HighPeak Energy Inc
For the period ended Dec 31, 2024. Filed Mar 10, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 10, 2025
HPK$7.140.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-06.
0001437749-24-006816
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-10.
0001437749-25-006838
Item 7. Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 94 current paragraphs.
68 unchanged; 21 reworded; 5 added; 32 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 51 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
The increase in average daily Boe sales volumes for the year ended December 31, 2024, compared with 2023 was due to the Company tying in all of its existing production facilities into natural gas gathering, processing and treating facilities and maintaining relatively flat crude oil production utilizing only a two-rig drilling program throughout 2024.
Current report
The following table illustrates the variance in revenues attributable to prices versus volumes (in thousands except prices and percentages):
Current report
As detailed above, the decrease in total operating revenues for the year ended December 31, 2024 compared to the same period in 2023 is the result of a 12% decrease in average realized price per Boe partially offset by a 10% increase in average daily sales volumes primarily as a result of the Company’s successful drilling program.
Current report
Lease operating expense per Boe for 2024 decreased compared with 2023. This is primarily related to lower chemical and treating costs, lower costs of handling produced water and lower workover costs, partially offset by increased pumper, roustabout and supervision costs, communication expenses, rental equipment and contract services.
Removed paragraphs (32)
Previous report
The following discussion and analysis should be read in conjunction with the other sections of this Annual Report, including but not limited to“Items 1 and 2. Business and Properties—Regulation of the Crude Oil and Natural Gas Industry.”Historical financial statements and related notes included elsewhere in this Annual Report. This discussion contains“forward-looking statements”* reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward*-looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, market prices for crude oil and natural gas, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report. Please read Cautionary Statement Concerning Forward-Looking Statements. Also, please read the risk factors and other cautionary statements described under“Part I, Item 1A. Risk Factors.”* We assume no obligation to update any of these forward*-looking statements, except as required by applicable law. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 6, 2023 for a discussion of the Company’s 2022 results of operations compared with the Company’s 2021 results of operations.
Previous report
Overview
Previous report
HighPeak Energy, Inc., a Delaware corporation, was formed in October 2019, is an independent crude oil and natural gas exploration and production company that explores for, develops and produces crude oil, NGL and natural gas in the Permian Basin in West Texas, more specifically, the Midland Basin. The Company’s assets are located primarily in Howard and Borden Counties, Texas, and to a lesser extent Scurry and Mitchell Counties, which lie within the northeastern part of the crude oil-rich Midland Basin. As of December 31, 2023, the assets consisted of two highly contiguous leasehold positions of approximately 143,187 gross (131,636 net) acres, approximately 64% of which were held by production, with an average working interest of 92%. Our acreage is composed of two core areas, Flat Top primarily in the northern portion of Howard County extending into southern Borden County, southwest Scurry County and northwest Mitchell County and Signal Peak in the southern portion of Howard County. We operate approximately 98% of the net acreage across the Company’s assets and more than 90% of the net operated acreage provides for horizontal wells with lateral lengths of 10,000 feet or greater. For the year ended December 31, 2023, approximately 93% and 7% of sales volumes from the assets were attributable to liquids (both crude oil and NGL) and natural gas, respectively. As of December 31, 2023, HighPeak Energy was developing its properties using three (3) drilling rigs and one (1) frac crew and expects to average two (2) drilling rigs and one (1) frac crew during 2024 under our current development plan.
Previous report
The markets for the commodities produced by our industry strengthened in 2021 and continued to remain strong through 2023 and into 2024, although the market has decreased from 2022 levels overall, as a result of increased demand outpacing increased supply for each of the commodities we produce. Prices for the commodities produced by our industry improved from historic lows in 2020, with crude oil and natural gas prices reaching their highest average annual price since 2014 in 2022 before cooling off slightly in 2023. However, commodity markets, unavailability or high cost of drilling rigs, equipment, supplies, personnel, frac crews and oilfield services or supply constraints remain subject to heightened levels of uncertainty as a result of the war in Ukraine, the conflict between Israel and Hamas, elevated interest rates and associated policies of the Federal Reserve, which could adversely affect HighPeak Energy’s ability to execute on its capital plan. Despite continuing impacts of these and other factors and future uncertainty, we expect to maintain our ability to sustain strong operational performance and financial stability while maximizing returns, improving leverage metrics, and increasing the value of our Midland Basin assets. Additionally, the impact of inflation as well as elevated interest rates continue to have a negative impact on our cash flows and results of operations.
