• Production: Averaged approximately 49,100 BOE per day in the first half of 2024, an 8% increase compared to 2023 annual average.

• Free Cash Flow: Generated positive free cash flow for the fourth consecutive quarter.

• Lease Operating Expenses: Maintained sub-seven dollars per BOE cost level.

• Cash Margin: Net back for the quarter was over 80% of realized price on a BOE basis.

• Debt Reduction: Reduced long-term debt by $30 million at par.

• Share Buyback: Acquired over 413,000 shares during the second quarter.

• Production Guidance: Raised to 45,000 to 49,000 BOE a day, a 4.5% increase from initial 2024 range.

• Lease Operating Expenses Guidance: Lowered to $6.50 to $7.50 per BOE, a 12.5% reduction from initial expectations.

• Capital Budget: Narrowed from $85 million to $40 million due to additional infrastructure projects.

• EBITDAX Margin: Unhedged EBITDAX margin at $50.07 per BOE, over 65% higher than peer group average.

• Revenue: Generated over $2.7 billion of revenue since going public, on track to generate over $1 billion per year.

• Warning! GuruFocus has detected 2 Warning Signs with HPK.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• HighPeak Energy Inc (NASDAQ:HPK) reported positive free cash flow for the fourth consecutive quarter, even with high capital expenditures.

• The company achieved a significant reduction in lease operating expenses, maintaining a sub-seven dollars per BOE cost level.

• Production volumes exceeded expectations, with an average of over 52,000 barrels a day in the third quarter.

• HighPeak Energy Inc (NASDAQ:HPK) raised its production guidance for 2024, reflecting confidence in continued strong performance.

• The company successfully reduced long-term debt by $30 million and continued its share buyback program, acquiring over 413,000 shares.

Negative Points

• A delay in bringing a key pad online reduced expected second quarter production volumes.

• Higher workover expenses were incurred in the second quarter, impacting lease operating expenses.

• The company faces high interest payments on debt, which is 20% of EBITDA, affecting cash flow.

• There are Make-Whole provisions on debt that limit flexibility in refinancing until March.

• The capital budget was slightly increased due to additional infrastructure projects, impacting financial planning.

Q & A Highlights

Q: Can you explain the increase in lease operating expenses (LOE) this quarter and the impact of well workover expenses? A: Jack Hightower, CEO: The increase in LOE was due to a higher amount of well workover expenses. In Q1, we averaged about $0.39 per BOE for workover expenses, which increased to $0.68 in Q2. This was driven by the completion of 32% of our annual wells in Q2, which required additional workovers on offset wells. Normally, workover expenses range between $0.30 to $0.45 per BOE.