Definitions of Certain Terms and Conventions Used Herein Cautionary Statement Concerning Forward-Looking Statements PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents HighPeak Energy's unaudited condensed consolidated financial statements and detailed notes for the periods ended June 30, 2023 and 2022 [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :----- | :------------ | :---------------- | | Total assets | $2,790,003 | $2,279,482 | | Total current liabilities | $1,138,175 | $266,129 | | Total stockholders' equity | $1,255,410 | $1,169,647 | | Current portion of long-term debt, net | $741,155 | $— | | Accounts payable – trade | $215,845 | $105,565 | - Total assets increased by approximately **$510.5 million** from December 31, 2022, to June 30, 2023, primarily driven by an increase in proved crude oil and natural gas properties[31](index=31&type=chunk) - Current liabilities significantly increased by over **$872 million**, mainly due to the reclassification of long-term debt (Credit Agreement, 10.000% Senior Notes) to current portion as their maturities fall within the next twelve months[31](index=31&type=chunk) [Condensed Consolidated Statements of Operations](index=14&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $240,760 | $201,428 | $464,554 | $293,657 | | Income from operations | $84,954 | $122,804 | $173,540 | $177,378 | | Net income | $31,826 | $77,561 | $82,083 | $61,051 | | Basic net income per share | $0.26 | $0.69 | $0.67 | $0.56 | | Diluted net income per share | $0.25 | $0.64 | $0.64 | $0.52 | | Dividends declared per share | $0.025 | $0.025 | $0.05 | $0.05 | - Net income decreased significantly by **59%** for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to increased operating costs and expenses, particularly depletion, depreciation, and amortization (DD&A) and interest expense[34](index=34&type=chunk) - Total operating revenues increased by **19.5%** for the three months ended June 30, 2023, year-over-year, mainly driven by higher crude oil sales[34](index=34&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=15&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (in thousands) | Metric | Balance, December 31, 2022 | Balance, June 30, 2023 | | :----- | :------------------------- | :------------------- | | Total Stockholders' Equity | $1,169,647 | $1,255,410 | | Net Income (Six Months) | $160,740 (Retained Earnings) | $236,589 (Retained Earnings) | | Dividends Declared (Six Months) | N/A | $(5,659) | | Stock-based Compensation Costs (Six Months) | N/A | $8,038 | - Total stockholders' equity increased by **$85.7 million** from December 31, 2022, to June 30, 2023, primarily due to net income and stock-based compensation, partially offset by dividends declared[36](index=36&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=17&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $363,676 | $148,186 | | Net cash used in investing activities | $(612,521) | $(549,145) | | Net cash provided by financing activities | $248,606 | $388,507 | | Net decrease in cash and cash equivalents | $(239) | $(12,452) | | Cash and cash equivalents, end of period | $30,265 | $22,417 | | Cash paid for interest | $51,027 | $1,689 | - Net cash provided by operating activities increased by **145%** year-over-year for the six months ended June 30, 2023, reaching **$363.7 million**, primarily due to higher production volumes[40](index=40&type=chunk)[201](index=201&type=chunk) - Cash paid for interest significantly increased to **$51.0 million** for the six months ended June 30, 2023, compared to **$1.7 million** in the prior year, reflecting increased debt and interest rates[40](index=40&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=18&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1. Organization and Nature of Operations](index=18&type=section&id=NOTE%201.%20Organization%20and%20Nature%20of%20Operations) - HighPeak Energy, Inc. is an independent crude oil and natural gas exploration and production company operating in the Permian Basin in West Texas, specifically the Midland Basin in Howard and Borden Counties[42](index=42&type=chunk) - The company's common stock and warrants are listed and traded on the Nasdaq Global Market under ticker symbols 'HPK' and 'HPKEW', respectively[42](index=42&type=chunk) [NOTE 2. Basis of Presentation and Summary of Significant Accounting Policies](index=18&type=section&id=NOTE%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Management identified substantial doubt about the Company's ability to continue as a going concern within one year due to significant current debt and working capital deficits, necessitating refinancing or repayment of current debt[45](index=45&type=chunk)[46](index=46&type=chunk) - The Company uses the successful efforts method of accounting for crude oil and natural gas properties, capitalizing costs associated with productive wells and nonproductive development wells, while expensing nonproductive exploration costs[55](index=55&type=chunk) - Revenue from crude oil, NGL, and natural gas sales is recognized when control of the product is transferred to the purchaser, typically at the wellhead or lease location, based on market-based pricing adjusted for differentials[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [NOTE 3. Acquisitions](index=26&type=section&id=NOTE%203.%20Acquisitions) - In June 2022, the Company completed the Hannathon Acquisition for **$337.2 million**, including 3,522,117 shares of common stock, to acquire crude oil and natural gas properties in Howard County[87](index=87&type=chunk) - In March and June 2022, the Company completed the Alamo Acquisitions for a total of **$167.1 million**, including 7,331,517 shares of common stock, to acquire properties in Borden County[88](index=88&type=chunk) - During the six months ended June 30, 2023, the Company incurred **$7.8 million** in acquisition costs for undeveloped crude oil and natural gas properties contiguous to its operating areas[89](index=89&type=chunk) [NOTE 4. Fair Value Measurements](index=27&type=section&id=NOTE%204.%20Fair%20Value%20Measurements) Fair Value Measurements of Derivatives (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :----- | :------------ | :---------------- | | Commodity price derivatives – current assets | $435 | $17 | | Commodity price derivatives – current liabilities | $10,700 | $16,702 | | Commodity price derivatives – noncurrent liabilities | $1,094 | $691 | | Total recurring fair value measurements (net liability) | $(11,359) | $(17,376) | - The Company's commodity price derivatives, primarily crude oil swap contracts and deferred premium put options, are measured using Level 2 inputs (observable market data) and resulted in a net liability of **$11.4 million** as of June 30, 2023[91](index=91&type=chunk)[93](index=93&type=chunk) [NOTE 5. Derivative Financial Instruments](index=29&type=section&id=NOTE%205.