{"id":7676,"date":"2023-05-12T05:11:07","date_gmt":"2023-05-12T09:11:07","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/highpeak-energy-may-need-to-do-an-equity-offering-to-deal-with-its-notes-nasdaqhpk\/"},"modified":"2023-05-12T05:11:08","modified_gmt":"2023-05-12T09:11:08","slug":"highpeak-energy-may-need-to-do-an-equity-offering-to-deal-with-its-notes-nasdaqhpk","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=7676","title":{"rendered":"HighPeak Energy May Need To Do An Equity Offering To Deal With Its Notes (NASDAQ:HPK)"},"content":{"rendered":"
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As previously expected, HighPeak Energy (NASDAQ:HPK<\/span>) has reduced its 2023 capital expenditure budget in an attempt to manage its liquidity. It is now projected to have around $171 million in cash burn at current strip. This should keep it from completely using up its credit facility borrowing capacity.<\/span><\/p>\n

However, HighPeak now needs to deal with its February 2024 notes by the end of June 2023. This results in a significant chance of an equity offering to help repay those notes. I estimate HighPeak’s value at $17 per share in a long-term $75 WTI oil environment, but that doesn’t include the potential dilution from an equity offering.<\/p>\n

Reduced Budget<\/h2>\n

HighPeak has reduced its 2023 capital expenditure budget by approximately $212 million, going from four rigs to two rigs starting in June 2023 until early 2024. This results in a roughly 2,000 BOEPD reduction in its expected 2023 average production and a roughly 4,000 BOEPD reduction in its projected 2023 exit rate production.<\/span><\/p>\n

It appears that HighPeak is also guiding for higher absolute lease operating expenses. It initially expected lease operating expenses per BOE to be around $5.50 in 2023. It has now increased this to approximately $7.00 per BOE, resulting in a $23 million increase in lease operating expenses despite slightly lower production expectations.<\/p>\n

At $70 WTI oil, HighPeak’s 2023 cash burn would be reduced by approximately $150 million as a result of its reduced capex budget combined with lower production and higher lease operating expenses.<\/p>\n

HighPeak has kept its tentative 2024 capex budget at $900 million for now, but has reduced its expectations for average 2024 production by 10,000 BOEPD and its expectations for 2024 exit rate production by 4,000 BOEPD. This reflects the impact of the decrease in new wells coming online in 2H 2023. As well, HighPeak’s updated 2024 expectations appear more realistic, as I had thought that it would be difficult for it to average 73,000 BOEPD in production in 2024 with a $900 million capex budget.<\/p>\n

2023 Results At Current Strip<\/h2>\n

I’ve now updated HighPeak’s model to account for its updated guidance (at the midpoint of its guidance range) for 48,000 BOEPD in average production during 2023. It reported 37,222 BOEPD in average production in Q1 2023, essentially flat with its Q4 2022 production. HighPeak has indicated that its production growth can be pretty lumpy, so it still expects significant growth later in 2023.<\/p>\n

At current strip of $73 WTI oil, HighPeak is projected to generate $1.097 billion in revenues after hedges now.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n
Type<\/td>\nBarrels\/Mcf<\/td>\n$ Per Barrel\/Mcf<\/td>\n$ Million<\/td>\n<\/tr>\n
Oil<\/td>\n14,366,400<\/td>\n$73.00<\/td>\n$1,049<\/td>\n<\/tr>\n
NGLs<\/td>\n1,839,600<\/td>\n$26.00<\/td>\n$48<\/td>\n<\/tr>\n
Natural Gas<\/td>\n7,884,000<\/td>\n$1.75<\/td>\n$14<\/td>\n<\/tr>\n
Hedge Value<\/td>\n <\/td>\n <\/td>\n-$14<\/td>\n<\/tr>\n
Total<\/td>\n <\/td>\n <\/td>\n$1,097<\/td>\n<\/tr>\n<\/table>\n

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