HighPeak Energy, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Condensed Consolidated Statements of Changes in Stockholders' Equity

(in thousands)

Condensed Consolidated Statements of Cash Flows

(in thousands)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Organization and Nature of Operations

HighPeak Energy, Inc. ("HighPeak Energy" or the "Company") is a Delaware corporation, formed in October 2019. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 11, 2026, for further information regarding the formation of the Company. HighPeak Energy’s common stock is listed and traded on the Nasdaq Global Market (the "Nasdaq") under the ticker symbol “HPK.” The Company 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 primarily in Howard and Borden Counties. 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.

NOTE 2. Basis of Presentation and Summary of Significant Accounting Policies

***Presentation.***In the opinion of management, the unaudited interim condensed consolidated financial statements of the Company as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025 include all adjustments and accruals, consisting only of normal, recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods in conformity with generally accepted accounting principles in the United States ("GAAP"). Certain reclassifications have been made to prior period amounts to conform to the current period’s presentation, specifically gathering, processing and transportation expenses, which were previously netted against NGL and natural gas sales and are now reflected as a component of total operating costs and expenses, which had no effect on the previously reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows. The operating results for the three and six months ended June 30, 2026 are not indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the SEC. These unaudited interim condensed consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

***Principles of consolidation.***The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries since their acquisition or formation. All material intercompany balances and transactions have been eliminated.

***Use of estimates in the preparation of consolidated financial statements.***Preparation of the Company's consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of crude oil and natural gas properties is determined using estimates of proved crude oil, NGL and natural gas reserves and evaluations for impairment of proved and unproved crude oil and natural gas properties, in part, is determined using estimates of proved and risk adjusted probable and possible crude oil, NGL and natural gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, if needed, evaluations for impairment of proved crude oil and natural gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, commodity price outlooks and future undiscounted and discounted net cash flows. In addition, evaluations for impairment of unproved crude oil and natural gas properties on a project-by-project basis are also subject to numerous uncertainties including, among others, estimates of future recoverable reserves, results of exploration activities, commodity price outlooks, planned future sales or expirations of all or a portion of such projects. Other items subject to such estimates and assumptions include, but are not limited to, the carrying value of crude oil and natural gas properties, asset retirement obligations, equity-based compensation, fair value of derivatives, expected credit losses and estimates of income taxes. Actual results could differ from the estimates and assumptions utilized.

***Cash and cash equivalents.***The Company’s cash and cash equivalents include depository accounts held by banks with original issuance maturities of 90 days or less. The Company’s cash and cash equivalents are generally held in financial institutions in amounts that may exceed the insurance limits of the Federal Deposit Insurance Corporation. However, management believes that the Company’s counterparty risks are minimal based on the reputation and history of the institutions selected.

***Accounts receivable.***As of June 30, 2026 and December 31, 2025, the Company’s accounts receivables primarily consist of amounts due from the sale of crude oil, NGL and natural gas of $60.8 million and $35.4 million, respectively, and are based on estimates of sales volumes and realized prices the Company anticipates it will receive, a receivable from the State of Texas of $10.0 million for a multi-year natural gas severance tax refund as of both June 30, 2026 and December 31, 2025, receivables from electric power infrastructure installed throughout Flat Top by the Company for which it will be reimbursed totaling $4.1 million and $224,000, respectively, joint interest receivables of $3.3 million and $4.8 million, respectively, current U.S. federal income tax receivables of $2.9 million and $3.2 million, respectively, and receivables related to settlements of derivative contracts of $1.9 million and $1.9 million, respectively. The Company’s share of crude oil, NGL and natural gas production is sold to various purchasers who must be prequalified under the Company’s credit risk policies and procedures. The Company’s credit risk related to collecting accounts receivables is mitigated by using credit and other financial criteria to evaluate the credit standing of the entity obligated to make payment on the accounts receivable, and where appropriate, the Company obtains assurances of payment, such as a guarantee by the parent company of the counterparty or other credit support.

Accounts receivable are stated at amounts due from purchasers or joint interest owners, net of an allowance for expected losses as estimated by the Company when collection is doubtful. For receivables from joint interest owners, the Company typically has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Accounts receivable from purchasers or joint interest owners outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for each type of receivable by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. The Company writes off specific accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for expected losses. As of June 30, 2026 and December 31, 2025, the Company hadno allowance for credit losses related to accounts receivable.

***Concentration of credit risk.***The Company is subject to credit risk resulting from the concentration of its crude oil and natural gas receivables with significant purchasers. For the six months ended June 30, 2026 and 2025, sales to the Company’s largest purchaser accounted for approximately 88% and 87%, respectively, of the Company’s total crude oil, NGL and natural gas sales revenues and sales to the Company’s second largest purchaser accounted for approximately 6% and 10%, respectively, of the Company’s total crude oil, NGL and natural gas revenues. The Company generally does not require collateral and does not believe the loss of these particular purchasers 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.

***Inventory.***Inventory is comprised primarily of crude oil and natural gas drilling and completion or repair items such as pumps, tubing, casing, vessels, operating supplies and ordinary maintenance materials and parts. The materials and supplies inventory is primarily acquired for use in future drilling and completion or repair operations and is carried at the lower of cost or net realizable value, on a weighted average cost basis. Valuation allowances for materials and supplies inventories are recorded as reductions to the carrying values of the materials and supplies inventories in the Company’s consolidated balance sheet and as charges to other expense in the consolidated statements of operations. The Company’s materials and supplies inventory as of June 30, 2026 and December 31, 2025 is $3.8 million and $7.6 million, respectively, and the Company has not recognized any valuation allowance to date.

***Prepaid expenses.***Prepaid expenses are comprised primarily of software maintenance fees that will be amortized over the life of the contracts, fees related to advisory services that will be deducted from eventual commissions on a future transaction, if any, caliche that will be used on future locations and roads in our development areas and prepaid insurance, listing, subscription and agency fees. Prepaid expenses as of June 30, 2026 and December 31, 2025 are $3.2 million and $5.1 million, respectively.

Crude oil and natural gas properties. The Company utilizes the successful efforts method of accounting for its crude oil and natural gas properties. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized while nonproductive exploration costs and geological and geophysical expenditures are expensed.

