HighPeak Energy, Inc. — Form 8-K Summary
Reporting date: December 17, 2020. The filing reports entry into a material definitive agreement and creation of a direct financial obligation. It does not provide quarterly or annual operating results.
Material Financing Agreement
- HighPeak Energy entered into a senior secured revolving credit agreement with Fifth Third Bank, National Association, as administrative agent, and participating lenders.
- The facility matures three and one-half years after the closing date.
- Borrowing capacity is the lowest of the borrowing base, elected commitments, or $500.0 million.
- The initial borrowing base was $40.0 million, while aggregate elected commitments were $20.0 million.
- At closing, the company had no borrowings or letters of credit outstanding, resulting in approximately $20.0 million of availability.
- The facility is guaranteed by the company and its restricted subsidiaries and secured by substantially all of their assets.
Key Terms and Financial Metrics
| Item | Term |
|---|---|
| Initial borrowing base | $40.0 million |
| Initial elected commitments | $20.0 million |
| Initial availability | Approximately $20.0 million |
| Letters of credit capacity | Greater of $5.0 million or 5.0% of the borrowing base, reducing available borrowings |
| Eurodollar loan margin | 3.25% to 4.25% over the Adjusted LIBO Rate |
| Alternate base rate loan margin | 2.25% to 3.25% over the applicable base rate |
| Commitment fee | 0.50% |
| Default rate increase | 2.00% above the otherwise applicable rate and margin, at lender election |
| Maximum total debt-to-EBITDAX ratio | 3.0 to 1.0, beginning with the quarter ending March 31, 2021 |
| Minimum current ratio | 1.0 to 1.0, beginning with the quarter ending March 31, 2021 |
Redeterminations, Restrictions, and Liquidity Provisions
- The borrowing base is scheduled for semiannual redetermination each April 1 and October 1, beginning on or about April 1, 2021. The company and administrative agent may each request one additional unscheduled redetermination between scheduled reviews.
- The borrowing base is determined by the administrative agent under its oil and gas lending criteria and may be adjusted for asset sales, reductions or eliminations of hedge positions, and additional debt.
- The agreement restricts additional indebtedness, liens, investments, mergers and acquisitions, dividends and other payments, certain hedging transactions, asset sales, and affiliate transactions.
- Monthly mandatory prepayments may be required when consolidated cash exceeds $20.0 million.
- Borrowings may be repaid before maturity without a premium or penalty, other than customary LIBOR breakage costs.
Material Changes, Outlook, and Risks
Relative to the prior comparable period, the filing text does not provide operating or financial performance comparisons. The material change is the establishment of a secured revolving credit facility with initial undrawn availability of approximately $20.0 million.
- Future liquidity depends on continued compliance with financial covenants, borrowing-base determinations, lender commitments, and conditions precedent to borrowing.
- A borrowing-base reduction, additional debt, asset sales, or changes in hedge positions could reduce availability.
- Failure to satisfy covenants or other events of default, including a change in control, could permit acceleration of outstanding obligations and termination of commitments.
- The filing provides no earnings, revenue, cash-flow, margin, production, or formal guidance outlook.
Investor Verification Items
- Verify the full credit agreement, including omitted schedules, annexes, exhibits, borrowing conditions, and detailed covenant definitions.
- Monitor the April 2021 and subsequent borrowing-base redeterminations and any changes to elected commitments.
- Confirm future borrowings, letters of credit, interest expense, and compliance with the 3.0-to-1.0 debt-to-EBITDAX and 1.0-to-1.0 current-ratio covenants.
- Assess the effect of the facility’s first-priority liens, mandatory cash prepayment provisions, and restrictions on corporate activity.