUITY (Continued)
(HK TMS),
wholly owned by the Company that, as of June 16, 2014 held all of the Company's undeveloped acreage in the TMS formation, located in Mississippi and Louisiana, in exchange for
the issuance by HK TMS of 150,000 preferred shares. At the closing, the Company also contributed $50 million in cash to HK TMS. Holders of the HK TMS preferred shares will receive quarterly
cash dividends of 8% cumulative perpetual per annum, subject to HK TMS' option to pay such dividends "in-kind" through the issuance of additional preferred shares. The preferred shares will be
automatically redeemed and cancelled when the holders receive cash dividends and distributions on the preferred shares equating to the greater of a 12% annual rate of return plus principal and 1.25
times their investment plus applicable fees (the Redemption Price), subject to adjustment under certain circumstances. The preferred shares have a liquidation preference in the event of dissolution in
an amount equal to the Redemption Price plus any unpaid dividends not otherwise included in the calculation of the Redemption Price through the date of liquidation payment. HK TMS may also redeem the
preferred shares at any time after December 31, 2016 by paying the Redemption Price, or may be required to redeem the preferred shares for the Redemption Price plus certain fees under certain
circumstances.
On
June 1, 2015, HK TMS and Apollo entered into an amendment to the original agreement (the HK TMS Amendment) which, among other things, i) commits HK TMS to drill a
minimum of 6.5 net wells in each of the five consecutive twelve month periods beginning December 31, 2015 and ii) allows for the redemption of preferred shares at the Redemption Price
between March 1, 2016 and June 30, 2016 at the election of Apollo to the extent there is available cash above the minimum cash balance, which is discussed further below. For any
commitment period in which HK TMS does not meet its drilling
obligation, HK TMS must use available cash, above the minimum cash balance, to redeem preferred shares at the Redemption Price.
The
preferred shares have been classified as "
Redeemable noncontrolling interest
" and included in "
Mezzanine
equity
" between total liabilities and stockholders' equity on the unaudited condensed consolidated balance sheets pursuant to ASC 480-10-S99-3A. The preferred shares are
considered probable of becoming redeemable and therefore were accreted up to the estimated required redemption value through June 30, 2016. The accretion is presented as a deemed dividend and
recorded in "
Redeemable noncontrolling interest
" on the unaudited condensed consolidated balance sheets and within "
Preferred
dividends and accretion on redeemable noncontrolling interest
" on the unaudited condensed consolidated statements of operations. In accordance with ASC 480-10-S99-3A, an
adjustment to the carrying amount presented in "
Mezzanine equity
" will be recognized as charges against retained earnings and will reduce income
available to common shareholders in the calculation of earnings per share. Adjustments to the carrying amount may not be necessary if the application of ASC No. 810,
Consolidation
(ASC 810) results
in a noncontrolling interest balance in excess of what is required pursuant to ASC 480-10-S99-3A.
In
March 2015, Apollo delivered a withdrawal notice to HK TMS indicating their election not to acquire additional preferred shares in HK TMS (the Withdrawal Notice). Upon issuance of the
Withdrawal Notice, HK TMS incurs a fee escalating from $2.50 per share to $20.00 per share for the next eight full fiscal quarters for any preferred shares then outstanding, which began in the quarter
ended June 30, 2015 (the Withdrawal Exit Fee). The Withdrawal Exit Fee is payable upon redemption of the preferred shares. As of June 30, 2016, HK TMS incurred Withdrawal Exit Fees of
$6.2 million. The Withdrawal Exit Fees were recorded at fair value within "
Other noncurrent liabilities
" on the unaudited condensed consolidated
balance sheets.
33
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. MEZZANINE EQUITY (Continued)
As
part of the transaction, there are certain restrictions on the transfer of assets, including cash, to the Company from HK TMS. HK TMS is required to maintain a minimum cash balance
equal to two quarterly dividend payments, of approximately $3.5 million each, plus $10.0 million, which is presented on the unaudited condensed consolidated balance sheets in
"
Restricted cash
." Additionally, the quarterly 8% dividends paid to holders of the HK TMS preferred shares have priority over other cash distributions.
No dividends are permitted to be paid to the Company from HK TMS prior to December 31, 2016. HK TMS is restricted from transferring more than 20% of its maximum net acres and from transferring
any assets exceeding 20% of HK TMS's proved reserves at any one time without approval from the Company and Apollo. Finally, proceeds from any such transfers of acres or other assets must be used for
HK TMS's capital or operating expenditures, or to redeem preferred shares.
The
following table sets forth a reconciliation of the changes in fair value of the embedded derivative associated with the amended transaction, which is classified as Level 3 in
the fair value hierarchy (in thousands):
|
|
|
|
|
|
|
Embedded
derivative
|
|
Balance at December 31, 2015
|
|
$
|
6,100
|
|
Change in fair value
|
|
|
3,020
|
|
|
|
|
|
|
Balance at June 30, 2016
|
|
$
|
9,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company recorded the following activity related to the preferred shares recorded in
"Mezzanine equity"
on the unaudited condensed
consolidated balance sheets for the period presented (in thousands, except share amounts):
|
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling
interest
|
|
|
|
Shares
|
|
Amount
|
|
Balances at December 31, 2015
|
|
|
165,639
|
|
$
|
183,986
|
|
Dividends paid in-kind
|
|
|
6,655
|
|
|
6,655
|
|
Accretion of redeemable noncontrolling interest
|
|
|
|
|
|
21,862
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2016
|
|
|
172,294
|
|
$
|
212,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the six months ended June 30, 2016 and 2015, HK TMS issued 6,655 and 6,131 additional preferred shares to Apollo for dividends paid-in-kind, respectively. These dividends are
presented within "
Preferred dividends and accretion on redeemable noncontrolling interest
" on the unaudited condensed consolidated statements of
operations. Upon the election of in-kind dividends, HK TMS must pay a fee of $5.00 per preferred share then outstanding (PIK Exit Fee). Such fees will be due upon redemption of the preferred shares.
