GlobeNewswire Inc | Nov 8, 2021 04:01PM EST

November 08, 2021

FORT WORTH, Texas, Nov. 08, 2021 (GLOBE NEWSWIRE) -- HighPeak Energy, Inc. (HighPeak or the Company) (NASDAQ: HPK) today announced financial and operating results for the third quarter 2021. The Company completed its business combination on August 21, 2020 and consequently, the following operational and financial data refer to the three and nine months ended September 30, 2021 and the period from August 22, 2020 through September 30, 2020 (the Successor periods) and the periods from July 1, 2020 through August 21, 2020 and January 1, 2020 through September 30, 2020 (the Predecessor periods).

Third Quarter 2021 Highlights

-- Third quarter 2021 sales volumes of 8,168 barrels of oil equivalent per day (Boe/d), 94% liquids. Production volumes have averaged approximately 15,500 Boe/d since mid-October. -- EBITDAX (a non-GAAP measure as defined and reconciled below) of $33.3 million and $91.8 million for the three and nine months ended September 30, 2021, respectively. -- Third quarter 2021 realized price of $63.18 per Boe and realized cash operating margin of $51.88 per Boe, excluding the effects of derivatives. -- Drilled ten (10) operated wells and one (1) operated salt-water disposal well and completed six (6) operated wells. Also participated in drilling three (3) non-operated horizontal wells. -- Closed multiple bolt-on acquisitions comprising approximately 10,600 net acres in the aggregate. -- Initiated a $0.025 per share quarterly dividend and paid a special dividend of $0.075 per share in July 2021. Declared a $0.025 per share quarterly dividend in September 2021 which was paid in October 2021. -- Amended the Revolving Credit Facility to increase the borrowing base and the elected commitments to $195 million effective October 1, 2021. -- Ended third quarter 2021 with a revolving credit facility balance of $95 million and a $12 million cash balance, or net debt of $83 million (a non-GAAP measure as defined and reconciled below). -- Completed a public stock offering on October 20, 2021 of 2.53 million shares of common stock for aggregate gross proceeds of approximately $25.3 million. -- Continued to realize peer leading operated all-in drill, complete, equip and facility well costs of approximately $505 per lateral foot in our Flat Top operating area.

2022 Preliminary 4 Rig Development Outlook

Production (Boe/d) ? Average production rate 26,000 ? 31,000?Exit production rate 36,000 ? 42,000 Capex ($MM) ?Gross Operated Wells TIL 80 - 110?Capital Expenditures, D,C,E&F $610 - $660 ?Capital Expenditures, Infra/Land/Other $35 - $40?Total Capital Expenditures $645 - $700 Unit Measures ($/Boe) ?Lease Operating Expenses $4.50 - $5.25?Production Taxes $3.75 - $4.50?General & Administrative $1.00 - $1.50?Total Cash Costs $9.25 - $11.25

HighPeak Chairman and Chief Executive Officer, Jack Hightower, said, Our production growth rate continues to increase significantly based on the strong performance of our wells. Our production volumes during the second half of October averaged approximately 15,500 Boe/d. We are excited to continue the acceleration of our rapid development growth plan. In addition, due to our excellent well economics and the current strength of the commodity market, we now plan to introduce a fourth rig before the end of the year to continue to pull value forward for our investors while maintaining our philosophy of less than one turn of leverage.

Third Quarter Operational Update

The Companys production since mid-October has averaged approximately 15,500 Boe/d compared with third quarter 2021 production average of 8,168 Boe/d. The Companys third quarter production volumes were significantly influenced by the temporary curtailment of producing wells during offset well completion operations. The temporarily shut-in wells returned to production late in the third quarter and have continued to increase to pre-shut in production levels. The Company expects the wells drilled by the second rig during the third quarter 2021 to begin contributing meaningful production early in 2022.

During the third quarter of 2021, the Company drilled ten (10) operated horizontal wells and one (1) operated horizontal salt-water disposal well utilizing two (2) drilling rigs. The Company completed six (6) producing wells in its Flat Top area. At the end of the third quarter, the Company was in various stages of completion on three (3) wells, had five (5) operational drilled uncompleted wells (DUCs) waiting on completion, and was in the process of drilling three (3) operated wells. The Company also participated in drilling three (3) non-operated horizontal wells during the third quarter 2021 and was participating in drilling two (2) non-operated horizontal wells at the end of the quarter.

The Company added a third drilling rig in October 2021 to further delineate its Signal Peak area and to accelerate development drilling in its Flat Top operating area. The addition of the third rig will not change the Companys capital expenditure guidance for 2021.

