Battalion Oil Corporation (BATL) Q2 2018 Earnings Report, Transcript and Summary

Good day, everyone and welcome to the Halcón Resources Second Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mark Mize. Please go ahead, sir. Mark J. Mize - Halcón Resources Corp.: Good morning. This conference call contains forward-looking statements. For a detailed description of our disclaimers, see our earnings release issued yesterday, posted on our website. We've also updated our investor presentation for second quarter activity and other operational items, and you can access that presentation on our website. I'll make a few comments about our financial performance for the second quarter, and then I'll turn the call over to Jon Wright who'll talk about operations, and then Floyd will take the call to discuss guidance and strategy. Production for the second quarter averaged 12,769 barrels of oil equivalent per day comprised of 68% oil. This production rate was approximately 500 Boe a day; less than we had projected due to some unexpected downtime that was caused by power interruptions as well as some weather-related issues. Our realized second quarter oil differential of 90% of NYMEX was less than the 99% differential seen in the first quarter, which was really just driven by weaker Midland pricing. Our second quarter natural gas differential came in at 52% of NYMEX which was lower than the first quarter of 2018 and that was driven by a weaker WAHA pricing. Our NGL differential for the second quarter 39%, was more or less in line with the first quarter which was at 41%. Our LOE and workover expense was $7.3 million for the quarter or $6.25 per Boe versus $6.36 per Boe in the first quarter and our second quarter LOE and workover rate per Boe would have been right at about $6 per Boe, if we would've experienced the unexpected downtime. We expect this rate to continue to trend down in the second quarter or the second half of 2018 as we continue to gain scale and ramp production. Gathering and other expense as adjusted in the press release totaled $5.5 million for the quarter or $4.73 compared to $5.55 in the first quarter. This metric also was impacted by the unexpected downtime. G&A expense as adjusted totaled $10.1 million for the quarter or $8.68 per Boe versus $11.35 per Boe in the first quarter. This per Boe rate will continue to come down over the remainder of 2018, again, as we gained scale without any significant G&A additions is expected. With respect to the current quarter capital spending we incurred right at $132 million in D&C, $29 million infrastructure, seismic and other, and $214 million on acquisitions. The majority of that was the West Quito Draw acreage. As far as hedging, we did realize the net gain on settled derivative contracts of approximately $26 million during the second quarter. We're well-hedged on WTI for the rest of 2018 and 2019. We have 11,500 barrels a day of oil hedged at an average price of $53.03 per barrel for the last six months of 2018 and we have 15,504 barrels per day of oil hedged in 2019 at an average price of $56.27. We also had 8,000 barrels a day of MidCush basis swaps in place for the remainder of 2018 at an average price of $11.69. We have 12,000 a day of MidCush swaps in place for the first half of 2019 at $3.02 and we have 4,000 barrels a day in place for the second half of 2019 at $3.95. Regarding gas hedges, we have 7,500 MMBtu of gas hedged for the last six months of 2018 at an average price of $3.16. We have 20,000 MMBtu a day of gas hedged in 2019 at an average price of $2.80. We also have 15,000 MMBtu a day of WAHA basis hedges in place for the second half of 2018 at $1.10 and 25,500 MMBtu a day of WAHA basis hedges in placed for 2019 at a $1.18. As of June 30th, the end of the quarter, we had $294 million of liquidity that did consist of $96 million of cash on the balance sheet plus a fully undrawn revolver. And with that, I'll turn the call over to Jon. Jon C. Wright - Halcón Resources Corp.: Thanks, Mark. As Mark indicated, we had quite a bit of unexpected downtime in the second quarter driven by power interruptions and bad weather. Although, we can't control the weather, we do have the ability to improve the power situation. We have worked with our local utility provider to have a new substation constructed within our acreage position, which will improve power liability. We've recently connected roughly half of the Hackberry Draw field to the substation via our new feeder line. And we anticipate that we will have the remaining wells connected within next few weeks on our second feeder line. Additionally, we will continue to build up our HFS-owned power transmission infrastructure throughout the field to ensure that all of our well sites are connected to the grid, making us less reliant on generators for power. In Monument Draw, we continue to be very happy with our drilling results. The Sealy Ranch 6401H began cutting on late June and has exhibited very strong results with the current 20-day average of 1885 Boe per day at 86% oil, which continues to improve. This well may reach a 30-day peak IP rate of around 2,000 barrels equivalent per day making it our best well drilled to-date in the Delaware. The 6401H is located in the central portion of our Monument Draw acreage position. We recently began flowing back to the Sealy Ranch 7701H and the 7702H in Monument Draw. As of this morning, these wells are producing over 1,600 and 1,400 barrels equivalent per day respectively, and the rates continue to increase. One note on this is that these are not peak rates. We expect that peak rates will be in line with other recently reported rates in Monument Draw. These two wells were completed under the lower and upper Wolfcamp intervals at spacing of 330 feet apart horizontally and 250 feet apart vertically wine rack positioning. We ran micro-seismic on this project and we had confirmed that the frac was contained within each interval with little to no interference. These wells confirm our spacing assumptions of up to 13 upper and lower Wolfcamp wells for 1,280-acre