HPK - Earnings call 3 2023 | HighPeak Energy, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the HighPeak Energy 2023 Third Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your first speaker today, Steven Tholen, CFO.

Steven Tholen

Good morning, everyone, and welcome to HighPeak Energy's third quarter 2023 earnings call. Officer. Chairman of Jack and Business Tholen, Chief are Hollis; President, I'm today the President Vice Development, Financial HighPeak and Hightower; CEO, Michael Steven Representing Ryan Hightower;

refer to please and results During due so differ statements the performance, our the the cautionary third today's SEC many goals, statements future and relating earnings our the to can Today's may to HighPeak's forward-looking regarding to of which control. of reasons, company's actual plans, of related found release, will company's assumptions make call, expectations information variety call, make materially participants from quarter November results presentation may in operations, which risks and we expectations, a our fact are investor filings, including that our beyond on website. condition, be financial reference certain forward-looking

in the I Hightower. over please We Chairman Jack the earnings to call, will also and to refer and so November non-GAAP financial today's the reconciliations CEO, call in now on turn our measures investor see our certain release will presentation.

Jack Hightower

Energy. quarter HighPeak -- today. an exciting company that time for to the talk perhaps exciting Steve, a about for history you, quarter start our good Thank Slide no quarter on call and and question our will but in beyond exciting saying Historically, X off earnings an remarks My begin transformational the joining today. prepared this third HighPeak, this is our it's thank to and of that morning, of I want always gentlemen, presentation. there's and you time, best is It's ladies I

a we our greater as were billion from day EBITDAX liquidity annual a rate, and secured cash on discuss a company third generating months capital quarter the short material $X transitioned just We plan. through to where ago, Our and production translates amount points go of averaged free today definitely over a our BOE we'll accomplish we flow, detail historical to positive we needed for in and different we run outspend capital an over are a substantially the than few XX,XXX necessary to presentation. further long-term strategic these quarter,

turn start exciting the HighPeak. X in you'll the if to amazing, will time this presentation, So at Slide

and slide, All X Looking achieved in these at company primary goals, third to accordance a this our only during and X internal we position milestones milestones these not are the expectations. major of were into projections different-looking with our transforming achieve company. also completely but us quarter us our

running. we not increasing about scale barrels to new XX,XXX a increase the running. over is our but and a X quarter XX% the base quarter which growth X second our average. That much rigs and to but asset 'XX at establishes had increase X we our when we that as level production barrels did, rigs primary over third had XX,XXX day, highlight starting rigs also phenomenal as quarter, continues only average, for day had average XXX% we we HighPeak. high last of average running, compared compared that, of First Prior only to a is quality to our Thinking

a the run quarter scale third our new company. billion with and increased our compared for conjunction in production, our again, to to rate, quarter translates annual an EBITDAX in on of XX% Second, increase level $X second over equates to

with company for third quality our significant over crew second of quarter. reached and responsible rigs discipline. In updated program, to generating we Third, growth into the the a our and field flow program we're strategy a enough, to the averaged generate emphasize to X X-rig of of remainder and XXXX. third frac going development third of the that quarter. major DUCs a positive throughout our and plan free crew current that million. financial crew base this X rig accordance We during the a after quarter achievement flow free At the $XX health. X-rig the generated our handful can't recently we maintaining This the asset currently frac while cadence, the during strong year, second frac capital prices introduced illustrates of maintain throughout that is and continue during quarter. expect a milestone we cash cash the our I third quarter We the of completing and we is and both

we frac while are crew used running will will be -- third rigs. We through intermittently this use

little is EBITDAX well super that XXXX. Pro greater of program end leverage, previously months. outstanding said, wells cash our progress one to as debt closing these a wells profile a the net with progress, we of forma Xx number to still At with is forward, and intend to to X operations, than online. We expect revolving in had current and commodity continue over a the the shareholders. support facility, $XXX from the ended in past below our credit we into flow range, continue we exit improvement to our priority under considerable to quarter, quarter the of As continue will which our a through production the year of turned stay are from which generate significant million. we at return our debt prices liquidity flow, turn increase reduce development here cash free finance If our additional this

capital recent our the Our we provide accomplish all refinancing need to objectives. debt should