%20Derivative%20Financial%20Instruments) - The Company uses commodity swap contracts and deferred premium put options to manage crude oil price volatility, support capital budgeting, protect borrowing base, and meet contractual obligations[96](index=96&type=chunk) Effect of Derivatives on Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Noncash derivative gain (loss), net | $703 | $25,191 | $6,017 | $(16,442) | | Cash payments on settled derivatives, net | $(5,066) | $(37,082) | $(7,260) | $(61,843) | | Derivative loss, net | $(4,363) | $(11,891) | $(1,243) | $(78,285) | Outstanding Crude Oil Derivative Contracts as of June 30, 2023 | Contract Type | Period | Volume (MBbls) | Price per Bbl | | :------------ | :----- | :------------- | :------------ | | Crude Oil Price Swaps – WTI | Remainder of 2023 | 276.0 | $72.30 | | Deferred Premium Put Options – WTI (Put Price) | Remainder of 2023 | 1,564.0 | $57.82 | | Deferred Premium Put Options – WTI (Net of Premium) | Remainder of 2023 | 1,564.0 | $52.82 | | Deferred Premium Put Options – WTI (Put Price) | 2024 Total | 2,740.0 | $53.83 | | Deferred Premium Put Options – WTI (Net of Premium) | 2024 Total | 2,740.0 | $48.83 | [NOTE 6. Exploratory/Extension Well Costs](index=31&type=section&id=NOTE%206.%20Exploratory%2FExtension%20Well%20Costs) Changes in Capitalized Exploratory/Extension Well Costs (in thousands) | Metric | Six Months Ended June 30, 2023 | | :----- | :----------------------------- | | Beginning capitalized costs | $186,427 | | Additions | $322,902 | | Reclassification to proved properties | $(428,306) | | Ending capitalized costs | $81,023 | - The Company capitalizes exploratory/extension well and project costs until proved reserves are found, or the project is impaired or sold. All current capitalized costs have been for less than one year[102](index=102&type=chunk)[103](index=103&type=chunk) [NOTE 7. Long-Term Debt](index=31&type=section&id=NOTE%207.%20Long-Term%20Debt) Components of Long-Term Debt (in thousands) | Debt Type | June 30, 2023 | December 31, 2022 | | :-------- | :------------ | :---------------- | | Credit Agreement due 2024 | $525,000 | $270,000 | | 10.625% Senior Notes, due 2024 | $250,000 | $250,000 | | 10.000% Senior Notes, due 2024 | $225,000 | $225,000 | | Total debt | $973,009 | $704,349 | | Less current portion of long-term debt, net | $(741,155) | $— | | Long-term debt, net | $231,854 | $704,349 | - The Credit Agreement's borrowing base was increased to **$700.0 million** in March 2023, with elected commitments at **$575.0 million** as of June 30, 2023. Outstanding borrowings under the Credit Agreement increased to **$525.0 million**[109](index=109&type=chunk)[112](index=112&type=chunk) - The Company is required to redeem or refinance its 10.000% Senior Notes (due February 2024) or extend their maturity by September 1, 2023, or face an event of default under the Credit Agreement[109](index=109&type=chunk)[111](index=111&type=chunk) - The Credit Agreement requires a total debt to EBITDAX ratio not exceeding **3.00 to 1.00** and a current ratio of at least **1.00 to 1.00**. The Company obtained waivers for the current ratio covenant as of March 31, 2023, and June 30, 2023[113](index=113&type=chunk) [NOTE 8. Asset Retirement Obligations](index=36&type=section&id=NOTE%208.%20Asset%20Retirement%20Obligations) Asset Retirement Obligations Activity (in thousands) | Metric | Six Months Ended June 30, 2023 | | :----- | :----------------------------- | | Beginning asset retirement obligations | $7,502 | | Liabilities incurred from new wells | $186 | | Dispositions | $(40) | | Accretion of discount | $238 | | Ending asset retirement obligations | $7,886 | - The Company's asset retirement obligations, primarily for future well plugging and abandonment, increased to **$7.9 million** as of June 30, 2023, and are classified as noncurrent[119](index=119&type=chunk)[120](index=120&type=chunk) [NOTE 9. Incentive Plans](index=36&type=section&id=NOTE%209.%20Incentive%20Plans) - The Company's 401(k) Plan includes a **100%** matching contribution up to **4%** of a participant's annual base salary. Contributions for the six months ended June 30, 2023, were **$134,000**[121](index=121&type=chunk) - Stock-based compensation expense for stock options was **$555,000** for the six months ended June 30, 2023, with **$443,000** of unrecognized expense remaining[122](index=122&type=chunk) - In July 2023, an additional **1.9 million** stock options were issued to employees, valued at approximately **$10.2 million**[122](index=122&type=chunk) [NOTE 10. Commitments and Contingencies](index=37&type=section&id=NOTE%2010.%20Commitments%20and%20Contingencies) Maturities of Operating Lease Obligations (in thousands) | Period | Amount | | :----- | :----- | | Remainder of 2023 | $392 | | 2024 | $552 | | Total lease payments | $944 | | Less present value discount | $(53) | | Present value of lease liabilities | $891 | - The Company has a crude oil delivery commitment with Delek for **10,000 Bopd** for eight years, with a remaining monetary commitment of approximately **$14.2 million** if no additional volumes are delivered[130](index=130&type=chunk) - A sand purchase commitment requires buying at least **1.7 million tons** over two years, with a remaining monetary commitment of approximately **$19.1 million** as of June 30, 2023, if no additional sand is delivered[134](index=134&type=chunk) [NOTE 11. Related Party Transactions](index=39&type=section&id=NOTE%2011.%20Related%20Party%20Transactions) - The Company terminated a water treatment contract with Pilot Exploration, Inc. (a related party) in April 2023, incurring a **$6.5 million** charge to other expense[136](index=136&type=chunk) - Payments to Pilot for water treatment services totaled **$1.5 million** for the six months ended June 30, 2023[136](index=136&type=chunk) [NOTE 12. Major Customers](index=41&type=section&id=NOTE%2012.%20Major%20Customers) - Delek accounted for approximately **77%** of the Company's revenues during the six months ended June 30, 2023[137](index=137&type=chunk) - Energy Transfer Crude Marketing, LLC (ETC) accounted for approximately **19%** of the Company's revenues during the six months ended June 30, 2023[137](index=137&type=chunk) [NOTE 13. Income Taxes](index=41&type=section&id=NOTE%2013.%20Income%20Taxes) Income Tax Expense (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Deferred income tax expense | $9,644 | $24,072 | $24,151 | $23,760 | | Total income tax expense | $9,644 | $24,072 | $24,151 | $23,760 | | Effective income tax rate | 23.3% | 23.7% | 22.7% | 28.0% | - The effective income tax rate for the six months ended June 30, 2023, was **22.7%**, down from **28.0%** in the prior year, primarily due to decreased net income and a revision in deferred tax assets related to stock-based compensation[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - The Inflation Reduction Act of 2022 (IRA 2022) did not materially impact the Company's current year tax provision[138](index=138&type=chunk) [NOTE 14. Earnings Per Share](index=43&type=section&id=NOTE%2014.%20Earnings%20Per%20Share) Earnings Per Share Reconciliation (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income as reported | $31,826 | $77,561 | $82,083 | $61,051 | | Basic earnings attributable to common stockholders | $28,884 | $77,185 | $74,493 | $55,882 | | Diluted net income attributable to common stockholders | $28,930 | $71,347 | $74,616 | $55,006 | | Basic weighted average shares outstanding | 111,227 | 103,178 | 111,227 | 99,530 | | Diluted weighted average shares outstanding | 115,978 | 111,228 | 117,127 | 106,843 | - Basic net income per share decreased from **$0.69** to **$0.26** for the three months ended June 30, 2023, compared to the prior year, reflecting lower net income and an increase in weighted average shares outstanding[34](index=34&type=chunk)[146](index=146&type=chunk) [NOTE 15. Stockholders' Equity](index=45&type=section&id=NOTE%2015.