drilling spacing unit in Monument Draw. There's a great illustration of this work on slide 8 of our investor deck. Now, with six additional wells flowing back now are being put on line over the next few months, we will have de-risked most of Monument Draw for the Wolfcamp by year-end as shown on slide 7. We also have improved our drilling performance in Monument Draw recently by not applying our drilling fluid program and implementing new bid designs in the intermediate section, which has resulted in reduced drilling days. I will also note that we had eight locations in Monument Draw with intermediate casing preset. We will have a great head start once we move back into this area in 2019. This is about a $14 million impact to CapEx. We expect to continue to improve our drilling performance here and in our other areas. We put three Wolfcamp wells on line in Hackberry Draw in the second quarter of 2018. The most recent of these wells, the Bobby 1H is outperforming our type curve. The other two wells were drilled further south in our acreage position. And while they're performing slightly well below type curve estimates, they're still economic. We expect to put five additional wells on line here for the remainder of 2018 and all these wells are focused on areas that we expect to meet or exceed type curve expectations. In West Quito, we recently began our drilling program with few rigs on a two-well pad and a three-well pad. These five wells are all 10,000 foot Wolfcamp laterals. The first pad should be on line in Q4 when we anticipate the second pad will be on line around the year-end 2018. These two pads are illustrated on slide 9 of our Investor deck. Our drilling performance thus far has been on track with total drilling days looking to be around 30 days. Certainly, we will have adjusted – currently, we have adjusted our D&C costs in West Quito downward to around $10.6 million versus $11.5 million as previously reported. We're excited about this area and look forward to talking about well results here later in 2018. With that, I'll turn the call over to Floyd. Floyd C. Wilson - Halcón Resources Corp.: Thanks, Jon. Jon and his staff are doing a wonderful job of building a world-class asset out here based on technology and cutting-edge practices. We don't hire the low cost providers. We hire the best providers in any area that we work in. As to rigs and growth, as reported, we drop the rig while that bringing our recount to three rigs for the rest of the year, and for at least the first part of next year. This moderation in cadence is driven by the basis blowout with that differential standing above $15 a barrel today. Not exactly the right time to press for higher and higher production. I'd like to see realized net prices back over $60 a barrel before adding the rig back in. Time will tell on that. Having said that we've dropped a rig and lowered production, we're still guiding to a 33% production growth rate Q4 over Q3 of 2018. And that becomes more than a 300% production increase year-over-year 2017 to 2018. These are very strong wells that we're drilling out here. We're lending one dedicated frac crew today and we'll bring in the spot crew as needed. As I mentioned, we continue to use only the best contractors, the best service providers and the high-end of all equipment as we build our 60,000 acre 2,000-location position in the Delaware into a durable profitable type asset base. We have lowered production guidance due to our rig count reduction, but as I mentioned, we'll deliver strong growth in spite of that. We hope to add a rig in 2019. Again, as I mentioned, and that is dependent on crude netback pricing. If we do that, that'll allow us to continue growth to about 32,000 barrels a day average for next year; again, a very strong data point. On that, based on logjam, we've announced and executed comprehensive takeaway agreement with Salt Creek Midstream, a great partner for us in the Delaware Basin. Our agreements with them lead to a 25,000 barrel of oil per day firm capacity on new construction, taking our oil to the Gulf Coast at some point in 2019. This will lead to better than WTI net prices after transport. On cost, inflation seems to have moderated a bit. It's hard to pick a day at a point in time and say it's done, but it has definitely slowed down maybe even flattened. Drilling and completion CapEx is now approximately $400 million for 2018, down about $35 million from before we dropped a rig. Infrastructure and seismic spending will be about $20 million, a bit more higher than before at approximately $100 million. This is driven primarily due to additional costs related to building out a high-spec gathering and treating system at Monument Draw where we are seeing elevated levels of H2S. Halc (00:12:44) Field Services is – remains a large focus of ours. It's a very vibrant and valuable asset. The additional build-out – as part of this additional build out to deal with the issues at Monument Draw is part of Halc (00:13:03) Field Services and will provide an even more highly valuable asset encompassed within our subsidiary. We reported the launch of a process to sell this half of this awesome asset, Halc (00:13:19) Field Services. We've received a very high level of interest from both strategic and financial parties. I expect to have nearly 40 CAs executed soon as we go down the path that we have gone down before successfully. We expect the marketing process to be completed within a month or month and a half and a closing within a month or month and a half after that. We're open to both, the partial sale or an outright sale of this valuable asset. Any proceeds from this divestiture will enhance our liquidity as we move towards cashless efficiency. We have several additional liquidity and leverage-enhancing projects under consideration at this time. We are not pursuing any significant acquisition ideas today. And as far as strategy, it's really pretty simple. Great rock, great execution will lead to a great end result for all of our investors. Operator, we're ready for questions, if there are any.

