HOUSTON -- Floyd Wilson, the chairman and chief executive of Halcón Resources Corp. (NYSE: HK), began his energy career in 1970. In almost 45 years in varying roles, he has faced a multitude of challenges. While the scopes of the difficulties have shifted over the years, Wilson will tell you that challenges are omnipresent.
Wilson talked about some of the roadblocks that his company and the industry are facing at a Winter NAPE conference earlier this month. He emphasized that the greatest challenges are of an internal nature.
“We’re in the midst of a savage fight to reduce well costs, while at the same time we’re in a relentless push to increase efficiencies to find the perfect frac job for each area and create significant returns on capital investment,” he said. “And then there’s a problem of what we’re going to do with the new barrels we will be producing, and probably an even more daunting problem – what to do with the future barrels we expect to produce.
“Capital requirements are another challenge to our business. In our business you’re way out front with investments and acreage expertise and drilling wells before you see returns. If you’re public, often the time frame for value creation doesn’t really coincide with investor sentiment or their needs.”
External challenges also come into play, Wilson said.
“Sometimes things just change. Maybe an industry gets too good too quickly and commodity prices come under pressure, or new regulations come into effect or politics comes into the conversation.”
And then, there are challenges having to do with the environment.
“I’m asked a lot what my answer or what Halcón’s answer is to the environmentalists. I can tell you that this pisses me off. My answer is that I’m an environmentalist, and Halcón is more environmentally aware than many of the self-described environmentalists. But I did drive here today. I did turn on my lights at home and I’m going to put some ice in my cocktail, so I’m a realist. I think realists can also be environmentally sensitive people.”
Any talk about challenges must be accompanied by a discussion about opportunities, “and we have so many in our business and so many in our country,” Wilson said. “If you can find some money and you can master or develop some technology; if you can talk some good people into working for you; if you’re willing to take a few risks you can build a significant company in the energy business today. You can make money the old-time way, and you can create a lot of jobs. You can’t find another place in the world where this is as possible. So there are lots of challenges in our business, but I wouldn’t trade what I do for anything.”
When Halcón started up two years ago, Wilson said its strategy was to build an oil company from scratch concentrated in several core areas, and with several thousand future wells to drill. “And we’re there,” he said.
Wilson was the chairman and CEO of Petrohawk Energy Corp. from May 2004 until BHP Billiton Ltd. (NYSE: BHP) acquired the company in August 2011. About a year later, Wilson responded with the creation of Halcón.
This year, Halcón expects to spend $950 million drilling about 125 operated wells, and perhaps three or four times that many non-operated wells in the Middle Bakken/Three Forks and the El Halcón in East Texas. “And there’s room in our budget for a couple of wildcats,” he said.
In the Williston Basin, “we’re drilling on pads and completing in batches. This is leading to enhanced economics. We’re having great results there.
“We’re drilling both Middle Bakken and Three Forks, and our most recent wells are the best ever. In El Halcón we’re drilling Eagle Ford shale wells, and we’re having good results with really great economics there as well. In parts of the field, we’re just now going to batch drilling and batch completing.”
The company’s areas of operation are 90% oil and involve long-reach horizontal drilling and hydraulic fracturing, Wilson said, adding, “NGLs are not part of the picture in these plays, and that’s all by design.”
He concluded his company summary by saying, “We’ve built an awesome staff of experienced professionals, and we’re on track to deliver an excellent year for our shareholders. Our overall strategy is intact to build a great company and sell it sometime.”