As of June 30, 2016, HK TMS incurred PIK Exit Fees totaling $5.6 million, which were recorded at fair value within "
Other noncurrent
liabilities
" on the unaudited condensed consolidated balance sheets.
HK
TMS was not included in the chapter 11 filings or the Restructuring Support Agreement discussed in Note 1, "
Financial Statement
Presentation
" and Note 2, "
Restructuring Support Agreement,
" respectively.
34
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. STOCKHOLDERS' EQUITY
5.75% Series A Convertible Perpetual Preferred Stock
On June 18, 2013, the Company completed its offering of 345,000 shares of its 5.75% Series A Convertible Perpetual
Preferred Stock (the Series A Preferred Stock) at a public offering price of $1,000 per share (the Liquidation Preference). The net proceeds to the Company were approximately
$335.2 million, after deducting the underwriting discount and offering expenses. The Company used the net proceeds to repay a portion of the then outstanding borrowings under its Senior Credit
Agreement.
Holders
of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Company's Board of Directors, cumulative dividends at the rate of 5.75% per annum
(the Dividend Rate) on the Liquidation Preference per share of the Series A Preferred Stock, payable quarterly in arrears on each dividend payment date. Dividends may be paid in cash or, where
freely transferable by any non-affiliate recipient thereof, in common stock of the Company, or a combination thereof, and are payable on March 1, June 1, September 1 and
December 1 of each year. In January 2016, the Company announced that future quarterly dividends on the Series A Preferred Stock will be suspended due to the weakened market conditions as
a result of low commodity prices. As of June 30, 2016, cumulative, undeclared dividends on the Series A Preferred Stock amounted to approximately $7.5 million.
The
Series A Preferred Stock has no maturity date, is not redeemable by the Company at any time, and will remain outstanding unless converted by the holders or mandatorily
converted by the Company. Each share of Series A Preferred Stock is convertible, at the holder's option at any time, into approximately 32.49 shares of common stock of the Company (which is
equivalent to a conversion price of approximately $30.80 per share), subject to certain adjustments. Based on the initial conversion rate and Series A Preferred Stock outstanding, approximately
11.2 million shares of common stock of the Company are issuable upon conversion of all the shares of Series A Preferred Stock. On or after June 6, 2018, the Company may, at its
option, give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of common stock of the Company at the conversion
rate (as defined in the Series A Designation), if the closing sale price of the Company's common stock equals or exceeds 150% of the conversion price for at least 20 trading days in a period of
30 consecutive trading days. As of June 30, 2016, 122,546 shares of Series A Preferred Stock have been converted into approximately 4.0 million shares of common stock and 222,454
shares of Series A Preferred Stock remained outstanding.
If
the Company undergoes certain fundamental changes, including failure of the Company's common stock to be listed on the NYSE, NASDAQ Global Select or NASDAQ Global Market, and a holder
converts its shares of the Series A Preferred Stock at any time beginning at the opening of business on the trading day immediately following the effective date of such fundamental change and
ending at the close of business on the 30th trading day immediately following such effective date, the holder will receive, for each share of the Series A Preferred Stock surrendered for
conversion, a number of shares of common stock of the Company equal to the greater of: (1) the sum of (i) the conversion rate and (ii) the make-whole premium, if any, as described
in the Series A Designation; and (2) the conversion rate which will be increased to equal (i) the sum of the $1,000 liquidation preference plus all
accumulated and unpaid dividends to, but excluding, the settlement date for such conversion, divided by (ii) the average of the closing sale prices of the Company's common stock for the five
consecutive trading days ending on the third business day prior to such settlement date; provided that the prevailing conversion rate as adjusted pursuant to this will not exceed 58.48 shares of
common
35
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. STOCKHOLDERS' EQUITY (Continued)
stock
of the Company per share of the Series A Preferred Stock (subject to adjustment in the same manner as the conversion rate).
Except
as required by Delaware law, holders of the Series A Preferred Stock will have no voting rights unless dividends are in arrears and unpaid for six or more quarterly
periods. Until such arrearage is paid in full, the holders (voting as a single class with the holders of any other preferred shares having similar voting rights) will be entitled to elect two
additional directors and the number of directors on the Company's board of directors will increase by that same number.
Common Stock
On December 28, 2015, the Company completed a one-for-five reverse stock split. Retroactive application of the reverse stock
split is required and all share and per share information included for all periods presented in these unaudited condensed consolidating financial statements reflects the reverse stock split.
On
March 18, 2015, the Company entered into an Equity Distribution Agreement (the Equity Distribution Agreement) with BMO Capital Markets Corp., Jefferies LLC and
MLV & Co. LLC (collectively, the Managers), pursuant to which, during 2015, the Company publicly sold approximately 1.9 million shares for net proceeds of approximately
$15.0 million, after deducting offering expenses. The shares sold were registered under the Securities Act pursuant to a Registration Statement on Form S-3 (No. 333-188640), which
was filed with the SEC and became effective March 13, 2015. The Company used the net proceeds from the offering to repay a portion of outstanding borrowings under its Senior Credit Agreement
and for general corporate purposes.
On
May 22, 2014, with stockholder approval, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of
State to increase its
authorized common stock by approximately 670.0 million shares for a total of 1.34 billion authorized shares of common stock.
Warrants
In February 2012, in conjunction with the issuance of the Convertible Note, the Company issued warrants to purchase 7.3 million
shares of the Company's common stock at an exercise price of $22.50 per share of common stock, which the Company refers to as the February 2012 Warrants. The Company allocated $43.6 million to
the February 2012 Warrants which is reflected in additional paid-in capital in stockholders' equity, net of $0.6 million in issuance costs. The February 2012 Warrants entitled the holders to
exercise the warrants in whole or in part at any time prior to the expiration date of February 8, 2017.
On
March 9, 2015, in conjunction with the HALRES Note Amendment, the Company entered into an amendment to the February 2012 Warrants, the Warrant Amendment, which extended the
term of the February 2012 Warrants from February 8, 2017 to February 8, 2020 and adjusted the exercise price from $22.50 to $12.20 per share. The HALRES Note Amendment and the Warrant
Amendment (the Amendments) were approved by the Company's stockholders on May 6, 2015, in accordance with the rules of the New York Stock Exchange. See Note 4,
"
Debt
," for further discussion of the Amendments.