The Company does not carry the costs of drilling an exploratory well as an asset in its consolidated balance sheet following the completion of drilling unless both of the following conditions are met: (i) the well has found a sufficient quantity of reserves to justify its completion as a producing well and (ii) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

Due to the capital-intensive nature and the geographical location of certain projects, it may take an extended period of time to evaluate the future potential of an exploration project and the economics associated with making a determination on its commercial viability. In these instances, the project’s feasibility is not contingent upon price improvements or advances in technology, but rather the Company’s ongoing efforts and expenditures related to accurately predict the hydrocarbon recoverability based on well information, gaining access to other companies’ production data in the area, transportation or processing facilities and/or getting partner approval to drill additional appraisal wells. These activities are ongoing and are being pursued constantly. Consequently, the Company’s assessment of suspended exploratory well costs is continuous until a decision can be made that the project has found sufficient proved reserves to sanction the project or is noncommercial and is charged to exploration and abandonment expense. See Note 6 for additional information.

The capitalized costs of proved properties are depleted using the unit-of-production method based on proved reserves for leasehold costs and proved developed reserves for drilling, completion and other crude oil and natural gas property costs. Unproved leasehold costs are excluded from depletion until proved reserves are established or, if unsuccessful, impairment is determined.

Proceeds from the sales of individual properties are credited to proved or unproved crude oil and natural gas properties, as the case may be, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recorded until an entire amortization base is sold. However, gain or loss is recorded from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base.

The Company performs assessments of its long-lived assets to be held and used, including proved crude oil and natural gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. If there is an indication the carrying value of the assets may not be recovered, an impairment loss is recognized if the sum of the expected future cash flows is less than the carrying amount of the assets. In these circumstances, the Company recognizes an impairment charge for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Unproved crude oil and natural gas properties are periodically assessed for impairment on a project-by-project basis. These impairment assessments are affected by the estimates of future recoverable reserves, results of exploration activities, commodity price outlooks, planned future sales or expirations of all or a portion of such projects. If the estimated future net cash flows attributable to such projects are not expected to be sufficient to fully recover the costs invested in each project, the Company will recognize an impairment charge at that time.

***Other property and equipment, net.***Other property and equipment is recorded at cost. The carrying values of other property and equipment, net of accumulated depreciation of $1.5 million and $1.3 million as of June 30, 2026 and December 31, 2025, respectively, are as follows (in thousands):

Other property and equipment are depreciated over their estimated useful life on a straight-line basis. Land is not depreciated. Transportation equipment is generally depreciated over five years, buildings are generally depreciated over forty years, field equipment is generally depreciated over seven years and furniture and fixtures is generally depreciated over five years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the underlying terms of the associated leases.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recorded is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value. The estimated fair value is determined using either a discounted future cash flow model or another appropriate fair value method.

***Aid-in-construction assets.***As of June 30, 2026 and December 31, 2025, the Company had aid-in-construction assets totaling $14.7 million and $15.2 million, respectively, included in other noncurrent assets. The Company funded aid-in-construction projects during the six months ended June 30, 2026 and 2025 ofzero and $71,000, respectively, under the contract. The Company has received and will continue to receive payments based on gross system throughput, including any third-party natural gas that is potentially tied into the Flat Top gathering system in the future. Payments received during the six months ended June 30, 2026 and 2025 were approximately $531,000 and $878,000, respectively. The contract calls for future additional aid-in-construction fundings if expansions of the system are necessary as determined in the sole discretion of the Company.

***Leases.***The Company enters into leases for drilling rigs, storage tanks, equipment and buildings and recognizes lease expense on a straight-line basis over the lease term. Lease right-of-use assets and liabilities are initially recorded on the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate, which is determined based on information available at the commencement date of a lease. Leases may include renewal, purchase or termination options that can extend or shorten the term of a lease. The exercise of those options is at the Company’s sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required. Leases with an initial term of 12 months or less are generally not recorded as lease right-of-use assets and liabilities. See Note 10 for additional information.

***Current liabilities.***Current liabilities as of June 30, 2026 and December 31, 2025 totaled approximately $305.5 million and $230.3 million, respectively, including current maturities of long-term debt, trade accounts payable, accrued capital expenditures, revenues and royalties payable, derivative instruments mark-to-market liabilities, derivative settlements payable, advances from joint interest owners and accruals for operating and general and administrative expenses, operating leases and other miscellaneous items.

***Debt issuance costs and original issue discount.***The Company has paid and has capitalized a total of $15.1 million in debt issuance costs, $6.1 million and $7.9 million of which were incurred during the six months ended June 30, 2026 and the year ended December 31, 2025, respectively, primarily related to amendments to the Term Loan Credit Agreement and Senior Credit Facility Agreement in June 2026, March 2026 and August 2025, respectively. Amortization based on the straight-line method over the terms of the Term Loan Credit Agreement and Senior Credit Facility Agreement which approximates the effective interest method was $2.2 million and $4.1 million during the six months ended June 30, 2026 and 2025, respectively. In addition, the Company realized a total of $30.0 million in original issue discounts on the issuance of its Term Loan Credit Agreement that were being amortized over the life of the agreement which approximates the effective interest method and waszero and $4.9 million during the six months ended June 30, 2026 and 2025, respectively. All unamortized debt issuance costs and discounts as of the refinancing of the Term Loan Credit Agreement in August 2025 were charged to expense and included in loss on extinguishment of debt. See Note 7 for more information. As of June 30, 2026 and December 31, 2025, the remaining net debt issuance costs related to the Term Loan Credit Agreement and Senior Credit Facility Agreement are netted against the outstanding long-term debt on the accompanying consolidated balance sheets.

***Asset retirement obligations.***The Company records a liability for the fair value of an asset retirement obligation in the period in which the associated asset is acquired or placed into service if a reasonable estimate of fair value can be made. Asset retirement obligations are generally capitalized as part of the carrying value of the long-lived asset to which it relates. Conditional asset retirement obligations meet the definition of liabilities and are recorded when incurred and when fair value can be reasonably estimated. See Note 8 for additional information.

Revenue recognition**.**The Company follows FASB ASC 606, “Revenue from Contracts with Customers,” (“ASC 606”) whereby the Company recognizes revenues from the sales of crude oil, NGL and natural gas to its purchasers and presents them disaggregated on the Company’s consolidated statements of operations.

