Halcón Resources Announces Third Quarter 2018 Results and Provides an Operational Update

Record 30 and 60-Day IP Rates on Recent Monument Draw Wells

DENVER, Nov. 07, 2018 (GLOBE NEWSWIRE) — Halcón Resources Corporation (NYSE:HK) (“Halcón” or the “Company”) today announced its third quarter 2018 financial and operating results and also provided an operational update.

Net production for the three months ended September 30, 2018 averaged 14,609 barrels of oil equivalent per day (Boe/d), representing a 14% increase from second quarter production of 12,769 Boe/d.  Production for the third quarter was comprised of 73% oil, 14% natural gas liquids (NGLs) and 13% natural gas.  Third quarter production was negatively impacted by excess gas flaring primarily in the Company’s Monument Draw area.  Halcón estimates that without this excess flaring, third quarter average daily production would have exceeded 15,000 Boe/d. 

Halcón generated total revenues of $61.6 million for the third quarter of 2018.  The Company reported a net loss available to common stockholders of $(81.8) million or a net loss per basic and diluted share of $(0.52) for the same period.  After adjusting for selected items (see Selected Item Review and Reconciliation table for additional information), the Company generated a net loss of $(9.0) million, or $(0.06) per diluted share for the third quarter of 2018.  Adjusted EBITDA (see adjusted EBITDA Reconciliation table for additional information) totaled $27.5 million for the third quarter of 2018 as compared to $55.1 million for the second quarter of 2018.  The second quarter 2018 adjusted EBITDA included approximately $30.8 million of proceeds related to a monetization of MidCush oil hedges. 

Excluding the impact of hedges, for the third quarter of 2018 Halcón realized 79% of the average NYMEX oil price, 45% of the average NYMEX oil price for NGLs and 47% of the average NYMEX natural gas price.  Additionally, the Company realized hedge losses of approximately $9.6 million during the third quarter. 

Recent Monument Draw Well Results

Eight new long-lateral Wolfcamp wells were put online in the third quarter of 2018 in Halcón’s Monument Draw area.  Five of these wells have reached their 30-day and 60-day peak IP rates which averaged 1,753 and 1,558 Boe/d, respectively (80% oil).  Two of these wells, the Telluride 6201H and the Trinity 6205H, averaged 30-day and 60-day peak IP rates of 2,087 Boe/d (82% oil) and 1,840 Boe/d (81% oil), respectively.  The Trinity 6205H well produced nearly 55,000 barrels of oil in September, making it one of the top oil producing Wolfcamp wells drilled in all of Reeves and Ward counties since the beginning of 2017.  After being online for approximately three months, the Telluride 6201H and the Trinity 6205H wells continue to flow at very strong rates with a current average production rate in excess of 1,300 Boe/d (82% oil) per well.

Liquidity and Capital Spending

Halcón recently completed its fall 2018 borrowing base redetermination for its senior secured revolving credit facility.  The Company received commitments to increase its borrowing base from $200 million to $275 million upon the closing of the Company’s water infrastructure asset sale in December.  As of September 30, 2018, and pro forma for the recently announced water infrastructure asset sale and the increased borrowing base, Halcón had liquidity of approximately $418 million consisting of $145 million of cash on hand plus an undrawn commitment under its revolver borrowing base of $275 million less $2 million of letters of credit outstanding.  The Company expects this liquidity to fully fund its capital spending program beyond 2019. 

During the third quarter of 2018, the Company incurred capital costs of approximately $96 million on drilling and completions and $39 million on infrastructure, seismic and other.  Halcón’s year-to-date drilling and completion capital spending through the third quarter of 2018 of $344 million includes $27 million related to science (i.e. shuttle logs, pilot wells, etc.) and presetting surface and intermediate casing for wells to be drilled and completed in 2019 and beyond.  

Operations Update

Halcón is currently producing approximately 17,500 Boe/d net and is running three operated rigs in the Delaware Basin.  The Company expects to maintain this rig level through the remainder of 2018 and into early 2019 in addition to running one full-time frac crew over this same period.