Certainly. And we'll go first to Jeffrey Campbell with Tuohy Brothers.

Good morning. Floyd C. Wilson - Halcón Resources Corp.: Good morning.

I thought that slide 11 was interesting. I was looking at your economic comparison of the 5,000 and 10,000-foot laterals and it appears to show one-to-one production ratio between the lateral lengths. In other words, the production is doubling when you're doubling the length of the laterals. So I was just wondering is that consistently in your current well performance? Floyd C. Wilson - Halcón Resources Corp.: I believe what you're looking out there, it shows that during the first five years it's not exactly linear. You don't expect to 100% just double based on lateral length 5,000 versus 10,000, but certainly the early days is very dramatic increase.

And the early years are the ones that count, so that's good. I also thought I would ask you slide 16 has – I know this is pretty forward-looking, but I just thought I'd ask. Slide 16 has a nice (00:15:49) of de-risked zones and others that look – that would be appraisal zones. First, I was wondering as you think about your development cycle, when you think would be perhaps the year when you would do a first speculative zone (00:16:03) test. And second, I'm sure you're watching all the activity base and so based on what you see with peers, is there a (00:16:11) particular zones that seem to be pretty promising and might be the first one you would go after? Floyd C. Wilson - Halcón Resources Corp.: Well, we've done a couple of Bone Spring tests. We've done some upper Wolfcamp and lower Wolfcamp tests in the basin. I think you'd be hard pressed to call any of these speculative. The possibilities are a little bit different in different parts of the basin, but certainly, a couple of zones in the Bone Spring and the Bone Spring additional Wolfcamp zones, but probably more important is that the economics of this spacing test that Jon mentioned, if we find that we can drill wells in this chevron or wine rack pattern, they're only a few hundred feet apart and still maintain the integrity of our frac jobs that meaning keeping the frac jobs really tight to the drilled wellbore, that adds much more value than anything we could do with finding some wildcat zone. We do have plans. We're not going to do it this year likely, but we have plans to drill deeper tests at both Monument Draw and Hackberry and we also plan to drill deeper into the Wolfcamp. I think we, just for simplicity, call it Wolfcamp C at some point in the future up at West Quito. So there's a lot of ammunition out here for continued growth, but with 60,000 acres and a couple of thousand locations now, I mean how many do we want to count? We could count a lot more.