The Company enters into contracts with purchasers to sell its crude oil, NGL and natural gas production. Revenue on these contracts is recognized in accordance with the five-step revenue recognition model prescribed in ASC 606. Specifically, revenue is recognized when the Company’s performance obligations under these contracts are satisfied, which generally occurs with the transfer of control of the crude oil and natural gas to the purchaser. Control is generally considered transferred when the following criteria are met: (i) transfer of physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature of the products sold, revenue is recognized at a point in time based on the amount of consideration the Company expects to receive in accordance with the price specified in the contract. Consideration under the crude oil and natural gas marketing contracts is typically received from the purchaserone totwo months after the date of sale. As of June 30, 2026 and December 31, 2025, the Company had receivables related to contracts with purchasers of approximately $60.8 million and $35.4 million, respectively.

*Crude Oil Contracts.*The Company’s crude oil marketing contracts transfer physical custody and title at or near the wellhead, which is generally when control of the crude oil has been transferred to the purchaser. The crude oil produced is sold under contracts using market-based pricing which is then adjusted for the differentials based upon delivery location and crude oil quality. Since the differentials are incurred after the transfer of control of the crude oil, the differentials are included in crude oil sales on the consolidated statements of operations as they represent part of the transaction price of the contract.

*Natural Gas Contracts.*The majority of the Company’s natural gas is sold at the lease location, which is generally when control of the natural gas has been transferred to the purchaser. Natural gas is sold under (i) percentage of proceeds processing contracts or (ii) a hybrid of percentage of proceeds and fee-based contracts. Under the majority of the Company’s contracts, the purchaser gathers the natural gas in the field where it is produced and transports it to natural gas processing plants where NGL products are extracted. The NGL products and remaining residue natural gas are then sold by the purchaser. Under percentage of proceeds and hybrid percentage of proceeds and fee-based contracts, the Company receives a percentage of the value for the extracted liquids and the residue natural gas. Since control of the natural gas transfers upstream of the transportation and processing activities, revenue is recognized as the net amount received from the purchaser.

The Company does not disclose the value of unsatisfied performance obligations under its contracts with customers as it applies the practical exemption in accordance with ASC 606. The exemption, as described in ASC 606-10-50-14(a), applies to variable consideration that is recognized as control of the product is transferred to the customer. Since each unit of product represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

***Derivatives.***All the Company’s derivatives are accounted for as non-hedge derivatives and are recorded at estimated fair value in the consolidated balance sheets. All changes in the fair values of its derivative contracts are recorded as gains or losses in the earnings of the periods in which they occur. The Company enters into derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty. The Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and counterparty.

The Company’s credit risk related to derivatives is a counterparties’ failure to perform under derivative contracts owed to the Company. The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company’s credit risk policies and procedures.

The Company has entered into International Swap Dealers Association Master Agreements (“ISDA Agreements”) with each of its derivative counterparties. The terms of the ISDA Agreements provide the Company and the counterparties with rights of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative, whereby the party not in default may set off all derivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party. See Note 5 for additional information.

***Income taxes.***The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.

The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all the deferred tax assets will not be realized. The Company has not established a valuation allowance as of June 30, 2026 and December 31, 2025.

Tax benefits from uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period it is recognized. See Note 13 for additional information.

Tax-related interest charges are recorded as interest expense and any tax-related penalties as other expense in the consolidated statements of operations of which there have been none to date.

The Company is also subject to Texas margin tax. The Company realizedno current Texas margin tax for the six months ended June 30, 2026 and 2025 in the accompanying consolidated financial statements.

***Stock-based compensation.***Stock-based compensation expense for stock option awards is measured at the grant date or modification date, as applicable, using the fair value of the award, and is recorded, net of forfeitures, on a straight-line basis over the requisite service period of the respective award. The fair value of stock option awards is determined on the grant date or modification date, as applicable, using a Black-Scholes option valuation model with the following inputs; (i) the grant date’s closing stock price, (ii) the exercise price of the stock options, (iii) the expected term of the stock option, (iv) the estimated risk-free adjusted interest rate for the duration of the option’s expected term, (v) the expected annual dividend yield on the underlying stock and (vi) the expected volatility over the option’s expected term.

Stock-based compensation for restricted stock awarded to outside directors, employee members of the Board and certain other employees is measured at the grant or modification date using the fair value of the award and is recognized on a straight-line basis over the requisite service period of the respective award.

Reportable Segments. The Company is an independent energy company engaged in the exploration, development and production of crude oil and natural gas. The Company’s crude oil and natural gas exploration and production activities are solely focused in the U.S., specifically the Midland Basin portion of the Permian Basin in West Texas. For financial reporting purposes, the Company aggregates its operations intoone reporting segment due to the similar geographic location and nature of the operations.

The Company’s President and Chief Executive Officer is the chief operating decision maker (“CODM”). To assess the performance of our assets, the CODM uses net income. We believe net income provides information useful in assessing our operating and financial performance across periods.

The following table reflects the Company’s net income, assets and capital expenditures for the Company’s one reporting segment for the time periods presented:

Recently adopted accounting pronouncements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this standard provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid. This ASU is effective for the Company prospectively to all annual periods beginning after December 15, 2024, and interim reporting periods beginning after December 15, 2025. The Company adopted this update effective December 31, 2025. While the adoption of this ASU modified the Company’s disclosures, it had no impact on the Company’s consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows in its consolidated financial statements.

New accounting pronouncements not yet adopted. In November 2024, the FASB issued ASU 2024-03,Income Statement–* Reporting Comprehensive Income*–* Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses*, which requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the Condensed Consolidated Statement of Operations. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. Adoption of the update will not impact the Company’s consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows in its consolidated financial statements or its liquidity.

The Company considers the applicability and the impact of all ASUs. ASUs not listed above were assessed and determined to be either not applicable, previously disclosed, or not material upon adoption.

**NOTE 3.**Acquisitions and Divestitures

***Acquisitions.***During the six months ended June 30, 2026 and 2025, the Company incurred a total of $2.6 million and $3.6 million, respectively, in acquisition costs primarily to acquire various undeveloped crude oil and natural gas leases largely contiguous to its Flat Top and Signal Peak operating areas.

