Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks, focusing on companies believed to be undervalued based on fundamental analysis [2]. Company Summary - HighPeak Energy (HPK) currently holds a Zacks Rank of 1 (Strong Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The stock is trading at a P/E ratio of 6.70, significantly lower than the industry average of 10.35, suggesting it may be undervalued [4]. - Over the past 52 weeks, HPK's Forward P/E has fluctuated between a high of 20.01 and a low of 6.70, with a median of 10.42, further indicating its current valuation [4]. - HPK has a P/S ratio of 1.45, compared to the industry's average P/S of 2.04, reinforcing the notion that the stock is undervalued [5]. - The combination of these metrics, along with a strong earnings outlook, positions HPK as an impressive value stock at this time [6].

Group 1 - HighPeak Energy has reduced its rig count from 6 in 2023 to 2, indicating a continued effort in cost reduction [2] - The oil and gas industry is characterized as a boom-bust, cyclical sector, requiring patience and experience for successful investment [2] Group 2 - The analysis provided focuses on the balance sheet, competitive position, and development prospects of oil and gas companies [1]

Group 1 - The article promotes a free two-week trial for the investment group Distressed Value Investing, which offers exclusive research on various companies and investment opportunities [1] - The investment group focuses on value opportunities and distressed plays, particularly in the energy sector [2] - The author, Aaron Chow, has over 15 years of analytical experience and previously co-founded a mobile gaming company that was acquired by PENN Entertainment [2] Group 2 - The article emphasizes that past performance is not indicative of future results and does not provide specific investment recommendations [3] - It clarifies that the analysts contributing to the platform may not be licensed or certified by any regulatory body [3]

Financial Data and Key Metrics Changes - HighPeak Energy achieved a 10% increase in production year over year, surpassing initial expectations of flat production volumes [8] - The value of proved reserves increased by 17% compared to the prior year, despite lower SEC guideline commodity prices [15] - Absolute debt was reduced by $120 million during 2024, with an additional $30 million planned for repayment at the end of March 2025 [10][11] Business Line Data and Key Metrics Changes - The company reported an average production of over 50,000 BOEs per day in Q4 2024, with a strong start in Q1 2025 averaging over 52,000 barrels per day [14] - Lease operating expenses decreased by 17% on a BOE basis, reflecting improved operational efficiency [10] Market Data and Key Metrics Changes - HighPeak's proved reserves increased by almost 30% year-over-year, with a notable 36% increase in proved developed reserves [9][18] - The company reported a reserve replacement ratio of 345%, indicating strong performance despite lower SEC pricing [20] Company Strategy and Development Direction - The company plans to maintain capital discipline and focus on improving corporate efficiency, with a capital budget approximately 20% lower than in 2024 [12][34] - HighPeak aims to continue its two-rig development program while strategically delineating the Middle Spraberry zone [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial position, highlighting the transition to a more traditional capital structure to reduce cash interest expenses [38][39] - The company anticipates continued improvements in well performance and operational efficiency, positioning itself for sustainable long-term success [41][42] Other Important Information - HighPeak has added 30,000 net acres to its position over the past 15 months, with ongoing infrastructure projects to connect new areas to its core systems [31][32] - The company has layered on additional gas hedges to enhance its financial position, although gas will not be a significant part of its production mix [61] Q&A Session Summary Question: How many middle Spraberry wells are you planning for 2025? - The company plans to drill two to three additional middle Spraberry wells in 2025, focusing primarily on the Flat Top area [50][52] Question: Does the infrastructure improvement impact your ability to move more oil barrels? - Yes, the infrastructure improvements enhance flexibility in handling gas volumes, which indirectly supports oil production by capturing and selling gas [58][60] Question: How does the infrastructure build-out support corporate efficiency goals? - The infrastructure supports operational efficiency by reducing both OpEx and CapEx, allowing for better control over drilling and completion costs [64][66] Question: How do you weigh the merits of reducing debt versus buying back shares? - The company is focused on optimizing its capital structure, which could lead to significant cash flow improvements and flexibility in managing debt and share buybacks [75][78]

