UPDATE: J.P. Morgan Lowers PT on Halcon Resources on Multiple Risk Factors

In a report published Friday, J.P. Morgan analyst Joseph Allman reiterated a Neutral rating on Halcon Resources HK, but lowered the price target from $8.50 to $5.00.

In the report, J.P. Morgan noted, “Last year Halcón focused on building a critical mass of oil-weighted and liquids-rich assets. This year HK is delineating and formulating its development plans. Ultimately management intends to sell the company. The CEO sold a few companies in the past, including Petrohawk to BHP in 2011, so the market likely expects a sale at some point, in our view. Management indicates such a sale is possible over the next three to five years. HK has underperformed over the past one month, three months, and YTD. Three of the four core areas (Woodbine, Utica/Point Pleasant, and El Halcón) are early stage, and parts of Halcón's Bakken acreage are less developed. We anticipate additional well results from HK and offset operators throughout the year. New data points potentially could serve as catalysts for the stock and could allow us to de-risk (or not de-risk) some of these plays. For now we maintain a risked valuation. HK is trading at a significant premium to the group, which reflects investor optimism in early stage plays and management and/or takeout premiums, in our view. We estimate that the company will need to address its funding gap over the next two years. We reiterate our Neutral rating.”

Halcon Resources closed on Thursday at $5.58.