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HighPeak Energy Third Quarter 2021 Results; 2022 Outlook

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   |    Wednesday,November 10,2021

HighPeak Energy, Inc. announced financial and operating results for the third quarter 2021.

Third Quarter 2021 Highlights:

  • Third quarter 2021 sales volumes of 8,168 barrels of oil equivalent per day ("Boe/d"), 94% liquids. Production volumes have averaged approximately 15,500 Boe/d since mid-October.
  • EBITDAX (a non-GAAP measure as defined and reconciled below) of $33.3 million and $91.8 million for the three and nine months ended September 30, 2021, respectively.
  • Third quarter 2021 realized price of $63.18 per Boe and realized cash operating margin of $51.88 per Boe, excluding the effects of derivatives.
  • Drilled ten (10) operated wells and one (1) operated salt-water disposal well and completed six (6) operated wells. Also participated in drilling three (3) non-operated horizontal wells.
  • Closed multiple bolt-on acquisitions comprising approximately 10,600 net acres in the aggregate.
  • Initiated a $0.025 per share quarterly dividend and paid a special dividend of $0.075 per share in July 2021. Declared a $0.025 per share quarterly dividend in September 2021 which was paid in October 2021.
  • Amended the Revolving Credit Facility to increase the borrowing base and the elected commitments to $195 million effective October 1, 2021.
  • Ended third quarter 2021 with a revolving credit facility balance of $95 million and a $12 million cash balance, or net debt of $83 million (a non-GAAP measure as defined and reconciled below).
  • Completed a public stock offering on October 20, 2021 of 2.53 million shares of common stock for aggregate gross proceeds of approximately $25.3 million.
  • Continued to realize peer leading operated all-in drill, complete, equip and facility well costs of approximately $505 per lateral foot in our Flat Top operating area.

2022 Preliminary 4 Rig Development Outlook

Production (Boe/d)  
Average production rate 26,000 31,000
Exit production rate 36,000 42,000
Capex ($MM)  
Gross Operated Wells TIL 80 - 110
Capital Expenditures, D,C,E&F $610 - $660
Capital Expenditures, Infra/Land/Other $35 - $40
Total Capital Expenditures $645 - $700
Unit Measures ($/Boe)  
Lease Operating Expenses $4.50 - $5.25
Production Taxes $3.75 - $4.50
General & Administrative $1.00 - $1.50
Total Cash Costs $9.25 - $11.25

HighPeak Chairman and Chief Executive Officer, Jack Hightower, said, "Our production growth rate continues to increase significantly based on the strong performance of our wells. Our production volumes during the second half of October averaged approximately 15,500 Boe/d. We are excited to continue the acceleration of our rapid development growth plan. In addition, due to our excellent well economics and the current strength of the commodity market, we now plan to introduce a fourth rig before the end of the year to continue to pull value forward for our investors while maintaining our philosophy of less than one turn of leverage."

Third Quarter Operational Update

The Company's production since mid-October has averaged approximately 15,500 Boe/d compared with third quarter 2021 production average of 8,168 Boe/d. The Company's third quarter production volumes were significantly influenced by the temporary curtailment of producing wells during offset well completion operations. The temporarily shut-in wells returned to production late in the third quarter and have continued to increase to pre-shut in production levels. The Company expects the wells drilled by the second rig during the third quarter 2021 to begin contributing meaningful production early in 2022.

During the third quarter of 2021, the Company drilled ten (10) operated horizontal wells and one (1) operated horizontal salt-water disposal well utilizing two (2) drilling rigs. The Company completed six (6) producing wells in its Flat Top area. At the end of the third quarter, the Company was in various stages of completion on three (3) wells, had five (5) operational drilled uncompleted wells ("DUCs") waiting on completion, and was in the process of drilling three (3) operated wells. The Company also participated in drilling three (3) non-operated horizontal wells during the third quarter 2021 and was participating in drilling two (2) non-operated horizontal wells at the end of the quarter.

The Company added a third drilling rig in October 2021 to further delineate its Signal Peak area and to accelerate development drilling in its Flat Top operating area. The addition of the third rig will not change the Company's capital expenditure guidance for 2021.

Michael Hollis, HighPeak's President, commented, "In spite of recent industry-wide inflationary pressures, we maintained our peer leading $505 per lateral foot capital cost to drill, complete, equip and provide facilities in the Flat Top area which is a testament to our team, their cost-focused attention to detail and the measures they implemented to keep our costs stable in this environment. LOE was a little hot in the third quarter. We knew it was coming and took the necessary steps, beginning last year, to initiate and build the infrastructure to solve it. We expect LOE per Boe to be significantly lower in 2022 as these projects are commissioned and as represented in our 2022 outlook projections. Margins continue to be peer leading based on our high oil and liquids production mix. We expect to maintain robust margins going forward and, although we have hedged a portion of our forward production, most of our future production will be exposed to commodity prices."

Third Quarter 2021 Financial Results

HighPeak reported net income of $8.0 million for the third quarter of 2021, or $0.08 per diluted share. EBITDAX (a non-GAAP financial measure as defined and reconciled below) was $33.3 million, or $0.33 per diluted share.

Third quarter average realized prices were $69.84 per barrel of oil, $35.83 per barrel of natural gas liquids and $3.69 per Mcf of natural gas, resulting in an overall price of $63.18 per Boe, excluding the effects of derivatives. HighPeak's cash costs for the third quarter were $13.52 per Boe including lease operating expenses of $8.93 per Boe, production and ad valorem taxes of $2.37 per Boe and cash G&A expenses of $2.22 per Boe.

HighPeak's third quarter 2021 capital expenditures to drill, complete, equip, provide facilities and to build water and power infrastructure were approximately $64.6 million. In addition, the Company incurred capital expenditures of approximately $51.2 million to close multiple bolt-on acquisitions.

At September 30, 2021, the Company had $95.0 million in long-term debt and $12.0 million of cash on hand. In October 2021, the Company's borrowing base and bank commitments were increased to $195.0 million.

Bolt-On Acquisitions

During the third quarter 2021, the Company closed a series of unrelated, accretive bolt-on acquisitions from various third parties primarily located in its Signal Peak operating area. In the aggregate, the assets acquired represent approximately 10,600 net acres with estimated average production of more than 1,400 Boe/d for the remainder of 2021 and working interests in salt-water disposal wells and related infrastructure.

Initial Dividend

In July 2021, the Company's Board of Directors approved its first quarterly dividend of $0.025 per share and also approved a special dividend of $0.075 per share which resulted in a total of $9.3 million in dividends paid to stockholders on July 26, 2021. In addition, in September 2021, the Company's Board of Directors declared a dividend of $0.025 per share which resulted in a total of $2.3 million in dividends paid to stockholders on October 25, 2021.

Updated 2021 Guidance

HighPeak Energy increased its development drilling program from one rig to two rigs early in the third quarter with a primary focus on the co-development of its Lower Spraberry and Wolfcamp A formations in its Flat Top area. The Company added a third drilling rig in October to further delineate its Signal Peak area and to accelerate development drilling in its Flat Top area. The addition of the third rig will not change the Company's 2021 capital expenditure guidance. Additionally, we will continue the buildout of our field infrastructure to reduce operating costs and advance our ESG objectives. The Company reiterates its 2021 capital investment guidance of approximately $245 to $270 million, excluding acquisitions.

Mr. Hollis, continued, "Due to robust well results, high operating margins and our ability to keep capital costs flat at $505 per lateral foot, we intend to lean into this high commodity price environment by further accelerating our development program in the fourth quarter. We look forward to a year of substantial production and cash flow growth for HighPeak in 2022."

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