***Divestitures.***During the six months ended June 30, 2025, the Company sold various non-core non-operated working interests in certain producing properties outside of our core areas for total proceeds of $570,000.

NOTE 4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgement and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The Company uses appropriate valuation techniques based on available inputs to measure the fair value of its assets and liabilities.

***Assets and liabilities measured at fair value on a recurring basis.***Assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 are as follows (in thousands):

*Commodity price derivatives.*The Company’s commodity price derivatives for crude oil are currently made up of swap contracts, costless collars, roll swaps and basis swaps and for natural gas are currently made up of swap contracts and basis swaps. The Company measures derivatives using an industry-standard pricing model that is provided by the counterparties. The inputs utilized in the third-party discounted cash flow and option-pricing models for valuing commodity price derivatives include forward prices for crude oil, contracted volumes, volatility factors and time to maturity, which are considered Level 2 inputs.

***Assets and liabilities measured at fair value on a nonrecurring basis.Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Specifically, (i) stock-based compensation is measured at fair value on the date of grant based on Level 1 inputs for restricted stock awards or Level 2 inputs for stock option awards based upon market data, (ii) the estimates and fair value measurements used for the evaluation of proved property for potential impairment using Level 3 inputs based upon market conditions in the area, and (iii) asset retirement obligations are measured at estimated fair value on the date the liabilities are incurred using Level 3 inputs based on expected future costs to retire the assets, market conditions and estimated lives of the assets. The Company assesses the recoverability of the carrying amount of certain assets and liabilities whenever events or changes in circumstances indicate the carrying amount of an asset or liability may not be recoverable. These assets and liabilities can include inventories, proved and unproved crude oil and natural gas properties and other long-lived assets that are written down to fair value when they are impaired or held for sale. The Company did not record any impairments to proved or unproved crude oil and natural gas properties for the periods presented in the accompanying consolidated financial statements. ***

Financial instruments not carried at fair value. As of June 30, 2026 and December 31, 2025, the Company has financial instruments consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt (specifically the Term Loan Credit Agreement and Senior Credit Facility Agreement), and other current assets and liabilities that approximate fair value due to the nature of the instrument and their relatively short maturities.

NOTE 5. Derivative Financial Instruments

The Company utilizes derivative financial instruments, primarily swaps, costless collars, basis swaps and roll swaps to (i) reduce the effect of price volatility on the commodities the Company produces and sells, (ii) support the Company’s capital budgeting and expenditure plans, (iii) protect the Company’s commitments under the Term Loan Credit Agreement and Senior Credit Facility Agreement and (iv) support the payment of contractual obligations. The Company has not designated its derivative financial instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the cash and non-cash changes in fair value in the consolidated statements of operations under the caption “Gain (loss) on derivative instruments, net.”

The following table summarizes the effect of derivative instruments on the Company’s condensed consolidated statements of operations (in thousands):

By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company has entered into commodity derivative instruments only with counterparties that are also lenders under its Term Loan Credit Agreement and Senior Credit Facility Agreement and have been deemed acceptable credit risk. As such, collateral is not required from either the counterparties or the Company on its outstanding derivative contracts.

***Crude oil production derivatives.***The Company sells its crude oil production at the lease and the sales contracts governing such crude oil production are tied directly to, or are correlated with, NYMEX WTI Cushing and Argus WTI Midland crude oil prices. As such, the Company primarily uses NYMEX WTI Cushing derivative contracts as well as Argus WTI Midland basis swaps and NYMEX WTI roll swaps from time to time to manage future crude oil price volatility. The Argus WTI Midland basis differential represents the amount of premium to NYMEX WTI Cushing.

The Company’s outstanding NYMEX WTI Cushing, Argus WTI Midland and NYMEX WTI Roll crude oil derivative instruments as of June 30, 2026 and the weighted average crude oil prices per barrel for those contracts are as follows:

***Natural gas production derivatives.***The Company sells its natural gas production at the tailgate of the gas processing plants and the sales contracts governing such natural gas production are correlated with HH and WAHA natural gas prices. As such, the Company primarily uses HH and WAHA derivative contracts to manage future natural gas price volatility.

The Company’s outstanding HH and WAHA natural gas derivative instruments as of June 30, 2026 and the weighted average natural gas prices per MMBtu for those contracts are as follows:

Balance Sheet Offsetting of Derivative Assets and Liabilities. * *The fair value of derivative instruments is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity. While it is acceptable to record these fair values by netting asset and liability positions, including any deferred premiums, that are with the same counterparty and are subject to contractual terms which provide for net settlement, the Company elects to record them at the gross level showing assets and liabilities as if they were settled separately. See Note 4 – Fair Value Measurements for further details. Net derivative assets associated with the Company’s open commodity derivative instruments by counterparty are as follows (in thousands):

NOTE 6. Exploratory/Extension Well Costs

The Company capitalizes exploratory/extension wells and project costs until a determination is made that the well or project has either found proved reserves, is impaired or is sold. The Company’s capitalized exploratory/extension well and project costs are included in proved properties in the condensed consolidated balance sheets. If the exploratory/extension well or project is determined to be impaired, the impaired costs are charged to exploration and abandonments expense.

The changes in capitalized exploratory/extension well costs are as follows (in thousands):

All capitalized exploratory/extension well costs have been capitalized for less thanone year based on the date of drilling.