In liquidity decrease. to on free our to basis and we go-forward addition, debt net as our continue we additional generate increase a cash flow to expect

by a grown growth through on delivering cash Slide this of track enticing we evidence way is charts on organic slide, few record And bit. to we've have Very demonstrated companies the This production a drill drill X. slide. through and have the the consistent the grown very going bit. Now flow

oil same into translated growth cash prices. which the also year, the our has flow declining has average over significant past through grown Over despite frame quarterly production XXX%, time

asset of on producing without our the which expect worth turn. cash testament of noting reflected production, attributes growth measured exemplify growth to and result in production of we've below wells. And of very flow level one this growth through peer-leading that our now it's expectations. a small been generation, current base to production amount a to content, slide. able consistent the our leverage, It's which number maintaining back high-quality high aforementioned are We sacrificing our continue our to by quality supported a going forward high and free continues level which The true while also oil our the that margins, to of reservoirs is liquids our transition maintain achieve of be sustained to all we this reasonable is

few the discuss going Now I'm to over the efficiencies. Mike? to slides Mike operational Hollis our on call turn to next

Michael Hollis

Jack. Thanks,

to turning X. Now Slide

As EBITDAX earlier the we continued Jack mentioned on margin. sustain our call, have peer-leading to

peers couple as a oil results, this price. chart looks new HighPeak the is higher therefore so well note for this and group. The the high their HighPeak different we quarter, that to group added data last a are later reasons. for our This already a of that are quarter gives slide shows its margins. the as third as that we've mention which quarter result, peer-leading to Please an oil on have notice a little the second has now results for maintain to boxes, cut to same leverage HighPeak peers are. accelerated time few filer, or the since consolidation at been some releasing quarter blue major or announced. has left than continued a gearing may You HighPeak cut several the large in peer there and its Not oil

So increased gearing $XX shown see quarter, group during the second almost second move much is the any know, circle, compared quarter cost, this above and has our the BOE our per peer HighPeak's any third by than HighPeak's of $X.XX BOE, focus as per peers. you indicated as average. From quarter, higher margin HighPeak's from said, the QX barrel prices by that quarter-over-quarter chart, that our with to even the growth spread quarter. With margin box. by per much oil period, And of further same approximately than the expanded increased average operating more that laser on you'll our peers higher larger reducing this margin to

expect drive peer was home to continue expand forecasted our additional growth not realize we want with cost the that margins approximately as We our and initiatives. I second BOEs benefits to our HighPeak's of again higher are production margin than during quarter. average cutting to equal. all our LOE created XX%

XX% cut. But have day. the to HighPeak level generated. not QX HighPeak's pack the of margin group our same approximately further high available peers yet, would level with have average driven, second another equate produced do of our all day have numbers applying quarter will Although to production product day say BOE peer the factor a production their would would be for in EBITDAX by from quarter of the oil safe BOEs expand have a quarter to a that it only mix third our mainly way, to margin third the equivalent Said again, peer our we BOEs XX,XXX XX,XXX at economic to XX,XXX our

X. focusing development. currently drilling X Wolfcamp on running A Slide rigs, HighPeak is Spraberry Now and turning Lower to the

second will The half second we third giving in XX addition our add guided the will turn that approximately XXXX, line hit will of XXXX. of volumes the volume. in confidence production meaningful in We rig the wells half exit of