Financial Data and Key Metrics Changes - HighPeak Energy achieved a 10% year-over-year increase in production, surpassing initial expectations of flat production volumes for 2024 [8] - The company reduced its lease operating expenses by 17% on a BOE basis, despite adding new acreage [10] - Absolute debt was decreased by $120 million during 2024, with an additional $30 million planned for repayment at the end of March 2025 [10][11] - The value of proved reserves increased by 17% compared to the prior year, despite lower SEC guideline commodity prices [15] Business Line Data and Key Metrics Changes - The company reported a 29% increase in proved reserves year-over-year, including a 36% increase in proved developed reserves [18] - HighPeak's reserve replacement rate was noted at 345%, with significant extensions and positive revisions [20] Market Data and Key Metrics Changes - Production averaged over 50,000 BOEs per day in the fourth quarter, with a strong start in the first quarter of 2025 averaging over 52,000 barrels a day [14] - The company anticipates a capital budget approximately 20% lower than in 2024, while maintaining production levels [12][34] Company Strategy and Development Direction - HighPeak aims to maintain capital discipline and improve corporate efficiency, focusing on flat production volumes with reduced capital expenditures [12][28] - The company plans to continue its two-rig development program while strategically delineating the Middle Spraberry zone [28][29] - Infrastructure projects are prioritized in the first half of 2025 to enhance operational flexibility and efficiency [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial position, highlighting the potential for significant cash interest expense savings through a transition to a more traditional capital structure [38][39] - The company is positioned for sustainable long-term success, with a focus on operational efficiency and shareholder-friendly initiatives [42][43] Other Important Information - HighPeak's 2024 EBITDA was roughly flat year-over-year, despite lower average oil prices [15] - The company has a long runway of high-value inventory, with approximately 15 years of locations in core formations [42] Q&A Session Summary Question: How many middle Spraberry wells are planned for 2025? - Management anticipates drilling two to three additional middle Spraberry wells in 2025, primarily in the Flat Top area [50][52] Question: How do infrastructure improvements impact oil movement? - Infrastructure enhancements have improved flexibility in handling gas volumes, which indirectly supports oil movement by capturing and selling gas [58][60] Question: How does the infrastructure build-out support corporate efficiency goals? - The infrastructure supports operational efficiency by reducing both OpEx and CapEx, allowing for better control over drilling and completion costs [64][66] Question: How does the company weigh reducing debt versus buying back shares? - Management indicated that reducing borrowing costs could significantly enhance free cash flow, allowing for rapid debt repayment while maintaining flexibility for future capital needs [75][78]

2024 Key Realizations and Improvements - Production increased by 10% from 45.6 MBoe/d in 2023 to 50.0 MBoe/d in 2024[15] - Proved Reserves increased by 29% from 154.2 MMBoe in 2023 to 199.0 MMBoe in 2024[15] - LOE decreased by 17% from $8.74/Boe in 2023 to $7.23/Boe in 2024[15] - Capex decreased by 40% from $1200 million in 2023 to $1080 million in 2024[15] - Net Acreage increased by 8% from 132,000 acres to 143,000 acres[15] 2024 Financial Highlights - FY'24 EBITDAX was $842.9 million[20] - Q4'24 EBITDAX was $179.4 million[20] - YE'24 Net Debt / 2024 EBITDAX was 1.18x[20] - Reduced long-term debt by $120 million[20] Reserves - Year-End 2024 Total Proved Reserves were 198.998 MMBoe, with 85% being liquids[22] - The PV-10 value of the total proved reserves is $3.387 billion[20, 22] - The reserves replacement ratio was 345%[25] 2025 Outlook - The company is running an average of 2 rigs[18, 37] - Average production rate is projected to be between 47.0 and 50.5 MBoe/d[37] - Total Capital Expenditures are projected to be between $448 million and $490 million[37]