Halcón currently holds 22,110 net acres in its Monument Draw area.  The Company has put online 14 horizontal Wolfcamp wells in this area since it began drilling here in the first quarter of 2017.  Halcón expects to bring a rig back to Monument Draw in December 2018. 

The Company currently holds 11,008 net acres in its West Quito Draw area.  Halcón recently completed its first two operated horizontal Wolfcamp wells which are currently flowing back after frac.  In addition to these two wells, the Company has drilled three more wells that are planned to be put online in West Quito Draw near year end 2018. 

Halcón currently holds 23,816 acres in its Hackberry Draw area.  The Company has drilled and completed 18 horizontal wells in this area (16 Wolfcamp, one 2nd Bone Spring and one 3rd Bone Spring).  Halcón currently has two wells flowing back after frac and expects to put two additional wells online in Hackberry Draw before year end 2018. 

Hedging Update

As of November 7, 2018, Halcón had 13,000 Bbl/d of oil hedged for the last three months of 2018 at an average WTI NYMEX price of $54.76 per barrel (Bbl).  For 2019, the Company has 15,504 Bbl/d of oil hedged at an average WTI NYMEX price of $56.27/Bbl.  For 2020, Halcón has 4,000 Bbl/d of oil hedged at an average WTI NYMEX price of $58.56/Bbl.  Additionally, the Company has 11,000 Bbl/d of MidCush vs. NYMEX WTI basis differential swaps in place for the fourth quarter of 2018 at -$10.64/Bbl, 14,000 Bbl/d in place for the first half of 2019 at -$3.58/Bbl and 5,000 Bbl/d in place for the second half of 2019 at -$4.54/Bbl.  Halcón also has 5,000 Bbl/d of Magellan East Houston vs. NYMEX WTI basis differential swaps in place for fourth quarter of 2019 at +$3.72 and 9,000 Bbl/d in place for 2020 at +$2.95/Bbl. 

As of November 7, 2018, the Company had 7,500 MMBtu/d of natural gas hedged for the last three months of 2018 at an average price of $3.16/MMBtu.  For 2019, Halcón has 24,000 MMBtu/d of gas hedged at an average price of $2.81/MMBtu.  The Company also has 15,000 MMBtu/d of WAHA vs. NYMEX gas basis differential swaps in place for the fourth quarter of 2018 at -$1.10/MMBtu in addition to 25,500 MMBtu/d in place for the full year 2019 at -$1.18/MMBtu.

As of November 7, 2018, Halcón had 1,000 Bbl/d of NGL swaps in place for the last three months of 2018 at $32.50/Bbl and 4,252 Bbl/d in place for 2019 at an average price of $29.51/Bbl. 

Sale of Water Infrastructure Assets

On October 31, 2018, Halcón entered into a purchase and sale agreement with a third party midstream water operator to sell 100% of its water infrastructure assets across all areas.  The agreement provides for upfront cash of $200 million and up to another $125 million of incentive payments payable if the Company meets certain thresholds for gross wells put online annually.    Halcón expects this transaction to close by December 31, 2018. 

Fourth Quarter 2018 Guidance

Halcón expects fourth quarter 2018 net production to average between 18,000 and 20,000 Boe/d (63-67% oil).  This guidance range is 1,000 Boe/d lower than the Company’s previous guidance range primarily as a result of third party gas infrastructure constraints and the Company’s decision to shut-in the Sealy Ranch 7506H in mid-October given excessive gas treating costs on this well.  Halcón expects to put this well back online in the first quarter of 2019 once it completes upgrades to its gas treating capabilities in Monument Draw.  The Company expects fourth quarter drilling and completion capital spending to total $75 to $95 million in addition to infrastructure spend of approximately $20 to $30 million (excluding water infrastructure spending).  Halcón plans to provide 2019 guidance in early 2019. 