Previous report
Recent Events
Previous report
Share Repurchase Program. In February 2024, the Board approved a repurchase program of up to $75 million of the Company’s common stock. The approval grants HighPeak’s management the authority to repurchase shares opportunistically in the open market from time to time, through block trades, in privately negotiated transactions or by such other means which comply with applicable state and federal laws. This is the Company’s first authorization for a stock repurchase program since its founding.
Previous report
The Company intends to fund the repurchases from available working capital, cash provided from operations and borrowings under its Senior Credit Facility Agreement. The timing, number and value of shares repurchased under the program will be at the discretion of management and the Board of Directors and will depend on a number of factors, including general market and economic conditions, business conditions, the trading price of the Company’s common stock, the nature of other investment opportunities available to the Company and compliance with the Company’s debt and other agreements. The stock repurchase program does not obligate HighPeak to acquire any particular dollar amount or number of shares of its common stock and the stock repurchase program may be suspended from time to time, modified, extended or discontinued by the Company’s Board of Directors. The stock repurchase program authority will expire December 31, 2024.
Previous report
Underwritten equity offering. *** ***In July 2023, we completed an underwritten equity offering of 14,835,000 shares of common stock at a price of $10.50, netting proceeds to the Company of approximately $151.2 million that was used for working capital and to otherwise enhance near-term liquidity. Certain of our existing stockholders, including the John Paul DeJoria Family Trust, a holder of approximately 12% of our common stock, and Jack Hightower, our Chief Executive Officer and Chairman of our Board of Directors, and entities and individuals associated with them, purchased an aggregate 10,029,070 shares in the offering. The underwriters in such offering received a reduced underwriting discount on such shares purchased by these persons or entities compared with the other shares sold to the public in the offering.
Previous report
***Dividends and dividend equivalents.***In January, April, July and October 2023, the Board declared a quarterly dividend of $0.025 per share of common stock outstanding which resulted in a total of $2.8 million, $2.8 million, $3.2 million and $3.2 million, respectively, in dividends being paid on February 24, 2023, May 25, 2023, August 25, 2023 and November 22, 2023, respectively. In addition, under the terms of the LTIP, the Company paid a dividend equivalent per share to all vested stock option holders of $282,000 in February 2023, $286,000 in May 2023, $334,000 in August 2023 and $348,000 in November 2023 and accrued a dividend equivalent per share to all unvested stock option holders which is payable upon vesting, assuming no forfeitures. In addition, the Company accrued an additional combined $53,000 in February 2023, $53,000 in May 2023, $54,000 in August 2023 and $54,000 in November 2023 in dividends on the restricted stock issued to directors, management directors and certain employees that will be payable upon vesting.
Previous report
***Acquisitions.***During the year ended December 31, 2023, the Company incurred a total of $15.1 million in acquisition costs primarily to acquire additional bolt-on undeveloped acreage contiguous to its Flat Top and Signal Peak operating areas.
Previous report
***Crude Oil and Natural Gas Industry Considerations.***Since mid-2020, crude oil prices have improved, with demand steadily increasing. In addition, sanctions and import bans on Russia have been implemented by various countries in response to the war in Ukraine, further impacting global crude oil supply. As a result of crude oil and natural gas supply constraints, there have been significant increases in European energy costs, which have resulted in inflationary pressures throughout Europe, increasing prospects of recession in many countries throughout the continent. In April 2023, OPEC announced production cuts of around 1.16 million Bopd. On June 4, 2023, OPEC agreed to extend these previously announced production cuts through the end of 2024. On July 3, 2023, Saudi Arabia announced it was extending voluntary cuts through August 2023. However, as a result of current global supply and demand imbalances, crude oil and natural gas prices remain strong, although down from the prior year. In addition, the war between Russia and Ukraine and ongoing conflict between Israel and Hamas and other tensions in the Middle East have resulted in global supply chain disruptions, which has led to significant cost inflation. Such impacts may also be exacerbated by recent developments in the Israel-Hamas conflict. Specifically, the Company’s 2023 and 2024 capital program has been and continues to be impacted by higher inflation in steel, diesel, chemical prices and services, among other items.
Previous report
Global crude oil price levels and inflationary pressures will ultimately depend on various factors that are beyond the Company’s control, such as (i) general economic conditions and increasing expectations that the world may be heading into a global recession, (ii) the ability of OPEC and other crude oil producing nations to manage the global crude oil supply, (iii) the impact of sanctions and import bans on production from Russia and any resulting impact on production from the Israel-Hamas conflict, (iv) the timing and supply impact of any Iranian or Venezuelan sanction relief on their ability to export crude oil, (v) the global supply chain constraints associated with manufacturing and distribution delays, (vi) oilfield service demand and cost inflation, and (vii) political stability of crude oil consuming countries. The Company continues to assess and monitor the impact of these factors and consequences on the Company and its operations.
