Business Context and Reporting Period
HighPeak Energy, Inc. filed this Form 8-K on June 23, 2022, reporting completion of related acquisitions of oil and gas properties in Howard and Borden Counties, Texas, contiguous to its Flat Top operating area.
Transaction and Key Financial Information
- The February Acquisition closed on March 25, 2022 and included producing properties, undeveloped acreage, water-system infrastructure, and in-field fluid-gathering pipelines.
- Consideration for the February Acquisition was 6,960,000 shares of common stock valued at $156.6 million at closing, plus $141,000 in cash, subject to final post-closing settlement.
- The June Acquisition closed on June 21, 2022 and involved additional producing crude oil and natural gas properties in Borden County.
- Consideration for the June Acquisition was 371,517 shares of common stock valued at $11.2 million at closing, subject to final post-closing settlement.
- Combined consideration for both acquisitions was 7,331,517 shares of common stock, with customary closing adjustments totaling $1.3 million in cash paid to the Company, subject to post-closing settlements.
- The filing does not provide clear aggregate revenue, profit, cash flow, margin, debt, liquidity, or operating production figures for the acquired assets in the filing text.
Material Changes Versus Prior Period
The acquisitions expanded HighPeak’s producing properties, undeveloped acreage, water infrastructure, and fluid-gathering assets. Following the June closing, the transactions were determined to constitute a significant acquisition of a business when evaluated together under Rule 3-05 of Regulation S-X.
Guidance, Outlook, Risks, and Unusual Items
- No financial guidance or operating outlook is provided in the filing.
- Final consideration remains subject to post-closing settlements with the sellers.
- The acquired-business financial information includes audited historical consolidated revenues and direct operating expenses for the year ended December 31, 2021 and unaudited revenues and direct operating expenses for the three months ended March 31, 2022.
- Unaudited pro forma financial information was filed for the March 31, 2022 balance sheet and for the three months ended March 31, 2022 and year ended December 31, 2021 income statements. The filing text does not provide the pro forma amounts.
Investor Verification Items
- Review Exhibit 99.1 for the pro forma effects of the acquisitions on HighPeak’s balance sheet and operating results.
- Review Exhibits 99.2 and 99.3 for the acquired assets’ historical revenues and direct operating expenses.
- Verify the final post-closing settlement amounts and any resulting adjustment to purchase consideration.
- Assess the dilution from the issuance of 7,331,517 common shares and the acquired assets’ contribution to production, revenue, and cash flow.
- Review the purchase agreements for omitted schedules, confidential terms, closing adjustments, and other contingent obligations.