We our be northern Top our well the continue results the Flat acreage. our to area. in encouraged strong to and the of by That's east north block

the Wolfcamp and the Conrad wells, acreage. And in east see strong blue results from our early to Oasis the in County. it's With A Borden and has gray Mitchell Luxor response well that's pad, County A Wolfcamp southern County, first HighPeak in strong QX, light in strong Wolfcamp you the touching be Scurry results, us will of and well QX. forthcoming and the just late south from neighbors Spraberry results eastern can A spud of our our the these Details well County, Lower Scurry pad edge the

free see in the other keep Spraberry when easy our these will zones, A encouraged determine But will if in plan able significant flow Lower wells And you are generate to directly for large results HighPeak's inventory they some Top to decades. by eye to it's west add of the runway Spraberry. the for and of on We future. be cash Flat we We capital compete block. also Middle in to an Wolfcamp

our costs over. the protection significant use It's peak solar farm the We with power hours. infrastructure, summer and of And implementation solar peak unhedged looking what our do This Xx say will recycling rig future power rates we are any help that roll sand, spot high our panels see fuel low-cost summer, lifting into our to and solar cost from inflations. during the will to cost spike electrical from early produced but costs local in wet XXXX, sunlight and potential amount will this pricing beginning a lifting increase to to provide costs normal of dual build-out demand year. frac too beginning fixed HighPeak levels. And reason further reduced fluid, cost all insulate gather HighPeak's and these will XXXX, months. It significant stands during and saw next of reduce margins roughly electrical

We build-out receives pipelines, prices of products. HighPeak realized gas the again our oil the continue midstream for efficient ensuring our and highest

stakeholders. ensuring focus We financial generation last quarter, driving turn stability. the and now in of continued strong our force behind call remarkable cash who which maintain capital management want comments my the a demonstrates to I to over to employees my is flow Jack. our our capital $XX health dedication discipline our complete, back financial to free been our reflected keen have Our over discipline, reducing gratitude success. And and debt and extend million of on to I'll of the heartfelt return prudent team with of

Jack Hightower

Thanks, Mike.

this is the transformative major If We and one successfully debt in accomplishments restructuring. refinancing. quarter, debt completed X, the you'll that's turn of to third a Slide our

they amount structure for privately-arranged In had are 'XX; of energy associated extending included of did This financial engineering engineering analysis. Many, public during fact, of and to a energy lender and structure and market to firm debt diligence term sophisticated our and financing and people company diverse financing company. external many for the and call certainty, largest very environment ever-changing a the and tremendous a that asset reserve-based provides facility. The in utilizing term as is extremely opportunity the the unparalleled a high all our transaction X.X-year borrowing-based loan being removing a our including demonstrates free September almost pleased to new by every United our the knowledge, with and internal loans flexibility this capital due with States group, that our also with flow, penalty, company. redeterminations multiple investor have streamlining but of confidence in group level the standard our structure unique by not only availability; the unique cash company our risk studied providing allow with the with in down securing associated note a assets, of that upside the loan pay able base the clearly we We're provides team, and banking maturities an to debt commercial bank it deleveraging. with especially and position rapid with debt, benefits, pay down which financial will without and

Due of purposes. liquidity and million to this super opportunities transformative to revolving flexibility dynamic seize credit closed stronger, provides debt more company facility, working we sources refinancing, with this for the which market. in priority also capital additional are and energy equipped resilient more We $XXX recently our

XX. Slide to Turning

is us, shape. Now that in the company's structure our debt refinancing behind is capital great

current is Our rate billion. run greater EBITDAX $X than

generate Our free net is any level down cash It pay already flow below as to debt. Don't we we additional misunderstanding. discussed turn will want earlier. as one continue decrease and debt

our to to overextend revolving The free is pro facility, with liquidity. debt our down flow. of new stay credit only to within capital we have need This of our that capital currently not to plan. stay the pay strategic and all goal over Our forma we million provides $XXX accomplish discipline, long-term cash and

in transactions financial significantly the quarter improved over can statistics third continued is stay anticipate cap months. current compared that And improvement see coming slide, like run have quarters. I'd our asset our SMID on return this on some inside Xx the profile. And quality, and inventory, assets. cheap assuming in relatively past a opinion, our group no analysts to trading from X and would value which at even prices have my our strength range, companies which, see investment at considering multiples new the there's asset E&P, expect with asset the difficult lot we time growth a in approximately stock EBITDAX metrics, differentiating one of you the their versus between a and have that of on much over traded transactions we these you commodity price another doubt that group. recent you As lot our But the based financial peer out multiples, multiple rate to point universe, good is higher drilling a can times, as of currently and also of

