Highpeak Energy Inc ((HPK)) has held its Q4 earnings call. Read on for the main highlights of the call.
HighPeak Energy Inc. recently held its earnings call, revealing a strong performance marked by significant achievements in production growth, reserve increases, and cost efficiency. Despite facing challenges such as high interest expenses on its term loan and a slightly higher fourth-quarter CapEx, the company remains optimistic about its future, with plans to enhance its capital structure and maintain operational efficiency.
Increased Production and Efficiency
HighPeak Energy reported a remarkable 10% increase in production year over year, surpassing initial expectations of flat production volumes. This growth was achieved with a capital expenditure that was 40% less than in 2023, showcasing the company’s ability to enhance efficiency while managing costs effectively.
Proved Reserves Growth
The company experienced a substantial 30% increase in proved reserves by the end of 2023, with a 36% rise in proved developed reserves. This growth occurred despite utilizing lower SEC guideline prices for 2024, underscoring HighPeak’s robust resource management and strategic planning.
Reduction in Lease Operating Expenses
HighPeak successfully reduced lease operating expenses by 17% on a BOE basis, thanks to efficient infrastructure and operations. This reduction highlights the company’s commitment to cost management and operational excellence.
Debt Reduction and Shareholder Initiatives
In a move to strengthen its financial position, HighPeak reduced its absolute debt by $120 million, paid $22 million in dividends, and repurchased approximately 2.4 million shares, totaling $177 million in shareholder-friendly initiatives. These actions demonstrate the company’s dedication to enhancing shareholder value.
Operational Improvements and Cost Reductions
The company realized significant efficiency gains in drilling and completion, enabling more work with the same number of rigs. HighPeak anticipates a further 20% reduction in its capital budget for 2025, reflecting its ongoing commitment to operational improvements and cost reductions.
High Interest Expense
One of the challenges faced by HighPeak was the high average interest rate of 13% on its term loan in 2024, resulting in $150 million in annual cash interest expense. This highlights the need for strategic financial management to mitigate such costs.
Higher Than Expected Fourth Quarter CapEx
The fourth quarter CapEx exceeded initial expectations due to efficiency gains that allowed the company to advance some drilling and stimulation activities and initiate key 2025 projects. This proactive approach positions HighPeak for continued growth and development.
Forward-Looking Guidance
Looking ahead, HighPeak Energy’s CEO Jack Hightower outlined the company’s guidance for 2025. The company plans to maintain capital discipline with a 20% lower capital budget while keeping production volumes flat. HighPeak aims to enhance corporate efficiency and increase levered free cash flow by optimizing its capital structure, potentially reducing interest expenses significantly. The company also intends to continue shareholder-friendly initiatives, such as maintaining dividends and opportunistically buying back shares. Additionally, HighPeak plans to focus on co-developing high-return zones and connecting newly acquired acreage to its infrastructure, anticipating a 29% increase in proved reserves from 2023.
In summary, HighPeak Energy’s earnings call highlighted a strong performance with notable achievements in production growth, reserve increases, and cost efficiency. Despite challenges like high interest expenses and increased CapEx, the company remains optimistic about its future, with plans to enhance its capital structure and maintain operational efficiency. HighPeak’s strategic initiatives and forward-looking guidance underscore its commitment to delivering value to shareholders and sustaining growth.