Floyd C. Wilson, Halcón’s Chairman and CEO commented: “It was a busy quarter for Halcón, and one in which we accomplished many goals.  As previously announced, we successfully entered into an agreement to monetize our water infrastructure assets at a premium value.  We also bolstered our liquidity position further by negotiating an increase in our borrowing base by $75 million.  We believe we have adequate liquidity in place to fully fund our capital spending in 2019 and 2020 assuming three to four rigs running.  We were able to finalize a firm commitment to get a majority of our oil to the Gulf Coast, which we expect to be in service during the third quarter of 2019.  We also had a very successful quarter with the drill-bit as we put eight new wells on line in Monument Draw, all of which are exceeding expectations and a few of which have 30 and 60-day production rates at the top end of all recent wells drilled in Ward and Reeves counties.  We also continued to bring our recurring per unit operating costs down and kept our capital spending levels within expectations.  We did incur a significant amount of non-recurring gas treating charges in Monument Draw during the third quarter related to elevated chemical treating driven by the unexpected loss of a third party sour gas sales line.  The loss of this line also contributed to higher than expected gas flaring in the third quarter.  We expect these treating costs to decline significantly over the next couple of quarters as we build out our in-house gas treating infrastructure in Monument Draw.  Finally, we recently put online our first two wells in West Quito Draw and we expect these wells to be strong producers.  As we look forward to 2019, we are focused on continuing to grow our production and gain scale; but in a cost-efficient manner.”

Conference Call and Webcast Information

Halcón Resources Corporation (NYSE: HK) has scheduled a conference call for Thursday, November 8, 2018, at 11:00 a.m. EST (10:00 a.m. CST).  To participate in the conference call, dial (877) 451-6152 for domestic callers, and (201) 389-0879 for international callers a few minutes before the call begins and reference Halcón Resources conference ID 13684609.  The conference call will also be webcast live over the Internet on Halcón’s website at http://www.halconresources.com in the Investors section under Events and Presentations.    

About Halcón Resources

Halcón Resources Corporation is an independent energy company focused on the acquisition, production, exploration and development of liquids-rich onshore oil and natural gas assets in the United States.

For more information contact Quentin Hicks, Executive Vice President of Finance, Capital Markets & Investor Relations, at 303-802-5541 or [email protected].

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements.  Forward-looking statements include, among others, statements about anticipated production, divestitures, liquidity, capital spending and drilling and completion plans.  Forward-looking statements may often, but not always, be identified by the use of such words such as “expects”, “believes”, “intends”, “anticipates”, “plans”, “estimates”, “projects”, “potential”, “possible”, or “probable” or statements that certain actions, events or results “may”, “will”, “should”, or “could” be taken, occur or be achieved.  Forward-looking statements are based on current beliefs and expectations and involve certain assumptions or estimates that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other filings submitted by the Company to the U.S. Securities and Exchange Commission (SEC), copies of which may be obtained from the SEC’s website at www.sec.gov or through the Company’s website at www.halconresources.com. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. The Company has no duty, and assumes no obligation, to update forward-looking statements as a result of new information, future events or changes in the Company’s expectations.

 

                     
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
                     
        Three Months Ended    Nine Months Ended 
        September 30,   September 30,
        2018   2017   2018   2017
Operating revenues:                
                   
  Oil, natural gas and natural gas liquids sales:                
    Oil    $   53,918     $   88,256     $   145,743     $   319,472  
    Natural gas       1,407         2,886         5,286         15,051  
    Natural gas liquids       5,920         5,448         14,623         16,779  
     Total oil, natural gas and natural gas liquids sales        61,245         96,590         165,652         351,302  
  Other       350         363         613         1,386  
    Total operating revenues       61,595         96,953         166,265         352,688  
                     
Operating expenses:                
  Production:                
    Lease operating       5,275         17,798         15,504         58,822  
    Workover and other       1,478         3,644         4,795         22,213  
    Taxes other than income       3,557         6,846         9,812         29,149  
  Gathering and other       18,404         10,886         30,782         34,640  
  Restructuring       –          1,275         128         2,080  
  General and administrative       19,731         39,195         49,196         86,966  
  Depletion, depreciation and accretion       20,310         35,940         52,397         100,788  
  (Gain) loss on sale of oil and natural gas properties       1,331         (491,830 )       7,235         (727,520 )
    Total operating expenses       70,086         (376,246 )       169,849         (392,862 )
Income (loss) from operations       (8,491 )       473,199         (3,584 )       745,550  
Other income (expenses):                
  Net gain (loss) on derivative contracts       (60,406 )       (22,415 )       (66,603 )       28,139  
  Interest expense and other       (12,940 )       (19,330 )       (30,522 )       (63,808 )
  Gain (loss) on extinguishment of debt       –          (29,167 )       –         (86,065 )
    Total other income (expenses)       (73,346 )       (70,912 )       (97,125 )       (121,734 )
Income (loss) before income taxes       (81,837 )       402,287         (100,709 )       623,816  
Income tax benefit (provision)        –          17,000         –         5,000  
Net income (loss)       (81,837 )       419,287         (100,709 )       628,816  
Non-cash preferred dividend       –          –          –         (48,007 )
Net income (loss) available to common stockholders   $   (81,837 )   $   419,287     $   (100,709 )   $   580,809  
                     
