Up to $400M could spur oil drilling in La., Miss.

Published on NewsOK Modified: June 9, 2014 at 3:27 pm •  Published: June 9, 2014
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JACKSON, Miss. (AP) — A private equity firm will invest up to $400 million to support efforts by Houston-based Halcón Resources Corp to drill for oil on the 314,000 acres that Halcón has leased in the Tuscaloosa Marine Shale of southwest Mississippi and southeast Louisiana.

Halcón said Monday that it would sell $150 million in preferred stock to Apollo Global Management, agreeing to pay the company 8 percent yearly interest. Apollo will also get a 4 percent royalty on up to 75 wells that Halcón plans to drill. Apollo could buy up to $250 million more in preferred shares on the same terms, gaining royalty rights to up to 125 more wells.

The money could spur development in the fledgling oil region, where new wells have shown more consistent productivity in recent months. Halcón said its Horseshoe Hill well in Wilkinson County initially produced 1,208 barrels of oil per day. The company is completing a second well in the county and drilling a third and fourth.

"We are off to a solid start in the TMS, and the capital from our partnership with Apollo will help us to accelerate activity," Halcón Chairman and CEO Floyd Wilson said in a statement. "The TMS is quickly evolving into a world-class oil play."

Halcón's stock fell 18 cents Monday, closing at $6.22 per share, but has risen sharply in the last two months. Last week, Wunderlich Securities raised its rating on the stock, with analyst Jason Wangler writing that "Halcon's initial well results, and the potential for a joint venture in the sizeable asset could really begin to show the value in the play while also allowing Halcon to boost its production and liquidity positions nicely."