HPK - Earnings call transcript Q2 2024

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Operator

Good day, and thank you for standing by. Welcome to the HighPeak Energy 2024 Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Steven Tholen, CFO.

Steven Tholen

Representing HighPeak today are Chairman and CEO, Jack Hightower, President, Michael Hollis; and I'm Steven Tholen, the Chief Financial Officer.

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

reconciliations today's also the refer non-GAAP call. call the to and Chairman Please Hightower. our earnings in on CEO, our and in I the will release We will Presentation. financial see over certain Investor to Jack measures turn August now

Jack Hightower

another as XXXX core will strengthening and remarks stay Investor very report prepared our our solid Presentation. we My committed execution sheet maximizing to I'm drilling reducing had to quarter quarter, shareholder our the across focused disciplined that operations the cash continue consecutive generate daily for and into results on taking will Financially, optimizing our on remains of of production Slide and operations maintaining flow operations, balance to value. on Operationally, impressive board team spend X of proud values, the August level HighPeak begin this cost include generated our second CapEx positive aggressively structure. which focusing fourth we our free continued account quarter be even our program to highest year. that

value improved strategic free our cash of implement opportunistic our of objective our operational process. to our use our we through share alternatives ultimately strategy while and return shareholder to continue as executing value results, increasing maximizing capital debt program to We flow prioritize reduction buyback also primary

you X, HighPeak. strong turn if success was quarter, for another Slide second The operational to

that volumes. initially later some Top of volumes our beat will and then Our quarter in in wells production materially the off an noting than our dates day. the XX,XXX for extension well over pushed provide It's quarter operations quarter into you strong a the out quarter no After online that Mike continued later production XX,XXX impressive barrels pad, the lower from to Flat a have volumes our northern results BOE Further, remained quarter. think third the range, to the results quarter. insights seeing operating cost of here, also of area. continued production emphasize nice production achieving an second BOE team worth in expenses, pad to were quarter a XX.X% quarter the average high lease key due in we delayed which consensus additional considering delay. to a day a significant our recent sub-$X last first production operating per start was maintain our for XX,XXX compared over want averaged and we're estimate the level, bringing which in we This early our a is in barrels already as even strong to presentation. the reduction in I expected impressive when the third reduced expected very turn-on

BOE success operational realized Our equated its the over XX% of for peer-leading led continued to on a of to margins, cash netback maintaining price which quarter a HighPeak our basis.

very Our as which important our average, over company. cash will our BOE our margins Mike per and peer stream be than to success higher a income XX% continue to is emphasize

in flow volumes and expenses, sustained remain quarter solid a result a of cash generated financial operating As we of position. another healthy very our strong and production lower

shares by our during over We to XXX,XXX acquiring share buyback quarter. also by $XX second long-term continue reduced par debt at the another implement and program million opportunistically

expectations. This because we you'll are X. important an really Slide if our is Now turn exceeding slide to

'XX our our increase compared of result raising 'XX X.X% a updating a few approximate ranges our an guidance production to results, half we're initial BOE to categories. a day, guidance As XX,XXX-XX,XXX in successful our key We're first range. 'XX

for production also in Our lease bar expenses the lowering of the remainder initial volumes from and we $X.XX-$X.XX, our confident per our is We're expectations. year. XX.X% continue to strong, are this operating which lifting BOE remain to reduction a

we our of will results to provide start achieve well on guidance. for minutes. color year. the this some We're our additional details hopeful we've an to continue in operations Mike see savings narrowing now year. that Mike and first initial that, million are remainder million. volumes ability band The only optimizing some the production our impressive Our Extension additional continue to of is an we the initial team program done costs of provide our half has as to with update primarily the incremental infrastructure lower throughout key to band our slight remainder some turn operational exceptional our exceeding With fill few of supporting of this is that from that wide down Northern over $XX related our to very as year job our due throughout $XX capital and will the had to we're confident higher This also takeaway additional and there undertook in year. I'll to budget I'm projects the that a increase a President, call the area, to a Hollis expectations, improved