%20Stockholders'%20Equity) - As of June 30, 2023, the Company had **113,385,923 shares** of common stock outstanding and **8,134,977 warrants** outstanding with an exercise price of **$11.50 per share**[154](index=154&type=chunk) - Quarterly dividends of **$0.025 per share** were declared in January and April 2023, totaling **$5.6 million** in dividends and dividend equivalents paid for the six months ended June 30, 2023[150](index=150&type=chunk)[151](index=151&type=chunk) [NOTE 16. Subsequent Events](index=45&type=section&id=NOTE%2016.%20Subsequent%20Events) - In July 2023, the Board approved a quarterly dividend of **$0.025 per share**, totaling approximately **$3.2 million**, to be paid on August 25, 2023[155](index=155&type=chunk) - In July 2023, the Company completed a public stock offering of **14,835,000 shares** at **$10.50 per share**, netting approximately **$151.2 million** for working capital and liquidity[158](index=158&type=chunk) - The Ninth Amendment to the Credit Agreement in July 2023 provided waivers for the minimum current ratio covenant and postponed the 10.000% Senior Notes obligation to September 1, 2023[157](index=157&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses HighPeak Energy's financial condition, operational results, key performance drivers, and future outlook [Overview](index=47&type=section&id=Overview) - HighPeak Energy operates in the Midland Basin, West Texas, with approximately **127,267 gross (114,164 net) acres**, **62%** held by production, and an average working interest of **90%**[161](index=161&type=chunk) - For the six months ended June 30, 2023, liquids (crude oil and NGL) accounted for approximately **93%** of sales volumes, with natural gas making up the remaining **7%**[161](index=161&type=chunk) - As of June 30, 2023, the Company was developing properties using two drilling rigs and two frac fleets, expecting to average two drilling rigs and one frac crew for the remainder of 2023[161](index=161&type=chunk) [Recent Events](index=47&type=section&id=Recent%20Events) - In July 2023, the Company completed a public stock offering, issuing **14,835,000 shares** at **$10.50**, generating **$151.2 million** in net proceeds for working capital and liquidity[162](index=162&type=chunk) - The Ninth Amendment to the Credit Agreement in July 2023 waived the minimum current ratio covenant for Q2 2023 and postponed the 10.000% Senior Notes obligation to September 1, 2023[163](index=163&type=chunk) - Failure to refinance or repay the 10.000% Senior Notes by September 1, 2023, could trigger an event of default under the Credit Agreement, leading to acceleration of all outstanding debt[164](index=164&type=chunk) [Crude Oil and Natural Gas Industry Considerations](index=49&type=section&id=Crude%20Oil%20and%20Natural%20Gas%20Industry%20Considerations) - Global crude oil prices remain strong despite a decrease from the prior quarter, influenced by low worldwide inventories, OPEC production cuts (announced April 2023, extended June 2023), and geopolitical conflicts like the Russia-Ukraine war[168](index=168&type=chunk) - The Company's 2023 capital program is impacted by significant cost inflation in steel, diesel, chemicals, and services due to global supply chain disruptions[168](index=168&type=chunk) [Outlook](index=49&type=section&id=Outlook) - The Company's financial position is highly dependent on volatile commodity prices, which have ranged significantly (NYMEX WTI crude oil from **$16.70** to **$114.34 per Bbl**, NYMEX natural gas from **$1.50** to **$9.35 per MMBtu**) between January 2018 and June 2023[170](index=170&type=chunk) - HighPeak Energy is maintaining flexibility in its capital plan, shifting to an anticipated two-drilling rig program for the remainder of 2023, and will assess future activity levels monthly based on economic conditions[172](index=172&type=chunk) [Strategic Alternatives](index=51&type=section&id=Strategic%20Alternatives) - The Board initiated a process in January 2023 to evaluate strategic alternatives, including a potential sale of the Company, with Credit Suisse and Wells Fargo as financial advisors[173](index=173&type=chunk) - The strategic review is in preliminary stages, with no timetable set for conclusion, and no assurance of any transaction or strategic change[173](index=173&type=chunk) [Financial and Operating Performance](index=51&type=section&id=Financial%20and%20Operating%20Performance) Key Financial Performance Changes (Three Months Ended June 30, 2023 vs. 2022) | Metric | Change (in millions) | Reason | | :----- | :------------------- | :----- | | Net income | $(45.8) | Increased DD&A, interest expense, lease operating expenses, other expense, production taxes, G&A, exploration and abandonments; partially offset by increased revenues, decreased income tax expense, decreased stock-based compensation, and increased net derivative gain. | | DD&A expense | $58.1 (increase) | 92% increase in daily sales volumes and 39% increase in DD&A rate due to inflationary capital costs and acquisitions. | | Interest expense | $30.0 (increase) | Issuance of Existing Notes, increased Credit Agreement borrowings, $8.3M additional interest on 10.625% Senior Notes, increased amortization of debt costs. | | Lease operating expenses | $18.3 (increase) | Increased well count, power/chemical costs, repair/maintenance, and inflationary pressures. | | Crude oil, NGL, natural gas revenues | $39.3 (increase) | 92% increase in daily sales volumes, partially offset by 38% decrease in average realized commodity prices. | | Income tax expense | $(14.4) (decrease) | Lower net income. | | Stock-based compensation expense | $(10.6) (decrease) | Less options and restricted stock issued. | | Net derivative gain | $7.5 (increase) | Crude oil commodity contracts and subsequent price decrease. | Key Operating Performance (Three Months Ended June 30, 2023 vs. 2022) | Metric | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | Average daily sales volumes (Boe/d) | 42,207 | 21,995 | 92% increase | | Realized crude oil prices per Bbl (excl. derivatives) | $73.21 | $111.26 | (34%) decrease | | Realized NGL prices per Bbl | $20.77 | $47.29 | (56%) decrease | | Realized natural gas prices per Mcf | $0.70 | $6.02 | (88%) decrease | | Cash provided by operating activities (in millions) | $173.7 | $98.2 | 76.9% increase | [Derivative Financial Instruments](index=53&type=section&id=Derivative%20Financial%20Instruments) - As of June 30, 2023, the estimated fair value of outstanding open derivative financial instruments was a net liability of **$11.4 million**[177](index=177&type=chunk) - For the six months ended June 30, 2023, the Company recognized a net derivative gain of **$1.2 million**, comprising a **$6.0 million** mark-to-market gain and **$7.2 million** in net monthly settlement payments[177](index=177&type=chunk) - In July 2023, the Company entered into an additional crude oil price swap to hedge approximately **8,000 Bopd** for the second half of 2023 at a strike price of **$74.46 per Bbl**[178](index=178&type=chunk) [Operations and Drilling Highlights](index=54&type=section&id=Operations%20and%20Drilling%20Highlights) Average Daily Sales Volumes (Six Months Ended June 30, 2023) | Commodity | Volume | | :-------- | :----- | | Crude Oil (Bbls) | 33,506 | | NGL (Bbls) | 3,482 | | Natural Gas (Mcf) | 16,444 | | Total (Boe) | 39,728 | - Liquids production constituted **93%** of total production on a Boe basis for the six months ended June 30, 2023[179](index=179&type=chunk) Horizontal Producing Wells Drilled and Completed (Six Months Ended June 30, 2023) | Area | Drilled (Gross) | Drilled (Net) | Completed (Gross) | Completed (Net) | | :--- | :-------------- | :------------ | :---------------- | :-------------- | | Flat Top | 36 | 35.7 | 53 | 45.3 | | Signal Peak | 13 | 12.1 | 21 | 20.8 | | Total | 49 | 47.8 | 74 | 66.1 | - As of June 30, 2023, **42 gross (35.7 net)** wells were in various stages of completion, and **13 gross (8.6 net)** horizontal wells were in the process of drilling[182](index=182&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) [Crude Oil, NGL and natural gas revenues](index=55&type=section&id=Crude%20Oil,%20NGL%20and%20natural%20gas%20revenues) Average Daily Sales Volumes (Boe/d) and Realized Prices (per Boe, excluding derivatives) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total (Boe/d) | 42,207 | 21,995 | 92% | | Total per Boe | $62.68 | $100.63 | (38%) | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total (Boe/d) | 39,728 | 17,051 | 133% | | Total per Boe | $64.60 | $95.15 | (32%) | - The significant increase in sales volumes was driven by the Company's successful horizontal drilling program, partially offset by temporary third-party gas takeaway issues[183](index=183&type=chunk) [Crude Oil and natural gas production costs](index=55&type=section&id=Crude%20Oil%20and%20natural%20gas%20production%20costs) Crude Oil and Natural Gas Production Costs (in thousands, except per Boe) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total production costs | $34,934 | $16,595 | 111% | | Production costs per Boe (excl. workovers) | $8.39 | $8.27 | 1% | | Workover expense per Boe | $0.71 | $0.02 | 3,450% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total production costs | $67,876 | $26,041 | 161% | | Production costs per Boe (excl. workovers) | $8.48 | $8.39 | 1% | | Workover expense per Boe | $0.96 | $0.05 | 1,820% | - Total production costs increased significantly due to more producing wells, higher chemical and treating costs, increased repair and maintenance, and expense workovers[186](index=186&type=chunk) - Production was negatively impacted by a weather event, a fire, and temporary shut-ins for offset completion operations, as well as third-party natural gas plant issues in Flat Top[186](index=186&type=chunk) [Production and ad valorem taxes](index=57&type=section&id=Production%20and%20ad%20valorem%20taxes) Production and Ad Valorem Taxes (in thousands, except per Boe) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total taxes | $13,259 | $10,301 | 29% | | Production taxes per Boe | $3.03 | $4.82 | (37%) | | Ad valorem taxes per Boe | $0.42 | $0.33 | 27% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total taxes | $25,556 | $15,307 | 67% | | Production taxes per Boe | $3.09 | $4.56 | (32%) | | Ad valorem taxes per Boe | $0.46 | $0.40 | 15% | - The decrease in production taxes per Boe was primarily due to a **38%** and **32%** decrease in realized prices for the three and six months ended June 30, 2023, respectively[188](index=188&type=chunk) [Exploration and abandonments expense](index=57&type=section&id=Exploration%20and%20abandonments%20expense) Exploration and Abandonments Expense (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total expense | $480 | $184 | 161% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total expense | $2,644 | $393 | 573% | | Abandoned leasehold costs | $1,931 | $(1) | n/m | | Plugging and abandonment expense | $225 | $(2) | n/m | - The significant increase in exploration and abandonment costs for the six months ended June 30, 2023, was mainly due to **$1.9 million** in abandoned leasehold costs and higher plugging and abandonment costs for legacy vertical wells[189](index=189&type=chunk) [DD&A expense](index=57&type=section&id=DD%26A%20expense) DD&A Expense (in thousands, except per Boe) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total DD&A expense | $93,011 | $34,883 | 167% | | DD&A expense per Boe | $24.22 | $17.43 | 39% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total DD&A expense | $174,142 | $51,907 | 235% | | DD&A expense per Boe | $24.22 | $16.82 | 44% | - The substantial increase in DD&A expense and rate per Boe is attributed to increased production from the successful horizontal drilling program and significant inflationary pressures on capital costs, as well as bolt-on acquisitions[190](index=190&type=chunk) [General and administrative expense](index=58&type=section&id=General%20and%20administrative%20expense) General and Administrative Expense (in thousands, except per Boe) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total G&A expense | $2,516 | $2,016 | 25% | | G&A expense per Boe | $0.66 | $1.01 | (35%) | | Stock-based compensation expense | $3,984 | $14,579 | (73%) | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total G&A expense | $5,018 | $3,956 | 27% | | G&A expense per Boe | $0.70 | $1.28 | (45%) | | Stock-based compensation expense | $8,038 | $18,555 | (57%) | - General and administrative expense increased due to new employees, higher salaries, and increased audit/tax/internal audit costs, but the rate per Boe decreased due to economies of scale from increased production[191](index=191&type=chunk) - Stock-based compensation expense decreased significantly by **73%** and **57%** for the three and six months ended June 30, 2023, respectively, due to fewer options and restricted stock issuances compared to the prior year[191](index=191&type=chunk) [Interest expense](index=59&type=section&id=Interest%20expense) Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Total interest expense | $39,284 | $9,282 | 323% | | Credit Agreement | $11,323 | $735 | 1441% | | 10.625% Senior Notes | $6,633 | $— | n/m | | 10.000% Senior Notes | $5,625 | $5,562 | 1% | | Additional interest on 10.625% Senior Notes | $8,330 | $— | n/m | | Amortization of discount | $4,337 | $1,848 | 135% | | Amortization of debt issuance costs | $3,036 | $1,137 | 167% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total interest expense | $66,256 | $14,534 | 356% | - Interest expense increased significantly due to higher borrowings under the Credit Agreement, the issuance of 10.000% and 10.625% Senior Notes, and an **$8.3 million** additional interest payment on the 10.625% Senior Notes[192](index=192&type=chunk) [Derivative loss, net](index=59&type=section&id=Derivative%20loss,%20net) Derivative Loss, Net (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Noncash derivative gain (loss), net | $703 | $25,191 | (97%) | | Cash payments on settled derivative instruments, net | $(5,066) | $(37,082) | (86%) | | Derivative loss, net | $(4,363) | $(11,891) | (63%) | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Derivative loss, net | $(1,243) | $(78,285) | (98%) | - The net derivative loss decreased significantly by **63%** and **98%** for the three and six months ended June 30, 2023, respectively, primarily due to changes in noncash derivative gains/losses and lower cash payments on settled instruments[193](index=193&type=chunk) [Other expense](index=59&type=section&id=Other%20expense) Other Expense (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Water treatment contract buyout | $6,516 | $— | 100% | | Other | $986 | $— | 100% | | Total other expense | $7,502 | $— | 100% | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Total other expense | $7,502 | $— | 100% | - Other expense increased to **$7.5 million** for the three and six months ended June 30, 2023, primarily due to a **$6.5 million** buyout of a water treatment contract and **$986,000** in repairs from a production facility fire[194](index=194&type=chunk) [Income tax expense](index=60&type=section&id=Income%20tax%20expense) Income Tax Expense (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :------------- | | Income tax expense | $9,644 | $24,072 | (60%) | | Effective income tax rate | 23.3% | 23.7% | (2%) | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :----- | :----------------------------- | :----------------------------- | :------------- | | Income tax expense | $24,151 | $23,760 | 2% | | Effective income tax rate | 22.7% | 28.0% | (19%) | - The change in income tax expense and effective rate is primarily due to decreased net income in the current periods compared to the prior year[195](index=195&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) [Operating activities](index=61&type=section&id=Operating%20activities) Net Cash Provided by Operating Activities (in thousands) | Period | Amount | | :----- | :----- | | Six Months Ended June 30, 2023 | $363,676 | | Six Months Ended June 30, 2022 | $148,186 | | Change | $215,490 | | % Change | 145% | - The **145%** increase in net cash from operating activities was primarily driven by higher revenues from increased production volumes and an increase in accounts payables and accrued liabilities, partially offset by decreased realized prices[201](index=201&type=chunk) [Investing activities](index=61&type=section&id=Investing%20activities) Net Cash Used in Investing Activities (in thousands) | Period | Amount | | :----- | :----- | | Six Months Ended June 30, 2023 | $(612,521) | | Six Months Ended June 30, 2022 | $(549,145) | | Change | $(63,376) | | % Change | (12%) | - The increase in net cash used in investing activities was mainly due to higher additions to crude oil and natural gas properties, partially offset by a significant decrease in cash acquisition costs[202](index=202&type=chunk) [Financing activities](index=61&type=section&id=Financing%20activities) Net Cash Provided by Financing Activities (in thousands) | Period | Amount | | :----- | :----- | | Six Months Ended June 30, 2023 | $248,606 | | Six Months Ended June 30, 2022 | $388,507 | | Change | $(139,901) | | % Change | (36%) | - For the six months ended June 30, 2023, financing activities included **$255.0 million** in Credit Agreement borrowings and **$1.7 million** from warrant exercises, offset by **$5.6 million** in dividends and **$1.4 million** in debt issuance costs[205](index=205&type=chunk) - For the six months ended June 30, 2022, financing activities included **$210.2 million** from 10.000% Senior Notes, **$185.0 million** net from Credit Agreement, and **$7.8 million** from warrant exercises, offset by **$9.1 million** in debt issuance costs and **$5.4 million** in dividends[205](index=205&type=chunk) [Interest Rate Risk](index=61&type=section&id=Interest%20Rate%20Risk) - The Company is exposed to market risk from the floating interest rate on its **$525.0 million** outstanding Credit Agreement balance as of June 30, 2023[203](index=203&type=chunk) - A **1%** increase in interest rates on outstanding debt as of June 30, 2023, would result in an annual increase of approximately **$5.3 million** in interest expense[225](index=225&type=chunk) [Commodity Price Risk](index=61&type=section&id=Commodity%20Price%20Risk) - Crude oil, NGL, and natural gas prices are highly volatile, impacting revenue, profitability, and growth, with fluctuations driven by supply/demand, macroeconomic conditions, and geopolitical events[204](index=204&type=chunk) - A **$1.00 per barrel** increase (decrease) in crude oil price would change revenues by approximately **$12.5 million** annually, and a **$0.10 per Mcf** change in natural gas price would change revenues by approximately **$595,000** annually, excluding derivatives[206](index=206&type=chunk)[217](index=217&type=chunk) - A **$1.00** increase (decrease) in forward curves for crude oil derivatives would decrease (increase) net derivative positions by approximately **$886,000**[207](index=207&type=chunk) [Contractual obligations](index=62&type=section&id=Contractual%20obligations) - The Company's contractual obligations include leases for drilling rigs, equipment, and office facilities, capital funding obligations, volume commitments, and aid-in-construction obligations[208](index=208&type=chunk) [Non-GAAP Financial Measures](index=63&type=section&id=Non-GAAP%20Financial%20Measures) - EBITDAX is a non-GAAP measure used to assess the Company's ability to generate funds for exploration, development, acquisitions, and debt service, and is a key metric for financial covenants under the Credit Agreement and Senior Notes[209](index=209&type=chunk) EBITDAX Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $31,826 | $77,561 | $82,083 | $61,051 | | EBITDAX | $184,985 | $135,434 | $358,844 | $186,510 | - EBITDAX increased by **36.6%** for the three months ended June 30, 2023, and by **92.4%** for the six months ended June 30, 2023, compared to the same periods in 2022[210](index=210&type=chunk) [New Accounting Pronouncements](index=63&type=section&id=New%20Accounting%20Pronouncements) - Management's judgments and estimates in financial reporting are based on internal and external information, including reserve estimation, asset retirement obligations, impairment, stock-based compensation, and derivative valuations[212](index=212&type=chunk)[213](index=213&type=chunk) - There have been no material changes in critical accounting policies and procedures during the three months ended June 30, 2023[214](index=214&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details HighPeak Energy's exposure to commodity price and interest rate risks, and mitigation strategies - The Company's primary market risk is the volatile pricing of crude oil, NGL, and natural gas, with NYMEX WTI crude oil prices ranging from **$16.70** to **$114.34 per Bbl** and natural gas from **$1.50** to **$9.35 per MMBtu** between January 2018 and June 2023[216](index=216&type=chunk)[217](index=217&type=chunk) - Commodity derivative instruments (swaps, puts, collars) are used to hedge price risk, reduce cash flow variability, provide certainty for drilling programs, and protect the Credit Agreement borrowing base, as required by debt covenants[218](index=218&type=chunk) Average Forward NYMEX Prices | Commodity | June 30, 2023 (Remainder of 2023) | June 30, 2023 (Year Ending Dec 31, 2024) | August 3, 2023 (Remainder of 2023) | August 3, 2023 (Year Ending Dec 31, 2024) | | :-------- | :-------------------------------- | :--------------------------------------- | :--------------------------------- | :------------------------------------- | | Crude oil per Bbl | $70.41 | $68.51 | $79.94 | $76.53 | | Natural gas per MMBtu | $3.05 | $3.52 | $2.95 | $3.44 | - The Company faces credit risk from significant purchasers (Delek, ETC) and derivative counterparties, mitigated by credit risk policies and master netting arrangements[219](index=219&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of HighPeak Energy's disclosure controls and procedures as of June 30, 2023 - HighPeak Energy's disclosure controls and procedures were deemed effective as of June 30, 2023, ensuring timely and accurate reporting of information under the Exchange Act[226](index=226&type=chunk) - No material changes in the Company's internal control over financial reporting occurred during the three months ended June 30, 2023[227](index=227&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) Addresses HighPeak Energy's legal proceedings, asserting no material adverse effect on financial position or operations - The Company believes that the financial impact of any legal proceedings or claims will not materially adversely affect its consolidated financial position, liquidity, capital resources, or future annual results of operations[229](index=229&type=chunk) [Item 1A. Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, emphasizing the critical need for supplemental financing to address significant debt maturities - Failure to redeem, refinance, or extend the 10.000% Senior Notes by September 1, 2023, will result in an event of default under the Credit Agreement, potentially accelerating all outstanding debt and leading to cross-defaults on other indebtedness[231](index=231&type=chunk)[232](index=232&type=chunk)[235](index=235&type=chunk) - As of June 30, 2023, the Company had **$1.0 billion** in total indebtedness, all maturing in 2024, including **$225.0 million** of 10.000% Senior Notes, **$250.0 million** of 10.625% Senior Notes, and **$527.4 million** under the Credit Agreement[236](index=236&type=chunk) - Approximately **50.2%** of the Company's total estimated proved reserves at December 31, 2022, were undeveloped, requiring significant capital expenditures (**$934.3 million** over five years) that may be constrained by current liquidity and debt covenants[246](index=246&type=chunk) - Beginning in Q4 2024, the absence of commodity hedging contracts for projected production could expose the Company to greater adverse effects of price volatility and significant fluctuations in net income[247](index=247&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) States no director or officer adopted or terminated Rule 10b5-1 trading arrangements during Q2 2023 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[248](index=248&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance and debt documents - The exhibits include the Second Amended & Restated Certificate of Incorporation, Amended and Restated Bylaws, Registration Rights Agreement, Stockholders' Agreement, and various Indentures for Senior Notes[250](index=250&type=chunk) - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[250](index=250&type=chunk) Signatures

Financial Data and Key Metrics Changes - The company achieved an average production of 37,000 barrels per day in Q1 2023, which represents a year-over-year increase of over 200% compared to Q1 2022 [69] - The EBITDA run rate is projected to be about $1.2 billion at an $80 price deck, with potential increases at higher prices [4] - The company maintains the highest operating margins among its Permian peers, with a first-quarter margin per BOE that was 55% higher than the peer average [5][6] Business Line Data and Key Metrics Changes - HighPeak has more than doubled its acreage footprint over the last few years, leading to improved well results and confidence in substantial inventory [9] - The company plans to turn in line 110 wells in 2023, with 64 wells in various stages of drilling and completion at quarter-end [70] - The average lateral length of HighPeak's inventory is 12,000 feet, contributing to increased capital efficiency and well performance [11] Market Data and Key Metrics Changes - The company is positioned to continue increasing production next year at a four-rig cadence, funded entirely from cash flow from operations [4] - HighPeak's production is expected to grow at least 50% this year and another 30% next year, indicating strong market positioning [30] Company Strategy and Development Direction - The company is focused on a long-term development strategy to maximize shareholder value through sustained operations and strategic alternatives [68] - A reduction in rig count from four to two for the remainder of the year is aimed at strengthening financial position while maintaining production guidance [78] - The company anticipates entering a phase of positive free cash flow in the second half of the year, allowing for continued growth and financial discipline [33][83] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to optimize shareholder value despite current market volatility and commodity price fluctuations [76][77] - The company is committed to maintaining a debt-to-EBITDA ratio of about 0.5 turns while continuing to grow [33] - Management highlighted the importance of under-promising and over-performing in the current economic environment [81] Other Important Information - HighPeak's operations are highly oil-weighted, with 85% of production being oil and 94% liquids, which is expected to continue [32] - The company is actively working on ESG initiatives, including energy efficiency and recycling of stimulation fluids [24][25] Q&A Session Summary Question: Discussion on upcoming notes maturity - Management reassured that there is no immediate pressure regarding the notes maturing in 2024, with plans in place to address any liquidity concerns [37][39] Question: Impact of new wells on production - Management indicated that approximately 20 producing wells were offline for fracking activities, but significant growth is expected in Q2 and Q3 from these completions [51][57] Question: Trends in LOE expenses - Management explained that the Q1 LOE expense was influenced by workover activities and that trends are expected to decrease as new wells come online [41][42] Question: Production growth expectations - Management confirmed that production is expected to grow significantly throughout the year, with a steady number of wells being brought online [60][62]

($ in millions) | --- | --- | --- | |-------------------------|---------|---------| | Production (MBoe/d) | 2023 | 2024 | | Average production rate | 45 - 51 | 60 - 66 | | Exit production Rate | 55 - 61 | 68 - 76 | YoY Est. Avg. Production Growth >30% 4 (1) Free Cash Flow is a non-GAAP financial measure and defined as estimated EBITDAX less Capex, interest expense & dividends at various oil prices combined with gas price of $4/Mcf. Positive and increasing FCF projected in 2H'23 onwards HighPeak's oil cut ge ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-39464 HighPeak Energy, Inc. (Exact name of Registrant as specified in its charter) Delaware 84-3533602 (State or other j ...

Disclaimer •FORWARD-LOOKING STATEMENTS •The information in this presentation and in any oral statements made in connection herewith contains forward-looking statements that involve risks and uncertainties. When used in or in connection with this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "projects," "continue," "may," "will," "could," "should," "future," "potential," "estimate" or the negative of such terms and similar expressions as they relate to HighPeak En ...