36
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. STOCKHOLDERS' EQUITY (Continued)
Incentive Plan
On May 8, 2006, the Company's stockholders first approved the 2006 Long-Term Incentive Plan (the Plan). On May 6, 2015,
the Company's stockholders last approved an increase in authorized shares under the Plan from 8.3 million to 16.3 million. As of June 30, 2016 and December 31, 2015, a
maximum of 7.4 million and 6.3 million shares of common stock, respectively, remained reserved for issuance under the Plan.
The
Company accounts for share-based payment accruals under authoritative guidance on stock compensation, as set forth in ASC 718. The guidance requires all share-based payments to
employees
and directors, including grants of performance units, stock options, and restricted stock, to be recognized in the financial statements based on their fair values.
For
the three and six months ended June 30, 2016, the Company recognized $1.5 million and $3.7 million, respectively, of share-based compensation expense. For the
three and six months ended June 30, 2015, the Company recognized $3.4 million and $8.2 million, respectively, of share-based compensation expense. These were recorded as a
component of "
General and administrative
" on the unaudited condensed consolidated statements of operations.
Performance Share Units
As of June 30, 2016 and 2015, the Company had outstanding performance share units (PSU) under the Plan covering
0.3 million shares of common stock, respectively, granted to senior management of the Company in 2014. The PSU provides that the number of shares of common stock received upon vesting will vary
if the market price of the Company's common stock exceeds certain pre-established target thresholds as measured by the average of the adjusted closing price of a share of the Company's common stock
during the sixty trading days preceding the third anniversary of issuance, or the measurement date. The PSU utilizes $20.00 as the floor price, below which the PSU will not vest and will expire. If
the average market price at the measurement date is equal to $20.00, the PSU will vest and represent the right to receive 50% of the number of shares of common stock underlying the PSU. At $35.00, the
PSU will vest and represent the right to receive the full number of shares of common stock underlying the PSU; and at $50.00, the PSU will vest and represent the right to receive 200% of the number of
shares of common stock underlying the PSU. All stock price targets are subject to customary adjustments based upon changes in the Company's capital structure. In the event the average market price
falls between targeted price thresholds, the PSU will represent the right to receive a proportionate number of shares. The Company has reserved for issuance under the Plan the maximum number of shares
that participants might have the right to receive upon vesting of the PSU, or 0.6 million shares of common stock.
At
June 30, 2016, the Company had $1.1 million of unrecognized compensation expense related to non-vested PSU to be recognized over a weighted-average period of
0.7 years. At June 30, 2015, the Company had $2.7 million of unrecognized compensation expense related to non-vested PSU to be recognized over a weighted-average period of
1.7 years.
Stock Options
At June 30, 2016, the Company had $2.8 million of unrecognized compensation expense related to non-vested stock options
to be recognized over a weighted-average period of 1.2 years.
37
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. STOCKHOLDERS' EQUITY (Continued)
During
the six months ended June 30, 2015, the Company granted stock options under the Plan covering 0.7 million shares of common stock to employees of the Company. These
stock options have exercise prices ranging from $7.85 to $9.85 with a weighted average exercise price of $9.60. These awards typically vest over a three year period at a rate of one-third on the
annual anniversary date of the grant and expire ten years from the grant date. At June 30, 2015, the Company had $9.0 million of unrecognized compensation expense related to non-vested
stock options to be recognized over a weighted-average period of 1.3 years.
Restricted Stock
At June 30, 2016, the Company had $5.2 million of unrecognized compensation expense related to non-vested restricted
stock awards to be recognized over a weighted-average period of 1.3 years.
During
the six months ended June 30, 2015, the Company granted 0.5 million shares of restricted stock under the Plan to non-employee directors and employees of the Company.
These restricted shares were granted at prices ranging from $6.10 to $9.85 with a weighted average price of $8.70. Employee shares vest over a three year period at a rate of one-third on the annual
anniversary date of the grant, and the non-employee directors' shares vest six-months from the date of grant. At June 30, 2015, the Company had $13.4 million of unrecognized compensation
expense related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.3 years.
38
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. EARNINGS PER COMMON SHARE
The following represents the calculation of earnings (loss) per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(382,353
|
)
|
$
|
(1,104,581
|
)
|
$
|
(949,215
|
)
|
$
|
(1,705,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic number of common shares outstanding
|
|
|
120,708
|
|
|
109,063
|
|
|
120,360
|
|
|
96,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share of common stock
|
|
$
|
(3.17
|
)
|
$
|
(10.13
|
)
|
$
|
(7.89
|
)
|
$
|
(17.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(382,353
|
)
|
$
|
(1,104,581
|
)
|
$
|
(949,215
|
)
|
$
|
(1,705,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic number of common shares outstanding
|
|
|
120,708
|
|
|
109,063
|
|
|
120,360
|
|
|
96,569
|
|
Common stock equivalent shares representing shares issuable upon:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
Exercise of February 2012 Warrants
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
Vesting of restricted shares
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
Vesting of performance units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Convertible Note
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
Conversion of Series A Preferred Stock
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
Anti-dilutive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted number of common shares outstanding
|
|
|
120,708
|
|
|
109,063
|
|
|
120,360
|
|
|
96,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share of common stock
|
|
$
|
(3.17
|
)
|
$
|
(10.13
|
)
|
$
|
(7.89
|
)
|
$
|
(17.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock equivalents, including stock options, warrants, restricted shares, convertible debt and preferred stock totaling 44.6 million and 45.2 million shares for the
three and six months ended June 30, 2016 were not included in the computation of diluted earnings per share of common stock because the effect would have been anti-dilutive due to the net
losses. Common stock equivalents, including stock options, warrants, restricted shares, convertible debt, and preferred stock totaling 48.3 million and 48.2 million shares for the three
and six months ended June 30, 2015 were not included in the computation of diluted earnings per share of common stock because the effect would have been anti-dilutive due to the net losses.