Previous report
Outlook
Previous report
HighPeak Energy’s financial position and future prospects, including its revenues, operating results, profitability, liquidity, future growth and the value of its assets, depend heavily on prevailing commodity prices. The crude oil and natural gas industry is cyclical and commodity prices are highly volatile and subject to a high degree of uncertainty. For example, during the period from January 1, 2020 through December 31, 2023, the calendar month average NYMEX WTI crude oil price per Bbl ranged from a low of $16.70 to a high of $114.34, and the last trading day NYMEX natural gas price per MMBtu ranged from a low of $1.50 to a high of $9.35.
Previous report
The markets for the commodities produced by our industry strengthened in 2021 and continued to remain strong through 2023 and into 2024, although the market has decreased from 2022 levels overall, as a result of increased demand outpacing increased supply for each of the commodities we produce. Prices for the commodities produced by our industry improved from historic lows in 2020, with crude oil and natural gas prices reaching their highest average annual price since 2014. However, there are many factors beyond the Company’s control, including commodity markets, unavailability or high cost of drilling rigs, equipment, supplies, personnel, frac crews and oilfield services or supply constraints remain subject to heightened levels of uncertainty as a result of the conflicts in Russia and Ukraine and in Israel and Hamas, elevated interest rates and associated policies of the Federal Reserve, which could adversely affect HighPeak Energy. For additional information on the risks, see “Part I, Item 1A. Risk Factors.”
Previous report
Given the dynamic nature of this situation, the Company is maintaining flexibility in its capital plan as indicated by its recent shift to an anticipated two (2) drilling rig program for 2024. The Company will continue to evaluate drilling and completion activity on an economic basis, with future activity levels assessed monthly. Despite continuing impacts of the factors listed above and future uncertainty, we are focused on maintaining our ability to sustain strong operational performance and financial stability while maximizing returns, improving leverage metrics, and increasing the value of our Midland Basin assets.
Previous report
Strategic Alternatives
Previous report
On January 23, 2023, the Company announced the intention of its Board to initiate a process to evaluate certain strategic alternatives to maximize shareholder value, including a potential sale of the Company. Texas Capital Securities and Wells Fargo Securities, LLC have been retained as a financial advisors with respect to this strategic alternatives process. To date, however, this process has been exploratory in nature and accordingly remains in preliminary stages, with our discussions to date with prospective counterparties generally excluding substantive discussions regarding potential valuation, structure or other key transaction terms. The Company has not set a timetable for the conclusion of this review, nor has it made any decisions related to any further actions or potential strategic alternatives at this time. There can be no assurance that the review will progress beyond this exploratory phase or result in any transaction or other strategic change or outcome. The Company does not intend to comment further regarding the strategic alternatives process unless and until our Board has approved a specific course of action or we have otherwise determined that further disclosure is appropriate or required by law.
Previous report
Financial and Operating Performance
Previous report
The Company’s financial and operating performance for the year ended December 31, 2023 included the following highlights:
Previous report
Partially offset by:
Previous report
Derivative Financial Instruments
Previous report
***Derivative financial instrument exposure.***As of December 31, 2023, the Company was a party to the following open crude oil derivative financial instruments.
Previous report
The estimated fair value of the outstanding open derivative financial instruments as of December 31, 2023 was a net asset of $34.4 million which is included in current assets, noncurrent assets, current liabilities and noncurrent liabilities on the Company’s consolidated balance sheet as of December 31, 2023. During the year ended December 31, 2023, the Company recognized a net derivative gain of $27.6 million, including a $51.8 million mark-to-market gain partially offset by $24.2 million in net monthly settlement payments.
Previous report
Subsequent to yearend, the Company entered into fixed price basis swaps for the spread between the Cushing, Oklahoma crude oil price and the Midland WTI crude oil price. The weighted average differential represents the amount of premium to the Cushing, Oklahoma crude oil price for the notional volumes covered by the basis swap contracts as shown below.
Previous report
Operations and Drilling Highlights
Previous report
The Company's liquids production was 93% of total production on a Boe basis for the year ended December 31, 2023.
Previous report
Costs incurred are as follows (in thousands):
Previous report
Development/service and exploration/extension drilling activity is as follows:
Previous report
The increase in average daily Boe sales volumes for the year ended December 31, 2023, compared with 2022 was due to the Company’s successful horizontal drilling program. This increase could have been more significant had we not had a portion of our production curtailed during the year primarily due to a combination of extended maintenance downtime and start-up delays at gas processing plants owned by one of our primary gas midstream providers which resulted in periodic takeaway and processing constraints. This amounted to approximately 2,000 Boe in daily production that we were not able to sell for the year ended December 31, 2023.
