HighPeak Energy(US:HPK)2021-08-10 17:55Financial Data and Key Metrics Changes - The company reported a production increase of 66% quarter-over-quarter, averaging over 8,800 barrels of oil equivalent per day compared to 5,300 barrels in the first quarter [10][16] - EBITDAX increased by 91% to $38.4 million, reflecting strong operational performance [16][47] - The average realized price was $60.40 per barrel equivalent, with an operating cash margin of $51.35 per Boe, both of which are peer-leading figures [15][20] Business Line Data and Key Metrics Changes - The production stream consists of 90% oil and 96% liquids, which drives high profit margins and differentiates the company from peers [7][30] - The company has increased its lateral feet drilled by almost 40% quarter-over-quarter, indicating improved drilling efficiency [18][26] Market Data and Key Metrics Changes - The company realized prices at 92% of the WTI index on an unhedged basis, which is significantly higher than peers [19] - The cash margin for the second quarter was 75% of the oil and gas WTI index, again outperforming competitors [20][32] Company Strategy and Development Direction - The company is focused on growth, having added a second rig to accelerate production into 2022 [8][40] - Recent acquisitions are expected to add approximately 6,200 net acres and contribute nearly 1,400 barrels per day for the remainder of 2021 [13][76] - The company aims to maintain a low leverage situation while balancing growth and shareholder returns, with a 10-year inventory of drilling locations [50][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue growth despite potential lumpiness in production due to multi-pad development [42][43] - The company is optimistic about future profit margins and operational efficiencies, particularly with ongoing infrastructure improvements [88] Other Important Information - The company has a strong balance sheet with net debt of only $1.2 million and a borrowing base of $125 million [18][44] - The company has initiated a dividend project to align with shareholder interests, despite some cash flow challenges [44] Q&A Session Summary Question: Overall philosophy on balancing growth and shareholder return - Management aims to maintain low leverage while balancing growth with acquisitions and internal drilling opportunities, with a focus on effective growth for the next five to ten years [50] Question: Time needed for wells to reach peak production - Typically, it takes about a month from the time wells are put on flow back to reach peak production, with variations based on well type and area [51][52] Question: Status of wells in early stages of flow back - Of the 10 wells completed in the quarter, the first five to six have reached significant production, while the last four to five are in the initial cleanup period [61][62] Question: Expectations for wells in Signal Peak - Management is optimistic about the performance of wells in Signal Peak, with early production rates being encouraging [64][65] Question: Cost savings from operational initiatives - Anticipated savings from local sand and recycled water initiatives are expected to be significant, with electrification projected to reduce lifting costs substantially [70][73] Question: Details on acreage acquisitions - The acquired barrels are expected to be similar in commodity mix to current production, with low operating expenses contributing to favorable profit margins [76][77] Question: Impact of infrastructure work on crude oil price differential - New agreements are expected to significantly reduce transportation costs, improving realized prices for the company [81][82]