39
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. ADDITIONAL FINANCIAL STATEMENT INFORMATION
Certain balance sheet amounts are comprised of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
|
|
|
(In thousands)
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids revenues
|
|
$
|
55,250
|
|
$
|
55,129
|
|
Joint interest accounts
|
|
|
32,685
|
|
|
67,626
|
|
Accrued settlements on derivative contracts
|
|
|
23,072
|
|
|
47,011
|
|
Affiliated partnership
|
|
|
123
|
|
|
176
|
|
Other
|
|
|
1,725
|
|
|
3,682
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,855
|
|
$
|
173,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaids and other:
|
|
|
|
|
|
|
|
Prepaids
|
|
$
|
8,643
|
|
$
|
4,585
|
|
Other
|
|
|
51
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,694
|
|
$
|
4,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities:
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
23,357
|
|
$
|
47,261
|
|
Accrued oil and natural gas capital costs
|
|
|
25,356
|
|
|
54,651
|
|
Revenues and royalties payable
|
|
|
56,296
|
|
|
64,002
|
|
Accrued interest expense
|
|
|
105,782
|
|
|
88,499
|
|
Accrued employee compensation
|
|
|
4,954
|
|
|
2,829
|
|
Accrued lease operating expenses
|
|
|
16,435
|
|
|
20,036
|
|
Drilling advances from partners
|
|
|
223
|
|
|
7,964
|
|
Income taxes payable
|
|
|
9,172
|
|
|
9,172
|
|
Affiliated partnership
|
|
|
241
|
|
|
365
|
|
Other
|
|
|
373
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
$
|
242,189
|
|
$
|
295,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Company's obligations under its Senior Credit Agreement, 2020 Second Lien Notes, 2022 Second Lien Notes, Third Lien Notes and senior unsecured notes are fully and unconditionally
guaranteed, jointly and severally, by all of the Company's existing 100% owned subsidiaries, other than HK TMS. See Note 4, "
Debt
," for
information regarding the Company's Senior Credit Agreement, 2020 Second Lien Notes, 2022 Second Lien Notes, Third Lien Notes and senior unsecured notes. On June 16, 2014, the Company
contributed its TMS undeveloped acreage located in Mississippi and Louisiana to HK TMS. See Note 9, "
Mezzanine Equity
," for a discussion of the
restrictions on the transfer of assets between the Company and HK TMS.
The
following condensed consolidating balance sheets, condensed consolidating statements of operations, and condensed consolidating statements of cash flows for the parent company,
subsidiary guarantors on a combined basis, the non-guarantor subsidiary, the consolidating adjustments and the total consolidated amounts are presented as of June 30, 2016 and
December 31, 2015 and for the three and six months ended June 30, 2016 and 2015. Investments in the subsidiaries are accounted for under the equity method. Such condensed consolidating
financial information may not necessarily be indicative of the financial position, results of operations or cash flows had these subsidiaries operated as independent entities.
40
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
|
|
$
|
96,995
|
|
$
|
2,100
|
|
$
|
|
|
$
|
99,095
|
|
Natural gas
|
|
|
|
|
|
3,159
|
|
|
|
|
|
|
|
|
3,159
|
|
Natural gas liquids
|
|
|
|
|
|
3,504
|
|
|
|
|
|
|
|
|
3,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil, natural gas and natural gas liquids sales
|
|
|
|
|
|
103,658
|
|
|
2,100
|
|
|
|
|
|
105,758
|
|
Other
|
|
|
|
|
|
388
|
|
|
1
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
|
|
104,046
|
|
|
2,101
|
|
|
|
|
|
106,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
|
|
|
16,667
|
|
|
314
|
|
|
|
|
|
16,981
|
|
Workover and other
|
|
|
|
|
|
7,896
|
|
|
19
|
|
|
|
|
|
7,915
|
|
Taxes other than income
|
|
|
|
|
|
9,565
|
|
|
188
|
|
|
|
|
|
9,753
|
|
Gathering and other
|
|
|
|
|
|
10,516
|
|
|
3
|
|
|
|
|
|
10,519
|
|
Restructuring
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
|
189
|
|
General and administrative
|
|
|
20,243
|
|
|
4,453
|
|
|
237
|
|
|
(225
|
)
|
|
24,708
|
|
Depletion, depreciation and accretion
|
|
|
367
|
|
|
38,397
|
|
|
1,188
|
|
|
(281
|
)
|
|
39,671
|
|
Full cost ceiling impairment
|
|
|
|
|
|
250,753
|
|
|
6,835
|
|
|
281
|
|
|
257,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
20,610
|
|
|
338,436
|
|
|
8,784
|
|
|
(225
|
)
|
|
367,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(20,610
|
)
|
|
(234,390
|
)
|
|
(6,683
|
)
|
|
225
|
|
|
(261,458
|
)
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivative contracts
|
|
|
|
|
|
(54,523
|
)
|
|
|
|
|
|
|
|
(54,523
|
)
|
Interest expense and other, net
|
|
|
(77,069
|
)
|
|
20,786
|
|
|
(2,039
|
)
|
|
|
|
|
(58,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(77,069
|
)
|
|
(33,737
|
)
|
|
(2,039
|
)
|
|
|
|
|
(112,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(97,679
|
)
|
|
(268,127
|
)
|
|
(8,722
|
)
|
|
225
|
|
|
(374,303
|
)
|