Net income (loss) per share of common stock:                
    Basic   $   (0.52 )   $   2.85     $   (0.64 )   $   4.56  
    Diluted   $   (0.52 )   $   2.82     $   (0.64 )   $   4.52  
Weighted average common shares outstanding:                
    Basic       158,011         146,944         156,628         127,458  
    Diluted       158,011         148,490         156,628         128,410  
                     

         
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
         
    September 30, 2018   December 31, 2017
Current assets:      
  Cash and cash equivalents $ 137     $ 424,071  
  Accounts receivable   46,764       36,416  
  Receivables from derivative contracts   16,553       677  
  Prepaids and other   10,969       10,628  
  Total current assets   74,423       471,792  
Oil and natural gas properties (full cost method):      
  Evaluated   1,362,136       877,316  
  Unevaluated   982,922       765,786  
  Gross oil and natural gas properties   2,345,058       1,643,102  
  Less – accumulated depletion   (617,075 )     (570,155 )
  Net oil and natural gas properties   1,727,983       1,072,947  
Other operating property and equipment:      
  Other operating property and equipment   188,321       101,282  
  Less – accumulated depreciation   (9,136 )     (4,092 )
  Net other operating property and equipment   179,185       97,190  
Other noncurrent assets:      
  Receivables from derivative contracts   2,794        
  Funds in escrow and other   1,915       1,691  
Total assets $ 1,986,300     $ 1,643,620  
         
Current liabilities:      
  Accounts payable and accrued liabilities $ 141,377     $ 131,087  
  Liabilities from derivative contracts   86,176       19,248  
  Current portion of asset retirement obligation   149        
  Total current liabilities   227,702       150,335  
Long-term debt, net   667,726       409,168  
Other noncurrent liabilities:      
  Liabilities from derivative contracts   37,459       7,751  
  Asset retirement obligations   6,963       4,368  
Commitments and contingencies      
Stockholders’ equity:      
  Common stock: 1,000,000,000 shares of $0.0001 par value authorized;      
  160,676,356 and 149,379,491 shares issued and outstanding as of      
  September 30, 2018 and December 31, 2017, respectively   16       15  
  Additional paid-in capital   1,091,441       1,016,281  
  Retained earnings (accumulated deficit)   (45,007 )     55,702  
  Total stockholders’ equity   1,046,450       1,071,998  
Total liabilities and stockholders’ equity $ 1,986,300     $ 1,643,620  
                 

                   
HALCÓN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
                   
      Three Months Ended    Nine Months Ended 
      September 30,   September 30,
      2018   2017   2018   2017
Cash flows from operating activities:                
Net income (loss)   $ (81,837 )   $ 419,287     $ (100,709 )   $ 628,816  
Adjustments to reconcile net income (loss) to net cash                
provided by (used in) operating activities:                
  Depletion, depreciation and accretion     20,310       35,940       52,397       100,788  
  (Gain) loss on sale of oil and natural gas properties     1,331       (491,830 )     7,235       (727,520 )
  Stock-based compensation, net     4,423       12,258       12,241       33,548  
  Unrealized loss (gain) on derivative contracts     50,763       31,209       77,524       (11,010 )
  Amortization of deferred loan costs     371       410       1,022       1,306  
  Amortization of discount and premium     52       471       235       2,358  
  Loss (gain) on extinguishment of debt           29,167             86,065  
  Accrued settlements on derivative contracts     1,704       2,847       3,292       (673 )
  Other income (expense)     (499 )     (3,128 )     (1,978 )     (4,132 )
Cash flows from operations before changes in working capital     (3,382 )     36,631       51,259       109,546  
Changes in working capital     (3,487 )     (57,052 )     (14,550 )     (7,324 )
Net cash provided by (used in) operating activities     (6,869 )     (20,421 )     36,709       102,222  
                   