Michael Hollis, HighPeaks President, commented, In spite of recent industry-wide inflationary pressures, we maintained our peer leading $505 per lateral foot capital cost to drill, complete, equip and provide facilities in the Flat Top area which is a testament to our team, their cost-focused attention to detail and the measures they implemented to keep our costs stable in this environment. LOE was a little hot in the third quarter. We knew it was coming and took the necessary steps, beginning last year, to initiate and build the infrastructure to solve it. We expect LOE per Boe to be significantly lower in 2022 as these projects are commissioned and as represented in our 2022 outlook projections. Margins continue to be peer leading based on our high oil and liquids production mix. We expect to maintain robust margins going forward and, although we have hedged a portion of our forward production, most of our future production will be exposed to commodity prices.

Third Quarter 2021 Financial Results

HighPeak reported net income of $8.0 million for the third quarter of 2021, or $0.08 per diluted share. EBITDAX (a non-GAAP financial measure as defined and reconciled below) was $33.3 million, or $0.33 per diluted share.

Third quarter average realized prices were $69.84 per barrel of oil, $35.83 per barrel of natural gas liquids and $3.69 per Mcf of natural gas, resulting in an overall price of $63.18 per Boe, excluding the effects of derivatives.HighPeaks cash costs for the third quarter were $13.52 per Boe including lease operating expenses of $8.93 per Boe, production and ad valorem taxes of $2.37 per Boe and cash G&A expenses of $2.22 per Boe.

HighPeaks third quarter 2021 capital expenditures to drill, complete, equip, provide facilities and to build water and power infrastructure were approximately $64.6 million.In addition, the Company incurred capital expenditures of approximately $51.2 million to close multiple bolt-on acquisitions.

At September 30, 2021, the Company had $95.0 million in long-term debt and $12.0 million of cash on hand. In October 2021, the Companys borrowing base and bank commitments were increased to $195.0 million.

Bolt-On Acquisitions

During the third quarter 2021, the Company closed a series of unrelated, accretive bolt-on acquisitions from various third parties primarily located in its Signal Peak operating area. In the aggregate, the assets acquired represent approximately 10,600 net acres with estimated average production of more than 1,400 Boe/d for the remainder of 2021 and working interests in salt-water disposal wells and related infrastructure.

Initial Dividend

In July 2021, the Companys Board of Directors approved its first quarterly dividend of $0.025 per share and also approved a special dividend of $0.075 per share which resulted in a total of $9.3 million in dividends paid to stockholders on July 26, 2021. In addition, in September 2021, the Companys Board of Directors declared a dividend of $0.025 per share which resulted in a total of $2.3 million in dividends paid to stockholders on October 25, 2021.

Updated 2021 Guidance

HighPeak Energy increased its development drilling program from one rig to two rigs early in the third quarter with a primary focus on the co-development of its Lower Spraberry and Wolfcamp A formations in its Flat Top area. The Company added a third drilling rig in October to further delineate its Signal Peak area and to accelerate development drilling in its Flat Top area. The addition of the third rig will not change the Companys 2021 capital expenditure guidance. Additionally, we will continue the buildout of our field infrastructure to reduce operating costs and advance our ESG objectives. The Company reiterates its 2021 capital investment guidance of approximately $245 to $270 million, excluding acquisitions.

Mr. Hollis, continued, Due to robust well results, high operating margins and our ability to keep capital costs flat at $505 per lateral foot, we intend to lean into this high commodity price environment by further accelerating our development program in the fourth quarter. We look forward to a year of substantial production and cash flow growth for HighPeak in 2022.

Conference Call

HighPeak Energy will host a conference call and webcast on Tuesday, November 9, 2021 at 10:00 a.m. Central Time for investors and analysts to discuss its results for the third quarter of 2021 as well as provide an overview of recent activities and its remaining 2021 operating plan.Conference call participants may call (833) 362-0226 (United States/Canada) or (914) 987-7683 (International) and enter confirmation code 3399526.A live broadcast of the earnings conference call will also be available on the HighPeak Energy website at www.highpeakenergy.com under the Investors section of the website. A replay will also be available on the website following the call.

When available, a copy of the Companys earnings release, investor presentation and Quarterly Report on Form 10-Q may be found on its website at www.highpeakenergy.com.

About HighPeak Energy, Inc.