Income tax benefit (provision)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiary, net of tax
|
|
|
(281,476
|
)
|
|
(13,349
|
)
|
|
|
|
|
294,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(379,155
|
)
|
|
(281,476
|
)
|
|
(8,722
|
)
|
|
295,050
|
|
|
(374,303
|
)
|
Series A preferred dividends
|
|
|
(3,198
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,198
|
)
|
Preferred dividends and accretion on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
(4,852
|
)
|
|
|
|
|
(4,852
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(382,353
|
)
|
$
|
(281,476
|
)
|
$
|
(13,574
|
)
|
$
|
295,050
|
|
$
|
(382,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
|
|
$
|
153,792
|
|
$
|
4,318
|
|
$
|
|
|
$
|
158,110
|
|
Natural gas
|
|
|
|
|
|
5,578
|
|
|
|
|
|
|
|
|
5,578
|
|
Natural gas liquids
|
|
|
|
|
|
3,889
|
|
|
|
|
|
|
|
|
3,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil, natural gas and natural gas liquids sales
|
|
|
|
|
|
163,259
|
|
|
4,318
|
|
|
|
|
|
167,577
|
|
Other
|
|
|
|
|
|
447
|
|
|
|
|
|
|
|
|
447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
|
|
163,706
|
|
|
4,318
|
|
|
|
|
|
168,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
|
|
|
24,595
|
|
|
638
|
|
|
|
|
|
25,233
|
|
Workover and other
|
|
|
|
|
|
3,731
|
|
|
|
|
|
|
|
|
3,731
|
|
Taxes other than income
|
|
|
|
|
|
12,614
|
|
|
289
|
|
|
|
|
|
12,903
|
|
Gathering and other
|
|
|
|
|
|
7,746
|
|
|
|
|
|
|
|
|
7,746
|
|
Restructuring
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
|
309
|
|
General and administrative
|
|
|
15,097
|
|
|
7,519
|
|
|
723
|
|
|
(677
|
)
|
|
22,662
|
|
Depletion, depreciation and accretion
|
|
|
568
|
|
|
97,572
|
|
|
4,386
|
|
|
(1,332
|
)
|
|
101,194
|
|
Full cost ceiling impairment
|
|
|
|
|
|
911,496
|
|
|
35,805
|
|
|
1,332
|
|
|
948,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
15,665
|
|
|
1,065,582
|
|
|
41,841
|
|
|
(677
|
)
|
|
1,122,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(15,665
|
)
|
|
(901,876
|
)
|
|
(37,523
|
)
|
|
677
|
|
|
(954,387
|
)
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivative contracts
|
|
|
|
|
|
(87,564
|
)
|
|
|
|
|
|
|
|
(87,564
|
)
|
Interest expense and other, net
|
|
|
(85,042
|
)
|
|
24,734
|
|
|
(614
|
)
|
|
|
|
|
(60,922
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
22,766
|
|
|
|
|
|
|
|
|
|
|
|
22,766
|
|
Gain (loss) on extinguishment of Convertible Note and modification of February 2012
Warrants
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(70,495
|
)
|
|
(62,830
|
)
|
|
(614
|
)
|
|
|
|
|
(133,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(86,160
|
)
|
|
(964,706
|
)
|
|
(38,137
|
)
|
|
677
|
|
|
(1,088,326
|
)
|
Income tax benefit (provision)
|
|
|
|
|
|
(285
|
)
|
|
|
|
|
(1
|
)
|
|
(286
|
)
|
Equity in earnings of subsidiary, net of tax
|
|
|
(1,013,519
|
)
|
|
(48,528
|
)
|
|
|
|
|
1,062,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,099,679
|
)
|
|
(1,013,519
|
)
|
|
(38,137
|
)
|
|
1,062,723
|
|
|
(1,088,612
|
)
|
Series A preferred dividends
|
|
|
(4,902
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,902
|
)
|
Preferred dividends and accretion on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
(11,067
|
)
|
|
|
|
|
(11,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,104,581
|
)
|
$
|
(1,013,519
|
)
|
$
|
(49,204
|
)
|
$
|
1,062,723
|
|
$
|
(1,104,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
|
|
$
|
170,445
|
|
$
|
3,617
|
|
$
|
|
|
$
|
174,062
|
|
Natural gas
|
|
|
|
|
|
6,901
|
|
|
|
|
|
|
|
|
6,901
|
|
Natural gas liquids
|
|
|
|
|
|
5,441
|
|
|
|
|
|
|
|
|
5,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil, natural gas and natural gas liquids sales
|
|
|
|
|
|
182,787
|
|
|
3,617
|
|
|
|
|
|
186,404
|
|
Other
|
|
|
|
|
|
1,091
|
|
|
1
|
|
|
|
|
|
1,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
|
|
183,878
|
|
|
3,618
|
|
|
|
|
|
187,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
|
|
|
36,799
|
|
|
760
|
|
|
|
|
|
37,559
|
|
Workover and other
|
|
|
|
|
|
15,692
|
|
|
14
|
|
|
|
|
|
15,706
|
|
Taxes other than income
|
|
|
|
|
|
16,791
|
|
|
220
|
|
|
|
|
|
17,011
|
|
Gathering and other
|
|
|
|
|
|
21,899
|
|
|
4
|
|
|
|
|
|
21,903
|
|
Restructuring
|
|
|
|
|
|
5,073
|
|
|
|
|
|
|
|
|
5,073
|
|
General and administrative
|
|
|
55,840
|
|
|
10,406
|
|
|
528
|
|
|
(450
|
)
|
|
66,324
|
|
Depletion, depreciation and accretion
|
|
|
769
|
|
|
90,528
|
|
|
5,414
|
|
|
(1,774
|
)
|
|
94,937
|
|
Full cost ceiling impairment
|
|
|
|
|
|
670,828
|
|
|
82,167
|
|
|
1,774
|
|
|
754,769
|
|
Other operating property and equipment impairment
|
|
|
|
|
|
28,056
|
|
|
|
|
|
|
|
|
28,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
56,609
|
|
|
896,072
|
|
|
89,107
|
|
|
(450
|
)
|
|
1,041,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(56,609
|
)
|
|
(712,194
|
)
|
|
(85,489
|
)
|
|
450
|
|
|