Michael Hollis

Now turning X. to Slide

to As production by great higher-than-expected Jack start year shown our discussed, we volumes. go as this a off

great to increase well and higher the of our to remainder raising XX,XXX by key X% per to production XX,XXX the support start first is our program throughout half A is the guidance. our approximately annual of over our to this roughly continue development of BOE few as year expected compared Our an is evidenced X-rig day, current volumes production XXXX success. day, at a drivers off Further, which as quarter average. averaged a third BOE

conservative we we to move performance area. as any modeled. Our initial operators, new wells extension have our as areas very Again, northeastern we than in originally new northern prudent Top exhibited off start and Flat higher in always

well XX-day over peak approximately production. oil map, XX,XXX average Our is Flat associated #X northeast barrels plus and of of Judith of the in located the on It during BOEs cumed corner exhibited a days XX gas. first the has IP by a Top of referenced day the X,XXX

longer. located we and Wolfcamp making in northern XX,XXX-foot the barrels A that's first a on production increase currently as continuing can Our area, the XXX expansion Well over oil to is our #X day on of pull well map, is

third The petrophysical during Spraberry We we cuttings and the reservoir have what expect also the that #X. been drilled, analysis have core to is the that in on acreage two with on east and wells from new see these further by flat the pad to Wolfcamp online A this X-well quarter. a wells pad area. Lower and completed, denoted we turn top our confirmed them consistent The

area We continue the northern to field. be this encouraged about of and excited very

northern The all the in wells areas, operations continuing see lower our firing see continue successful the team across to board. is are cost addition new to cylinders, and better performance and In we on entire well to extension strong we our acreage. across uptime

X. Now turning to Slide

production again as $XX free cash quarter the on has been HighPeak mentioned, board, raised and to of Jack XXXX. to second to flow quarter. additional beaten they pricing for assuming reducing across cost focused guidance, this team lower LOE our as equates previously well million and been delivered intensely As EBITDAX

OpEx. chemical throughout been a in LOE field, team operations to focused change step year-over-year keenly program are: make our our of initiative to optimization drivers the key call component on and of our further significant strides. is Some this Chemical our continues has off

a disposal to Jack this on more month. by. commissioning the our higher about quarter, no that usual on continue delay last on The through quarter that compared is mentioned costs production company-owned Part to system earlier. reductions divide of We commented our that not delayed I key the As to expensive. dispose is turned field we in as third-party LOE of fully able contributor BOEs for to had the second our first, and and world-class quarter is not was having a used of to of produced XXX% exploitation the cost in inherently OpEx life wells was being those drives tank battery infrastructure note, second with disposal. being significant our the This rely any battery associated system. all to central exploit recycling water third-party On

those the you our numbers, quarter-to-date the As contributing. on a wells production now in would are come line see our earlier, have been LOE can first quarter. wells Had in month more with

only pay tie field dividends but wells huge distribution overhead Not to HighPeak. reliability in tight it the the it the new for start-up no i.e., to electric electrical able where versus is area into uptime, our Our generator secret electrical we've overhead electrical provide point on does until to expensive It's been the run in Basin. operations, of we've at more the power having continues expanded system supply power system areas more to to is extension to getting power ready. that system Permian overhead

Additional power are substantially out. project pushed lines time being

our to a at power job and HighPeak in recognizing construct well efficiently field. of even in field cadence. abundant this increased an done in for across is Our has the a taking reliable life situation great fantastic entire secure team advance, an that initiative delivers development distribution supply a position system development

all shortage power able benefit. our system. flat-top farm One for solar now insulate we're is summer our has months. pricing our renewable over tremendous and There's to during building operations. solar to to throughout few help no this Texas faces and farm will our now the thing electrical the of job that during The optimizing exploit spot abundant West infrastructure sunshine the summer operations electrical providing operational our addition, sure. consistent periodically fully world-class In Again, is overhead region supplement months, material years and out in cost the done also a our power past spikes field team

improve now line. materially are All which starting to of bottom our

Now budget capital for on our turning to a moment. focus

our that's and first mentioned reasons. program was previously we and due XXXX weighted, capital a messaged, to of number half As