Previous report
Lease operating expense per Boe for 2023 increased slightly compared with 2022. This is largely due to the aforementioned curtailed production during 2023. The increase in workover costs year over year can be attributed to wells getting older and beginning to need more repair and maintenance from time to time.
Previous report
Capital resources*.*
Reworded paragraphs (21)
Previous wording
The Company’s revenues, which are entirely originated in the continental United States, are derived from the sale of crude oil and natural gas production and the sale of NGL that are extracted from natural gas during processing. For the years ended December 31, 2023, 2022 and 2021, revenues from our assets were derived approximately 98%, 95% and 96%, respectively, from crude oil sales and 2%, 5% and 4%, respectively, from NGL and natural gas sales.
Current wording
The Company’s revenues, which are entirely originated in the continental United States, are derived from the sale of crude oil and natural gas production and the sale of NGL that are extracted from natural gas during processing. For the years ended December 31, 2024, 2023 and 2022, revenues from our assets were derived approximately 99%, 98% and 95%, respectively, from crude oil sales and 1%, 2% and 5%, respectively, from NGL and natural gas sales.
Previous wording
The Company is subject to credit risk resulting from the concentration of its crude oil and natural gas receivables with significant purchasers. For the year ended December 31, 2023, sales to the Company’s largest purchaser accounted for approximately 82% of the Company’s total crude oil, NGL and natural gas sales revenues. The Company generally does not require collateral and does not believe the loss of this particular purchaser would materially impact its operating results, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers in various regions.
Current wording
The Company is subject to credit risk resulting from the concentration of its crude oil and natural gas receivables with significant purchasers. For the year ended December 31, 2024, sales to the Company’s largest purchaser accounted for approximately 76% of the Company’s total crude oil, NGL and natural gas sales revenues. The Company generally does not require collateral and does not believe the loss of this particular purchaser would materially impact its operating results, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers in various regions.
Previous wording
The decrease in prices for crude oil, NGL and natural gas for the year ended December 31, 2023, compared with 2022 was due to a lower commodity price environment.
Current wording
The slight decrease in prices for crude oil, slight increase in prices for NGL and decrease in prices for natural gas for the year ended December 31, 2024, compared with 2023 was due to an overall lower commodity price environment.
Previous wording
Production taxes per Boe for the year ended December 31, 2023, compared with 2022, decreased primarily due to the 21% overall decrease in realized sales prices. The increase in ad valorem taxes per Boe for the year ended December 31, 2023, compared with 2022, was primarily due to the increase in commodity prices in 2022 and a significant number of wells that came on production during 2022 that had no ad valorem tax in 2022. 2023 was the first year these wells were assessed ad valorem taxes. In Texas, ad valorem taxes are based on a valuation of the wells on January 1 of a given year.
Current wording
Production taxes per Boe for the year ended December 31, 2024, compared with 2023, decreased primarily due to the 12% overall decrease in realized sales prices. The increase in ad valorem taxes per Boe for the year ended December 31, 2024, compared with 2023, was primarily due to the increase in commodity prices in 2023 and a significant number of wells that came on production during 2023 that had no ad valorem tax in 2023. 2024 was the first year these wells were assessed ad valorem taxes. In Texas, ad valorem taxes are based on a valuation of the wells on January 1 of a given year.
Previous wording
The increase in exploration and abandonment expenses is primarily the result of $3.4 million in abandoned leasehold costs related to undeveloped acreage that was not in an area where the Company had current plans to drill and thus the leases were allowed to expire. The Company remains committed to maintaining as much of its undeveloped acreage leasehold position as possible, but from time to time, certain acreage is not able to be extended at reasonable prices and we are not able to get a drilling rig in the area in time to save the leases for a multitude of reasons. In addition, the Company spent $745,000 on plugging various old vertical wells across our acreage position in accordance with applicable regulations.
Current wording
The decrease in exploration and abandonment expenses is primarily the result of $3.3 million less in abandoned leasehold costs related to undeveloped acreage that was not in an area where the Company had current plans to drill and thus the leases were allowed to expire in 2023. The Company remains committed to maintaining as much of its undeveloped acreage leasehold position as possible, but from time to time, certain acreage is not able to be extended at reasonable prices and we are not able to get a drilling rig in the area in time to save the leases for a multitude of reasons. In addition, the Company spent $194,000 less in 2024 on plugging various old vertical wells across our acreage position in accordance with applicable regulations.