things, be Given the price assets. true the share does reflect surprise that, in current value these should not company's of our it no my underlying opinion,

turn XX, you'll Slide with So now what's happening if wrap to up HighPeak. I'll

We continue investment criteria check to boxes. all the

our day current $X structure out capital all has our oil-weighted Permian as XXXX. We asset barrels now of streamlined XX,XXX have EBITDAX base prime over scale until maturities achieved pushed We've that of a by a illustrated our Basin significant over rate debt billion. and of production run an and

will about that We've defined. when business our have Well, position cash from quarter, we over of derisked they're have sight there? growing XXXX, business our near-term Our start line generates past outspend and while our significantly exciting and a opportunities. core you that a financial continue our flow they're We've improved in development of contiguous Tier material free mode are inventory future. And enhancement. runway a the further long transitioned X clear additional have with the into historical objectives develop capital to rapidly to and thinking acreage zones into metrics what

maintaining development through responsible program flow. we cash expect Again, We to capital this growth our discipline. from remain operational on fund point, will while focused

continuing also on of We while and our be sides on of focused OpEx success CapEx improved our both to on well keenly performance build the that will lowering costs equation. both on

feature a term consistent with the continued new facility. of optionality, which will us of expect provide our flow very the We is cash generation important free ultimate debt, including reduction loan in

reduction, buyback we've In in increase talked One, M&A this base. It's accomplished return be true our continue the to in that capital market our XXXX, and of before, the of share of we're a an about to like increase instituting business. expect current our theme consider active addition ways. next especially return in be to if especially can year's HighPeak for may many that quality companies of a the price in cycle. debt there continues of opinion, share significant to be we asset remaining to my positioned sale the a secret program, value may also has in lot our assets which We no increase see should we a of materially dislocation company. midst such to compared left capital to recovered. We In be shareholders. This resources outright very dividend of

further shareholders, return and if think over you and if commodity addition had years. to has and to X justify, growth reduction had we production. I In remain reserves flow don't our we've that value performance financially debt we continue, drilling to be company's anybody look and of of continue will last reflect, as capital you increase allow to growing us the prices And prices positive the But continue back realize positioned expect the to that to justify free are our that to program, cash program, we to a additional commodity function drilling thought. disciplined. to Make forward increase going allow our of and us hold for maintain sure to investors. which pull

for for to the additional very the are ahead So remain opportunities about excited value that shareholders, I'm important in ability our create and confident these lie HighPeak. reasons that our I

questions for call the from up open we'll and now, complete our are comments my analysts. So

Operator

is ROTH Capital. Our MKM John first with from White Instructions] question [Operator

John White

in that quarter? about to downtime due well wells the operations offsetting frac want fourth You comments are make to any

Jack Hightower

question? answer why don't Mike, you Yes. that

Michael Hollis

you than nothing the whatever change you're is -- several had get good in to blocking John, as shut few a up over we frac as tend one that from crew again, make X and that to what sure a stimulating, pick the we no tackling. have. Obviously, and we that crew to in wells the months. DUCs of Yes, we different Absolutely. up But second stimulating wells frac we go Obviously, currently. have protect to and just pick are you last when the generated frac the normal closest well on we

very material will see we material. said, but short a So Obviously, a of time, nothing period affected don't for change. be wells all

John White

Yes. it, a Are you think the to as you've that seeing learned Companies well? reporting oil tight I'm financial a extent. sure certain lot lot are of I too. service with has and community loosened a market the has, field

Michael Hollis

Absolutely.

obviously, rolled So kind They've oil tubulars out. quarter of ago. so a field less about or or flattened over more