HighPeak Energy, Inc. is a publicly traded independent oil and natural gas company, headquartered in Fort Worth, Texas, focused on the acquisition, development, exploration and exploitation of unconventional oil and natural gas reserves in the Midland Basin in West Texas. For more information, please visit our website at www.highpeakenergy.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate" or the negative of such terms and similar expressions as they relate to HighPeak Energy, Inc. ("HighPeak Energy," the "Company" or the Successor) are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control.

These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, the impact of a widespread outbreak of an illness, such as the coronavirus disease (COVID-19) pandemic, on global and U.S. economic activity, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company's drilling and operating activities, access to and availability of transportation, processing, fractionation, refining and storage facilities, HighPeak Energy's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to any credit facility and derivative contracts entered into by HighPeak Energy, if any, and purchasers of HighPeak Energy's oil, natural gas liquids and natural gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying forecasts, including forecasts of production, expenses, cash flow from sales of oil and gas and tax rates, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cybersecurity risks and acts of war or terrorism. These and other risks are described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and other filings with the SEC. The Company undertakes no duty to publicly update these statements except as required by law.

HighPeak Energy, Inc.Summary Balance Sheet Data (Unaudited)(In thousands)

September 30, December 31, 2021 2020Cash and cash equivalents $ 11,966 $ 19,552 Other current assets 30,453 13,743 Oil and natural gas properties, net 664,831 502,636 Other noncurrent assets 6,325 1,999 Total assets $ 713,575 $ 537,930 Current liabilities $ 77,014 $ 22,435 Long-term debt, net 93,102 ? Other long-term liabilities 53,551 41,269 Stockholders' equity Common stock 9 9 Additional paid-in capital 591,360 581,426 Accumulated deficit (101,461 ) (107,209 )Total stockholders' equity 489,908 474,226 Total liabilities and stockholders' equity $ 713,575 $ 537,930

HighPeak Energy, Inc.Condensed Consolidated and Combined Statements of Operations (Unaudited)(in thousands, except per share data)

Three August 22, July 1, Nine Months August 22, January 1, Months 2020 2020 Ended 2020 2020 Ended through through September through through September September August 21, 30, September August 21, 30, 30, 2020 2021 30, 2020 2021 2020 2020 Successor Successor Predecessor Successor Successor PredecessorOperating Revenues:Crude oil $ 44,785 $ 4,787 $ 2,607 $ 116,640 $ 4,787 $ 8,069 salesNatural gas 2,687 47 49 4,819 47 154 and NGL salesTotaloperating 47,472 4,834 2,656 121,459 4,834 8,223 revenuesOperatingCosts and Expenses:Oil andnatural gas 6,710 671 667 13,629 671 4,870 productionProduction andad valorem 1,783 257 164 5,990 257 566 taxesExplorationand 488 66 ? 1,142 66 4 abandonmentsDepletion,depreciation 13,917 2,327 1,294 43,737 2,327 6,385 andamortizationAccretion of 44 15 20 116 15 89 discountGeneral and 1,666 816 567 5,042 816 4,840 administrativeStock-based 905 14,508 ? 2,894 14,508 ? compensationTotaloperating 25,513 18,660 2,712 72,550 18,660 16,754 costs andexpensesIncome (loss)from 21,959 (13,826 ) (56 ) 48,909 (13,826 ) (8,531 )operationsInterest ? 1 ? 1 1 ? incomeInterest (947 ) ? ? (1,153 ) ? ? expenseDerivative (10,820 ) ? ? (24,416 ) ? ? loss, netOther expense ? ? ? (127 ) ? (76,503 )Income (loss)before income 10,192 (13,825 ) (56 ) 23,214 (13,825 ) (85,034 )taxesIncome taxexpense 2,145 (2,309 ) ? 2,535 (2,309 ) ? (benefit)Net income $ 8,047 $ (11,516 ) $ (56 ) $ 20,679 $ (11,516 ) $ (85,034 )(loss) Earnings(loss) per share:Basic net $ 0.07 $ (0.13 ) $ 0.18 $ (0.13 ) income (loss)Diluted net $ 0.08 $ (0.13 ) $ 0.18 $ (0.13 ) income (loss) Weightedaverage shares outstanding:Basic 92,676 91,592 92,648 91,592 Diluted 92,678 91,592 92,715 91,592 Dividendsdeclared per $ 0.125 $ ? $ 0.125 $ ? share

HighPeak Energy, Inc.Condensed Consolidated and Combined Statements of Cash Flows (Unaudited)(in thousands)

