Halcn Resources Corporation

Halcn represents a buy opportunity due to near-term value from positive operational results in the Bakken and
El Halcn generating stable growth and attractive returns, which will de-lever the balance sheet, as well as
longer-term value with the addition of drilling inventory in the prospective TMS.
Geography

Liquidity
While at present over levered, effectively no maturities until 2020

Significant inventory of drillable locations, with 90% of capex invested in

type curve areas producing IRRs of 50% or more

Recent Apollo JV shows capacity for flexible financing that does not
further burden the balance sheet

Premier acreage in mature basins which consistently outperforms type

curve assumptions due to efficiencies in completion optimization and
downspacing

Oil weighted asset portfolio and active hedging program limits effect of
swings in commodity price on liquidity

~316,000 acres in the TMS represents potential upside if proven

Woodbine sale was a step in the right direction, but hard to let go of
EBITDA

Operating synergies with El Halcn due to the proximity and

reservoir similarity

Biggest risk to HK is drop in commodity price

Short distance from El Halcn and the TMS to the Gulf Coast reduces
transportation costs to a premium commodity hub

Lower price not only slows EBITDA growing into debt, but also
leads to redetermination of borrowing base

Halcn currently trades at a discount to NAV

Comparable Analysis

Management Questions
EBITDAX
2014E
2015E
($MM)
($MM)

Firm Value
2014E
2015E
EBITDA (x) EBITDA (x)

Company

Share
Price

Shares
(mm)

EV
($mm)

FV
($mm)

Ha lc on Re sourc e s

$6.22

420.477

$3,032

$6,271

$786

$943

8.0x

6.7x

G ulfport Ene rgy

63.21

85.427

5,434

5,224

466

757

11.2

6.9

G oodric h P e trole um

27.79

44.281

1,586

2,085

156

267

13.4

7.8

S M Ene rgy

76.28

67.058

5,162

6,525

1,650

1,765

4.0

3.7

Peer Mean
Peer Median
Ha lc on Ta rge t

$8.07

420.477

$3,392

$6,632

$757
466

$930
757

9.5x
11.2

6.1x
6.9

$786

$943

9.5x

6.1x

Comps selected for size and geographic comparability

Gulfport is most indicative of a mature Halcn (takeout target for larger
player looking for turnkey investment)

Your well results are regularly out-performing your type curve

assumptions. Would you say your type curve guidance is conservative?
How do you think about revisions to these assumptions?
You have indicated that target leverage is between 3.0x 3.5x, however
Halcn is currently at 5.1x. In light of this, could you tell us how you
think about the time frame for reducing leverage, financing plan for
growth spending, and if you see leverage as an impediment?
Halcn has a balanced portfolio of core assets from a stable, mature,
major basin in the Bakken, to a young, highly prospective position in the
TMS. Could you let us know how you think about allocating resources
across this portfolio (or outside this portfolio), and where you see
future growth coming from?

Strategic Actions
Halcn / Apollo Joint Venture
Play Delineation / Royalty Upside

Halcn Rationale
Transfers the capital risk of delineating a
new play away from the Company

$150mm of development capital

8% Preferred Dividend
4% ORI in 75 TMS wells

Risk / Preferred Return

The financing structure does not burden

the balance sheet with additional debt, nor
does it dilute current common
shareholders
After initial exploration capital is spent on
single well drilling, Halcon will have
established windows in which to invest its
own development capital

Apollo Rationale
Apollos assumption of risk is compensated
by a guaranteed return with the preferred
dividend of 8%
In addition, the 4% overriding royalty
interest represents an attractive upside to
participate in the TMS
Option to upsize investment to $400mm
and 2% overriding royalty on 200 TMS
wells, contingent upon satisfactory initial
results

Potential to unlock a third core area with

a significant number of drilling locations

Divestment of Non-core Utica Acreage

Further divestment in 2014 highly unlikely as Halcn has already completed ~$500mm in
divestments this year
135,000 140,000 acres targeting the Utica / Point Pleasant shales in North East Ohio
and North West Pennsylvania
Currently six producing wells with production of 328 boe/d, and only 0.1 MMboe of
proved reserves which makes the borrowing base impact insignificant
While Halcn considered the Utica a core assets not long ago, their initial well results
there have been disappointing, while the Core focus has shifted much farther south
Northern Utica is nothing more than prospective, a position which the TMS already
occupies Halcns portfolio with much greater potential based on initial well results
Assuming $5,000 per acre and given the large acreage position, there is significant value
locked in the Utica which could be more efficiently invested
Other contemplated divestments: non-op Bakken production and Austin Chalk gas assets

Halcns
acreage in
Trumbull &
Mahoning