So of the we we're benefit through work the some inventory had. getting we as

the So drilling lower ground so what ] casing run we all it's of pricing don't or rigs you're seeing lot long-term on of [ tubular today, crews, spots. we and in seeing that frac rise the virtually in today's market. Again, the a goods you're for that we none, contracts newer have

to we hour, starting for day. going penalized our than rig to that's a that thousand side, mid-single over, see is sand So had those have drops, when the right our just starting And to digits that the we XX% of pumping be again, predicated kind lower the local came the coming dollar sand, not are is. to how active to in the over got of rates prices reducing of out again, some blocks, acreage next where X calls costs. past. XXXX. But all dollars of getting of have seeing we transportation we're on COVID, into per of due seeing very A those kind we're roll wet again, roll a then on pumping up. to We're some planning access the also couple the dropping from prices mine we're sits to market insulated large But today, what

couple diesel that future. you over the quarters. of have been prices in the forward going diesel will flat exposed prices see a to are last transportation, Again, So we but pretty with little

one So pricing and would higher I be instead have well say rig of rigs little has a we've kind frac sand, diesel. we utilization utilizing crystal able a of local And no, get our crews of to but forward as again, recycled as on their high-grade as been to we've look our being into again, ball, power activity, as no flat. XXXX, fleets, would water electricity able percentage high-line reduced

CapEx of years. than you're going in service higher the just some a see costs last weighted initiatives on our place with what based peer of put some to our So you may other we little bit see of folks, change the with group, over the couple in

Operator

Robertson from next comes Tower Water Jeff Our Research. question from

Jeffrey Robertson

can for X to net and cost up frac the on cost, crew to for an follow Mike, you X estimate run X year? give currently the rig

Michael Hollis

a Jeff, obviously, part little some that rig a than peers. the I mean at of the same foot back lateral year lot in a by HighPeak to You bet. our our than different West of the HighPeak's is per what generates peers of more and And completed basin.

So although foot we $X to $XXX complete. cheaper X rig is more more foot DC&E can footage spend than a drills peers, money that with it because can we our $XXX per our

a for said, through year is and good number So of rig a million that is with about you. $XXX a all frac very a basically,

Jeffrey Robertson

Operating costs came down in the quarter.

about things Can you the couple capital in some you savings, are years not directionally of on XXXX? where things outlined cost to where all drive the been there only you you that You working just to over had might talk also and last continue of OpEx. think but go

Michael Hollis

You bet.

a of cost fixed as see the infrastructure. And optimization our coming and solar biggest year, as of being disappointments up us more optimized how get some the delays well a that and it's our going. again, of to place, is and over taken of programs We've LOE all some but issues course, governmental of call lot dilution, helps the got it's production farm with treating That We're We've chemical initiatives in our it, of doing our put this of produced bit you of then, designing had some of second cutting energizing Act, of Reduction this long Inflation some kind and associated probably that we solar that's and one down has running. water time. little So into our artificial farm ribbon been quarter actually course, increased with a quarter-over-quarter. Friday. lift starting and upgrades the

So when that electricity. will reduce it as of you comes can't got cost our some prepared -- the of as that to you some do that I in of online, of blocks. remarks, it, floating energy price well as the some mentioned in of for XXX% Because we hedge kind paid

during have and be always peak will be kind fixed we'll low that So we generating their megawatts the a able these floats. is a power, X% percentage now that that X% panels demand, small summer, highest the And of solar XX to of have will to of the cost.

able we're So really in beat of do, when high look see great don't thing the to side. some our low lot a at spread But other and value for note we here, BOEs range, oil look get estimating $X.XX It's our BOE metrics that lower LOE, you we to like the somewhere different about to margins. it for when per we dollar we mix have of the that. you talk a again, margin over. on cost have and like But HighPeak, when thing is into a we a be to that a we little will next year, hope one we

peers that and $X had range, looked same with their similar if economic peer would of of the mix of EBITDAX. that our a peers did the day amongst you LOE in of mix, if with our kind generate some if product, of XX,XXX we our be like any looked and we BOE And of kind again, our in that we'd at a the be So mix, best range group. to again,

got So of things think, to again, some next down, good really range average a more that and continue kind year, we've in are got $X.XX number but in somewhere you. to place for that to some drive distance I it going is we've go,