Previous wording
The increase in DD&A expense is primarily due to the increased production associated with our successful horizontal drilling program. The increase in DD&A expense per Boe can be primarily attributed to inflationary pressures and lower well performance as we test new areas and new geologic horizons.
Current wording
The increase in DD&A expense is primarily due to the increased production associated with our successful horizontal drilling program in addition to an increase in the DD&A rate primarily attributed to increased infrastructure and associated costs as we test new areas. Based on year-end 2024 proved reserves, we anticipate our DD&A rate going into 2025 to be in the $23.00 per Boe range, similar to the fourth quarter of 2024.
Previous wording
The increase in general and administrative expense for the year ended December 31, 2023 is primarily as a result of increased employee count, salary increases and annual bonuses in addition to an increase in internal and external audit costs and legal expenses related to the growth of the Company.
Current wording
The increase in general and administrative expense for the year ended December 31, 2024 is primarily as a result of salary increases and annual bonuses in addition to an increase in internal and external audit costs and legal expenses related to the growth of the Company.
Previous wording
The increase in interest expense can be primarily attributed to higher interest rates in 2023 compared to 2022, but more importantly, to increased borrowings under the Term Loan Credit Agreement beginning in September 2023, increased borrowings under the Prior Credit Agreement throughout 2023 until September 2023 when it was paid in full and the issuance of $250.0 million of the Company’s 10.625% Senior Notes in late-2022 that were also paid off in September 2023. In addition, the Company also experienced an increase in both amortization of discounts and debt issuance costs with the increase in debt issuances from year to year.
Current wording
The increase in interest expense can be primarily attributed to higher interest rates in 2024 compared to 2023, but more importantly, to increased borrowings under the Term Loan Credit Agreement beginning in September 2023, partially offset by lower amortization of discounts and debt issuance costs with the longer term on the new debt issuances in 2023.
Previous wording
The Company primarily utilizes commodity swap contracts, enhanced collars and deferred premium puts to (i) reduce the effect of price volatility on the commodities the Company produces and sells, (ii) support the Company’s annual capital budget and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company’s Term Loan Credit Agreement and Senior Credit Facility Agreement require the Company to hedge certain quantities of its projected crude oil production. The Company may also, from time to time, utilize natural gas contracts or interest rate contracts to reduce the effect of interest rate volatility on the Company’s indebtedness. The above mark-to-market gains and losses and cash settlements relate to crude oil and natural gas derivative swap, enhanced collars and deferred premium put contracts.
Current wording
The Company primarily utilizes commodity swap contracts, collars, enhanced collars and deferred premium puts to (i) reduce the effect of price volatility on the commodities the Company produces and sells, (ii) support the Company’s annual capital budget and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company’s Term Loan Credit Agreement and Senior Credit Facility Agreement require the Company to hedge certain quantities of its projected crude oil production. The Company may also, from time to time, utilize natural gas contracts or interest rate contracts to reduce the effect of interest rate volatility on the Company’s indebtedness. The above mark-to-market gains and losses and cash settlements relate to crude oil and natural gas derivative swap, enhanced collars and deferred premium put contracts.
Previous wording
Liquidity*.*The Company’s primary sources of short-term liquidity are (i) cash and cash equivalents, including remaining cash proceeds from our recent $1.2 billion Term Loan Credit Agreement, (ii) net cash provided by operating activities, (iii) unused borrowing capacity under the Senior Credit Facility Agreement, (iv) on an opportunistic basis, other issuances of debt or equity securities and (v) other sources, such as sales of nonstrategic assets.
Current wording
Liquidity*.*The Company’s primary sources of short-term liquidity are (i) cash and cash equivalents, including remaining cash proceeds from our $1.2 billion Term Loan Credit Agreement, (ii) net cash provided by operating activities, (iii) unused borrowing capacity under the Senior Credit Facility Agreement, (iv) on an opportunistic basis, other issuances of debt or equity securities and (v) other sources, such as sales of nonstrategic assets.
