HighPeak Energy, Inc. 8-K Summary
Business Context and Reporting Period
Filed February 9, 2022, under Items 2.02, 7.01 and 8.01. The filing provides preliminary operating information for the quarter and year ended December 31, 2021, reserve estimates as of December 31, 2021, and financing-related updates. Final financial and operating results had not been completed when the filing was issued.
Key Financial and Operating Metrics
- HighPeak priced a proposed private placement of $225 million of 10.00% senior unsecured notes due 2024.
- Preliminary fourth-quarter 2021 average net daily production was estimated at 14.5 to 15.5 MBoe per day, consisting of approximately 85% to 90% oil and 92.5% to 97.5% liquids.
- Preliminary fourth-quarter 2021 EBITDAX was estimated at $70 million to $75 million. EBITDAX is a non-GAAP measure and was unaudited, unreviewed and subject to potentially material adjustments.
- The company drilled 26 horizontal wells during 2021: 21 in Flat Top, including one salt-water disposal well, and five in Signal Peak. An additional 28 wells were in progress at year-end.
- At December 31, 2021, the company had approximately 27 gross, or 23.0 net, oil wells in various stages of drilling or completion.
- The filing does not provide clear final values for revenue, net income, operating cash flow, margins, cash balances or total debt.
Proved Reserves and PV-10 at December 31, 2021
| Reserve category | SEC pricing | Management pricing |
|---|---|---|
| Proved developed producing | 20,371 MBoe; PV-10 of $530.7 million | 20,508 MBoe; PV-10 of $582.0 million |
| Proved developed non-producing | 8,214 MBoe; PV-10 of $211.3 million | 8,244 MBoe; PV-10 of $233.4 million |
| Proved undeveloped | 35,628 MBoe; PV-10 of $596.2 million | 35,757 MBoe; PV-10 of $682.2 million |
| Total proved | 64,213 MBoe; PV-10 of $1.338 billion | 64,509 MBoe; PV-10 of $1.498 billion |
PV-10 is a non-GAAP measure. SEC pricing uses required 12-month average commodity prices, while management pricing assumes $72 per barrel of oil and $3.75 per MMBtu of natural gas. Management pricing is not a forecast of future commodity prices.
Material Changes, Outlook and Risks
- For 2022, management planned to operate four drilling rigs and an average of two frac fleets in the Permian Basin.
- The company expects to maintain flexibility in its capital plan and assess drilling and completion activity monthly based on economic conditions.
- A proposed third amendment to the credit agreement would create a springing maturity date of October 1, 2023 if the 2024 notes are not retired or refinanced before then.
- The amendment would permit redemption of the notes with refinancing proceeds, equity offering proceeds or cash, subject to customary conditions, and would replace USD LIBOR with Term SOFR.
- COVID-19-related effects remain difficult to predict and could affect activity levels, costs and the capital plan.
- Lower oil and natural gas prices could reduce development capital, make proved undeveloped reserves uneconomic, or cause those reserves to be removed from the PUD category.
- Reserve reports were prepared by Cawley, Gillespie & Associates, Inc. Actual results may differ materially from the preliminary production and EBITDAX estimates.
Investor Verification Points
- Verify completion of the private placement and the resulting cash proceeds, interest obligations and debt balances.
- Reconcile the preliminary fourth-quarter production and EBITDAX estimates to the audited 2021 financial statements.
- Review the reserve engineers’ SEC-price and management-price reports, including PV-10 assumptions and PUD development timing.
- Confirm the final terms and effectiveness of the third credit agreement amendment, including the October 1, 2023 springing maturity.
- Assess liquidity, refinancing requirements and sensitivity to oil and natural gas prices.