HighPeak Energy, Inc. reported its Q4 and full year 2020 results as well as its 2021 capital plan.
- Capex: $135-150 million - up 20% vs. 2020 levels of $119MM
- Production: 10.5-12 MBOEPD - up 240% from 2020 output of 3.3 MBOEPD
- Wells Drilled: 20-24 gross wells - up 47% from 15 gross wells in 2020
- Rig Count: one rig running
HighPeak's 2021 capital budget is focused on the efficient development of its highly productive 51,000 net acre position in Howard County, Texas. The Company plans to operate one rig on average throughout 2021 with a primary focus on the co-development of its Lower Spraberry and Wolfcamp A formations. Additionally, we will continue the buildout of our water and power infrastructure.
The Company anticipates drilling 20 to 24 gross wells with average lateral lengths between 11,500 and 12,000 feet.
The Company expects the impact of its late 2020 capital program and its 2021 capital program to significantly increase production and lower its operating costs per Boe, thereby increasing margins and cash flow for the year. The Company anticipates 2021 full-year average production to be 10.5 to 12.0 MBoe per day, which includes the impact of the February winter storm in West Texas.
Jack Hightower continued, "We will focus on development of our acreage position, continued infrastructure buildout and ESG commitment during 2021. The low capital cost, low operating cost and substantial value creation characteristics of our assets enable us to rapidly increase our production and cash flow while maintaining low leverage. At mid-March 2021 oil prices of $63 per barrel, we expect to generate great returns on our development drilling program. We constantly monitor the commodity price environment and remain flexible to increase or decrease our development activity as prices change. The quality of our assets and our large inventory of high rate of return drilling locations provide us with the rare combination of increasing production, cash flow and value while maintaining a conservative balance sheet. With the strong momentum created since the closing of our business combination and the recent increase in oil prices, we expect to achieve significant production and proved reserve growth with a single rig program in 2021."
HighPeak Chairman and Chief Executive Officer, Jack Hightower, said, "Although 2020 was an exceptionally difficult year for the industry, HighPeak was able to complete several remarkable achievements. During the year, we completed our business combination, raised over $100 million of capital in a very difficult equity market and positioned the Company for continued growth while maintaining a strong, debt-free balance sheet."
Mr. Hightower continued, "Our well performance has met and, in many cases, exceeded our expectations. Our mid-March 2021 production of approximately 7,800 Boe per day is more than double our fourth quarter average. As we continue our one rig development program, we anticipate our production to steadily increase."
During the 2020 Successor period, the Company focused on completing and placing on production its inventory of 12 DUCs with completion activities beginning in September 2020 and continuing throughout the year. The Company also initiated a one rig drilling program in September 2020. As of mid-March 2021, the Company has completed and turned 14 wells on production since closing the business combination on August 21, 2020 including five (5) Lower Spraberry and nine (9) Wolfcamp A wells. Two of the wells drilled during the first quarter were drilled in the Company's Signal Peak area including one well in the Wolfcamp C zone and one well in the Wolfcamp D zone. Both of the Signal Peak wells are expected to be completed in the 2021 second quarter.
During the fourth quarter of 2020, HighPeak's production averaged 3,332 Boe per day including 2,979 barrels of oil per day. HighPeak's 2020 fourth quarter production stream was 89% oil and 5% natural gas liquids, or 94% liquids. Mid-March 2021 production has increased to approximately 7,800 Boe per day despite the delays caused by extended freezing temperatures, widespread power outages and road closures which caused HighPeak to temporarily shut in most of its production.
The Company's operating costs ("LOE") were $6.47 per Boe and cash G&A expense was approximately $2.0 million in the Company's 2020 fourth quarter.
With our focus on lowering our operating expenses, increasing our capital efficiency and commensurate with our ESG initiatives, HighPeak began construction and completed phase one of its 100% Company-owned water disposal and transportation system in its Flat Top operating area. This is the first phase of an extensive water handling, disposal and recycle infrastructure system that the Company expects to be completed during 2021.