Previous wording
On November 1, 2023, but included in part of the refinancing of the Company’s overall long-term debt, the Company entered into a Senior Credit Facility Agreement with Fifth Third Bank, National Association (“Fifth Third”) as the administrative agent and collateral agent and a number of banks included in the syndicate to establish a senior revolving credit facility (“Senior Credit Facility Agreement”) that matures on September 30, 2026. The Senior Credit Facility Agreement has aggregate maximum commitments of $100.0 million with current commitments of $75.0 million. Loans under the Senior Credit Facility Agreement bear interest at either the Adjusted Term SOFR (as defined in the Senior Credit Facility Agreement) or the Base Rate (as defined in the Senior Credit Facility Agreement) at the Company’s option, plus an applicable margin ranging (i) for Adjusted Term SOFR loans, from 4.00% to 5.00%, and (ii) for Base Rate loans, from 3.00% to 4.00%, in each case calculated based on the ratio at such time of the outstanding principal loan amounts to the aggregate amount of lenders’ commitments. To the extent that a payment default exists and is continuing, at the election of the Required Lenders (as defined in the Senior Credit Facility Agreement) under the Senior Credit Facility Agreement, all amounts outstanding under the Senior Credit Facility Agreement will bear interest at 2.00% per annum above the rate and margin otherwise applicable thereto. The Company is able to repay any amounts borrowed prior to the maturity date without premium or penalty. The Senior Credit Facility Agreement is guaranteed by the Company and certain of its subsidiaries and is secured by a first lien security interest in substantially all assets of the Company and certain of its subsidiaries.
Current wording
On November 1, 2023, but included in part of the refinancing of the Company’s overall long-term debt, the Company entered into a Senior Credit Facility Agreement with Fifth Third Bank, National Association (“Fifth Third”) as the administrative agent and collateral agent and a number of banks included in the syndicate to establish a senior revolving credit facility (“Senior Credit Facility Agreement”) that matures on September 30, 2026. The Senior Credit Facility Agreement has aggregate maximum commitments of $100.0 million and effective March 29, 2024 pursuant to the First Facility Amendment, current commitments of $100.0 million and customary debt issuance costs which totaled approximately $1.1 million. Loans under the Senior Credit Facility Agreement bear interest at either the Adjusted Term SOFR (as defined in the Senior Credit Facility Agreement) or the Base Rate (as defined in the Senior Credit Facility Agreement) at the Company’s option, plus an applicable margin ranging (i) for Adjusted Term SOFR loans, from 4.00% to 5.00%, and (ii) for Base Rate loans, from 3.00% to 4.00%, in each case calculated based on the ratio at such time of the outstanding principal loan amounts to the aggregate amount of lenders’ commitments. To the extent that a payment default exists and is continuing, at the election of the Required Lenders (as defined in the Senior Credit Facility Agreement) under the Senior Credit Facility Agreement, all amounts outstanding under the Senior Credit Facility Agreement will bear interest at 2.00% per annum above the rate and margin otherwise applicable thereto. The Company is able to repay any amounts borrowed prior to the maturity date without premium or penalty. The Senior Credit Facility Agreement is guaranteed by the Company and certain of its subsidiaries and is secured by a first lien security interest in substantially all assets of the Company and certain of its subsidiaries.
Previous wording
2024 capital budget*.*The Company’s capital budget for 2024 is expected to be in the range of approximately $450 to $525 million for drilling, completion, facilities and equipping crude oil wells plus $50 to $60 million for field infrastructure buildout and other costs. The 2024 capital budget excludes acquisitions, asset retirement obligations, geological and geophysical general and administrative expenses and corporate facilities. HighPeak Energy expects to fund its forecasted capital expenditures with cash on its balance sheet, cash generated by operations and borrowings under the Senior Credit Facility Agreement, if needed. The Company’s capital expenditures for the year ended December 31, 2023 were $1.0 billion, excluding acquisitions.
Current wording
2025 capital budget*.*The Company’s capital budget for 2025 is expected to be in the range of approximately $375 to $405 million for drilling, completion, facilities and equipping crude oil wells plus $40 to $50 million for field infrastructure buildout and other costs and $33 - $35 million on one-time infrastructure expenditures. The 2025 capital budget excludes acquisitions, asset retirement obligations, geological and geophysical general and administrative expenses and corporate facilities. HighPeak Energy expects to fund its forecasted capital expenditures with cash on its balance sheet, cash generated by operations and borrowings under the Senior Credit Facility Agreement, if needed. The Company’s capital expenditures for the year ended December 31, 2024 were $604.3 million, excluding acquisitions.
Previous wording
The budget above assumes that the Company will operate an average of two (2) drilling rigs and an average of one (1) frac crew during 2024. However, there are many factors and consequences beyond the Company’s control, such as policies of the Biden Administration, economic downturn or potential recession, geo-political risks and additional actions by businesses, and OPEC and other cooperating countries, that may have an impact on the Company’s future results and drilling plans. For additional information on the risks, see “Part I, Item 1A. Risk Factors.” Given the dynamic nature of this situation, the Company is maintaining flexibility in its capital plan and will continue to evaluate drilling and completion activity on an economic basis, with future activity levels assessed monthly.
