HighPeak Energy(HPK) - 2022 Q1 - Quarterly Report

Definitions of Certain Terms and Conventions Used Herein This section defines technical terms, abbreviations, and conventions specific to the oil and gas industry and the company's financial reporting - This section defines technical terms, abbreviations, and conventions specific to the oil and gas industry and the company's financial reporting used throughout the document[11] - Key defined terms include Boe (Barrel of oil equivalent) for comparing crude oil and natural gas volumes, Proved reserves as economically producible quantities, and PV-10 as a non-GAAP present value measure of future gross revenue[11][18][20] Cautionary Statement Concerning Forward-Looking Statements This section warns that the report contains forward-looking statements subject to significant risks and uncertainties, advising against undue reliance - The report contains forward-looking statements based on current expectations and projections, subject to significant risks and uncertainties, advising readers not to place undue reliance[23] - Key factors that could cause actual results to differ include the COVID-19 pandemic's impact, geopolitical instability, commodity price volatility, drilling risks, and capital availability[24] - Reserve estimates are inherently uncertain and may differ significantly from the quantities of oil and gas ultimately recovered[26] PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2022, including balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,144,718 | $818,960 | | Total current assets | $101,133 | $86,954 | | Total crude oil and natural gas properties, net | $1,037,433 | $725,615 | | Total Liabilities | $448,444 | $274,097 | | Total current liabilities | $179,646 | $103,000 | | Long-term debt, net | $203,197 | $97,929 | | Total Stockholders' Equity | $693,881 | $553,063 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total operating revenues | $92,229 | $25,717 | | Income from operations | $54,574 | $5,912 | | Derivative loss, net | $(66,394) | $— | | Net income (loss) | $(16,510) | $4,744 | | Diluted earnings (loss) per share | $(0.17) | $0.05 | Condensed Consolidated Statements of Changes in Stockholders' Equity - Stockholders' equity increased from $553.1 million at year-end 2021 to $693.9 million by March 31, 2022, driven by $156.6 million in share issuance for an acquisition, partially offset by a $16.5 million net loss and $2.4 million in dividends[33] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $49,947 | $11,373 | | Net cash used in investing activities | $(150,899) | $(31,921) | | Net cash provided by financing activities | $101,933 | $10,634 | | Net increase (decrease) in cash | $981 | $(9,914) | Notes to Condensed Consolidated Financial Statements - Acquisitions (Note 3): In Q1 2022, the company incurred $162.9 million in acquisition costs for properties, paid with cash and 6.96 million shares valued at $156.6 million[81] - Debt (Note 7): In February 2022, $225.0 million of 10.00% senior unsecured notes were issued to repay the Revolving Credit Facility, reducing its borrowing base to $138.8 million[98][102] - Derivatives (Note 5): As of March 31, 2022, a net derivative liability of $57.1 million existed from crude oil swap contracts, resulting in a $66.4 million total derivative loss in Q1 2022, including $41.6 million non-cash and $24.8 million cash settlements[91][93][154] - Subsequent Events (Note 16): In April 2022, an agreement was signed to acquire Hannathon Petroleum properties for $255.0 million in cash and approximately 3.8 million shares, expected to close in Q3 2022[135] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 performance, including increased sales, derivative-driven net loss, acquisitions, financing, and the revised capital budget - Q1 2022 financial performance resulted in a net loss of $16.5 million, down from $4.7 million net income in Q1 2021, primarily due to a $66.4 million net derivative loss offsetting a $66.5 million increase in operating revenues[143] Production and Price Changes (YoY) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Avg. Daily Sales (Boe/d) | 12,052 | 5,290 | +128% | | Avg. Realized Price ($/Boe) | $85.03 | $54.01 | +57% | - The revised 2022 capital budget is approximately $790 million to $860 million for drilling and infrastructure, excluding acquisitions, to be funded by cash, operating cash flow, and debt/equity offerings[173] Reconciliation of Net Income (Loss) to EBITDAX (Non-GAAP, in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income (loss) | $(16,510) | $4,744 | | Adjustments | $67,586 | $15,323 | | EBITDAX | $51,076 | $20,067 | - As of March 31, 2022, the company had $35.9 million in unrestricted cash and $136.8 million available under its Revolving Credit Facility, indicating significant liquidity[171] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is commodity price volatility, mitigated by derivatives, also managing counterparty and customer credit risks - The company's main market risk is commodity price volatility; a $1.00 per barrel change in crude oil price would have impacted annualized Q1 2022 revenues by approximately $3.8 million[187][188] - To manage price risk, the company uses commodity derivative instruments, primarily hedges, to reduce cash flow variability and support the capital program, not for speculative purposes[189] Outstanding Crude Oil Swap Contracts as of March 31, 2022 | Period | Volume (MBbls) | Weighted Avg. Swap Price/Bbl | | :--- | :--- | :--- | | Remainder of 2022 | 1,983.6 | $72.25 | | 2023 | 641.2 | $66.04 | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, 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 March 31, 2022[195] - No material changes occurred in the company's internal control over financial reporting during Q1 2022[196] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings but anticipates no material adverse effect on its financial position, liquidity, or operations - The company, while party to various legal proceedings, does not anticipate a material adverse effect on its consolidated financial position, liquidity, or future results[198] Risk Factors This section highlights new material risks related to geopolitical instability, particularly the war in Ukraine, in addition to existing risk factors - No material changes to risk factors from the 2021 Annual Report are noted, except for those related to geopolitical instability[199] - A new risk factor is the ongoing war between Russia and Ukraine, potentially causing supply chain disruptions, heightened oil and gas price volatility, and negative impacts on capital raising[200][201] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance, debt instruments, and Sarbanes-Oxley certifications - The report includes a list of filed exhibits, such as amendments to the Credit Agreement, the Indenture for the Senior Notes, and Sarbanes-Oxley Act certifications[204][205] Signatures - The report was signed on May 16, 2022, by Steven Tholen, Chief Financial Officer, and Keith Forbes, Vice President and Chief Accounting Officer[209]