Overview

HighPeak Energy is an independent oil and gas exploration and production company focused on the Permian Basin in West Texas. As of March 31, 2024, the company had approximately 143,414 gross acres in the Midland Basin, with 63% held by production. HighPeak operates about 97% of its acreage.

In the first quarter of 2024, HighPeak’s oil and gas sales volumes increased 34% over the prior year quarter to 49,729 barrels of oil equivalent per day. This growth was driven by the company’s successful horizontal drilling program. About 91% of HighPeak’s production is liquids (oil and natural gas liquids).

Recent Events

• In February 2024, HighPeak’s Board of Directors approved a $75 million share repurchase program to buy back the company’s stock. During the first quarter, HighPeak repurchased 565,540 shares at an average cost of $15.50 per share, for a total of $8.8 million.

• In February 2024, HighPeak declared a quarterly dividend of $0.04 per share, resulting in $5.1 million in dividends paid in March 2024. The company also paid $536,000 in dividend equivalents to vested stock option holders.

• HighPeak spent $2.2 million in the first quarter to acquire additional acreage contiguous to its core operating areas.

Industry Considerations

• Global oil prices have strengthened due to recovering demand and supply constraints. However, recession fears, conflict between Russia and Ukraine, and OPEC production cuts have introduced uncertainty. These factors could impact HighPeak’s future results and drilling plans.

• HighPeak is maintaining flexibility in its drilling program and capital spending plans. The company will continue evaluating activity levels on a monthly basis depending on market conditions.

Strategic Alternatives

• In January 2023, HighPeak announced its Board would evaluate potential strategic alternatives including a possible company sale. This process remains in the early exploratory stage.

Financial and Operating Performance

• First quarter 2024 net income was $6.4 million ($0.05 per diluted share) compared to $50.3 million in the prior year quarter. The decrease was primarily due to a non-cash loss on derivatives of $53.0 million in first quarter 2024 versus a $3.1 million gain last year.

• First quarter 2024 oil, NGL and gas revenues increased by $64.0 million over the prior year quarter to $315.6 million. This reflected a 34% increase in sales volumes partially offset by a 5% decrease in realized commodity prices.

• As of March 31, 2024, HighPeak was running 2 drilling rigs and 1 frac crew. The company expects to maintain this level of activity for the remainder of 2024.

EBITDAX (non-GAAP measure)

• First quarter 2024 EBITDAX was $233.3 million compared to $173.9 million in the prior year quarter. The increase primarily reflected higher oil and gas volumes and revenues.

Liquidity and Capital Resources

• As of March 31, 2024, HighPeak had $171.4 million of net cash provided by operating activities during the first quarter.

• The 2024 capital budget is estimated at $450 million to $525 million for drilling and completions, plus $50 million to $60 million for infrastructure. HighPeak expects to fund this spending with cash on hand, cash from operations, and borrowing capacity under its credit facility.

• As of March 31, 2024, HighPeak had $1.17 billion of debt outstanding under its Term Loan Credit Agreement. The company has hedges in place to mitigate exposure to commodity price volatility.

In summary, HighPeak Energy delivered strong production growth in the first quarter of 2024 compared to the prior year period. The company maintains a solid financial position and liquidity. HighPeak continues monitoring industry risks such as commodity prices, inflationary pressures, and the global macroeconomic environment. The company retains flexibility in its drilling program to adapt to market conditions.