Current wording
The budget above assumes that the Company will operate an average of two (2) drilling rigs and an average of one (1) frac crew during 2025. However, there are many factors and consequences beyond the Company’s control, such as policies of the Trump Administration, economic downturn or potential recession, geo-political risks and additional actions by businesses, and OPEC and other cooperating countries, that may have an impact on the Company’s future results and drilling plans. For additional information on the risks, see “Part I, Item 1A. Risk Factors.” Given the dynamic nature of this situation, the Company is maintaining flexibility in its capital plan and will continue to evaluate drilling and completion activity on an economic basis, with future activity levels assessed monthly.
Previous wording
As of December 31, 2023, the Company had $1.2 billion in outstanding borrowings under the Term Loan Credit Agreement and approximately $68.9 million available to borrow under the Senior Credit Facility Agreement. The Company also had unrestricted cash on hand of $194.5 million as of December 31, 2023.
Current wording
Capital resources*.*As of December 31, 2024, the Company had $1.1 billion in outstanding borrowings under the Term Loan Credit Agreement and approximately $93.1 million available to borrow under the Senior Credit Facility Agreement. The Company also had unrestricted cash on hand of $86.6 million as of December 31, 2024.
Previous wording
*Operating activities.*The increase in net cash flow provided by operating activities for the year ended December 31, 2023, compared with 2022, was primarily due to an increase in cash flow from the statement of operations related mostly to increased revenues associated with increased production volumes as a result of our successful horizontal drilling program, coupled with a positive working capital change of $52.5 million.
Current wording
*Operating activities.*The decrease in net cash flow provided by operating activities for the year ended December 31, 2024, compared with 2023, was primarily due to a decrease in cash flow from the statement of operations related mostly to decreased revenues associated with lower commodity prices partially offset by increased production volumes as a result of our successful horizontal drilling program, increased interest expense due to a higher debt balance and increased interest rates, partially offset by lower operating expenses.
Previous wording
*Investing activities.*The slight decrease in net cash used in investing activities for the year ended December 31, 2023, compared with 2022, was primarily due to a decrease in additions to crude oil and natural gas properties including drilling and completion operations and acquisitions in total.
Current wording
*Investing activities.*The decrease in net cash used in investing activities for the year ended December 31, 2024, compared with 2023, was primarily due to a decrease in additions to crude oil and natural gas properties including drilling and completion operations and a decrease in the change in working capital associated with oil and gas property additions.
Previous wording
Interest Rate Risk. * *We are exposed to market risk due to the floating interest rate associated with any outstanding balance on the Term Loan Credit Agreement and the Senior Credit Facility Agreement. As of December 31, 2023, we had a $1.2 billion outstanding balance on the Term Loan Credit Agreement and zero outstanding on the Senior Credit Facility Agreement. Our Term Loan Credit Agreement fixes the interest rate for all of the principal balance for a period of three months and the Senior Credit Facility Agreement allows us to fix the interest rate for all or a portion of the principal balance for a period of up to six months. To the extent that the interest rate is fixed, interest rate changes will affect the Term Loan Credit Agreement’s and Senior Credit Facility Agreement’s fair value but will not impact results of operations or cash flows. Conversely, for the portion of the Term Loan Credit Agreement and Senior Credit Facility Agreement that has a floating interest rate, interest rate changes will not affect the fair value but will impact future results of operations and cash flows.
Current wording
Interest Rate Risk. * *We are exposed to market risk due to the floating interest rate associated with any outstanding balance on the Term Loan Credit Agreement and the Senior Credit Facility Agreement. As of December 31, 2024, we had a $1.1 billion outstanding balance on the Term Loan Credit Agreement and zero outstanding on the Senior Credit Facility Agreement. Our Term Loan Credit Agreement fixes the interest rate for all of the principal balance for a period of three months and the Senior Credit Facility Agreement allows us to fix the interest rate for all or a portion of the principal balance for a period of up to six months. To the extent that the interest rate is fixed, interest rate changes will affect the Term Loan Credit Agreement’s and Senior Credit Facility Agreement’s fair value but will not impact results of operations or cash flows. Conversely, for the portion of the Term Loan Credit Agreement and Senior Credit Facility Agreement that has a floating interest rate, interest rate changes will not affect the fair value but will impact future results of operations and cash flows.