Right. And that sort of reinforces the notion that you don't make any more acquisitions at this time. Well, thanks, Floyd. I appreciate the color.

And we'll go next to Tarek Hamid with JPMorgan.

Good morning. Could you talk a little bit about the deal at Salt Creek. Just kind of color you can give us on how to think about the sort of the costs for some of the long-haul takeaway. Any color would be appreciated. Floyd C. Wilson - Halcón Resources Corp.: Well, we're probably not at liberty to say, put some exact numbers on that. It's a competitive situation out there for our partner. I will say that the transport costs are basically pretty nominal given the logjam. I don't know if we've given out any modeling advice on that or, Quentin, maybe you have something to say. Quentin R. Hicks - Halcón Resources Corp.: I would say if you look at the forward strip of Houston or LLS or Magellan East Houston pricing in late 2019 or early 2020 when we start to get on that pipe and that pipe hits a $3 or $4 premium to WTI, we expect to realized net of our transport costs is premium to WTI, accounted for that premium that you're seeing in the market. So I would tell you our fee is (00:19:23) nominal, as Floyd indicated.

Got it. That's really helpful. And then you wrote in the release that you have the ability to increase the capacity on each year annually. Can you maybe just talk a little bit about sort of how high that could go and sort of what the mechanism would be? Floyd C. Wilson - Halcón Resources Corp.: I'll ask either Anthony or Quentin to address that, but we found in every shale play that we've been involved in, which has been pretty much every one of them in the United States, that these logjams occur. They endure it for a year or more and then they move. And so I think that you don't ever want to have all of your product going in one spot. So, we intend to keep our options open for some of our crude to be sold in the basin in the future with the vast majority of it going to the coast. I think Steve is on the phone. Steve, do you have anything to add to that? Stephen W. Herod - Halcón Resources Corp.: No, Floyd. I think that sums it up. The flexibility is key as you say and as we know these things move around over time. And so we wanted to make sure that we weren't in a position where two or three or four-year that would be stacked somewhere might not be as attractive then as it might be a year from now and we've built in (00:20:57) agreement to take our capacity on the line over time (00:21:07) production, if we choose to. Floyd C. Wilson - Halcón Resources Corp.: Yes. I believe that written in part of that agreement is about 50% increase under the existing agreement. Stephen W. Herod - Halcón Resources Corp.: Yeah. I believe that's about right over time. That's right. And we have the ability to change it each year once we get going.

Got it. That's helpful. And just last one for me. You made a brief comment in the slides about completion cost. (00:21:39) little bit about what you're seeing on sand (00:21:44) as well pressure pumping crews? Floyd C. Wilson - Halcón Resources Corp.: Jon? Jon C. Wright - Halcón Resources Corp.: With regards to sand, really we're starting to see a lot of in-basin sand come online. It's primarily in that 100 mesh, we'll say that we are using in-basin sand for the 100 mesh. As far as pumping crews, we'll see some softening in the market there, some availability to pick up a spot crew when needed. So I think we're pretty set from that perspective.

Great. That's it from me. Thank you very much.

And next, we'll go to Jason Wangler with Imperial Capital.

Good morning. On the infrastructure build, could you maybe talk about – would you parse those area for just kind of the different ways you're looking at (00:22:45) simply just looking to monetize the interest in the asset? Floyd C. Wilson - Halcón Resources Corp.: Well as contemplated today, the potential sale of this is across the basin to include every aspect of infrastructure be it water, gas, oil, blending, trading, compression, disposal, everything (00:23:10). It would be our initial intention to sell off about half that business and on a go-forward basis, that party will be our partner in the growth of that business. I don't know if that's what you're looking for there, Jason.