NOTE 7. Long-Term Debt

The components of long-term debt, including the effects of debt issuance costs, are as follows (in thousands):

Term Loan Credit Agreement. On September 12, 2023, the Company entered into a Term Loan Credit Agreement with Texas Capital Bank (“Texas Capital”) as the administrative agent and Chambers Energy Management, LP (“Chambers”) as collateral agent and lenders from time-to-time party thereto to establish a term loan (“Term Loan Credit Agreement”) in an aggregate principal amount of $1.2 billion, less a 2.5% original issue discount of $30.0 million at closing and customary debt issuance costs which totaled approximately $24.0 million. The Term Loan Credit Agreement was set to mature on September 30, 2026. On August 1, 2025, the Company entered into the First Term Loan Amendment whereby, among other things, (i) the maturity was extended to September 30, 2028, (ii) borrowings were upsized to $1.2 billion, providing additional liquidity, and (iii) the quarterly amortization payments of $30.0 million were deferred for one year such that they begin again in September 2026. As a result of this amendment which was considered an extinguishment of debt, the Company recognized a loss on extinguishment of debt of $25.4 million consisting of (i) $11.5 million in unamortized discounts, (ii) $9.2 million in unamortized debt issuance costs and (iii) $4.7 million in premiums paid to those lenders that chose to exit the Term Loan Credit Agreement upon closing of the First Term Loan Amendment. Effective as of December 30, 2025, the Company entered into the Second Term Loan Amendment whereby, among other things, (i) the Company has been required to maintain an asset coverage ratio of not less than 1.00 to 1.00 for the fourth quarter of 2025 and the first quarter of 2026, representing a 0.25x decrease in the required ratio levels for such quarters, (ii) the Company has been required to maintain a total net leverage ratio of not greater than 2.50 to 1.00 for the fourth quarter of 2025 and the first quarter of 2026, representing a 0.50x increase in the required ratio levels for such quarters, (iii) the Company’s hedging obligations has been increased requiring it to maintain hedging agreements with respect to 75% of its proved developed producing oil production for the period from April 1, 2026 to March 31, 2027 and 60% of its proved developed producing oil production for the period from April 1, 2027 to September 30, 2027, in each case as provided in the Company’s reserve report as of December 31, 2025 and (iv) the Company is prohibited from making quarterly dividends on its common stock until September 30, 2026. On June 25, 2026, the Company entered into the Third Term Loan Amendment whereby, the Company will be required to maintain a total net leverage ratio of not greater than 2.25 to 1.00 for the second quarter of 2026, representing a 0.25x increase in the required ratio level for such quarter. For the third quarter of 2026 and quarterly periods ending thereafter, the required asset coverage ratio and total net leverage ratio levels will reset to the levels provided for such quarters in the Second Term Loan Amendment. As of June 30, 2026, $1.2 billion was outstanding under the Term Loan Credit Agreement. Loans under the Term Loan Credit Agreement bear interest at a rate per annum equal to the Adjusted Term SOFR (as defined in the Term Loan Credit Agreement) plus an applicable margin of 7.50%. To the extent a payment or other event of default exists and is continuing, at the election of the Required Lenders (as defined in the Term Loan Credit Agreement), all amounts outstanding under the Term Loan Credit Agreement will bear interest at 2.00% per annum above the rate otherwise applicable thereto. The Company is able to repay any amounts borrowed prior to the maturity date without premium or penalty. The Term Loan Credit Agreement is guaranteed by the Company and certain of its subsidiaries and is secured by a first-lien second-out security interest in substantially all assets of the Company and certain of its subsidiaries, which will require the Company to comply with an asset coverage ratio of not less than 1.25:1.00 for the fiscal quarter ending June 30, 2026 and 1.50:1.00 for fiscal quarters ending thereafter and a total net leverage ratio of not greater than 2.00:1.00 for the fiscal quarter ending June 30, 2026 and fiscal quarters ending thereafter.

The Term Loan Credit Agreement contains customary restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness (with exceptions permitting, among other things, the incurrence of a super priority revolving credit facility, subject to a cap of $100 million), incur additional liens, make investments and loans, enter into mergers and acquisitions, make dividends and certain other payments, enter into certain hedging transactions, sell assets, engage in transactions with affiliates and make certain capital expenditures.

In addition, the Term Loan Credit Agreement contains customary mandatory prepayments, in addition to quarterly scheduled amortization payments of $30.0 million referenced above, consisting of prepayments with proceeds of prohibited indebtedness and asset sales (including hedge terminations) in excess of $20.0 million in any calendar year, and prepayments with a percentage of Excess Cash Flow (as defined in the Term Loan Credit Agreement) equal to 0%, 25% or 50% based on a total net leverage ratio to the extent pro forma for any such payment, the aggregate cash and cash equivalents of the Company and its restricted subsidiaries would not be less than $100.0 million as of the date of such payment (with no such excess cash flow prepayments made as of June 30, 2026). The Term Loan Credit Agreement is subject to customary events of default, including upon the occurrence of a change in control. If an event of default occurs and is continuing, the collateral agent or the majority lenders may accelerate any amounts outstanding and terminate lender commitments.

***Collateral Agency Agreement.***On September 12, 2023, the Company entered into a collateral agency agreement (the “Collateral Agency Agreement”) with Texas Capital, as collateral agent, Chambers, as term representative, and Mercuria Energy Trading SA, as initial first-out representative, which was later joined by Fifth Third Bank, National Association, as successor first-out representative.

The Collateral Agency Agreement provides for the appointment of Texas Capital, as collateral agent, for the present and future holders of the first-lien obligations (including holders of “first-out” obligations and obligations under the Term Loan Credit Agreement) to receive, hold, administer and distribute proceeds of the collateral and to enforce the Security Documents. Under the terms of the Collateral Agency Agreement, proceeds of collateral are first distributed to holders of “first-out” obligations, including certain hedging and cash management obligations and obligations under the Senior Credit Facility Agreement but excluding certain “excess” first-out obligations, and second to holders of obligations under the Term Loan Credit Agreement.