program, quarter being quarter our we during quarter is partially range. from of last primarily our of 'XX. hottest running the second higher QX year. turn-in the year to CapEx XXXX XX% approximately Furthermore, QX entire first fourth at year speaks the which half cadence our This carried this of our that for into is were and additional lines in Our X-rig due to turn-in-line calendar annual guide XX% program a of slightly wells

to weighted. addition wells our during the were infrastructure also In first half, projects the in turned first extra line half

these extended full acreage Top, areas returns with systems new in constructed to support a future incremental immediate northern in our of areas to development we As these new Flat requirements. extension projects only manner provide capital our were and

weighted areas of first extension these batteries half facility we field. was Our spend the new in as tank also constructed

or dollar per our considerably. in in basis these seen quarter the realized rigs remainder the progress reduction spreads fact, expect we guided at that our As very softening albeit that steady frac quarters, will this over and as the budget cost we've the drill a last drop remain foot CapEx narrowed for holding and range. quarter several wells are industry prices some more first development we on costs in has small. our areas, within I additional and that feel will the confident facility our To year, DC&E we of year a during plan would

Slide turning a continue group. amongst per to X. BOE our commanding HighPeak's Now margins peer lead

EBITDAX past EBITDAX continued peer group said index over average. every prices on HighPeak BOE, NYMEX $XX higher the on realized unhedged who, of $XX average, we produces, for of our The NYMEX at chart which BOE an only be at group, price. profit approximately $XX.XX In peer profit second a highlights oil oil the or HighPeak over assuming has $XX, margins price. than way, margin margins comparison averaged that slide average XX% of $XX quarter quarters per our remained NYMEX BOE that with five an Our XX% over strong roughly per another generate to net

a our is price view evaluate net way of This our less for versus converting a into realized BOEs to a how margins HighPeak. more margin per and are efficient Another of EBITDAX like our produced we of we peers to per is percentage our our of comparison profit BOE. as compare BOE

realized Our second for BOE sales BOE the for into net of every profit HighPeak quarter over produced, company. that price we that the margins per show converted XX%

allow here cost-effectively of which locations us undrilled We have HighPeak, will machine efficient to profit. very substantial deep into our a built inventory convert at

As are always all say, equal. we BOEs created not

structure comments will Jack. profits continue Our high oil over cut for differential cost and improved to to to our to the turn HighPeak now I'll the decades come. With allow complete, back call generate my

Jack Hightower

operations come our you is next want to the XX. page from, want in we years quarter. to few business important highlight to on opportunity We've where went slide and turn look I been take company a four slide a comparative and for analysis. see to a now historical facts. team This the back congratulate from successful we Let's since to growth Slide very public, an noteworthy

As billion This $X.X has our Collectively, growth of basis, the terms over have on to produced record combined of now factor million you four track BOEs demonstrated Production significant over about life four the generating X-year and public. across years, past an since revenue HighPeak 'XX, gross forward over in over XX wells a short to over a amounts going of we're the led On generate feet. over It company. annual we've horizontal shows Think lateral drilling this by our responsible of during future XXx our drilled Through basis year as forward. a from has our a see, be but growth that track into HighPeak can $X can can into per production on increased operated billion future. history financially project on. has years. to acreage position. XXX this to looking going you X.X also wells over million of year the what

as forward next on with the leave When future. want well as we're go I think the the is continuing execute takeaways I cylinders. slide, XX, to think you it's Slide back about important all to look on today look as to forward in you you

high-margin strong Our asset full barrels. oily, production base deliver continues results of to

which this confident by and our operations, in past of likes going the world-class system to we're first Throughout field is the have we field-wide life focused our intensely continue, We been why evidenced our raising have operating as through the of trend areas half our guidance. reductions realization to say, as this cost production on significant expect year, results production Mike year. These of optimizing reach infrastructure all led the to of forward. expanding to

guidance step We going and expect in lower LOE are this such, expenses range. to confident forward, in operating change maintain our as lowering

world-class significant sought complete, our from and company want we a say excited do development. consolidation opportunities now holds for is to Second, I comments position the prime significant very amassed the a I the highly I'll the basin open margin the It's positioned what remaining and truly really Permian specific one built our insulate in to of a scale creation. about few for I'm that to the lucrative but sizable, country, strategic large-scale leasehold contiguous progress, profit in peer-leading HighPeak of most We've our very after acreage future optimal value the of We've for the puts and HighPeak time, barrel We unique Basin. questions decades process a high-value $XX our analysts. will in up increased With a delineated details market current high-margin position. and making of significant position. oil-weighted We've call of production support long per provide our shareholders. which our system, immense can't breakeven which extreme trend rapidly inventory, field level. helps for reserves infrastructure spans of to runway entire come. inventory life The and on this at development scarcity