No, that's helpful. Thank you, Floyd. And then just as we think about beyond just 2018 at the rate program whether it's 3 or if you go to 4, do you have a sense of kind of where you'd focus those? Obviously, you've had some really good results in Monument and we'll see about West Quito, but it's a great location. Just how you think about where those rigs are kind of going to float around as we think longer-term. Floyd C. Wilson - Halcón Resources Corp.: Well, it probably doesn't come through very well in our presentation or our discussion. We are in all new areas. You work pretty hard to define your best area within each of your holding areas. And so, we have three main ones here. We've actually defined some really good (00:24:15) Hackberry Draw. We'll continue drilling down there. And we've had a few areas where the results are a little less attractive. We won't drill in those areas at Hackberry, but the largest part of our acreage down there, we've had some really interesting results. And with this moderation in inflation, we think that there's some upside in our cost down there. So we're not going to discontinue that by any means. I wouldn't say it would be an even third, third, third going forward. That just changes over time. As we move to 100% pad drilling, your rig or your well count is driven by pads. So if we can get ourselves into position of drilling more multi-well pads, you're longer in one area than you might have been drilling singles. So you might find yourself when you're drilling more wells than you might have thought at Hackberry or more Monument Draw just because of the pad drilling situation. Generally speaking, I'm going to guess it's going to be about 25% of Hackberry and the rest kind of evenly split between Monument Draw and West Quito, but again we just brought in a couple of great wells on in Hackberry. We see no reason to deemphasize that except in just the bold nature of the rate of return of a well that's going to make 2 million Boe compared to a well that's going to make 1.25 million Boe or whatever.

I appreciate the color. Thank you.

Your next question will come from Mike Kelly with Seaport Global.

Great. Thanks. Floyd, I was hoping maybe you could expand upon your thoughts for 2019. I think that you mentioned you'd like to get a rig active early in the year, but you also said that you'd like to see $60 to make it happen, just like a little more thoughts on that. And then maybe if you guys do have a decent base case, maybe a three-rig scenario and what that could look like for the capital spend for next year and what's the deepest number on a run through rigs? Thanks. Floyd C. Wilson - Halcón Resources Corp.: Yeah. The $60 that I referenced would be kind of a netback price after a differential of things have softened or evened out. And we don't know when that might happen. If you're running the three rigs in 2019, you'd look to spend a bit more than $300 million, maybe $325 million or so and maybe give yourself a spread around that of, say, $300 million to $350 million. If you brought a rig in partway through the year, that would increase about $50 million. So if there's 3.5 rigs, be about $350 million to $400 million, something like that.

Okay. That's great. And I want to take a stab at potential growth there, a three or 3.5 rig program. Floyd C. Wilson - Halcón Resources Corp.: Well of course, I did mention that we would expect under our current expectations that lead us to think that we'd be average about $30 million for the year. And if it was fewer rig, it'd be about 10% or 11% less than that. Those are steps by the way, as we've seen we need to pursue the appropriate development of these assets and you can't do that if you have a lot of uncertainty on commodity pricing. So right now our three rigs would be about what I said and yield 25,000 Boe per day to 30,000 Boe per day and 3.5 rigs yields about another 3 million or 4 million (00:28:23) net barrels per day on top of that.

Okay. Great. I appreciate that. Floyd C. Wilson - Halcón Resources Corp.: 4,000 (00:28:32).

Understood. Okay. And then one more from me. You mentioned in the press release there's several options to fund near-term, the near-term outspend. You talked pretty extensively about the midstream component of that. You also mentioned in the press release, JVs and other options and I was hoping you can give maybe a little more context around those second two. Thanks. Floyd C. Wilson - Halcón Resources Corp.: Mike, we're focused on leveraging liquidity as always. We've got a tight plan. We're good to go at this moment, anything we can do to enhance that, I think might release some of the market concerns that we hear. So if you think about a company our size, basically a startup, we started – bought our first property last year in March out here, sold everything else on 60,000 acres several thousand – a couple of thousand locations or more. We can't drill that many no matter how many rigs. So the JV that involves selling off some of that acreage or selling off some of that drillings would be kind of an attractive way to sort of reduce our inventory without reducing our growth trajectory. So, there're several things that we're looking at along those lines. I don't want to highlight anything other than the current move to move forward with this Field Services partial sale. And, of course, that's a simple matter, we're trading at 30 (00:30:21) times EBITDA and we can get 10 times more than that for it. So we'll – it's an asset that we shouldn't own all the time. It's pretty simple there.