(853,842
|
)
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivative contracts
|
|
|
|
|
|
(35,781
|
)
|
|
|
|
|
|
|
|
(35,781
|
)
|
Interest expense and other, net
|
|
|
(155,863
|
)
|
|
52,753
|
|
|
(3,003
|
)
|
|
|
|
|
(106,113
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
81,434
|
|
|
|
|
|
|
|
|
|
|
|
81,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(74,429
|
)
|
|
16,972
|
|
|
(3,003
|
)
|
|
|
|
|
(60,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(131,038
|
)
|
|
(695,222
|
)
|
|
(88,492
|
)
|
|
450
|
|
|
(914,302
|
)
|
Income tax benefit (provision)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiary, net of tax
|
|
|
(811,781
|
)
|
|
(116,559
|
)
|
|
|
|
|
928,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(942,819
|
)
|
|
(811,781
|
)
|
|
(88,492
|
)
|
|
928,790
|
|
|
(914,302
|
)
|
Series A preferred dividends
|
|
|
(6,396
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,396
|
)
|
Preferred dividends and accretion on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
(28,517
|
)
|
|
|
|
|
(28,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(949,215
|
)
|
$
|
(811,781
|
)
|
$
|
(117,009
|
)
|
$
|
928,790
|
|
$
|
(949,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
|
|
$
|
272,997
|
|
$
|
9,526
|
|
$
|
|
|
$
|
282,523
|
|
Natural gas
|
|
|
|
|
|
12,537
|
|
|
|
|
|
|
|
|
12,537
|
|
Natural gas liquids
|
|
|
|
|
|
7,957
|
|
|
|
|
|
|
|
|
7,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil, natural gas and natural gas liquids sales
|
|
|
|
|
|
293,491
|
|
|
9,526
|
|
|
|
|
|
303,017
|
|
Other
|
|
|
|
|
|
1,201
|
|
|
|
|
|
|
|
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
|
|
294,692
|
|
|
9,526
|
|
|
|
|
|
304,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
|
|
|
57,930
|
|
|
1,088
|
|
|
|
|
|
59,018
|
|
Workover and other
|
|
|
|
|
|
6,841
|
|
|
4
|
|
|
|
|
|
6,845
|
|
Taxes other than income
|
|
|
|
|
|
24,596
|
|
|
548
|
|
|
|
|
|
25,144
|
|
Gathering and other
|
|
|
|
|
|
21,492
|
|
|
|
|
|
|
|
|
21,492
|
|
Restructuring
|
|
|
|
|
|
2,230
|
|
|
|
|
|
|
|
|
2,230
|
|
General and administrative
|
|
|
30,352
|
|
|
16,637
|
|
|
1,435
|
|
|
(1,353
|
)
|
|
47,071
|
|
Depletion, depreciation and accretion
|
|
|
1,192
|
|
|
212,198
|
|
|
9,770
|
|
|
(2,822
|
)
|
|
220,338
|
|
Full cost ceiling impairment
|
|
|
|
|
|
1,451,630
|
|
|
48,184
|
|
|
2,822
|
|
|
1,502,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
31,544
|
|
|
1,793,554
|
|
|
61,029
|
|
|
(1,353
|
)
|
|
1,884,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(31,544
|
)
|
|
(1,498,862
|
)
|
|
(51,503
|
)
|
|
1,353
|
|
|
(1,580,556
|
)
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivative contracts
|
|
|
|
|
|
12,184
|
|
|
|
|
|
|
|
|
12,184
|
|
Interest expense and other, net
|
|
|
(168,760
|
)
|
|
49,566
|
|
|
(3,034
|
)
|
|
(1
|
)
|
|
(122,229
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
22,766
|
|
|
|
|
|
|
|
|
|
|
|
22,766
|
|
Gain (loss) on extinguishment of Convertible Note and modification of February 2012
Warrants
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(154,213
|
)
|
|
61,750
|
|
|
(3,034
|
)
|
|
(1
|
)
|
|
(95,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(185,757
|
)
|
|
(1,437,112
|
)
|
|
(54,537
|
)
|
|
1,352
|
|
|
(1,676,054
|
)
|
Income tax benefit (provision)
|
|
|
|
|
|
(6,121
|
)
|
|
|
|
|
5,922
|
|
|
(199
|
)
|
Equity in earnings of subsidiary, net of tax
|
|
|
(1,510,214
|
)
|
|
(66,981
|
)
|
|
|
|
|
1,577,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,695,971
|
)
|
|
(1,510,214
|
)
|
|
(54,537
|
)
|
|
1,584,469
|
|
|
(1,676,253
|
)
|
Series A preferred dividends
|
|
|
(9,803
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,803
|
)
|
Preferred dividends and accretion on redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
(19,718
|
)
|
|
|
|
|
(19,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,705,774
|
)
|
$
|
(1,510,214
|
)
|
$
|
(74,255
|
)
|
$
|
1,584,469
|
|
$
|
(1,705,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
104
|
|
$
|
7,069
|
|
$
|
|
|
$
|
7,173
|
|
Accounts receivable
|
|
|
|
|
|
111,219
|
|
|
2,401
|
|
|
(765
|
)
|
|
112,855
|
|
Receivables from derivative contracts
|
|
|
|
|
|
135,455
|
|
|
|
|
|
|
|
|
135,455
|
|
Restricted cash
|
|
|
165
|
|
|
|
|
|
16,999
|
|
|
|
|
|
17,164
|
|
Inventory
|
|
|
|
|
|
1,498
|
|
|
|
|
|
|
|
|
1,498
|
|
Debt issuance costs, net
|
|
|
5,557
|
|
|
|
|
|
|
|
|
|
|
|
5,557
|
|
Prepaids and other
|
|
|
4,006
|
|
|
4,688
|
|
|
|
|
|
|
|
|
8,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
9,728
|
|
|
252,964
|
|
|
26,469
|
|
|
(765
|
)
|
|
288,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas properties (full cost method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluated
|
|
|
|
|
|
7,172,496
|
|
|
511,771
|
|
|
(4,350
|
)
|
|
7,679,917
|
|
Unevaluated
|
|
|
|
|
|
1,180,148
|
|
|
|
|
|
|
|
|