Cash flows from investing activities:                
  Oil and natural gas capital expenditures     (117,343 )     (97,670 )     (369,304 )     (218,880 )
  Proceeds received from sale of oil and natural gas properties     (132 )     1,424,272       1,647       1,901,578  
  Acquisition of oil and natural gas properties     (569 )     (9,189 )     (333,470 )     (916,676 )
  Acquisition of other operating property and equipment                       (25,538 )
  Other operating property and equipment capital expenditures     (26,147 )     (11,739 )     (79,389 )     (25,474 )
  Proceeds received from sale of other operating property and equipment     337       10,939       2,236       21,291  
  Funds held in escrow and other     (2 )     1,174       153       1,459  
Net cash provided by (used in) investing activities     (143,856 )     1,317,787       (778,127 )     737,760  
                   
Cash flows from financing activities:                
  Proceeds from borrowings     87,000       114,000       293,000       1,349,000  
  Repayments of borrowings     (32,000 )     (379,826 )     (32,000 )     (1,497,826 )
  Cash payments to Noteholders           (39,986 )           (70,903 )
  Debt issuance costs     (8 )     (397 )     (4,013 )     (17,220 )
  Preferred stock issued                       400,055  
  Common stock issued                 63,480        
  Offering costs and other           (1,831 )     (2,983 )     (13,765 )
Net cash provided by (used in) financing activities     54,992       (308,040 )     317,484       149,341  
                   
Net increase (decrease) in cash and cash equivalents     (95,733 )     989,326       (423,934 )     989,323  
                   
Cash and cash equivalents at beginning of period     95,870       21       424,071       24  
Cash and cash equivalents at end of period   $ 137     $ 989,347     $ 137     $ 989,347  
                   

                 
HALCÓN RESOURCES CORPORATION
SELECTED OPERATING DATA
(Unaudited)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2018   2017   2018   2017
                 
Production volumes:                
Crude oil (MBbls)     980       2,007       2,468       7,108  
Natural gas (MMcf)     1,040       1,874       3,009       6,892  
Natural gas liquids (MBbls)     190       335       523       1,165  
Total (MBoe)     1,344       2,655       3,493       9,422  
Average daily production (Boe/d)     14,609       28,859       12,795       34,513  
                 
Average prices:                
Crude oil (per Bbl)   $ 55.02     $ 43.97     $ 59.05     $ 44.95  
Natural gas (per Mcf)     1.35       1.54       1.76       2.18  
Natural gas liquids (per Bbl)     31.16       16.26       27.96       14.40  
Total per Boe     45.57       36.38       47.42       37.29  
                 
Cash effect of derivative contracts:                
Crude oil (per Bbl)   $ (10.05 )   $ 4.14     $ 4.25     $ 2.32  
Natural gas (per Mcf)     0.20       0.26       0.14       0.10  
Natural gas liquids (per Bbl)                        
Total per Boe     (7.17 )     3.31       3.13       1.82  
                 
Average prices computed after cash effect of settlement of derivative contracts:                
Crude oil (per Bbl)   $ 44.97     $ 48.11     $ 63.30     $ 47.27  
Natural gas (per Mcf)     1.55       1.80       1.90       2.28  
Natural gas liquids (per Bbl)     31.16       16.26       27.96       14.40  
Total per Boe     38.40       39.69       50.55       39.11  
                 
Average cost per Boe:                
Production:                
Lease operating   $ 3.92     $ 6.70     $ 4.44     $ 6.24  
Workover and other     1.10       1.37       1.37       2.36  
Taxes other than income     2.65       2.58       2.81       3.09  
Gathering and other, as adjusted (1)     3.77       3.63       4.59       3.06  
Restructuring           0.48       0.04       0.22  
General and administrative, as adjusted (1)     6.76       5.02       8.70       4.08  
Depletion     13.52       12.93       13.43       10.20  
                 