Got it. Floyd C. Wilson - Halcón Resources Corp.: (00:30:34) we have several ideas and these things are kind of running in parallel with everything else we do. In parallel meaning we're working really hard on getting the drilling costs down, we're working really hard on the efficiency of the frac jobs, working really hard on the infrastructure build out regardless of the sale because these wells will be producing for 50 or 100 years or whatever these leases will for sure. And you got to build a durable platform for that kind of activity. So we're focused on all of that at the same time quite focused on balance sheet and liquidity.

Got it. Appreciate it. Thank you.

And next we'll go to Ron Mills with Johnson Rice. Ronald E. Mills - Johnson Rice & Co. LLC: Good morning. Floyd, the release under (00:31:25) also mentioned the building of some oil pipelines to get your volumes (00:31:31). Is that designed to get all of your oil volumes off a truck and in the pipeline and (00:31:37) can that have on the cost structure? Floyd C. Wilson - Halcón Resources Corp.: Well, I'd like Anthony or Steve to really address the details of that, but within a couple of months we expect to be essentially off truck and in pipe. Trucking is, gosh, four, five times as much as the pipeline costs. Five times as much. So that's a significant factor. It's also just a big factor. You get muddy trucks break down, drivers don't show up, whatever. We're going to get all of the oil to Wink. And from there, as soon as these other pipes open up, we'll get all of our oil out of the basin, all that we choose to. What else? Anthony Amoroso - Halcón Resources Corp.: Yeah. And also part of the deal includes a purchase option to move all the oil from Wink. So, it improves your takeaway. Ronald E. Mills - Johnson Rice & Co. LLC: That's supposed to be operational at some point in the fourth quarter? Floyd C. Wilson - Halcón Resources Corp.: I think within two months as far as being off of trucks. Stephen W. Herod - Halcón Resources Corp.: That's right, Ron. We expect the Monument Draw oil to be (00:32:56) and that's of course, the biggest share of the volume in Ward County by October and then West Quito by December. And as Floyd and Anthony mentioned, of course, it helps us buy but also particularly Monument Draw where the volume will be ramping, it helps us a lot just on ability because as Floyd said, trucking being as a less than perfect way to move that much product. Ronald E. Mills - Johnson Rice & Co. LLC: Okay. Great. And Floyd, maybe just sort of – and maybe for Jon. I think about strategy where you took the rig out of Monument Draw, where you've seen some of your (00:33:40) and took it down to Hackberry, how do you how do you weigh that allocation and when do you think about bringing a rig back to mining and trying to play the timing of when you're going to see increased capacity and improve (00:34:00) pricing? Floyd C. Wilson - Halcón Resources Corp.: Let me ask Jon to add to this, but we moved a rig back to Hackberry because we have several great locations to drill down there, simple, at the cost that we expect to experience are going to be reasonably competitive. At Monument, we kind of outran our coverage in terms of infrastructure and we need to do some more work there. Having said that, we've had this process where we had intermediate rigs out there drilling down to the curves – I think to the curve is a sure way to say it. And I think Jon's got 5 or 10 of those already drilled. So he's got – maybe it was eight exactly – a good list of wells that are going to be fracked anyway. So we're not going to experience a big loss of production growth from Monument Draw. You've got a limited ability to spend money and you'd take those rigs where they should be in terms of the best investment, where they should be in terms of technical coverage. Sometimes you might be waiting on seismic, sometimes you might be waiting on a marketing agreement or some pipe or some infrastructure. So Jon, what else could be there, too? Jon C. Wright - Halcón Resources Corp.: Now Floyd, you mentioned earlier in the call about the installation of a gathering systems to the wellhead for service applications. So those are some of things that we're working on over a mine to draw, but as you mentioned, eight wells that are set with intermediate casing. So, that was a forward spend for us. We got a bit ahead of ourselves with that. And so that's contributes to the capital spend in 2018 but will have a positive impact for 2019. We're working on all fronts here. The results on Monument Draw have been great, I think, certainly exceeded our expectations. But we're working on the cost side as well, there are two sides to that. We've been pumping some of our frac – more recent fracs both in Hackberry Draw and Monument Draw. We've been pumping a smaller job approximately 2,000 pounds per foot. And as indicated by these results, those frac show good initial rates. I mentioned that we're using in-basin 100-mesh sand. We'll have some considerations about how we progress with that as we move forward. We're continuing to focus on automized cost efficiency while increasing our stage length. So what the end result there is a lower cost. So we're making great wells. We're focused on lower costs through our completion efficiencies, drilling multi-well pads throughout the rest of 2018 and 2019 which further adds efficiency to our operations and decreases costs. So those are the key points that we're really focused on, Ron. Ronald E. Mills - Johnson Rice & Co. LLC: Great. And then one last question on West Quito. Are your first five wells you're drilling, what zone are you targeting out at West Quito? Jon C. Wright - Halcón Resources Corp.: So those five wells are targeting the Wolfcamp; upper Wolfcamp interval. Ronald E. Mills - Johnson Rice & Co. LLC: Thank you very much.