1,180,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross oil and natural gas properties
|
|
|
|
|
|
8,352,644
|
|
|
511,771
|
|
|
(4,350
|
)
|
|
8,860,065
|
|
Lessaccumulated depletion
|
|
|
|
|
|
(6,285,845
|
)
|
|
(497,621
|
)
|
|
4,350
|
|
|
(6,779,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net oil and natural gas properties
|
|
|
|
|
|
2,066,799
|
|
|
14,150
|
|
|
|
|
|
2,080,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas gathering and other operating assets
|
|
|
12,473
|
|
|
87,707
|
|
|
175
|
|
|
|
|
|
100,355
|
|
Lessaccumulated depreciation
|
|
|
(9,475
|
)
|
|
(13,604
|
)
|
|
(76
|
)
|
|
|
|
|
(23,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other operating property and equipment
|
|
|
2,998
|
|
|
74,103
|
|
|
99
|
|
|
|
|
|
77,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from derivative contracts
|
|
|
|
|
|
5,642
|
|
|
|
|
|
|
|
|
5,642
|
|
Intercompany notes and accounts receivable
|
|
|
4,642,675
|
|
|
367,525
|
|
|
|
|
|
(5,010,200
|
)
|
|
|
|
Equity in oil and natural gas partnership
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
11
|
|
Funds in escrow and other
|
|
|
515
|
|
|
1,098
|
|
|
|
|
|
|
|
|
1,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,655,916
|
|
$
|
2,768,142
|
|
$
|
40,718
|
|
$
|
(5,010,965
|
)
|
$
|
2,453,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
|
|
$
|
275,141
|
|
$
|
2,269
|
|
$
|
(35,221
|
)
|
$
|
242,189
|
|
Asset retirement obligations
|
|
|
|
|
|
412
|
|
|
|
|
|
|
|
|
412
|
|
Current portion of long-term debt, net
|
|
|
2,825,807
|
|
|
|
|
|
|
|
|
|
|
|
2,825,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,825,807
|
|
|
275,553
|
|
|
2,269
|
|
|
(35,221
|
)
|
|
3,068,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from derivative contracts
|
|
|
|
|
|
194
|
|
|
|
|
|
|
|
|
194
|
|
Asset retirement obligations
|
|
|
|
|
|
47,274
|
|
|
1,280
|
|
|
|
|
|
48,554
|
|
Deferred income taxes
|
|
|
1,848
|
|
|
(1,848
|
)
|
|
|
|
|
|
|
|
|
|
Intercompany notes and accounts payable
|
|
|
367,525
|
|
|
4,642,675
|
|
|
|
|
|
(5,010,200
|
)
|
|
|
|
Investment in subsidiary
|
|
|
2,345,867
|
|
|
149,999
|
|
|
|
|
|
(2,495,866
|
)
|
|
|
|
Other
|
|
|
|
|
|
162
|
|
|
9,121
|
|
|
|
|
|
9,283
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
212,503
|
|
|
|
|
|
212,503
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Additional paid-in capital
|
|
|
3,288,371
|
|
|
|
|
|
403,678
|
|
|
(403,678
|
)
|
|
3,288,371
|
|
Retained earnings (accumulated deficit)
|
|
|
(4,173,514
|
)
|
|
(2,345,867
|
)
|
|
(588,133
|
)
|
|
2,934,000
|
|
|
(4,173,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(885,131
|
)
|
|
(2,345,867
|
)
|
|
(184,455
|
)
|
|
2,530,322
|
|
|
(885,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
4,655,916
|
|
$
|
2,768,142
|
|
$
|
40,718
|
|
$
|
(5,010,965
|
)
|
$
|
2,453,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
100
|
|
$
|
7,926
|
|
$
|
|
|
$
|
8,026
|
|
Accounts receivable
|
|
|
88
|
|
|
166,770
|
|
|
9,985
|
|
|
(3,219
|
)
|
|
173,624
|
|
Receivables from derivative contracts
|
|
|
|
|
|
348,861
|
|
|
|
|
|
|
|
|
348,861
|
|
Restricted cash
|
|
|
138
|
|
|
|
|
|
16,674
|
|
|
|
|
|
16,812
|
|
Inventory
|
|
|
|
|
|
4,554
|
|
|
81
|
|
|
|
|
|
4,635
|
|
Prepaids and other
|
|
|
328
|
|
|
4,307
|
|
|
|
|
|
|
|
|
4,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
554
|
|
|
524,592
|
|
|
34,666
|
|
|
(3,219
|
)
|
|
556,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas properties (full cost method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluated
|
|
|
|
|
|
6,634,426
|
|
|
430,645
|
|
|
(4,350
|
)
|
|
7,060,721
|
|
Unevaluated
|
|
|
|
|
|
1,566,705
|
|
|
74,651
|
|
|
|
|
|
1,641,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross oil and natural gas properties
|
|
|
|
|
|
8,201,131
|
|
|
505,296
|
|
|
(4,350
|
)
|
|
8,702,077
|
|
Lessaccumulated depletion
|
|
|
|
|
|
(5,527,948
|
)
|
|
(410,090
|
)
|
|
4,350
|
|
|
(5,933,688
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net oil and natural gas properties
|
|
|
|
|
|
2,673,183
|
|
|
95,206
|
|
|
|
|
|
2,768,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas gathering and other operating assets
|
|
|
12,474
|
|
|
117,441
|
|
|
175
|
|
|
|
|
|
130,090
|
|
Lessaccumulated depreciation
|
|
|
(8,705
|
)
|
|
(13,676
|
)
|
|
(54
|
)
|
|
|
|
|
(22,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other operating property and equipment
|
|
|
3,769
|
|
|
103,765
|
|
|
121
|
|
|
|
|
|
107,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from derivative contracts
|
|
|
|
|
|
16,614
|
|
|
|
|
|
|
|
|
16,614
|
|
Debt issuance costs, net
|
|
|
7,633
|
|
|
|
|
|
|
|
|
|
|
|
7,633
|
|
Intercompany notes and accounts receivable
|
|
|
4,749,760
|
|
|
302,096
|
|
|
|
|
|
(5,051,856
|
)
|
|
|
|
Equity in oil and natural gas partnership
|
|
|
|
|
|
209
|
|
|
|
|
|
|
|
|
209
|
|
