Halcon Resources Corp.
Last close: $6.83 (U.S.) a share
52-week trading range: $5.26 to $11.24 a share
Annual dividend: none
Analysts' ratings: There were 13 buys, five holds and no sells, according to Bloomberg data. Target prices ranged from $8 a share, as estimated by Global Hunter Securities analyst Michael Kelly, and $13 a share by Barclays analyst Jeffrey Roberts.
Recent history: Halcon's chief executive officer Floyd Wilson was at the helm of of Petrohawk Energy Corp. in 2011 when it was bought by global miner BHP Billiton Ltd. for $15.1-billion, including debt. When he resurfaced to take over Ram Energy Resources Inc., recapitalized the energy junior with $150-million of his own money and began a makeover under the name of Halcon [Spanish word for Hawk], its shares skyrocketed early last year to $12 a share from around $2 within days. Over the past year, shares of the Houston-based oil and gas company have tumbled 35 per cent as investor interest waned while Mr. Wilson was acquiring oil-producing properties for drilling. The Canadian Pension Plan Investment Board bought an equity stake in Halcon last fall to help finance a $1.45-billion (Canadian) deal to buy assets in the Bakken formation in North Dakota.
Manager insight: Halcon may not be on many people's radar screens yet, but this stock is essentially a bet on Mr. Wilson's acumen and success as a veteran energy industry entrepreneur, says Michael Gentile, a portfolio manager with Montreal-based Formula Growth Ltd. "He started and sold three companies prior to this one. We owned Petrohawk for three years, and did really well with him."
In the energy space, "management teams are very important for value creation because they are the ones buying the acreage and drilling the wells," he said. "The way stock markets work is that people get excited and then get bored. The stock basically sold off so we bought it between $5 (U.S.) and $7 a share [nine months ago]."
In addition to the Bakken assets, Mr. Wilson has also purchased acreage in the Woodbine play in Texas and and Ohio's Utica play. Its net asset value has now climbed to about $12 a share, and yet the stock is now around $6, said Mr. Gentile. "That is where we want to be buying the stock...Our premise is that he has done a great job buying really good assets, and now the assets are about to prove to the market how good they are."
Over the next three to six months, the catalysts for Halcon stock are expected drill results, particularly from the lesser-known Woodbine and Utica plays. The first Utica results should come in April, while Halcon has already had good results from the other two. "Woodbine is emerging on investors' radar screens as a good play, but investors have not yet given them full credit in the Utica," he said. "We are very confident the results will be well above what the Street is expecting, and that should lead to a strong appreciation for the stock price. It could hit $12 a share within a year."
Oil production, which stood at around 25,000 barrels a day at the end 2012, is expected to grow to 40,000 barrels in 2013, 65,000 in 2014 and 85,000 in 2015, he estimates. While it is possible that the Utica and Woodbine plays won't turn out as anticipated, there isn't a whole lot of downside for the stock, he suggested. "With the stock at $6 to $7 a share, there isn't a whole lot of expectation in the stock for these wells."