Midstream - Pipelines | Quarterly / Earnings Reports | Second Quarter (2Q) Update

Halcon Signs Permian Transport Agreement; Selling Services Business

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Long-Term Oil and Gas Takeaway Agreements

Halcón recently signed a 15-year agreement with an affiliate of Salt Creek Midstream, LLC ("SCM") that provides a comprehensive takeaway solution for the Company's oil production in Monument Draw and West Quito Draw. Under the terms of the agreement, SCM will construct oil lines to Halcón's central production facilities in both the Monument Draw and West Quito Draw areas. The oil lines will run to a terminal in Wink, Texas which will then have multiple outlets to various in-basin and long-haul pipelines.

The agreement also guarantees 25,000 Bbl/d of firm capacity on a long-haul pipeline to Corpus Christi, Texas, which is expected to be operational in the second half of 2019. Halcón's 25,000 Bbl/d of capacity can be increased on an annual basis. The Company previously signed a 15-year gas takeaway and processing agreement with SCM whereby its Monument Draw and West Quito Draw gas will be taken to SCM's newly constructed processing plant located near Pecos, Texas.

The agreements with SCM provide the Company with flow assurance for all of its expected near-term oil and gas production in both Monument Draw and West Quito Draw as well as premium coastal pricing for its oil when the long-haul pipeline is operational in 2019. There are no minimum volume commitments or other similar arrangements associated with these agreements. In Hackberry Draw, Halcón has an oil agreement in place through August 2019 and a gas agreement through 2027 providing flow assurance to the Midland market for its oil and the WAHA market for gas (firm capacity). The Company is evaluating oil takeaway options for its anticipated Hackberry Draw production after August 2019.

Potential Sale of Halcón Field Services

Halcón has engaged Scotiabank and BMO Capital Markets as its financial advisors for a potential partial or full sale of its Halcón Field Services infrastructure assets. The assets include water gathering, recycling, disposal and sourcing facilities, as well as gas gathering and treating infrastructure, power transmission and crude gathering systems across the Company's operating areas in the Delaware Basin.

Operations Update

The Company is currently producing in excess of 13,750 Boe/d net and running three operated rigs in the Delaware Basin. The Company expects to maintain this rig level through the remainder of 2018 in addition to running one full-time frac crew.

Halcón currently holds 21,987 net acres in its Monument Draw area. The Company has eight horizontal Wolfcamp wells currently producing, two of which began producing in mid-July. Additionally, Halcón has one well flowing back after completion, one well being completed and four wells waiting on completion. Halcón expects to have all of these wells online by the end of the third quarter of 2018, bringing its total producing horizontal wells to 14, with no additional wells planned to be put online in Monument Draw until early 2019.

Halcón currently holds 10,834 net acres in its West Quito Draw area. The Company recently spud its first two operated horizontal Wolfcamp wells which are scheduled to be completed early in the fourth quarter of 2018. In addition to these two wells, the Company expects three more wells to be put online in West Quito Draw around year end 2018.

Halcón currently holds 26,859 net acres in its Hackberry Draw area. The Company has drilled and completed 15 horizontal wells (13 Wolfcamp, one 2^nd Bone Spring and one 3^rd Bone Spring). Halcón has one well flowing back after frac and two wells currently being drilled. Including the well currently flowing back after frac, the Company expects to put five additional wells online in Hackberry Draw before year end 2018.

Recent Well Results

Within its Monument Draw area in Ward County, Halcón's Sealy Ranch 6401H well began producing oil in late June. This Wolfcamp well was drilled in the central portion of Monument Draw and completed with a 9,591' effective lateral length. The well reached a 2-stream peak 24 hour IP rate of 2,219 Boe/d (89% oil) on a 38/64" choke. The current 30-day average rate on this well is 1,756 Boe/d (86% oil) and continues to increase. The Company also recently began flowing back its Sealy Ranch 7701H and 7702H wells with average lateral length of 9,952'. These wells were completed "wine rack style" in the lower and upper Wolfcamp zones 330' apart horizontally and 250' apart vertically. The daily rates on these wells continue to increase with the latest 2-stream peak 24 hour IP rate for each well reaching 1,500 and 1,300 boe/d, respectively.

Within its Hackberry Draw area in Pecos County, Halcón recently put the Bobby West 1H well on production. The Bobby West 1H, located in the northeast portion of Hackberry Draw, was completed with a 9,755' effective lateral length and had a 2-stream peak 24 hour IP rate of 1,352 Boe/d (89% oil) on a 34/64" choke in addition to a 30 day peak 2-stream IP rate of 1,085 Boe/d (87% oil).