Operator

first question the of Our with from Capital. White comes MKM ROTH John line

John White

of amount In the related a of past tank delays but you about the quarter. battery, lease well higher weren't there talked in terms expenses to operating expense, the workover

Michael Hollis

we we of and lot you're or that, this averaged What closer to our drove $X.XX quarter. referring about of quarter for $X.XX workover completions QX, the BOE year. did If were to we XX% quarter-over-quarter, for expenses, again, this $X.XX per a

do basis expense BOE think that, do workover that us side what a good the throughout for number number of you're would somewhere bringing completing, wells was HighPeak QX general XX it's heavy the we completions on cadence of of work change completing wells That you what quarter. Whenever of those some some modeling a have I That's QX. either go-forward that QX lot $X.XX-$X.XX drove around the our normal workovers impact there. drive difference where expense wells on a and the associated $X.XX between the wells to of on between do is some look cadence with and offset to you at of on did the these at and in did, a If and run. you we

Operator

Our of next question Tower from comes line the at Research. Jeff Water Robertson

Jeffrey Robertson

Two questions. XX. One on Slide

Flat that talk last investment Top. infrastructure Can about going capital your field bullet about program? life development of would Your progress just and forward development point, in how through you infrastructure as you that impact efficiency have returns made you talked you supporting

Michael Hollis

it's because infrastructure question Obviously, initially value that put too. it we overlooked helps build you the when of for in. that often you Thank infrastructure the us our

area to From initial one low put battery. new built For standpoint the instance, tie day of of infrastructure lot pretty our you where capital northern efficiency a in we a it's dollars one. in,

area have with foot coming dollar goes However, we same when completed wells wells that XX, per through associated that you're future infrastructure, develop cost lateral down dramatically. XX and

we out we've multiple price one the lower back We've and the as many on increase the all in pull time, as of balance future. if oil were and HighPeak again, ability to spent needs, go the activity, that's the we built the we into the at if of prices and future, all wanted for on reins that about talked As six for running At were field Again, sheet cadence. of and vast we rigs. to depending always could. money that life commodity to the ever whatever have plan strength, majority drill to zones as Jack infrastructure already mentioned,

allows that built. running. XXX,XXX It's unique position this leasehold one rig us differential very very a that's that position a just with leasehold less system acres we've to the whole or have hold We

the out we in every that the last well As years gets that future building infrastructure. additional money spent we've out, that you the over benefit that drill from X.X pointed

Jack Hightower

that that, and an go you locations the just rapidly. even can that locations potentially, X,XXX of we've Middle I in some would product all now the that's invested the and to almost think our go X,XXX support now the to Spraberry success other infrastructure A Jeff, billion barrels have to expand and back in here. us you and the on acreage Lower Spraberry of is We of way When add, and to expanding and a growth. with the water if zones, additional few got Wolf and with completions own to XXX,XXX That up infrastructure allow with handle basically our $X in and dispose That others handle in recycling very limited well future our excess will of oil capital going XXX% forward, disposal the able expenditures. will infrastructure to spend place. across the be dollars position to saltwater be it We'll but system. entire be now as able as

Michael Hollis

LOE sure being a Obviously, we down in and as reduced we that of X%. want make to of the midpoint meet conservative, from $X midpoint a beat guide we well. to that Again,

see side production the XX,XXX. where in production we're the midpoint BOEs we to from on with sitting that increased Slide XX,XXX You X on the that guide

year in Since have infrastructure change flow prepared we've You put we're paying free in free additional that a those the and all as dividends an EBITDA full is now this flow Again, year systems goes this of guide cash place million. the will and of cash to all XXXX calendar forward, going changes missed as in remarks, equate well and may well. two over EBITDA future. continue $XX money this as mode about of in in to the

