Oil exploration company gets $400M from private equity firm
Published: June 10,2014
Tags: Adams County, Apollo Management Group, Chandler Russ, energy, equity, finance, Halcón Resources Corp, Horseshoe Well, investment, Jason Wangler, Natchez Inc. city of Natchez, Oil, Tuscaloosa shale, well, Wilkinson County
WILKINSON COUNTY — A private equity firm will invest up to $400 million to support efforts by Houston-based Halcón Resources Corp to drill for oil on the 314,000 acres that Halcón has leased in the Tuscaloosa Marine Shale of southwest Mississippi and southeast Louisiana.
Halcón said yesterday that it would sell $150 million in preferred stock to Apollo Global Management, agreeing to pay the company 8 percent yearly interest. Apollo will also get a 4 percent royalty on up to 75 wells that Halcón plans to drill. Apollo could buy up to $250 million more in preferred shares on the same terms, gaining royalty rights to up to 125 more wells.
The money could spur development in the fledgling oil region, where new wells have shown more consistent productivity in recent months. Halcón said its Horseshoe Hill well in Wilkinson County initially produced 1,208 barrels of oil per day. The company is completing a second well in the county and drilling a third and fourth.
“We are off to a solid start in the TMS, and the capital from our partnership with Apollo will help us to accelerate activity,” Halcón Chairman and CEO Floyd Wilson said in a statement. “The TMS is quickly evolving into a world-class oil play.”
Halcón’s stock fell 18 cents yesterday, closing at $6.22 per share, but has risen sharply in the last two months. Last week, Wunderlich Securities raised its rating on the stock, with analyst Jason Wangler writing that “Halcon’s initial well results, and the potential for a joint venture in the sizeable asset could really begin to show the value in the play while also allowing Halcon to boost its production and liquidity positions nicely.”
The well counts in the deal show the scale of the development that could come. Fewer than 50 wells have been drilled so far in Amite and Wilkinson counties in Mississippi and West Feliciana, East Feliciana, St. Helena and Tangipahoa parishes in Louisiana. Halcón has leases on 241,000 acres in that region east, as well as on almost 73,000 acres west of the Mississippi River where operators have so far drilled few wells.
Halcón also said yesterday it plans to develop an oil handling terminal at Natchez. Chandler Russ, executive director of development group Natchez Inc., said the Adams County Board of Supervisors and the Natchez-Adams Port Authority voted last week to sign options to sell 50 acres of land to Halcón. He declined to name the purchase price, but said it would be “fair market value.” Russ said Halcón has committed to investing at last $6 million in tanks and pipes and hiring at least 25 workers.
Houston-based Genesis Energy LP already has an oil terminal at Natchez, which has focused on transferring crude oil shipped by rail from Canada to barges that travel to refineries.
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