Previous wording
Commodity Price Risk. * *The prices we receive for our crude oil, NGL and natural gas production directly impact our revenue, profitability, access to capital, and future rate of growth. Crude oil, NGL and natural gas prices are subject to unpredictable fluctuations resulting from a variety of factors, including changes in supply and demand and the macroeconomic environment, and seasonal anomalies, all of which are typically beyond our control. The markets for crude oil, NGL and natural gas have been volatile, especially over the last several years. Commodity prices have improved from historic lows in 2020 resulting from the impacts of the COVID-19 pandemic. Additionally, commodity prices are subject to heightened levels of uncertainty related to geopolitical issues such as the ongoing armed conflict between Russia and Ukraine. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control. Based on our 2023 sales volumes and excluding the effects on derivatives, a $1.00 per barrel increase (decrease) in the weighted average crude oil price for the year ended December 31, 2023 would have increased (decreased) the Company’s crude oil and NGL revenues by approximately $14.3 million and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2023 would have increased (decreased) the Company’s natural gas revenues by approximately $722,000.
Current wording
Commodity Price Risk. * *The prices we receive for our crude oil, NGL and natural gas production directly impact our revenue, profitability, access to capital, and future rate of growth. Crude oil, NGL and natural gas prices are subject to unpredictable fluctuations resulting from a variety of factors, including changes in supply and demand and the macroeconomic environment, and seasonal anomalies, all of which are typically beyond our control. The markets for crude oil, NGL and natural gas have been volatile, especially over the last several years. Commodity prices have improved from historic lows in 2020 resulting from the impacts of the COVID-19 pandemic. Additionally, commodity prices are subject to heightened levels of uncertainty related to geopolitical issues such as the ongoing armed conflict between Russia and Ukraine. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control. Based on our 2024 sales volumes and excluding the effects on derivatives, a $1.00 per barrel increase (decrease) in the weighted average crude oil price for the year ended December 31, 2024 would have increased (decreased) the Company’s crude oil and NGL revenues by approximately $14.5 million and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2024 would have increased (decreased) the Company’s natural gas revenues by approximately $1.3 million.
Previous wording
We enter into commodity derivative contracts to reduce the risk of fluctuations in commodity prices. The fair value of our commodity derivative contracts is largely determined by estimates of the forward curves of the relevant price indices. As of December 31, 2023, a $1.00 increase (decrease) in the forward curves associated with our crude oil commodity derivative instruments would have changed our net derivative positions for these products by approximately $6.8 million.
Current wording
We enter into commodity derivative contracts to reduce the risk of fluctuations in commodity prices. The fair value of our commodity derivative contracts is largely determined by estimates of the forward curves of the relevant price indices. As of December 31, 2024, a $1.00 increase (decrease) in the forward curves associated with our crude oil commodity derivative instruments would have changed our net derivative positions for these products by approximately $1.4 million.
Previous wording
The Company’s proved reserve information included in this Annual Report as of December 31, 2023, 2022 and 2021 was prepared by independent petroleum engineers. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities of crude oil and natural gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions, positively or negatively, to the estimate of proved reserves. For the years ended December 31, 2023, 2022 and 2021, net downward revisions of our proved reserves totaled approximately 16,093 MBoe, 9,211 MBoe and 1,658 MBoe, respectively. We cannot predict the amounts or timing of future reserve revisions or removals.
Current wording
The Company’s proved reserve information included in this Annual Report as of December 31, 2024, 2023 and 2022 was prepared by independent petroleum engineers. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities of crude oil and natural gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions, positively or negatively, to the estimate of proved reserves. For the year ended December 31, 2024, net upward revisions of our proved reserves totaled approximately 18,017 MBoe and for the years ended December 31, 2023 and 2022, net downward revisions of our proved reserves totaled approximately 16,093 MBoe and 9,211 MBoe, respectively. We cannot predict the amounts or timing of future reserve revisions or removals.
Previous wording
***Impairment of unproved crude oil and natural gas properties.***At December 31, 2023, the Company carried unproved property costs of $72.7 million. Management assesses unproved crude oil and natural gas properties for impairment on a project-by-project basis. Management's impairment assessments include evaluating the results of exploration activities, management's price outlooks and planned future sales or expiration of all or a portion of such projects.
Current wording
***Impairment of unproved crude oil and natural gas properties.***At December 31, 2024, the Company carried unproved property costs of $70.9 million. Management assesses unproved crude oil and natural gas properties for impairment on a project-by-project basis. Management's impairment assessments include evaluating the results of exploration activities, management's price outlooks and planned future sales or expiration of all or a portion of such projects.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Average daily crude oil, NGL and natural gas sales volumes are as follows: