HighPeak Energy(US:HPK)2024-05-09 19:56Financial Data and Key Metrics Changes - The company generated positive free cash flow from operations for the third consecutive quarter, with a free cash flow increase of 42% compared to the last quarter, totaling over $150 million in the last three quarters [16][46]. - The unhedged first quarter EBITDAX margin was $52.68 per BOE, approximately 70% higher than the public peer average and over 30% higher than the closest peer [11][12]. - Operating expenses saw a 16% decrease in LOE per BOE, down to $6.30, while absolute dollars spent on LOE were roughly $200,000 lower than Q1 2023 despite increased production [17][20]. Business Line Data and Key Metrics Changes - The company maintained average production levels at approximately 50,000 barrels per day, consistent with the previous quarter [17]. - The capital investment in infrastructure is expected to yield significant dividends, improving EBITDAX margins and lowering well breakeven costs [21]. Market Data and Key Metrics Changes - The company’s focus on high oil cut production, with only 1% of revenue from gas, positions it competitively in the market, especially as gas prices remain low [38][99]. - The company anticipates moving more locations into the sub-$50 per barrel breakeven category as costs are driven down [26]. Company Strategy and Development Direction - The company is committed to disciplined operations, strengthening its balance sheet, and maximizing shareholder value through increased dividends and share buybacks [15][6]. - The strategic focus includes maintaining capital discipline while exploring opportunities for increased drilling activity if oil prices stabilize [65][66]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance and the ability to generate free cash flow, emphasizing the importance of maintaining capital discipline [29][57]. - The company is optimistic about its extensive inventory of oil-rich, low-cost locations, which will be converted into free cash flow for shareholders [55][93]. Other Important Information - The company has invested in a solar farm to enhance its electrical system, which is expected to reduce power costs significantly [10][96]. - The infrastructure built is designed for the life of the field, allowing for scalability and efficiency in operations [42][89]. Q&A Session Summary Question: Can you provide more detail on the chemical program's efficiency? - The chemical program has seen improvements due to infrastructure investments, reducing treatment costs for recycled water by about half compared to six months ago [34][35]. Question: What is the company's approach to increasing drilling activity? - The company plans to be cautious and slow in increasing activity, ensuring that any additional rigs are supported by free cash flow [66][86]. Question: Is there flexibility in the term loan repayment? - The company has the ability to accelerate repayments under the term loan without penalties after 15 months, depending on free cash flow and market conditions [73][75]. Question: How does the company view its inventory and potential for future production? - The company believes it can significantly increase production with its existing inventory and infrastructure, potentially doubling production levels in the right market conditions [30][74].