Shale Legend Floyd Wilson Strikes Out as Halcon Nears Bankruptcy

  • Halcon will file a Chapter 11 plan if enough lenders agree
  • Wilson famed for sale of Petrohawk for $15.1 billion in 2011

Veteran wildcatter Floyd Wilson’s Halcon Resources Corp. is about to go under, the latest high-flying oil and gas explorer grounded by too much debt and a slump in prices.

Halcon plans to file a Chapter 11 bankruptcy plan if enough lenders agree to the terms, the company said Wednesday in a press release.

Wilson, 69, became a legend in the U.S. shale industry after selling Petrohawk Energy Corp. for $15.1 billion in 2011. Halcon, which is Spanish for Hawk, was named in its honor. In the four years since, Halcon’s debt ballooned to $2.9 billion as Wilson bought up acreage in North Dakota, Texas, Mississippi and Pennsylvania, only to see several of the company’s prospects fail to pan out and oil prices collapse.

"He had this big home run with Petrohawk, and everybody looked at him and said, ‘Well, what are you going to do next?’ They threw money at him thinking he’d be able to do it again," said Ed Hirs, a managing director at Houston-based Hillhouse Resources, an independent energy company. "He just couldn’t beat these market conditions."

Storied Career

A Halcon bankruptcy will be the biggest setback for Wilson, who built and sold three energy companies in his storied career. The first company he took public, Hugoton Energy Corp., was sold to Chesapeake Energy Corp. for $326 million in 1998. His second, 3TEC Energy Corp., was bought by Plains Exploration & Production Co. for $417.6 million in 2003, U.S. Securities and Exchange Commission records show. His biggest coup, the Petrohawk sale in 2011, was the second-largest transaction in North America’s oil and gas industry in more than five years, trailing only Exxon Mobil Corp.’s $35 billion purchase of XTO Energy Inc. in 2010, according to data compiled by Bloomberg.

"He’s always been an aggressive guy, he’s always used the capital markets and debt very aggressively," said Jason Wangler, an analyst at Wunderlich Securities in Houston who rates the shares a hold and owns none. "The cycle got him this time. He’s got more wins than losses."

Under the plan, bank lenders will retain the first lien on the company’s assets. Bondholders in second-lien notes will be unaffected. About $1 billion in third-lien notes, which were offered last year in exchange for unsecured bondholders taking a haircut on how much they were owed, will get 76.5 percent of the restructured company. The remaining creditors and equity investors will receive smaller stakes.

The company’s shares plunged 67 percent at 7:32 p.m. in New York after the Houston-based company announced the proposal. Quentin Hicks, Halcon’s investor relations chief, didn’t immediately return a telephone message seeking comment.

"The company’s going to live on in a different fashion," Wangler said. "We’ll see if he decides to stay on board and try to catch the next up-cycle to build it up again."

Oil Bankruptcies

Halcon joins a long list of oil companies brought down by the worst oil market in a generation. Since the start of 2015, 138 oilfield service companies and oil and gas producers have gone bankrupt owing more than $61 billion, law firm Haynes & Boone said in an April 29 report.

Following Petrohawk’s success, Wilson and his partners pooled $55 million to take over RAM Energy Resources Inc. in February 2012 and renamed it Halcon. A further $550 million came from EnCap Investments LP, a private equity firm that had backed Wilson before. Less than two years later, the company was forced to write off $1.2 billion after disappointing results in two key prospects. The company’s debt today is 12 times higher than it was when Wilson took over, and Halcon has lost about $2.5 billion since the start of 2015.

In a 2014 interview, when asked how he handles failure, Wilson said, "What do you do if you’re wrong? You go home and cry?" He shook his head. "Uh-uh."

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