Operator

Pope Research. comes from with Our last Seaport question Nicholas

Nicholas Pope

we're repurchases high, debt. that with Obviously, Obviously, and to talk was little about it's three here the of but I items was good curious options at I thinking could debt a interest share that down bit forward. uses looking last how payments. to quarters hoping dividends, is the about have, very you two a problem cash. guys going pay you're

return EBITDA. weighing of you're place? how Curious XX% in it's two options think these shareholder to you that I relative have that other

Jack Hightower

to program we're stick is to with down great our a that debt. Nick, pay question, and going

balance sheet make because cold and made Now we're debt the want provisions, we we at now, keep to on that right going pay cash par. to have sure we the down

whole Of run in course, March. provisions out our

changing. even refinance in between got we that whole aware costs the go with It could well down fully pretty after to something, that six payment are BB we and -seven our would We issuance and will the a We've before now with to make rating something-percent new consider March. probably a be range. would

goal is debt. Our pay down to

more with a our don't way off in going of what have program we stick we eventually, if we've by happen then, the refinance successfully forward. strategic our debt our with we're stick doing term bonds go and Now the and to been to up oil we prices have alternative but and optionality go pay past and would if drilling

$XXX Of would cost course, year of a the to today compared debt the in a what be that of bond million flow. almost difference is cash additional

good have process. but very encouraged optionality, strategic by alternative We our we're

Nicholas Pope

I'm fun areas there little big into Switching newer these were Northeastern went to as the answered. curious to new Curious, that be thought these questions you acreage. any those, some needed more into wells. going you extensional

into new guess, you numbers about As think these the the past? from new new expectations does the the wells, that up, there affects what the you production I that were the going with wells? talked zones, match in we've that is Do and get How inventory productivity? of data

Michael Hollis

the where we to as Again, that miles the two in make had we conservative. cuttings, suggested and in beat be yet flat fully what walkout like analysis from down expectations expected To X-mile known to as using any for as should zones, log or beat result. modeling were. We of top was of a were did. additional sure risk yes, wells north wells miles we move went that area. we good we standpoint, your background. what From from see another had to they to Spraberry. the question petrophysical When expecting to Wolfcamp north just you A they answer operator, it enough everything a core go we we the of we were than get No, we be were away the from what as the more wells were engineers not these We about all couple say as these Lower this we're answer expectations, call we production,

down end likely were already Now drill last going Middle a Flat the We'll in the quarter and but most Top, of in we and we our acreage are well, to call. some we of center that have middle well completed the of the running which Spraberry the I side first drilled Again, sits mentioned part there's touching pump Spraberry information future sometime offset in at third today. the quarter ground have our west the block. for near wells

when that we do in drill all we should as as they and able for saw we've should to while areas some to put Spraberry oil from we these that new no, that would, were we left cuttings returns suspected on we but of give the encouraging acting are It's we As flattop, an little targeted in a to that be things well, they guidance, just for cut guys. there two good Again, zone drilling. additional modeling. the in try Middle always update

Jack Hightower

acreage like a I we would to add, thing and even said feel moving East. and position to from what the geological only analysis, The our whole petrophysical is Mike oil-in-place Nick,

turning successful in we wells. best of well. was a Scurry the that outside production going well decline County, our one to which the bit of it's well eastern well is our our the well, well can move and you Virginia is out is we still we but that furthest to most anticipated imagine, think very have potentially, our little As Judith east, yet, It companies certain be as

excited wells, potential more least of being another the As wells that to probably definitely very up Wolf then of that well south A able Peak production drill are locations to Hutton, an going prove in of those good to drill we're east more and another Spraberry we definitely adding suitors. That exciting move Signal drill and adds zone. number the and going that have. B east, to forward, C down at And probably that and us, for well, we to Middle was the things we'll arrangement. potential the to about are locations we'll Wolfcamp we in and happening some lot the at the

Operator

concludes conclude Thank does for participation you the This the your in today's session. question-and-answer program. conference. This

may You disconnect. now

HighPeak Energy (HPK) 6 Aug 242024 Q2 Earnings call transcript