Core Viewpoint - HighPeak Energy, Inc. reported quarterly earnings of $0.06 per share, missing the Zacks Consensus Estimate of $0.13 per share, and showing a significant decline from $0.66 per share a year ago, indicating a -53.85% earnings surprise [1][2] Financial Performance - The company posted revenues of $234.81 million for the quarter ended December 2024, which was 4.90% below the Zacks Consensus Estimate and down from $301.15 million year-over-year [2] - Over the last four quarters, HighPeak Energy has surpassed consensus EPS estimates only once and topped consensus revenue estimates two times [2] Stock Performance - HighPeak Energy shares have declined approximately 18.7% since the beginning of the year, contrasting with the S&P 500's decline of -1.9% [3] Future Outlook - The company's earnings outlook is mixed, with current consensus EPS estimates at $0.24 for the coming quarter and $1.01 for the current fiscal year, with revenues expected to be $257.96 million and $1.05 billion respectively [7] - The Zacks Rank for HighPeak Energy is currently 3 (Hold), suggesting that shares are expected to perform in line with the market in the near future [6] Industry Context - The Oil and Gas - Exploration and Production - United States industry is currently in the top 13% of Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Reserves and Production - As of December 31, 2024, HighPeak Energy's estimated proved reserves were 198,998 MBoe, with 85% being crude oil and NGL, and 54% developed[40]. - The estimated proved reserves increased from 122,958 MBoe in 2022 to 198,998 MBoe in 2024, reflecting a growth of 61.6%[40]. - As of December 31, 2024, HighPeak Energy's total proved reserves reached 198,998 MBoe, a significant increase from 154,162 MBoe in 2023, representing a growth of approximately 29%[50]. - The company's proved undeveloped reserves increased to 90,879 MBoe as of December 31, 2024, up from 74,569 MBoe in 2023, marking a growth of about 22%[52]. - Extensions and discoveries added 33,540 MBoe of new proved undeveloped locations in 2024, contributing to the overall increase in reserves[55]. - The company plans to develop all proved undeveloped reserves within five years from their initial recording date as of December 31, 2024[54]. - Average net sales volumes for crude oil in 2024 were 13,877 MBbl with an average sales price of $76.42/Bbl, while total average daily sales volumes reached 49,960 Boepd[60]. - Average net sales volumes for natural gas in 2024 were 12,747 MMcf with an average sales price of $0.49/Mcf[60]. - The company drilled 51 productive development wells in 2024, compared to 57 in 2023[68]. - The company drilled 18 exploratory/extension productive wells in 2024, with a net of 14.6, compared to 70 gross and 63.3 net in 2023[68]. Financial Performance - HighPeak Energy plans to fund its anticipated capital expenditures of $448 to $490 million for 2025 through cash on hand, operational cash flow, and potential borrowings[38]. - Estimated future net cash flows from proved reserves as of December 31, 2024, are projected at $6,159,303,000, an increase from $5,277,582,000 in 2023[58]. - The present value of estimated future net cash flows (PV-10) for total proved reserves as of December 31, 2024, is $3,387,074,000, compared to $2,884,067,000 in 2023[58]. - The average adjusted price realized for crude oil as of December 31, 2024, was $75.56 per barrel, reflecting a decrease from $78.13 per barrel in 2023[58]. - Total average production costs for 2024 were $58.48 per Boe, reflecting an increase from $66.80 per Boe in 2023[60]. - Major customers accounted for 76% of revenues in 2024 from DK Trading & Supply, LLC and 18% from Energy Transfer Crude Marketing, LLC[74]. Operational Strategy - The company operates approximately 97% of its net acreage, which consists of 154,368 gross (141,907 net) acres, with 64% held by production[32]. - HighPeak Energy's drilling plan for 2025 includes averaging two drilling rigs and one frac crew[38]. - The company utilizes multi-well pad development to optimize drilling and completion cycle times, aiming to reduce overall costs[32]. - HighPeak Energy's assets are primarily located in the Midland Basin, specifically in Howard and Borden Counties, Texas[30]. - The company plans to retain substantially all of its undeveloped acreage through its development plan, with 28,584 net acres expiring in 2025[65]. Market and Competition - The company faces various risks including market price volatility for crude oil and natural gas, political instability, and regulatory changes[6]. - HighPeak Energy's crude oil and natural gas operations face intense competition from larger companies with greater resources, which may limit its ability to acquire properties and discover reserves[77]. - The company faces indirect competition from alternative energy sources, including wind and solar, which may affect its market position[78]. - Seasonal demand fluctuations affect natural gas prices, typically higher in Q4 and Q1, while crude oil demand peaks in Q2 and Q3[79]. Regulatory Environment - HighPeak Energy believes it is in substantial compliance with applicable laws and regulations, but the regulatory burden increases operational costs and affects profitability[85]. - The company operates under various federal, state, and local regulations that govern drilling, production, and environmental compliance, which may change and impact operations[87]. - The FERC regulates interstate natural gas pipeline transportation rates and service conditions, which may affect the marketing of crude oil and natural gas produced[94]. - The company is subject to strict liability under CERCLA for hazardous substance releases, which could lead to significant cleanup costs and liabilities[108]. - New regulations in Texas may restrict the ability to use hydraulic fracturing or dispose of produced water, potentially adversely affecting the Company's operations[117]. Human Resources and Corporate Governance - As of December 31, 2024, the company employed 47 full-time employees, with no employees covered by collective bargaining agreements, indicating good employee relations[135]. - The company is committed to equal employment opportunities and aims to attract a multitalented workforce[138]. - The company values talent development and offers cross-training and leadership learning opportunities to enhance employee skills[140]. - The company has a diverse board of directors with extensive experience in the oil and gas industry, including the CEO who has over 50 years of experience[144]. - The Chief Financial Officer has over 30 years of experience in corporate finance and has been with the company since its inception in October 2019[148].