(1) Represents gathering and other and general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
                 
General and administrative:                
General and administrative, as reported   $ 14.68     $ 14.77     $ 14.08     $ 9.23  
Stock-based compensation:                
Non-cash     (3.29 )     (4.62 )     (3.50 )     (3.56 )
Transaction costs and other:                
Cash     (4.63 )     (5.13 )     (1.88 )     (1.59 )
General and administrative, as adjusted(2)   $ 6.76     $ 5.02     $ 8.70     $ 4.08  
                 
Gathering and other, as reported   $ 13.69     $ 4.10     $ 8.81     $ 3.68  
Rig stacking charges, gas treating fees and other     (9.92 )     (0.47 )     (4.22 )     (0.62 )
Gathering and other, as adjusted(3)   $ 3.77     $ 3.63     $ 4.59     $ 3.06  
                 
Total operating costs, as reported   $ 36.04     $ 29.52     $ 31.51     $ 24.60  
Total adjusting items     (17.84 )     (10.22 )     (9.60 )     (5.77 )
Total operating costs, as adjusted(4)   $ 18.20     $ 19.30     $ 21.91     $ 18.83  
                 
(2) General and administrative, as adjusted, is a non-GAAP measure that excludes non-cash stock-based compensation charges relating to equity awards under our incentive stock plans, as well as other cash charges associated with certain transactions. The Company believes that it is useful to understand the effects that these charges have on general and administrative expenses and total operating costs and that exclusion of such charges is useful for comparison to prior periods.
 
(3) Gathering and other, as adjusted, is a non-GAAP measure that excludes rig stacking charges, certain gas treating fees to remove hydrogen sulfide from natural gas produced from our Monument Draw properties and other costs.  The Company believes that it is useful to understand the effects that these charges have on gathering and other expense and total operating costs and that exclusion of such charges is useful for comparison to prior periods.
 
(4) Represents lease operating, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in reconciliation above.
                 

                 
HALCÓN RESOURCES CORPORATION  
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)  
(In thousands, except per share amounts)  
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2018   2017   2018   2017
As Reported:                
Net income (loss) available to common stockholders, as reported   $ (81,837 )   $ 419,287     $ (100,709 )   $ 580,809  
Non-cash preferred dividend                       48,007  
Net income (loss), as reported     (81,837 )     419,287       (100,709 )     628,816  
                 
Impact of Selected Items:                
Unrealized loss (gain) on derivatives contracts:                
Crude oil   $ 39,426     $ 30,632     $ 67,136     $ (10,104 )
Natural gas     883       577       (669 )     (906 )
Natural gas liquids     10,454             11,057        
Total mark-to-market non-cash charge     50,763       31,209       77,524       (11,010 )
(Gain) loss on sale of oil and natural gas properties     1,331       (491,830 )     7,235       (727,520 )
Loss (gain) on extinguishment of debt           29,167             86,065  
Deferred financing costs expensed (1)                       305  
Restructuring           1,275       128       2,080  
Rig stacking charges, gas treating fees, transaction costs and other     20,778       13,865       22,384       19,874  
Selected items, before income taxes     72,872       (416,314 )     107,271       (630,206 )
Income tax effect of selected items (2)           (12,000 )            
Selected items, net of tax     72,872       (428,314 )     107,271       (630,206 )
                 
As Adjusted:                
Net income (loss) available to common stockholders, excluding selected items (3)(4)   $ (8,965 )   $ (9,027 )   $ 6,562     $ (1,390 )
                 
Basic net income (loss) per common share, as reported   $ (0.52 )   $ 2.85     $ (0.64 )   $ 4.56  
Impact of selected items     0.46       (2.91 )     0.68       (4.57 )
Basic net income (loss) per common share, excluding selected items (3)   $ (0.06 )   $ (0.06 )   $ 0.04     $ (0.01 )
                 
