Halcon Resources (HK) is an independent, U.S.-based oil and gas exploration and production company. At the time of our investment, the stock was out of favor due to a combination of high levels of investment spending and poor drilling results at select wells. This created an opportunity to invest in the management team, which has an excellent record of finding and developing energy assets, and their ability to deliver improved exploration results and production growth. Halcon’s stock underperformed meaningfully in the quarter, reversing strong performance in the first half of 2014. As a development-stage company with a leveraged balance sheet, the company’s stock demonstrated greater volatility than the sector as a whole and declined significantly more than the price of oil. Despite short-term volatility potential, we believe the company has the ability grow reserves and production and could potentially be an acquisition target over the long term.
From Meridian Funds (Trades, Portfolio)’ Meridian Contrarian Fund 3Q 2014 Commentary.
