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Daily Report 9-3-2014 - Floyd Wilson (Halcon) Reports

Posted by bernell on September 3, 2014

Before I get into Floyd's talk, let me say the preliminary docket of the September meeting of the Mississippi Oil and Gas Board came out today...there appears to be around 25 new units shown on the docket.  Very confusing stuff...we'll get it out to you as soon as possible...give us a few days.

Floyd Wilson spoke today at Barclays CEO Energy/Power Conference.  Some of what he shared was off the cuff, so maybe just a little off base on the facts, but instructive nonetheless.

Here is my brief scattering of what I picked up from his no particular order.

1. The TMS is very expensive to drill right now. Specifically, there aren't a lot of oil field service yards in the area such that, for example, frack operations are over $30,000 per stage higher than in the Eagle Ford area...current fracking costs are $200,000 per stage.  Current costs to complete a well are in the $15 million range...unless there is a "mistake" whereupon you can easily add another $5 million to a well.  He believes costs will come down to $13 million or less by the end of 2015 and ultimately for the cost to drop to the $10 million range.

2. All upfront costs are charged against the first well, including pad costs, leasing costs, surveying costs, legal costs, etc...(I heard a not so hidden dare of anyone wanting to lease under one of their wells.  He was if you want to, but we're dumping all our costs on this first well and only drilling one per 2,000 acres.  We'll come back when and if we get around to it.)  Take note independents leasing under Halcon holdings!

3. Trouble free drilling is a key and there are too few companies drilling here with too few rigs to learn as fast as they would like.  But, learning is definitely taking place.  For example, "rubble zone" issues have virtually disappeared. 

4. He mentioned 3D seismic studies planned for the area (Charles Cusack, Halcon COO mentioned this last week, also.) in order to learn of fault areas that should be avoided and perhaps to learn of areas a bit more desirable.

5. No one knows of what the ultimate spacing (number of wells per unit-distance between wells) will be in the TMS.  Halcon's goal is to get 605,000+ barrel EUR (estimated ultimate recovery) wells. 

6. Despite the obstacles, Mr. Wilson is confident the TMS is going to be a long term asset.  Learning is continuing and you simply can't rush it.  More rigs and more companies are needed in the TMS in order to accelerate the learning.

7. The Richland Sand is found scattered around the TMS.  Its presence offers opportunity for better fracturing operations.  The Crosby 12H-1 had a fair amount of this sand.

8. Initial production numbers, especially 30 day IP's are highly indicative of the ultimate recovery of oil from a particular well.

9. The TMS is an oil play.  As such, development of the Halcon Natchez terminal is very important to saving transportation costs and improving marketability of the TMS oil.  Whether by rail, by pipeline or by barge, the Natchez terminal will save transportation costs and increase the market for the oil.

10. Halcon rig count will move from 2 in early 2015 to 4 by the end of the 1st quarter of 2015.

11. Gel frac jobs are required in the TMS.  Slickwater frack jobs simply don't do as well here as it does in say the Bakken.

12. Halcon expects there to be literally thousands of wells that can be drilled in the TMS.

See the earlier post about "Halcon Presentation Link" to listen to the half hour program yourself. 

Very instructive.

If anyone else listened...expand upon or correct my observations, please.


What do you think about it?