Senior Credit Facility Agreement. On November 1, 2023, the Company entered into a credit agreement with Fifth Third Bank, National Association (“Fifth Third”) as the administrative agent and as the collateral agent, together with a number of other banks and financial institutions party thereto, to establish a senior revolving credit facility (“Senior Credit Facility Agreement”). The Senior Credit Facility Agreement has aggregate maximum commitments of $100.0 million. On August 1, 2025, the Company entered into the Second Facility Amendment which, among other things, extended the maturity date to September 30, 2028, which was not considered an extinguishment of debt. Effective as of December 30, 2025, the Company entered into the Third Facility Amendment whereby, among other things, (i) the Company has been required to maintain an asset coverage ratio of not less than 1.00 to 1.00 for the fourth quarter of 2025 and the first quarter of 2026, representing a 0.25x decrease in the required ratio levels for such quarters, (ii) the Company has been required to maintain a total net leverage ratio of not greater than 2.50 to 1.00 for the fourth quarter of 2025 and the first quarter of 2026, representing a 0.50x increase in the required ratio levels for such quarters, (iii) the Company’s hedging obligations has been increased requiring it to maintain hedging agreements with respect to 75% of its proved developed producing oil production for the period from April 1, 2026 to March 31, 2027 and 60% of its proved developed producing oil production for the period from April 1, 2027 to September 30, 2027, in each case as provided in the Company’s reserve report as of December 31, 2025 and (iv) the Company is prohibited from making quarterly dividends on its common stock until September 30, 2026. On June 30, 2026, the Company entered into the Fourth Facility Amendment whereby, the Company has been required to maintain a total net leverage ratio of not greater than 2.25 to 1.00 for the second quarter of 2026, representing a 0.25x increase in the required ratio level for such quarter. For the third quarter of 2026 and quarterly periods ending thereafter, the required asset coverage ratio and total net leverage ratio levels will reset to the levels provided for such quarters in the Third Facility Amendment. As of June 30, 2026, the balance due under the Senior Credit Facility Agreement was zero. 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 or other event of default exists and is continuing, at the election of the Required Lenders (as defined in 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 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 first-out security interest in substantially all assets of the Company and certain of its subsidiaries.

The Term Loan Credit Agreement and the Senior Credit Facility Agreement have hedging requirements to which the Company adheres.

NOTE 8. Asset Retirement Obligations

The Company’s asset retirement obligations primarily relate to the future plugging and abandonment of wells and remediation of related facilities. Market risk premiums associated with asset retirement obligations are estimated to represent a component of the Company’s credit-adjusted risk-free rate that is utilized in the calculations of asset retirement obligations.

Asset retirement obligations activity is as follows (in thousands):

As of June 30, 2026 and December 31, 2025, all asset retirement obligations are considered noncurrent and classified as such in the accompanying condensed consolidated balance sheets.

NOTE 9. Incentive Plans

***401(k) Plan.***The HighPeak Energy Employees, Inc 401(k) Plan (the “401(k) Plan”) is a defined contribution plan established under Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”). All regular full-time and part-time employees of the Company are eligible to participate in the 401(k) Plan after three continuous months of employment with the Company. Participants may contribute up to 80 percent of their annual base salary into the 401(k) Plan. Matching contributions are made to the 401(k) Plan in cash by the Company in amounts equal to 100 percent of a participant’s contributions to the 401(k) Plan up tofour percent of the participant’s annual base salary (the “Matching Contribution”). Each participant’s account is credited with the participant’s contributions, Matching Contributions and allocations of the 401(k) Plan’s earnings. Participants are fully vested in their account balances at their eligibility date. During the six months ended June 30, 2026 and 2025, the Company contributed $323,000 and $241,000 to the 401(k) Plan, respectively.

***Long-Term Incentive Plan.***The Company’s Second Amended & Restated Long Term Incentive Plan (“LTIP”) provides for the grant of stock options, restricted stock, stock awards, dividend equivalents, cash awards and substitute awards to officers, employees, directors and consultants of the Company. The number of shares available for grant pursuant to awards under the LTIP as of June 30, 2026 and December 31, 2025 are as follows:

***Stock options.***Stock option awards were granted to employees on August 24, 2020, November 4, 2021, May 4, 2022, August 15, 2022 and July 21, 2023. Stock-based compensation expense related to the Company’s stock option awards for the six months ended June 30, 2026 and 2025 waszero and a negative $109,000 due to certain forfeitures, respectively, and as of June 30, 2026 there was no unrecognized stock-based compensation expense related to unvested stock option awards. The 1,949,000 stock options granted in July 2023 were 100% vested upon grant on July 21, 2023. However, to encourage long-term alignment with the Company stockholders, the stock options are not exercisable until the earlier of (i) August 31, 2026, (ii) upon a change in control or (iii) upon the death or disability of the grantee.

The Company estimates the fair value of stock options granted on the grant date using a Black-Scholes option valuation model, which requires the Company to make several assumptions. In 2025, the Company approved an extension of the expiration term for certain outstanding stock options, lengthening the window to exercise those awards, and the table below reflects such extension. The expected term of the stock options granted was determined based on the simplified method of the midpoint between the vesting dates and the contractual term of the stock options. The risk-free interest rate is based on the U.S. treasury yield curve rate for the expected term of the stock option at the date of grant and the volatility was based on the volatility of either an index of exploration and production crude oil and natural gas companies or on a peer group of companies with similar characteristics of the Company on the date of grant since the Company had minimal or did not have any trading history. More detailed stock options activity and details are as follows:

***Restricted stock issued to certain employees.***A total of 1,500,500 shares of restricted stock was approved by the Board to be granted to certain employee members of the Board of the Company on November 4, 2021, which were set to vest on thethree-year anniversary of such grant assuming the employees remain in his or her position as of the anniversary date. Therefore, no stock-based compensation expense was recognized during the six months ended June 30, 2026 and 2025, and there is no remaining unrecognized stock-based compensation expense as of June 30, 2026 to be recognized, which was based upon the closing price of the stock on the date of the restricted stock issuance. The Board also approved a total of 600,000 shares of restricted stock to be granted to certain employees of the Company on June 1, 2022, which were set to vest on November 4, 2024, assuming the employees remain in his or her position as of that date. Therefore, no stock-based compensation expense was recognized during the six months ended June 30, 2026 and 2025, and there is no remaining unrecognized stock-based compensation expense as of June 30, 2026 to be recognized, which was based upon the closing price of the stock on the date of the restricted stock issuance. On October 31, 2024, the vesting date for the aforementioned 2,100,500 shares of restricted stock was extended from November 4, 2024 to December 31, 2025 to ensure said restricted stock would continue to provide retention value to the Company. There is no excess stock-based compensation expense as the closing price on the modification date was lower than the original grant dates. On September 15, 2025, the Company’s Chief Executive Officer retired and in conjunction with said retirement, the 1,385,500 shares of restricted stock issued to him vested immediately. As a result,545,195 shares were withheld and cancelled in lieu of $3.8 million in cash taxes withheld and paid by the Company on his behalf. On December 31, 2025, the remaining 715,000 shares of restricted stock issued to certain other employees vested. As a result,256,989 shares were withheld and cancelled in lieu of $1.2 million in cash taxes withheld and paid by the Company on their behalf. On January 9, 2026, a total of 1,028,000 shares of restricted stock was approved by the Board to be granted to certain employees of the Company which will vest pro-rata over the next three years assuming the employees remain in his or her position as of the annual anniversary dates or upon a change of control. Therefore, compensation expense of $1.4 million andzero was recognized during the six months ended June 30, 2026 and 2025, respectively, and there is $3.1 million in unrecognized stock-based compensation expense as of June 30, 2026 to be recognized, which was based upon the closing price of the stock on the date of the restricted stock issuance.