And our next question comes from David Beard with Coker & Palmer. David Earl Beard - Coker & Palmer, Inc.: Hey good morning, gentlemen. Whilst my questions have been asked, so I just had a follow-up on the Salt Creek relative to timing. If it comes up in the fourth quarter, will you able to move all your oil volume to that theoretically or is there some restrictions? Floyd C. Wilson - Halcón Resources Corp.: When it's available, we'll have our full allotment available to ship. David Earl Beard - Coker & Palmer, Inc.: Okay. Great. Thank you and congratulations. Floyd C. Wilson - Halcón Resources Corp.: (00:38:17)

And next, we'll go to Vivek Pal with Seaport Global.

Yeah. Good afternoon. Good morning, guys. Could you give us a sense of timing and potential value of the midstream assets? Is $300 million a realistic for the whole base? Floyd C. Wilson - Halcón Resources Corp.: Gee-whiz. We won't sell it for that. Period. That's a crazy low number.

(00:38:45) Floyd C. Wilson - Halcón Resources Corp.: Timing-wise, you're looking at about a month or a month and a half before we know the interested parties down to the real interested party, another month and a half or so to finalize paperwork and maybe a little bit longer to close. So they'd close certainly late third quarter, early fourth quarter something like that.

Do you believe the... Floyd C. Wilson - Halcón Resources Corp.: I mean, there's somebody – yeah go ahead.

Do you believe the proceeds will be sufficient to fund the cash burn or you may have to pursue some other options that you were telling on Mike Kelly's question? And just to be – putting our numbers in is more debt – taking on more debt an option to kind of fund the full burn? Floyd C. Wilson - Halcón Resources Corp.: Let me answer your question you didn't ask. Absolutely no intention to place any equity. We have no intention of placing any debt other than our normal and appropriate use of our revolver, which is undrawn at this time as you know. So yes, we have a plan that allows us to proceed without that sale. And it just enhances our plan if we make that sale. We've got a lot of interested parties. So we won't be forced to go to any other alternative. If we choose to, we'll do so because of just common sense, but first off, take that $300 million thing and erase it off your sheet.