Mike Hollis, HighPeak's President, said, "We have continued to innovate and improve our capital and operational efficiency since the closing of the business combination. Our average $400 per lateral foot for drill and complete costs and average $505 per lateral foot for all-in costs (drill, complete, equip and facilities costs) are best-in-class. Our capital efficiency combined with our high oil cut and premier acreage position, result in industry leading returns on investment and cash margins. We expect further capital and operating efficiencies as we continue to develop our infrastructure and properties. We are very excited to complete our Signal Peak Wolfcamp C and Wolfcamp D wells in the coming months. I could not be more proud of what our organization has accomplished in such a short period of time especially considering the challenges brought on by the unprecedented COVID-19 pandemic."
During the short time since the closing of the business combination, the Company has added substantial water infrastructure and is positioned to begin recycling water in 2021, demonstrating our commitment to the sustainable development of our natural resources. HighPeak has taken several actions through the date of this release and intends to implement several actions throughout the remainder of 2021 to (i) safeguard the environment, (ii) protect the health and safety of our employees and the communities in which we live and operate and (iii) continue to implement best-in-class governance.
Mr. Hollis continued, "HighPeak has taken several actions and has numerous additional measures planned throughout the year to ensure we are a leader and a premier operator for the sustainable development of our oil and gas reserves."
HighPeak reported a net loss of $4.9 million for the fourth quarter of 2020, or $0.05 per diluted share. The 2020 fourth quarter net loss includes an abandonment charge of $4.8 million for non-core leases not included in the Company's long-term drilling plan. EBITDAX (a non-GAAP financial measure as defined and reconciled below) was $7.0 million, or $0.08 per diluted share.
Fourth quarter average realized prices were $40.87 per barrel of oil, $19.77 per barrel of natural gas liquids and $1.34 per Mcf of natural gas, resulting in an overall price of $37.73 per barrel of oil equivalent ("Boe"). HighPeak's cash operating costs for the fourth quarter were $14.91 per Boe including lease operating expenses of $6.47 per Boe, production and ad valorem taxes of $2.05 per Boe and cash G&A expenses of $6.39 per Boe. HighPeak expects its cash operating expenses per Boe to decline as it completes its water and power infrastructure projects and continues to build additional scale.
HighPeak's full year capital expenditures to drill, complete, equip and provide facilities was approximately $101.7 million. In addition, the Company incurred capital expenditures of approximately $17.1 million for building water and power infrastructure, land related expenses and other expenses.
At December 31, 2020, the Company had no debt and approximately $20 million of cash. In March 2021, the Company's borrowing base and bank commitments were increased to $50 million, subject to finalization of customary documentation.
HighPeak reported a 96% increase in year-end 2020 total proved reserves to 22.5 MMBoe, consisting of 84% oil, 10% natural gas liquids and 6% natural gas. Proved developed reserves increased 107% to 10.3 MMBoe (46% of the Company's total proved reserves) reflecting continued success of the Company's horizontal drilling program focused on the Wolfcamp A and Lower Spraberry formations in the Company's Flat Top operating area. Cawley, Gillespie & Associates, Inc., an independent reserve engineering firm, prepared the Company's year-end reserve estimates.
Securities and Exchange Commission ("SEC") required pricing for 2020 was $39.57 per barrel of oil and $1.985 per MMBtu of natural gas, adjusted for price differentials, down 29% and 23% respectively compared with 2019 SEC pricing. Natural gas liquids realized pricing for the Company's 2020 proved reserve report was $12.27 per barrel, down 42% compared with $21.17 per barrel pricing used in the Company's 2019 year-end reserve report. Under 2020 SEC pricing, the Company's PV-10 was $235 million at year-end 2020, an increase of 67%, compared with $141 million at year-end 2019.
Using flat prices of $63.00 per barrel oil, $3.00 per MMBtu of natural gas, adjusted for differentials, and an estimated realized price of $19.52 per barrel of natural gas liquids, the Company's estimated 2020 year-end proved reserves were 23.4 MMBoe (84% oil, 94% liquids). Under this pricing scenario, the Company's 2020 year-end PV-10 reserve value increases to approximately $490 million, including approximately $292 million for proved developed reserves.
Mr. Hightower continued, "Although we paused our drilling program beginning in March 2020 for six (6) months due to the low commodity price environment, HighPeak almost doubled its proved reserves year over year. The rapid increase in our PV-10 reserve value demonstrates the quality, productivity and high-margin characteristics of our acreage position."