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Stock Strategist

The Hawk in the Bakken

We take a close look at Halcon's underappreciated Bakken acreage.

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 Halcon's (HK) investors have taken a whipping in recent months. Pessimism surrounding potential success in the Utica as well as recent financing activity has caused the firm's share price to drop. These factors have captured a far greater share of attention than positive developments have, in our opinion. The stock is priced as though nothing will go right, now trading at 40% of our fair value estimate after falling 14% in August.

One highlight of Halcon's performance has been its recent activity in the Bakken. Management devotes a reasonable amount of discussion to the play in quarterly results, but the investment community either has not caught on or is hesitant to increase its forecasts before the company officially provides new production and reserve estimates. After breaking down Halcon's Bakken acreage to its constituent fields and formations, and reviewing the company's recent performance improvements, we now expect higher production rates and denser well spacing across the entirety of the firm's acreage position. We believe this translates to a significant increase in the value of Halcon's Bakken acreage.

Robert Bellinski, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.