Step-Change Growth Ahead



KEY POINTS
  • A planned four-rig development is expected to drive significant production and cash-flow growth through 2022. Management provided a preliminary 2022 plan with an annual production guidance range of 26 – 31 MBOE/d and a year-end 2022 exit rate in the 36 – 42 MBOE/d range on a capital budget of $645 - $700 million.
  • Using a $77.50/bbl WTI oil price, we estimate that the company could generate approximately $585 million of EBITDAX for full-year 2022 and exit the year at an annualized rate of nearly $850 million. Importantly, HighPeak could deliver significant growth while maintaining a leverage ratio below 1.0x and be in position to generate free cash in 2023.
  • The development program should also drive substantial reserve growth through next year. Through September 30, 2021, management estimates that more than $300 million of PV10 value has been added through the addition of 33 gross horizontal wells on top of $100 million from higher commodity prices. The four-rig 2022 plan could add another 100 wells to the proved developed category resulting in additional value recognition.
  • Based on our 2022 estimates, HighPeak is valued at 2.6x full-year EBITDAX and 1.7x annualized 2022 exit rate EBITDAX.
  • 3Q21 production averaged approximately 8.2 MBOE/d (85% oil) and was impacted by curtailed production to accommodate new completion activity that resulted in 4 – 6 MBOE/d to be offline at times. For the second half of October, production averaged 15.5 MBOE/d.
  • HighPeak maintained peer-leading cash margins despite a spike in lease operating expenses. Lease operating expense averaged $8.93/BOE during 3Q21. The expected completion of a significant power upgrade in Flat Top should drive down the power component of lease operating costs beginning in 2Q22.
  • HighPeak’s balance sheet is strong. Net debt at quarter’s end was $83 million. Ninety-five million dollars was drawn on the company’s revolver, which has a $195 million borrowing base. The leverage ratio was 0.6x based on annualized 3Q21 EBITDA.
COMPANY OVERVIEW

HighPeak Energy is an independent oil and gas exploration and production company, headquartered in Fort Worth, Texas. The company is focused on the acquisition, development, exploration and exploitation of unconventional oil and gas reserves in the Midland Basin of West Texas. HighPeak currently owns interests in approximately 62,000 net acres in Howard County.

A planned four-rig development is expected to drive significant production and cash-flow growth through 2022. Management provided a preliminary 2022 plan with an annual production guidance range of 26 – 31 MBOE/d and a year-end 2022 exit rate in the 36 – 42 MBOE/d range on a capital budget of $645 - $700 million.

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