Financial Data and Key Metrics Changes - The company reported an average production of 37,300 barrels per day, representing a 42% increase from the third quarter and a 150% increase compared to the fourth quarter of the previous year [7] - Crude reserves increased by 92% year-over-year to 123 million barrels of oil [8] - The company is projecting an EBITDA run rate of over $1.5 billion at reasonable oil prices by the end of the year [10] - General and administrative expenses were slightly higher due to year-end bonuses but are expected to decrease as production volumes increase [12] Business Line Data and Key Metrics Changes - The company has expanded its acreage position from 61,000 acres at the end of 2021 to over 112,000 acres [4] - The production from the Signal Peak area has been a significant contributor to the overall production growth [5] - The company has been focusing on operational efficiency, with improvements in well performance and cost reductions [6] Market Data and Key Metrics Changes - The company anticipates generating free cash flow in the second half of the year, contingent on oil prices remaining favorable [26] - The average peer company would need to produce about 60,000 BOEs per day to achieve similar cash flow results that HighPeak achieves with 40,000 BOEs per day [11] Company Strategy and Development Direction - The company is focused on optimizing shareholder value and maintaining a healthy balance sheet while navigating supply chain disruptions [23] - HighPeak is pursuing strategic alternatives, including potential mergers or sales, to enhance shareholder value [39] - The company plans to reduce its rig count from six to four to maintain a strong balance sheet while still achieving production growth [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue improving production and cash flow despite market volatility [28] - The company is positioned to achieve free cash flow at a breakeven oil price as low as $45, which is unprecedented in the industry [37] - Management emphasized the importance of maintaining a conservative approach to reserve bookings while still achieving significant growth [54] Other Important Information - The company has a 130% compounded annual growth rate of proved reserves over the last two years [16] - HighPeak's operational and environmental initiatives are designed to be both financially and environmentally rewarding for shareholders [13] Q&A Session Summary Question: Are the wells mentioned in the press release related to the Conrad and Griffin pads? - Yes, the wells are from the western part to the eastern part of the Conrad and Griffin wells [62] Question: Are any of the results from the pads additive to the inventory counts? - All locations are included in the inventory mix, and as these wells are developed, they will move up into the primary numbers [67] Question: How does the recovery factor on Flat Top compare to other areas? - There is about a 2% difference in recovery factors between the eastern and western parts of Howard County, with the eastern area outperforming [68] Question: What is the company's approach to reserve bookings? - The company maintains a conservative approach to reserve bookings, allowing for potential future growth in recoverable reserves [69] Question: How does the company plan to manage its drilling program in the future? - The company has the flexibility to adjust its drilling program based on market conditions and does not have long-term contracts that could hinder its operations [60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-39464 HighPeak Energy, Inc. (Exact name of Registrant as specified in its charter) Securities registered pursuant to Section ...

Financial Data and Key Metrics Changes - The company reported a 63% increase in average production from the second quarter to the fourth quarter, reaching over 35,750 barrels of oil per day [6][12] - The average production for the third quarter was 26,250 barrels per day, a 19% increase from the second quarter and a 220% increase year-over-year [11] - The unhedged cash operating margin for the third quarter was $72.01 per barrel, with a significant increase in EBITDA run rate approaching $1 billion [12][20][49] Business Line Data and Key Metrics Changes - The company has expanded its acreage position to over 105,000 net acres, a 68% increase compared to the previous year [13] - The average well results for 2022 are outperforming prior year results, indicating improved reservoir quality and operational efficiency [8][48] - The company maintained best-in-class margins, generating 36% more margin per BOE than its peer group [23] Market Data and Key Metrics Changes - The company has successfully navigated supply chain constraints and inflationary pressures while maintaining production growth [9][49] - The current production rate is expected to continue growing, with the potential for significant increases in oil prices due to low storage levels and high demand [55] Company Strategy and Development Direction - The company is focused on responsible growth, with a flexible development program that allows for adjustments based on market conditions [18][44] - HighPeak is positioned for continued margin expansion through various cost reduction initiatives, including electrification and water recycling [24][37] - The company aims to delineate significant proved reserves and expand its drilling program across multiple formations [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate significant free cash flow while maintaining production growth [50] - The company anticipates a challenging capital market environment but believes its strong asset base and liquidity position will support ongoing development [44][85] - Management highlighted the potential for higher oil prices in the coming year due to increasing demand and declining storage levels [55] Other Important Information - The company raised a total of $435 million in recent financings, significantly enhancing its liquidity [15][44] - HighPeak's ESG initiatives are integral to its operations, with a focus on reducing emissions and improving environmental impact [39][40] Q&A Session Summary Question: Can you discuss the performance improvement in the 2022 drilling program? - Management confirmed that moving to full pad development has improved results, allowing for more efficient production growth [58][60] Question: What is the average well cost and how has it progressed through the year? - The blended average well cost is approximately $7 million, with inflationary pressures leading to a 15% increase in costs due to various efficiency initiatives [74][76] Question: Can you elaborate on the capital program and production progression? - Management acknowledged delays in production due to simultaneous frac operations but expects a more normal growth pattern moving forward [79][80] Question: Does the recent private placement provide sufficient liquidity for 2023? - Management confirmed that the $225 million private placement enhances liquidity, supporting the development drilling program [85] Question: What are the company's oil price realizations and differentials? - The company has consistently averaged above WTI prices, benefiting from advantageous location and marketing strategies [86]

| --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | E | N | | R | G | | | 3Q22 Presentation November 2022 DISCLAIMER 2 •FORWARD-LOOKING STATEMENTS •The information in this presentation and in any oral statements made in connection herewith contains forward-looking statements that involve risks and uncertainties. When used in or in connection with this document, the words "believes," "plans," " ...

