Why The Highpeak Energy Stock Increased Over 11% (HPK)

By Amit Chowdhry ● Jan 24, 2023
  • The stock price of Highpeak Energy (HPK) increased by over 11% pre-market. This is why.

The stock price of Highpeak Energy (HPK) increased by over 11% pre-market.

Why: HighPeak Energy announced that its Board of Directors (the “Board”) has voted to initiate a process to evaluate certain strategic alternatives to maximize shareholder value, including a potential sale of the Company. Credit Suisse Securities (USA) LLC and Wells Fargo Securities, LLC have been retained as financial advisors, and Vinson & Elkins L.L.P. as legal counsel to assist in the review process. Plus, HighPeak is providing 2023 and 2024 guidance herein, as approved by the Board.

There can be no assurance that any evaluation will result in one or more transactions or other strategic changes or outcomes. The Company has not set a timetable for the conclusion of its evaluation of strategic alternatives and it does not intend to comment further unless and until the Board has approved a specific course of action or the Company has otherwise determined that further disclosure is appropriate or required by law.

2023 and 2024 Development Outlook

Production (MBoe/d) 2023 2024
  • Average production rate
47 – 53 70 – 76
  • Exit production rate
58 – 66 72 – 80
Capex ($mm)
  • Gross Operated Wells TIL
135 – 145 105 – 110
  • Capital Expenditures D, C, E & F
$1,100 – $1,200 $850 – $900
  • Capital Expenditures, Infra/Land/Other
$50 – $60 $20 – $30
  • Total Capital Expenditures
$1,150 – $1,260 $870 – $930
Unit Measures ($/Boe)
  • Lease Operating Expenses
$5.25 – $5.75 $5.00 – $5.50
  • General & Administrative
$0.75 – $1.00 $0.60 – $0.80

 

ighPeak Chairman and Chief Executive Officer Jack Hightower released this statement:

The Board and I believe now is an opportune time to capture the value we do not consider is presently reflected in our share price. We have worked diligently over the last few years to secure this position and are poised to capitalize on the favorable energy market outlook.

Many investors remain unfamiliar with the extent of de-risking that has occurred in the Eastern Howard County area of the Midland Basin. There are currently 11 oil and gas companies running 21 rigs in Howard County, with over 1,600 completions in the last three years. HighPeak successfully drilled 215 horizontal wells across the Wolfcamp and Spraberry formations since inception. Furthermore, set against an economic backdrop of increasing scarcity of premium undeveloped inventory in the Permian Basin, HighPeak has identified approximately 2,500 total locations, including approximately 1,300 delineated primary locations which have a projected average return of 95% at a flat price of $90/Bbl WTI and $4/MMBtu HH natural gas. Our production is over 90% liquids and, based on public data, our margins are the highest of any pure-play Permian Basin public company. Our primary inventory locations alone are expected to provide over 14 years of activity at a 4-rig pace, which is what we project will be needed to maintain our estimated 2024 production level of around 75,000 Boe per day.

We believe our current acreage position of approximately 110,000 acres, consisting of two highly contiguous blocks, is configured optimally for efficient development. From the beginning, we had the long-term goal to both develop this acreage to maximize our returns and to minimize future infill, parent-child related issues. We have planned our facilities, infrastructure, and production corridors in an environmentally sound, efficient manner and consider our asset base, with its many years of high return inventory and first-class infrastructure and production facilities, as one of the premier acreage positions in the Midland Basin.

Based on our forecast, we anticipate having self-sustaining operations and becoming cash flow positive in the second half of this year and then transitioning into consistent free cash flow generation thereafter. We believe we are currently trading at a substantial discount to our intrinsic value and our investors will benefit materially as we transition into a free cash flow mode. Likewise, we believe many companies would benefit from owning our portfolio to extend their premium inventory life and enhance their return on capital. Due to our deep, high return inventory, industry leading margins, and long-term free cash flow generating asset base, we believe that our share price should move up to the trading multiples currently realized by certain potential purchasers and large cap pure play owners of Midland Basin assets. In closing, the Board and I are excited to start this process to explore ways to maximize the Company’s value for all its shareholders.

– Jack Hightower, Chairman and CEO