***Restricted stock issued to outside directors.***A total of 94,700 shares of restricted stock was approved by the Board to be granted to the outside directors of the Company on June 2, 2026, which will vest at the next annual meeting, assuming the Board members maintain their positions on the Board. Therefore, stock-based compensation expense of $63,000 was recognized during the six months ended June 30, 2026 and the remaining $687,000 will be recognized through May 2027, which was based upon the closing price of the stock on the date of the restricted stock issuance. Further, a total of 64,792 shares of restricted stock was approved by the Board to be granted to the outside directors of the Company on June 3, 2025, which vested on June 2, 2026. Therefore, stock-based compensation expense of $295,000 and $59,000 was recognized during the six months ended June 30, 2026 and 2025, respectively, which was based upon the closing price of the stock on the date of the restricted stock issuance. Finally, a total of 53,879 shares of restricted stock was approved by the Board to be granted to the outside directors of the Company on June 4, 2024 and which vested on June 3, 2025. Therefore, stock-based compensation expense ofzero and $316,000 was recognized during the six months ended June 30, 2026 and 2025, respectively, which was based upon the closing price of the stock on the date of the restricted stock issuance.

NOTE 10. Commitments and Contingencies

***Leases.***The Company follows ASC Topic 842, “Leases” to account for its operating and finance leases. Therefore, as of June 30, 2026 the Company had right-of-use assets totaling $499,000 included in other noncurrent assets and operating lease liabilities totaling $523,000, $448,000 of which is included in current liabilities and $75,000 of which is included in noncurrent liabilities, and as of December 31, 2025 the Company had right-of-use assets totaling $957,000 included in other noncurrent assets and operating lease liabilities totaling $987,000, $845,000 of which are included in current liabilities and $142,000 of which are included in noncurrent liabilities on the accompanying condensed consolidated balance sheets. The Company does not currently have any finance right-of-use leases. Maturities of the operating lease obligations are as follows (in thousands):

***Legal actions.From time to time, the Company may be a party to various proceedings and claims incidental to its business. While many of these matters involve inherent ***uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company’s consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated.

***Indemnifications.***The Company has agreed to indemnify its directors, officers and certain employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.

***Environmental.***Environmental expenditures that relate to an existing condition caused by past operations and have no future economic benefits are expensed. Environmental expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or remediation occurs.

Crude oil delivery commitments. In September 2024, the Company entered into an amended and restated crude oil marketing contract with DK Trading & Supply, LLC (“Delek”) as the purchaser and DKL Permian Gathering, LLC (“DKL”) as the gatherer and transporter. The contract includes the Company’s current and future crude oil production from the majority of its horizontal wells in Flat Top and Signal Peak where DKL is continually expanding their crude oil gathering system and custody transfer meters to most of the Company’s central tank batteries. The contract contains a minimum volume commitment commencing May 2024 that totals $138.7 million based on the gross piped barrels delivered of 23,500 Bopd for the first ten years of the contract at a certain amount per barrel escalating throughout the term of the contract. However, the Company generally has the ability under the contract to cumulatively bank dollars based on excess volumes delivered to offset the minimum volume commitment. For the period from May 1, 2024 to June 30, 2026, the Company has delivered approximately 32,022 Bopd under the contract. The remaining monetary commitment as of June 30, 2026, if the Company never delivers any additional volumes under the agreement, is approximately $107.7 million.

Power contracts. In June 2022, the Company entered into a contract to receive a block of electric power at an attractive variable rate, which fluctuates based on the usage by the Company through May 31, 2032. In March 2024, the Company entered into a contract to receive an additional block of electric power under similar terms. In conjunction with these contracts, the Company has a $4.6 million Letter of Credit in place in lieu of a deposit that is cancellable at the end of the contract term.

NOTE 11. Related Party Transactions

Retirement of Jack Hightower. On September 16, 2025, the Company announced Mr. Jack Hightower’s retirement and resignation from his role as Chief Executive Officer and Chairman of the Board of the Company, effective as of September 15, 2025 (the “Separation Date”). In connection with Mr. Hightower’s notice of retirement and resignation from employment with the Company and his resignation from the Board, the Company entered into a Separation Agreement and General Release of Claims with Mr. Hightower on September 15, 2025 (the “Separation Agreement”), pursuant to which Mr. Hightower released the Company and its affiliates from certain liabilities and agrees to certain restrictive covenants. The Company, in turn, released Mr. Hightower from certain liabilities and provided Mr. Hightower with certain payments and benefits pursuant to the terms and conditions of the Separation Agreement, which, among other things, modified the benefits provided under Mr. Hightower’s outstanding equity awards, namely, his outstanding stock option grant notices and agreements, dated August 24, 2020, November 4, 2021, May 4, 2022, and August 15, 2022, respectively (the “Stock Option Agreements”), and his certain restricted stock agreement and the amendment thereto, dated November 4, 2021 and October 31, 2024, respectively (the “Restricted Stock Agreement”). The Separation Agreement provided for (i) Mr. Hightower’s 1,385,500 unvested shares outstanding under the Restricted Stock Agreement to fully vest as of the Separation Date; (ii) extending the period in which Mr. Hightower may exercise the stock options pursuant to the 2020 and 2021 Stock Option Agreements such that the stock options pursuant to such agreements remains exercisable by Mr. Hightower until the date that is twelve (12) months following the Separation Date; (iii) forfeiture by Mr. Hightower of the right to exercise the outstanding stock options granted pursuant to the 2022 Stock Option Agreements as of the Separation Date; (iv) a cash separation payment to Mr. Hightower in the amount of $2,400,000, payable on the Company’s next regularly scheduled payroll date after the Separation Date and (v) the registration of Mr. Hightower’s 1,532,478 founder’s shares as soon as reasonably possible following the Separation Date.