Nine Months Ended September 30, 2020 Nine Months August 22, January 1, Ended 2020 2020 September through through 30, September August 21, 2021 30, 2020 2020 Successor Successor PredecessorCASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 18,534 $ (11,516 ) $ (85,034 )Adjustments to reconcile net income(loss) to net cash provided by (used in) operations:Exploration and abandonment expense 698 14 4 Depletion, depreciation and 43,737 2,327 6,385 amortization expenseAccretion expense 116 15 89 Stock based compensation expense 2,894 14,508 ? Amortization of debt issuance costs 259 ? ? Derivative-related activity 19,402 ? ? Loss on terminated acquisition ? ? 76,500 Deferred income taxes 4,680 (3 ) ? Changes in operating assets and liabilities:Accounts receivable (16,168 ) (3,404 ) 844 Prepaid expenses, inventory and other (7,816 ) (357 ) (196 )assetsAccounts payable, accrued liabilities 21,401 9,109 (2,694 )and other current liabilitiesNet cash provided by (used in) 87,737 10,693 (4,102 )operating activitiesCASH FLOWS FROM INVESTING ACTIVITIES: Additions to oil and natural gas (154,599 ) (17,908 ) (49,364 )propertiesChanges in working capital associatedwith oil and natural gas property 15,995 (23,421 ) 7,348 additionsAcquisitions of oil and natural gas (53,276 ) (704 ) (3,338 )propertiesProceeds from sales of properties 3,234 ? (50 )Other property additions (453 ) ? (50 )Issuance of notes receivable ? ? (7,482 )Extension payment on acquisition ? ? (15,000 )Net cash used in investing activities (189,099 ) (42,033 ) (67,886 )CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit 95,000 ? ? facilityProceeds from exercises of warrants 5,466 ? ? Proceeds from subscription receivable 3,596 ? ? from exercise of warrantsProceeds from exercises of stock 1,574 ? ? optionsDebt issuance costs (1,757 ) ? ? Dividends paid (9,274 ) ? ? Dividend equivalents paid (829 ) ? ? Proceeds from stock offering ? 92,554 ? Stock offering costs ? (8,383 ) ? Cash acquired from non-successors in ? 100 ? HighPeak business combinationContributions from partners ? ? 54,000 Distributions to partners ? ? (2,780 )Net cash provided by financing 93,776 84,271 51,220 activitiesNet (decrease) increase in cash and (7,586 ) 52,931 (20,768 )cash equivalentsCash and cash equivalents, beginning 19,552 1,943 22,711 of periodCash and cash equivalents, end of $ 11,966 $ 54,874 $ 1,943 period

HighPeak Energy, Inc.Operating Highlights (Unaudited)

Three Months Ended September 30, 2020 Three August 22, Months 2020 July 1, Ended through 2020 through September September August 21, 30, 30, 2020 2021 2020 Successor Successor PredecessorsSales Volumes: Oil (Bbls) 641,238 124,168 64,493 NGLs (Bbls) 61,949 1,749 3,150 Natural gas (Mcf) 289,520 12,466 21,283 Total (Boe) 751,440 127,995 71,189 Daily Sales Volumes: Oil (Bbls/d) 6,970 3,104 1,240 NGLs (Bbls/d) 673 44 61 Natural gas (Mcf/d) 3,147 312 409 Total (Boe/d) 8,168 3,200 1,369 Revenues (in thousands): Crude oil sales $ 44,785 $ 4,787 $ 2,607 Crude oil derivative settlements (3,976 ) ? ? NGL and natural gas sales 2,687 47 49 Total Revenues, including derivative $ 43,496 $ 4,834 $ 2,656 settlements Average sales prices: Crude oil (per Bbl) $ 69.84 $ 38.55 $ 40.43 Crude oil derivative settlements (per (6.20 ) ? ? Bbl)NGL (per Bbl) 35.83 16.43 4.91 Natural gas (per Mcf) 3.69 2.30 2.04 Total, including derivative contract $ 57.88 $ 37.77 $ 37.30 settlements (per Boe) Weighted Average NYMEX WTI ($/Bbl) $ 70.70 $ 40.20 $ 42.12 Weighted Average NYMEX Henry Hub ($/ 4.07 2.33 1.64 Mcf)Realization to benchmark Crude oil (per Bbl) 99 % 96 % 96 %Natural gas (per Mcf) 91 % 99 % 124 % Operating Costs and Expenses (in thousands):Lease operating expenses $ 6,710 $ 671 $ 667 Production and ad valorem taxes 1,783 257 164 General and administrative expenses 1,666 816 567 Depletion, depreciation and 13,917 2,327 1,294 amortization Operating costs per Boe: Lease operating expenses $ 8.93 $ 5.24 $ 9.38 Production and ad valorem taxes 2.37 2.01 2.30 General and administrative expenses 2.22 6.38 7.96 Depletion, depreciation and 18.52 18.18 18.17 amortization

