HighPeak Energy(US:HPK)2025-08-11 20:04PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025 Condensed Consolidated Balance Sheets Total assets slightly increased to $3.09 billion, while total liabilities decreased to $1.44 billion as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $21,853 | $86,649 | | Total current assets | $122,216 | $195,012 | | Total crude oil and natural gas properties, net | $2,943,774 | $2,845,729 | | Total assets | $3,089,453 | $3,063,288 | | Liabilities & Equity | | | | Total current liabilities | $140,685 | $284,630 | | Long-term debt, net | $1,027,354 | $928,384 | | Total liabilities | $1,435,367 | $1,460,832 | | Total stockholders' equity | $1,654,086 | $1,602,456 | Condensed Consolidated Statements of Operations Net income for Q2 2025 decreased to $26.2 million from $29.7 million year-over-year, driven by lower operating revenues Key Performance Indicators - Three Months Ended June 30 (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total operating revenues | $200,400 | $275,266 | | Income from operations | $43,444 | $87,260 | | Gain (loss) on derivative instruments, net | $26,446 | $(2,702) | | Net income | $26,176 | $29,717 | | Diluted EPS | $0.19 | $0.21 | Key Performance Indicators - Six Months Ended June 30 (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total operating revenues | $457,848 | $563,030 | | Income from operations | $133,823 | $190,280 | | Gain (loss) on derivative instruments, net | $18,519 | $(55,745) | | Net income | $62,511 | $36,155 | | Diluted EPS | $0.45 | $0.25 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $298.3 million for the first six months of 2025, contributing to a $64.8 million net decrease in cash Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $298,265 | $373,770 | | Net cash used in investing activities | $(322,078) | $(324,612) | | Net cash used in financing activities | $(40,983) | $(85,762) | | Net decrease in cash and cash equivalents | $(64,796) | $(36,604) | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, derivative instruments, debt structure, and significant subsequent events like credit agreement amendments - The company utilizes various derivative instruments to hedge against commodity price volatility, with a fair value net asset of $16.4 million as of June 30, 20258994163 - As of June 30, 2025, the company had $1.02 billion outstanding under its Term Loan Credit Agreement and $30.0 million under its Senior Credit Facility Agreement97 - Subsequent to quarter-end, the company amended its credit agreements, extending maturities to 2028, upsizing the term loan to $1.2 billion, and deferring amortization payments140 - The company has a crude oil marketing contract with a remaining monetary commitment of approximately $123.9 million as of June 30, 2025116 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, operational results, liquidity, and capital resources amid volatile market conditions Overview and Recent Events The company operates in the Midland Basin and recently amended its debt facilities to enhance liquidity and defer principal payments - As of June 30, 2025, the company's assets consisted of approximately 143,826 net acres in the Midland Basin, with an average working interest of 93%145 - In August 2025, the company amended its credit agreements to extend maturities to 2028, upsize its Term Loan to $1.2 billion, and defer $30.0 million in quarterly amortization payments for one year146 Industry Considerations and Outlook The company anticipates continued price volatility due to market factors and maintains a flexible one to two drilling rig program - The market environment is influenced by OPEC's production decisions, US tariffs, and geopolitical instability, leading to significant price volatility150152 - The company plans to average a one to two (1-2) drilling rig program for the remainder of 2025, maintaining flexibility in its capital plan157 Results of Operations Q2 2025 revenues decreased 27% year-over-year due to lower realized prices, despite flat sales volumes and reduced DD&A expenses Average Daily Sales Volumes | Product | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Crude Oil (Bbls) | 33,913 | 37,073 | (9)% | | NGL (Bbls) | 7,462 | 6,018 | 24% | | Natural Gas (Mcf) | 43,642 | 32,640 | 34% | | Total (Boe) | 48,649 | 48,531 | 0% | Weighted Average Realized Prices (excluding derivatives) | Product | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Crude Oil per Bbl | $63.74 | $81.39 | (22)% | | NGL per Bbl | $20.34 | $20.32 | 0% | | Natural Gas per Mcf | $1.50 | $0.13 | 1,054% | | Total per Boe | $45.27 | $62.33 | (27)% | Key Operating Costs per Boe | Cost Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Production Costs (excl. workovers) | $6.55 | $6.79 | (4)% | | DD&A Expense | $22.87 | $28.91 | (21)% | | G&A Expense | $1.28 | $1.07 | 20% | Liquidity and Capital Resources Liquidity is sourced from operations and credit facilities, with a 2025 capital budget of $375-$405 million for drilling and completions - The 2025 capital budget is expected to be approximately $375 to $405 million for drilling and completion, plus additional funds for infrastructure184 Cash Flow Summary - Six Months Ended June 30 (in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $298,265 | $373,770 | | Net cash used in investing activities | $(322,078) | $(324,612) | | Net cash used in financing activities | $(40,983) | $(85,762) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity price and interest rate volatility, which are partially managed through derivatives - A $1.00 per barrel change in the weighted average crude oil price would have impacted annualized revenues by approximately $14.0 million for the six months ended June 30, 2025203 - A 1% increase in interest rates on outstanding debt would result in an annual increase in interest expense of approximately $10.5 million211 - The company uses commodity derivative instruments to hedge price risk, as required by its credit agreements, to provide cash flow certainty204 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of the end of the period212 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025213 PART II. OTHER INFORMATION Legal Proceedings The company is involved in routine legal proceedings that are not expected to have a material adverse financial impact - The company states that while it is party to various legal proceedings, it does not expect the outcomes to have a material adverse effect on its financial condition215 Risk Factors Key risks include commodity price volatility, trade policy impacts, capital intensity, inflation, and geopolitical instability - Key risks include: - Commodity Price Volatility: Sustained price declines could adversely affect business and financial condition - Tariffs and Trade Policy: Trade restrictions could increase costs and disrupt the supply chain - Capital Needs: Development projects require substantial capital, and financing ability is uncertain - Inflation and Costs: Rising inflation may increase capital and operating costs, impacting profitability - Geopolitical Risks: Political instability in energy-producing regions can impact global supply and prices - Strategic Alternatives Process: The ongoing evaluation creates uncertainty and may not result in a transaction217219224233237241 Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q2 2025, with $39.9 million remaining under the authorized repurchase program - The company did not repurchase any of its common stock during the three months ended June 30, 2025246 - As of June 30, 2025, approximately $39.9 million remained available under the company's stock repurchase program, which expires on December 31, 2025246248 Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement during the quarter249 Exhibits This section lists all exhibits filed with the report, including debt agreements and required officer certifications