PART I. FINANCIAL INFORMATION [Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) HighPeak Energy's unaudited financial statements for Q3 2022 reflect substantial asset growth to $2.04 billion, fueled by acquisitions and increased long-term debt, resulting in $169.0 million net income for the nine months [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets surged 150% to $2.04 billion by September 30, 2022, driven by crude oil and natural gas properties, funded by increased long-term debt and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$2,042,262** | **$818,960** | | Total current assets | $148,677 | $86,954 | | Total crude oil and natural gas properties, net | $1,883,381 | $725,615 | | **Total Liabilities and Stockholders' Equity** | **$2,042,262** | **$818,960** | | Total current liabilities | $260,350 | $103,000 | | Long-term debt, net | $561,756 | $97,929 | | Total stockholders' equity | $1,100,745 | $553,063 | [Condensed Consolidated Statements of Operations](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2022 operating revenues soared to $204.1 million, yielding $107.9 million net income, while nine-month revenues reached $497.8 million with $169.0 million net income Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $204,114 | $47,472 | $497,771 | $121,459 | | Income from operations | $118,310 | $21,959 | $295,688 | $48,909 | | Net income | $107,904 | $8,047 | $168,955 | $18,534 | | Diluted EPS | $0.85 | $0.08 | $1.40 | $0.18 | [Condensed Consolidated Statements of Cash Flows](index=16&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash flow significantly increased to $302.8 million, while investing activities used $843.4 million, largely funded by $540.0 million from financing activities Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $302,806 | $87,737 | | Net cash used in investing activities | ($843,351) | ($189,099) | | Net cash provided by financing activities | $540,024 | $93,776 | | **Net decrease in cash** | **($521)** | **($7,586)** | - Non-cash investing activities included the issuance of **$265.0 million** in stock for acquisitions during the first nine months of 2022[37](index=37&type=chunk)[82](index=82&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail $523.4 million in property acquisitions, increased debt facilities including $225.0 million Senior Notes, an amended $550 million revolving credit facility, and significant operational commitments - During the nine months ended September 30, 2022, the Company acquired crude oil and natural gas properties for a total of **$523.4 million**, consisting of approximately 42,855 net acres, including the issuance of **10.85 million shares** of common stock valued at **$265.0 million**[82](index=82&type=chunk) - The company's long-term debt increased to **$561.8 million**, primarily due to borrowings under its Revolving Credit Facility and the issuance of **$225.0 million** in 10.000% Senior Notes in February 2022[97](index=97&type=chunk)[103](index=103&type=chunk) - Subsequent to the quarter end, in October 2022, the company amended its Revolving Credit Facility, increasing the elected commitments to **$525 million** and the borrowing base to **$550 million**[143](index=143&type=chunk) - The company has a crude oil delivery commitment with a remaining monetary value of approximately **$20.7 million** and a sand purchase commitment with a remaining value of approximately **$6.4 million** as of September 30, 2022[117](index=117&type=chunk)[122](index=122&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strong Q3 2022 performance, driven by 221% sales volume growth and 34% higher commodity prices, was supported by $523.4 million in acquisitions and robust liquidity, with a Q4 capital budget of $285-$295 million - The company's financial performance in Q3 2022 was highlighted by a **$99.9 million increase in net income** year-over-year, driven by a **221% increase in daily sales volumes** and a **34% increase in average realized commodity prices**[151](index=151&type=chunk) - As of September 30, 2022, the company was operating **six drilling rigs** and **three frac fleets**, with plans to maintain this activity level for the remainder of the year[149](index=149&type=chunk)[166](index=166&type=chunk) - The capital budget for the fourth quarter of 2022 is estimated to be between **$285 million and $295 million**, primarily for drilling, completion, and infrastructure, excluding acquisitions[185](index=185&type=chunk) EBITDAX Reconciliation (Non-GAAP, in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income | $107,904 | $8,047 | $168,955 | $18,534 | | **EBITDAX** | **$169,704** | **$33,337** | **$356,214** | **$91,784** | [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Q3 2022 operating results showed significant growth, with total production volume up 221% to 26,247 Boe/d and average realized price per Boe increasing 34% to $84.53, while production costs per Boe decreased Average Daily Sales Volumes | Product | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Crude oil (Bbls) | 21,857 | 6,970 | 214% | | NGL (Bbls) | 2,530 | 673 | 276% | | Natural gas (Mcf) | 11,162 | 3,147 | 255% | | **Total (Boe)** | **26,247** | **8,168** | **221%** | Weighted Average Realized Prices (excluding derivatives) | Product | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Crude oil per Bbl | $94.21 | $69.84 | 35% | | NGL per Bbl | $36.59 | $35.83 | 2% | | Natural gas per Mcf | $7.73 | $3.69 | 109% | | **Total per Boe** | **$84.53** | **$63.18** | **34%** | Operating Costs per Boe | Cost Category | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Production costs | $8.16 | $8.93 | (9)% | | Production taxes | $4.08 | $3.06 | 33% | | DD&A expense | $17.65 | $18.52 | (5)% | | G&A expense | $0.78 | $2.22 | (65)% | [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages commodity price volatility through derivatives and faces interest rate risk on variable-rate debt, with a 1% rate increase impacting annual interest expense by $5.8 million - A **$1.00 per barrel change** in crude oil prices would impact annualized revenues by approximately **$6.5 million**, while a **$0.10 per Mcf change** in natural gas prices would impact annualized revenues by about **$282,000**, excluding derivative effects[199](index=199&type=chunk) - The company is exposed to interest rate risk on its Revolving Credit Facility; a **1% increase in interest rates** on outstanding debt as of September 30, 2022, would increase annual interest expense by approximately **$5.8 million**[205](index=205&type=chunk) - The company uses commodity derivative instruments to reduce price volatility and support its capital program, not for speculative purposes[200](index=200&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2022, disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during Q3 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[206](index=206&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[207](index=207&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) Management anticipates no material adverse financial impact from ongoing legal proceedings or claims incidental to the company's business - The company does not expect any ongoing legal proceedings or claims to have a material adverse effect on its financial condition or results[209](index=209&type=chunk) [Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) Key risks include geopolitical instability, significant indebtedness of $605 million, potential new costs from the Inflation Reduction Act, and increased capital and operating costs due to inflation and rising interest rates - Political instability, particularly the war between Russia and Ukraine, creates uncertainty in commodity markets, elevates supply chain disruption risks, and could materially impact business results[211](index=211&type=chunk)[212](index=212&type=chunk) - The company's significant indebtedness could make it difficult to satisfy obligations, increase vulnerability to adverse economic conditions, and limit flexibility for strategic actions[214](index=214&type=chunk)[216](index=216&type=chunk) - The Inflation Reduction Act of 2022 introduces a methane emissions fee starting in 2024 and provides incentives for clean energy, which could increase operating costs and decrease long-term demand for crude oil and natural gas[220](index=220&type=chunk) - Ongoing inflation and rising interest rates may increase the cost of goods, services, and capital, potentially hurting financial and operating results[221](index=221&type=chunk)[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued unregistered equity securities, including 3,522,117 shares for the Hannathon Acquisition and 3,933,376 shares in an $85.0 million private placement for general corporate purposes - On June 27, 2022, the company issued **3,522,117 shares** of common stock in connection with the Hannathon Acquisition[226](index=226&type=chunk) - The company completed an **$85.0 million private placement**, issuing **3,933,376 shares** of common stock at **$21.61 per share**, with final closings on September 2, 2022[227](index=227&type=chunk) [Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including acquisition agreements, debt instruments, credit facility amendments, and required certifications - Key exhibits filed include the Fifth and Sixth Amendments to the Credit Agreement, indentures for senior notes, and various registration rights and purchase agreements[229](index=229&type=chunk)