Funds in escrow and other
|
|
|
517
|
|
|
1,082
|
|
|
|
|
|
|
|
|
1,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,762,233
|
|
$
|
3,621,541
|
|
$
|
129,993
|
|
$
|
(5,055,075
|
)
|
$
|
3,458,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
|
|
$
|
326,655
|
|
$
|
6,102
|
|
$
|
(37,672
|
)
|
$
|
295,085
|
|
Asset retirement obligations
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
326,818
|
|
|
6,102
|
|
|
(37,672
|
)
|
|
295,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
|
|
|
2,873,637
|
|
|
|
|
|
|
|
|
|
|
|
2,873,637
|
|
Other noncurrent liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from derivative contracts
|
|
|
|
|
|
290
|
|
|
|
|
|
|
|
|
290
|
|
Asset retirement obligations
|
|
|
|
|
|
45,602
|
|
|
1,251
|
|
|
|
|
|
46,853
|
|
Intercompany notes and accounts payable
|
|
|
302,096
|
|
|
4,749,760
|
|
|
|
|
|
(5,051,856
|
)
|
|
|
|
Investment in subsidiary
|
|
|
1,534,086
|
|
|
32,993
|
|
|
|
|
|
(1,567,079
|
)
|
|
|
|
Other
|
|
|
|
|
|
164
|
|
|
6,100
|
|
|
|
|
|
6,264
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
183,986
|
|
|
|
|
|
183,986
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Additional paid-in capital
|
|
|
3,283,097
|
|
|
|
|
|
403,678
|
|
|
(403,678
|
)
|
|
3,283,097
|
|
Retained earnings (accumulated deficit)
|
|
|
(3,230,695
|
)
|
|
(1,534,086
|
)
|
|
(471,124
|
)
|
|
2,005,210
|
|
|
(3,230,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
52,414
|
|
|
(1,534,086
|
)
|
|
(67,446
|
)
|
|
1,601,532
|
|
|
52,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
4,762,233
|
|
$
|
3,621,541
|
|
$
|
129,993
|
|
$
|
(5,055,075
|
)
|
$
|
3,458,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(207,084
|
)
|
$
|
348,223
|
|
$
|
1,604
|
|
$
|
|
|
|
142,743
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas capital expenditures
|
|
|
|
|
|
(168,122
|
)
|
|
(2,136
|
)
|
|
|
|
|
(170,258
|
)
|
Other operating property and equipment capital expenditures
|
|
|
|
|
|
(886
|
)
|
|
|
|
|
|
|
|
(886
|
)
|
Advances to subsidiary
|
|
|
178,978
|
|
|
|
|
|
|
|
|
(178,978
|
)
|
|
|
|
Funds held in escrow and other
|
|
|
|
|
|
(233
|
)
|
|
|
|
|
|
|
|
(233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
178,978
|
|
|
(169,241
|
)
|
|
(2,136
|
)
|
|
(178,978
|
)
|
|
(171,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
425,000
|
|
Repayments of borrowings
|
|
|
(395,648
|
)
|
|
|
|
|
|
|
|
|
|
|
(395,648
|
)
|
Debt issuance costs
|
|
|
(1,186
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,186
|
)
|
Restricted cash
|
|
|
|
|
|
|
|
|
(325
|
)
|
|
|
|
|
(325
|
)
|
Proceeds from subsidiary
|
|
|
|
|
|
(178,978
|
)
|
|
|
|
|
178,978
|
|
|
|
|
Offering costs and other
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
28,106
|
|
|
(178,978
|
)
|
|
(325
|
)
|
|
178,978
|
|
|
27,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
|
|
|
4
|
|
|
(857
|
)
|
|
|
|
|
(853
|
)
|
Cash at beginning of period
|
|
|
|
|
|
100
|
|
|
7,926
|
|
|
|
|
|
8,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
104
|
|
$
|
7,069
|
|
$
|
|
|
$
|
7,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Table of Contents
HALCÓN RESOURCES CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
|
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(187,977
|
)
|
$
|
400,988
|
|
$
|
4,519
|
|
$
|
|
|
$
|
217,530
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas capital expenditures
|
|
|
|
|
|
(369,816
|
)
|
|
(37,935
|
)
|
|
|
|
|
(407,751
|
)
|
Other operating property and equipment capital expenditures
|
|
|
(457
|
)
|
|
(7,024
|
)
|
|
3
|
|
|
|
|
|
(7,478
|
)
|
Advances to subsidiary
|
|
|
27,136
|
|
|
|
|
|
|
|
|
(27,136
|
)
|
|
|
|
Funds held in escrow and other
|
|
|
|
|
|
3,012
|
|
|
|
|
|
|
|
|
3,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
26,679
|
|
|
(373,828
|
)
|
|
(37,932
|
)
|
|
(27,136
|
)
|
|
(412,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
1,296,000
|
|
|
|
|
|
|
|
|
|
|
|
1,296,000
|
|
Repayments of borrowings
|
|
|
(1,129,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,129,000
|
)
|
Debt issuance costs
|
|
|
(18,612
|
)
|
|
|
|
|
|
|
|
|
|
|
(18,612
|
)
|
Common stock issued
|
|
|
15,354
|
|
|
|
|
|
|
|
|
|
|
|
15,354
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
(352
|
)
|
|
|
|
|
(352
|
)
|
Proceeds from subsidiary
|
|
|
|
|
|
(27,136
|
)
|
|
|
|
|
27,136
|
|
|
|
|
Offering costs and other
|
|
|
(2,444
|
)
|
|
|
|
|
1
|
|
|
|
|
|
(2,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
161,298
|
|
|
(27,136
|
)
|
|
(351
|
)
|
|
27,136
|
|
|
160,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
|
|
|
24
|
|
|
(33,764
|
)
|
|
|
|
|
(33,740
|
)
|
Cash at beginning of period
|
|
|
|
|
|
15
|
|
|
43,698
|
|
|
|
|
|
43,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
39
|
|
$
|
9,934
|
|
$
|
|
|
$
|
9,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
Table of Contents