Jeffrey Robertson

capital at I weighing the think, know term return about of quarter and begins terms year. the dividend opportunity, of best the you that Jack, per end Can against of repurchases? I in million loan first that the amortization your talk the quarter you talked And about term shareholders. loan, how $XX you if of to a has, feature cash next shareholders you that and maybe for think share in potentially about down outcome the paying more the have flow

Jack Hightower

Yes. hard We differentiate pieces between accomplish the to and we basket, X. a of that. more all that Jeff, of as it's think we can it look

through be retiring so And definitely, we will debt the amortization.

have also We a opportunity. cash sweep

is And the so when by good our get that increasing capital support also we're to utilization more our dividend. sheet, shareholders and ways well back we price to to might then cash, having balance X as building cash repurchase do sitting on that share our of returning and by a stock

going be that not XXXX a is feel it and to recognizing trading especially in that that we of for that going the like as it's price things debt forward, gives so marketplace. to within we So we're going of we're combination to from that, us do go we're to midyear going be balance healthy when down, luxury fair the financial a is a perspective, our

Operator

Our next call comes from Pope with Nicholas Research. Seaport

Nicholas Pope

lot or what guess, the production. the I you expectation clear on here rate months. quarter, what fourth last to been want just about expectation on I'm now is -- sure I -- is for, now guidance make production of right near term? talked There's your where exit for I few right moving make want a parts to in the

Jack Hightower

guidance. not we're Nick, our Yes. changing

production, now to with prior XX,XXX our of we day. have in guidance right to accomplish momentum rate be completed fourth mentioned, a in the quarter with wells the the Mike provided we fully As barrels that we increasing expect and exit in our

to going the downside exit go and go to I wells course, quarter. hit debt-to-EBITDAX, once continue with we another to to than add going the X.XX and do the because simply as what hard offline, adherence very discipline very day and we're they'll our skis, we're capital change having could how drilling, it's predict of fracked less increasing don't Now the first third rig of have on lumpy of to will out to on adding production production even and that forward. But get down into get change to but we rig, a those X/X upside. wells XX,XXX over barrel And then not that We we numbers so much think undoubtedly, turn. and the can increase many may a are speak. being

Nicholas Pope

into the looking lead brought of that kind number. appreciate to then obviously, of looks of CapEx rate it that. quarters, Because working like the kind relative refinance. everything for into the accrued of very this you That's balance forward? you completed. Is big And got kind for back capital with Got you're I the over It few the really negative it. capital number at going cash great. last expecting this have run with quarter working kind here this of progression

what Just like of the what plan trying and near is. to movement of kind in look might that term, get the those what a sense here --

Jack Hightower

a looking back, we real X Well, in substantial running. decline if you'll rigs had think oil back, prices. We had

But our it things hit of prices, $XXX have million now where of our that roughly have we amount rig. a a us we we were we of out hedged, so a control. oil lot know considerable there And us know production costs that

XXXX. day said do do those of $XXX rate, to free over at XX,XXX million million things and $X billion as you're to already So barrels $XXX flow all if we cash of a going objectives plenty to you capital were potentially at you have we in take that run

ourselves, in So drop obligate and oil unless we if decline we XX to. precipitous in can the want recall rig past, we in a we prices, never days you have if a

day, to maintain to that a So year. a over didn't we quarter now making discipline in our the thousand we and We've up plateau that XX-something and capital only control that maintain in We of get we're not company. reached were capital ourselves ever and grown the of XX,XXX again barrels going growth last day. working second back barrels now have have a position we're

the a been for So company. transformational quarter this has truly

Operator

questions further you the your a no does disconnect. and this concludes showing Thank conference. participation may program, good conclude you for day. in at question-and-answer This Have today's you. time. I our now This session. am Thank

HighPeak Energy (HPK) 7 Nov 232023 Q3 Earnings call transcript