Core Insights - HighPeak Energy, Inc. reported solid financial and operational results for 2024, with a focus on disciplined capital management and production growth [3][4][7]. Financial Performance - The company achieved a net income of $95.1 million for 2024, translating to $0.67 per diluted share, with EBITDAX of $842.9 million or $6.01 per diluted share [7][15]. - Adjusted net income for 2024 was $144.8 million, or $1.05 per diluted share [7]. - Fourth quarter 2024 net income was $9.0 million, or $0.06 per diluted share, with EBITDAX of $179.4 million, or $1.27 per diluted share [15][16]. Production and Reserves - Average production for 2024 was approximately 50.0 MBoe/d, a 10% increase year-over-year, with fourth quarter production averaging 50.2 MBoe/d [11][7]. - Estimated proved reserves at year-end 2024 were 199 million Boe, a 29% increase from 2023, with proved developed reserves increasing by 36% to 108 million Boe [7][13]. Capital Expenditures and Guidance - The company reduced its capital expenditures by 40% in 2024 and plans to further reduce them by 20% in 2025, with a capital budget of $448 - $490 million for 2025 [3][4][8]. - HighPeak plans to maintain a two-rig drilling program in 2025, with an average production guidance of 47,000 – 50,500 Boe/d [5][6]. Operational Efficiency - Lease operating expenses for 2024 averaged $7.23 per Boe, a 17% decrease year-over-year [7]. - The company successfully reduced long-term debt by $120 million and paid dividends of $0.16 per share in 2024 [7][22]. Shareholder Returns - HighPeak's Board of Directors declared a quarterly dividend of $0.04 per share for the fourth quarter of 2024 and for March 2025, totaling approximately $5.0 million in dividends [22][4]. - The company authorized a share repurchase program of up to $75 million, with approximately $40 million remaining available [7][4].

Production and Reserves - HighPeak Energy's 2024 average production was approximately 50.0 MBoe/d, a 10% increase year-over-year[4] - The company's year-end 2024 estimated proved reserves were 199 MMBoe, representing a 29% increase compared to year-end 2023[10] - The company's 2024 reserve replacement ratio was 345%, an increase of 17% compared to 2023[10] - The company reported a reserve replacement ratio of 345% for the year, with proved reserves increasing from 154,162 MBoe in 2023 to 198,998 MBoe in 2024[48] Financial Performance - 2024 net income was $95.1 million, or $0.67 per diluted share, with EBITDAX of $842.9 million, or $6.01 per diluted share[4] - Fourth quarter 2024 net income was $9.0 million, or $0.06 per diluted share, with adjusted net income of $28.2 million, or $0.19 per diluted share[14] - Net income for the year ended December 31, 2024, was $95,069,000, a decrease of 56% from $215,866,000 in 2023[36] - Adjusted net income for the year was $144,807,000, with diluted earnings per share of $1.05, compared to $194,310,000 and $1.58 in 2023[43] Revenue and Expenses - Total operating revenues for Q4 2024 were $234.8 million, a decrease of 22% compared to $301.2 million in Q4 2023[34] - Crude oil sales in Q4 2024 were $232.9 million, down 21% from $296.1 million in Q4 2023[34] - The company’s total operating costs and expenses for the year were $728.2 million, an increase of 8% from $676.6 million in 2023[34] - Total cash provided by operating activities for the year was $690,391,000, down from $756,389,000 in 2023, reflecting a decrease of approximately 8.7%[36] Capital Expenditures and Investments - HighPeak plans to reduce capital expenditures by an additional 20% in 2025, with total capital expenditures expected to be between $448 million and $490 million[7] - Total cash used in investing activities was $620,843,000 for the year, down from $1,125,935,000 in 2023, reflecting a reduction of about 44.8%[36] Shareholder Returns - The Board of Directors declared a quarterly dividend of $0.04 per share, totaling approximately $5.0 million in dividends for the fourth quarter of 2024[20] - The company repurchased shares under its buyback program for a total of $35,166,000 during the year[36] Asset and Liability Management - Total current assets decreased to $195.0 million in 2024 from $328.8 million in 2023, a reduction of approximately 41%[32] - Proved properties increased to $3.96 billion in 2024 from $3.34 billion in 2023, representing a growth of about 19%[32] - Total liabilities decreased to $1.46 billion in 2024 from $1.52 billion in 2023, indicating a reduction of approximately 4%[32] - The company reported a total stockholders' equity of $1.60 billion in 2024, up from $1.55 billion in 2023, an increase of about 3%[32] Operational Strategy - The company aims to maintain production flat while averaging two drilling rigs and one frac crew during 2025[6] - The company plans to continue its strategic review and may explore various alternatives, although outcomes are uncertain[26] Pricing and Sales Volumes - HighPeak's fourth quarter average realized prices were $70.46 per Bbl of crude oil, resulting in an overall realized price of $50.83 per Boe[15] - Average realized price for crude oil per Bbl decreased to $76.42 in 2024 from $78.26 in 2023, a decline of approximately 2.4%[38] - Average daily sales volumes for crude oil decreased to 37,914 Bbls in 2024 from 38,041 Bbls in 2023, while natural gas sales increased to 34,828 Mcf from 19,777 Mcf[38]