HighPeak Energy, Inc.Operating Highlights (Unaudited)

Nine Months Ended September 30, 2020 August 22, January 1, Nine Months 2020 2020 Ended through through September 30, September August 21, 2021 30, 2020 2020 Successor Successor PredecessorsSales Volumes: Oil (Bbls) 1,791,002 124,168 235,557 NGLs (Bbls) 134,110 1,749 20,024 Natural gas (Mcf) 610,114 12,466 87,258 Total (Boe) 2,026,798 127,995 270,123 Daily Sales Volumes: Oil (Bbls/d) 6,560 3,104 1,007 NGLs (Bbls/d) 491 44 86 Natural gas (Mcf/d) 2,235 312 373 Total (Boe/d) 7,424 3,200 1,154 Revenues (in thousands): Crude oil sales $ 116,640 $ 4,787 $ 8,069 Crude oil derivative settlements (5,014 ) ? ? NGL and natural gas sales 4,819 47 154 Total Revenues, including $ 116,445 $ 4,834 $ 8,223 derivative settlements Average sales prices: Crude oil (per Bbl) $ 65.13 $ 38.55 $ 34.26 Crude oil derivative settlements (2.80 ) ? ? (per Bbl)NGL (per Bbl) 31.16 16.43 9.31 Natural gas (per Mcf) 3.09 2.30 0.52 Total, including derivative $ 57.45 $ 37.77 $ 30.44 contract settlements (per Boe) Weighted Average NYMEX WTI ($/Bbl) $ 65.92 $ 40.20 $ 35.17 Weighted Average NYMEX Henry Hub 3.40 2.33 1.76 ($/Mcf)Realization to benchmark Crude oil (per Bbl) 99 % 96 % 97 %Natural gas (per Mcf) 91 % 99 % 30 % Operating Costs and Expenses (in thousands):Lease operating expenses $ 13,629 $ 671 $ 4,870 Production and ad valorem taxes 5,990 257 566 General and administrative 5,042 816 4,840 expensesDepletion, depreciation and 43,737 2,327 6,385 amortization Operating costs per Boe: Lease operating expenses $ 6.72 $ 5.24 $ 18.03 Production and ad valorem taxes 2.96 2.01 2.10 General and administrative 2.49 6.38 17.92 expensesDepletion, depreciation and 21.58 18.18 23.64 amortization

HighPeak Energy, Inc.Reconciliation of Net Income (Loss) to EBITDAX (Unaudited)(in thousands)

Three Months Ended Nine Months Ended September 30, 2020 September 30, 2020 Three August 22, July 1, Nine August 22, January 1, Months 2020 2020 Months 2020 2020 Ended through through Ended through through September September August 21, September September August 21, 30, 30, 2020 30, 30, 2020 2021 2020 2021 2020 Successor Successor Predecessor Successor Successor PredecessorNet income $ 8,047 $ (11,516 ) $ (56 ) $ 18,534 $ (11,516 ) $ (85,034 )(loss)Interest 947 ? ? 1,153 ? ? expenseInterest ? (1 ) ? (1 ) (1 ) ? incomeIncome taxexpense 2,145 (2,309 ) ? 4,680 (2,309 ) ? (benefit)Depletion,depreciation 13,917 2,327 1,294 43,737 2,327 6,385 andamortizationAccretion of 44 15 20 116 15 89 discountExplorationand 488 66 ? 1,142 66 4 abandonmentexpenseStock based 905 14,508 ? 2,894 14,508 ? compensationDerivativerelated 6,844 ? ? 19,402 ? ? noncashactivityOther ? ? ? 127 ? 76,503 expenseEBITDAX $ 33,337 $ 3,090 $ 1,258 $ 91,784 $ 3,090 $ (2,053 )

HighPeak Energy, Inc.Net Debt (Unaudited)(In thousands) September 30, 2021Outstanding borrowings on Revolving Credit Facility $ 95,000Cash and cash equivalents 11,966Net debt $ 83,034

Investor Contact:

Ryan HightowerVice President, Business Development817.850.9204rhightower@highpeakenergy.com

Source: HighPeak Energy, Inc.