All right. Okay. Can you elaborate on that? Is $400 million, $500 million a realistic number or you don't speculate at this time? Floyd C. Wilson - Halcón Resources Corp.: We've had a lot of experience in structure build outs and sales. It's been sort of fact in our business for years that the toll roads leading from your wellbore to the markets are more valuable sometimes in the E&P asset in terms of EBITDA multiples that seems to be the case today. I wouldn't be very interested in selling it to even at $400 million. So I mean you're just way low. I mean, it's – I guess we haven't reported any numbers on EBITDA from that business, but I mean we're certainly not getting any value in our share price for that. So it's hard to say. The market will speak as it does with everything. Look, I don't want to salt the market with any expectations, but our expectations are a fair price for a great asset and that number will be appropriate to the projected EBITDA.

That's terrific. I would love to (00:42:01). In terms of limitations on drawing on your revolver to fund the cash burn, (00:42:10) or is it for you to use any way you choose? Floyd C. Wilson - Halcón Resources Corp.: We have no limitations. We've got, as you know, a decade-long relationship with our banks. Our borrowing base documents have barely changed in 20 years. There're no limitations whatsoever. There's limitation to, if you want to go buy a yacht or something or I mean something silly, but during the course of business, we don't have any limitations.

Just... Floyd C. Wilson - Halcón Resources Corp.: Actually, a yacht, I never had one. It sounds kind of good.

So that is great. Just in terms of RBL and how many banks do you have? Do you need like a majority or do you need everyone to agree with the amount? How does that work with you, guys? Mark J. Mize - Halcón Resources Corp.: Hey we have six banks in our credit facility, and different votes take different levels. We have some boats that are 50%, some two-thirds, and some 100%. I can assure you – there's only a few things that require 100% and this is not one of them. So our banks are well aware of our plans and there's not going to be any issues at all. They're going to work with us. The pipe system really it doesn't get any credit, the RBL leader. That's purely based on our oil and gas assets. So we will not have any issues around that. Floyd C. Wilson - Halcón Resources Corp.: There's no voting requirement to draw the $200 million. Mark J. Mize - Halcón Resources Corp.: Not to draw.

All right. Thank you very much.

And next, we'll go to David Epstein with Cowen.

Thanks for taking my call. Your commentary on the midstream (00:43:53) very interesting. Obviously, $400 million would, correct me if I'm wrong, probably approach double or more of what you've put into it. How do you think sort of the value relative to cost or how do you think the market would think about that? Floyd C. Wilson - Halcón Resources Corp.: Well, the market would have no idea what to think, to tell you the truth. We would think at this early stage a triple in our cost would be a good outcome. We would think that some multiple of EBITDA that approaches a triple on how we trade would be a good outcome as well. So those are sort of ballpark-ish ideas there, but double on our cost would not be attractive.

Okay. Appreciate that. I noticed on (00:44:50) slides you raised them considerably particularly for West Quito. I assume a lot of that is a function of the D&C dropping to $10.6 million for West Quito wells. Assuming in terms of differentials, does this assume like a 2.20 (00:45:06) kind of differential once things are back to a normalized number or what? Quentin R. Hicks - Halcón Resources Corp.: Yeah. We use a blended differential that includes the near-term higher differential associated with Midland pricing, we mean in the longer term once we get on the (00:45:23) we'll be realizing a differential above 100%. So most of the economics of a type curve are dictated by the later years – the first six month versus later years. So it's something right around a 100% differential on oil or type curves after blending the near-term and the long-term.

Appreciate that. And if I could quickly, can you tell us what capitalized G&A is? And I was curious now that you guys are a little bit less in acquisition mode, it seems, will that have any impact on your capitalized or expense G&A stock or cash expense? Thanks. Floyd C. Wilson - Halcón Resources Corp.: I have no idea what that even is. Does any of you guys know? Mark J. Mize - Halcón Resources Corp.: Yeah. For the full year, that number should be about $12 million. That's looked at every quarter, but as we sit here today, $12 million is a good number for you to use.

Okay. Thanks very much.

And that will conclude our question-and-answer session. I'll turn things back over to our speakers for any additional or closing remarks. Floyd C. Wilson - Halcón Resources Corp.: No additional remarks. Thanks for darling in. We'll be talking as you care to. Thank you.