NOTE 12. Major Customers

Delek accounted for approximately 88% and 87% and Energy Transfer Crude Marketing, LLC (“ETC”) accounted for less than 10% and approximately 10% of the Company’s revenues during the six months ended June 30, 2026 and 2025, respectively. Based on the current demand for crude oil and natural gas and the availability of other purchasers, management believes the loss of either of these major purchasers would not have a material adverse effect on our financial condition and results of operations because crude oil and natural gas are fungible products with well-established markets and numerous purchasers.

NOTE 13. Income Taxes

Income Tax Expense (Benefit)

The following table presents the Company’s income tax expense (benefit) (in thousands):

The income tax (benefit) expense differed from the amounts computed by applying the U.S. federal income tax rate to (losses) earnings before income taxes as a result of the following (in thousands, except rate):

Income taxes were (received from) paid to the following jurisdictions (in thousands):

On July 4, 2025, the “One Big Beautiful Bill” (“OBBB”) was signed into law. The OBBB is a significant piece of tax legislation that includes provisions that restore 100% bonus depreciation under section 168(k) for certain property placed in service after January 19, 2025, allow for the expensing of domestic R&D expenditures beginning in 2025, and allow for the deduction of intangible drilling costs as part of the computation of the corporate alternative minimum tax beginning in 2026. The OBBB did not have a significant impact on the Company’s income tax expense.

Deferred Tax Assets and Liabilities

The following table presents the tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities (in thousands):

As required by ASC Topic 740, “Income Taxes,” (“ASC 740”) the Company uses reasonable judgments and makes estimates and assumptions related to evaluating the probability of uncertain tax positions. The Company bases its estimates and assumptions on the potential liability related to an assessment of whether the income tax position will “more likely than not” be sustained in an income tax audit. Based on that analysis, the Company believes the Company has not taken any material uncertain tax positions, and therefore has not recorded an income tax liability related to uncertain tax positions. However, if actual results materially differ, the Company’s effective income tax rate and cash flows could be affected in the period of discovery or resolution. The Company also reviews the estimates and assumptions used in evaluating the probability of realizing the future benefits of the Company’s deferred tax assets and records a valuation allowance when the Company believes that a portion or all the deferred tax assets may not be realized. If the Company is unable to realize the expected future benefits of its deferred tax assets, the Company is required to provide a valuation allowance. The Company uses its history and experience, overall profitability, future management plans, tax planning strategies, and current economic information to evaluate the amount of valuation allowance to record. As of June 30, 2026 and December 31, 2025, the Company hadnot recorded a valuation allowance for deferred tax assets arising from its operations because the Company believed they met the “more likely than not” criteria as defined by the recognition and measurement provisions of ASC 740.

The Company is also subject to Texas margin tax. The Company realized zero in current Texas margin tax in the accompanying consolidated financial statements for the six months ended June 30, 2026 and 2025. The Company has recognized a net deferred Texas margin tax liability of $9.9 million and $9.7 million as of June 30, 2026 and December 31, 2025, respectively, in the accompanying condensed consolidated balance sheets.

NOTE 14. (Losses) Earnings Per Share

The Company uses the two-class method of calculating earnings (losses) per share because certain of the Company’s stock-based awards qualify as participating securities.

The Company’s basic earnings (losses) per share attributable to common stockholders is computed as (i) net income (loss) as reported, (ii) less participating basic earnings (iii) divided by weighted average basic common shares outstanding. The Company’s diluted earnings (losses) per share attributable to common stockholders is computed as (i) basic earnings (losses) attributable to common stockholders, (ii) plus reallocation of participating earnings (iii) divided by weighted average diluted common shares outstanding.

The following table reconciles the Company’s earnings (losses) from operations and earnings (losses) attributable to common stockholders to the basic and diluted earnings used to determine the Company’s earnings (losses) per share amounts for the three and six months ended June 30, 2026 and 2025 under the two-class method (in thousands):

The calculation for weighted average shares reflects shares outstanding over the reporting period based on the actual number of days the shares were outstanding.

NOTE 15. Stockholders’** Equity**

***Issuance of Common Stock.***During the six months ended June 30, 2026 and 2025, the Company issued 1,028,000 andzero shares, respectively, of restricted stock to certain employees of the Company,94,700 and 64,792 shares, respectively, of restricted stock to outside directors of the Company andzero and 60 shares of HighPeak Energy common stock, respectively, as a result of warrants being exercised. All of the Company’s remaining outstanding warrants expired on August 21, 2025. Pursuant to a sales agreement with its agents entered into on May 6, 2026, the Company may sell shares of its common stock at the market price from time to time up to a maximum aggregate of $150 million. The Company has not issued any shares of its common stock under an at the market offering thus far.

Dividends and Dividend Equivalents. In the first quarter of 2026, the Board elected to discontinue the quarterly dividend. In May 2025, the Board declared a quarterly dividend of $0.04 per share of common stock outstanding which resulted in a total of $5.0 million in dividends being paid in June 2025. In addition, under the terms of the LTIP, the Company paid a dividend equivalent per share to all vested stock option holders of $531,000 in June 2025. In addition, the Company accrued an additional combined $84,000 in dividends on the restricted stock issued to directors, management directors and certain employees that was paid upon vesting.

In February 2025, the Board declared a quarterly dividend of $0.04 per share of common stock outstanding which resulted in a total of $5.0 million in dividends being paid in March 2025. In addition, under the terms of the LTIP, the Company paid a dividend equivalent per share to all vested stock option holders of $531,000 in March 2025. In addition, the Company accrued an additional combined $86,000 in dividends on the restricted stock issued to directors, management directors and certain employees that was paid upon vesting.

***Outstanding securities.***As of June 30, 2026 and December 31, 2025, the Company had 126,452,804 and 125,330,104 shares of common stock outstanding, respectively.

NOTE 16. Subsequent Events

***Natural gas derivative financial instruments.***Subsequent to June 30, 2026, the Company entered into the following additional natural gas derivative financial instruments:

PART I. FINANCIAL INFORMATION