                 
Diluted net income (loss) per common share, as reported   $ (0.52 )   $ 2.82     $ (0.64 )   $ 4.52  
Impact of selected items     0.46       (2.88 )     0.68       (4.53 )
Diluted net income (loss) per common share, excluding selected items (3)(5)   $ (0.06 )   $ (0.06 )   $ 0.04     $ (0.01 )
                 
                 
Net cash provided by (used in) operating activities   $ (6,869 )   $ (20,421 )   $ 36,709     $ 102,222  
Changes in working capital     3,487       57,052       14,550       7,324  
Cash flows from operations before changes in working capital     (3,382 )     36,631       51,259       109,546  
Cash components of selected items     19,074       13,299       19,368       23,554  
Income tax effect of selected items (2)           (12,000 )            
Cash flows from operations before changes in working capital, adjusted for selected items (3)(4)   $ 15,692     $ 37,930     $ 70,627     $ 133,100  
                 
(1) For the 2017 column, this represents non-recurring charges in connection with  the redetermination of the Company’s borrowing base under its senior revolving credit facility.
                 
(2) For the 2017 column, this represents the reversal of the $12.0 million alternative minimum tax generated primarily by the sale of the El Halcón Assets.        
                 
(3) Net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital adjusted for selected items are non-GAAP measures presented based on management’s belief that they will enable a user of the financial information to understand the impact of these items on reported results.  Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flows from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón’s performance.
                 
(4)  For the nine months ended September 30, 2018, net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital include approximately $30.8 million of proceeds related to a monetization of MidCush hedges that occurred in the second quarter of 2018.
                 
(5) The impact of selected items for the three months ended September 30, 2018 and 2017 was calculated based upon weighted average diluted shares of 158.0 million and 146.9 million, respectively, due to the net loss available to common stockholders, excluding selected  items.
The impact of selected items for the nine months ended September 30, 2018 was calculated based upon weighted average diluted shares of 156.9 million, due to the net income available to common stockholders, excluding selected items. The impact of selected items for the nine months ended September 30, 2017 was calculated based upon weighted average diluted shares of 127.5 million, due to the net loss available to common stockholders, excluding selected items. 
                 

                 
HALCÓN RESOURCES CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited) 
(In thousands)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
     2018     2017     2018     2017 
                 
Net income (loss), as reported   $   (81,837 )   $   419,287     $   (100,709 )   $   628,816  
Impact of adjusting items:                
Interest expense        11,759         21,394         32,595         66,141  
Depletion, depreciation and accretion       20,310         35,940         52,397         100,788  
Income tax provision (benefit)       –          (17,000 )       –          (5,000 )
Stock-based compensation       4,423         12,258         12,241         33,548  
Interest income       (142 )       (693 )       (1,914 )       (851 )
(Gain) loss on sale of other assets       103         (358 )       (1,231 )       (355 )
Restructuring        –          1,275         128         2,080  
Loss (gain) on extinguishment of debt       –          29,167         –          86,065  
(Gain) loss on sale of oil and natural gas properties       1,331         (491,830 )       7,235         (727,520 )
Unrealized loss (gain) on derivatives contracts       50,763         31,209         77,524         (11,010 )
Deferred financing costs expensed       –          –          –          305  
Rig stacking charges, gas treating fees, transaction costs and other       20,778         13,865         22,384         19,874  
Adjusted EBITDA(1)(2)(3)   $   27,488     $   54,514     $   100,650     $   192,881  
                 
(1)  Adjusted EBITDA is a non-GAAP measure, which is presented based on management’s belief that it will enable a user of the financial information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP. This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Halcón’s performance.
                 
(2)  Adjusted EBITDA for the nine months ended September 30, 2018 includes approximately $30.8 million of proceeds related to a monetization of MidCush hedges that occurred in the second quarter of 2018. 
                 
(3)  Adjusted EBITDA for the three and nine months ended September 30, 2018 excludes approximately $13.7 million and $14.0 million, respectively, of costs to remove hydrogen sulfide from natural gas produced from the Company’s Monument Draw properties as a consequence of a third party pipeline temporarily going out of service.  The Company is temporarily allowed to exclude these non-recurring costs for purposes of calculating certain debt covenants under its Senior Credit Agreement through the first quarter of 2019.