HighPeak Energy outlines 2026 road map with disciplined cash flow focus and debt reduction amid governance overhaul

Earnings Call Insights: HighPeak Energy (HPK) Q3 2025

MANAGEMENT VIEW

* Interim CEO Michael Hollis reported, "Production levels were consistent with the second quarter despite our reduced level of development activity. We only ran 1 rig through the entirety of the third quarter, drilled 6 wells and turned in line only 9 wells." Hollis noted that CapEx was down 30% from Q2 due to deliberate activity reduction and matched internal estimates. He emphasized, "We held our LOE per BOE consistent with our first half 2025 levels. And as we discussed on last quarter's call, we successfully amended and extended our term loan, pushed out debt maturities until 2028 and materially increased our liquidity."
* Hollis stated, "We delayed picking our second rig back up until mid-October, a roughly 1.5-month delay from our original plan. Now we plan to run both rigs throughout the fourth quarter before making a determination as to what the appropriate level of activity should be for 2026, which will be heavily dependent on oil prices, D&C cost and overall market conditions."
* Operationally, Hollis highlighted, "We recently finished our second successful simul-frac completion on a 6-well pad with 15,000-foot average lateral lengths. This operation went smoothly with HighPeak recognizing cost savings per well of over $400,000 compared with our traditional zipper frac technique." He further reported increased efficiencies in simul-frac operations.
* Hollis announced, "Effective immediately, I have accepted the role of permanent President and CEO of HighPeak Energy." He congratulated several employees on new senior management roles and introduced Jason Edgeworth as the new independent Chairman. Hollis explained, "Over the last few months, we have made key changes in each of these areas," including establishing fully independent Board committees.
* On governance and shareholder structure, Hollis stated, "These partnerships plan to begin methodically distributing shares over the next 2 years, with HighPeak II being distributed first in 2026 and HighPeak I in 2027."
* CFO Steven Tholen opened the call, stating, "During today's call, we may refer to our November investor presentation and our third quarter earnings release, which can be found on HighPeak's website."

OUTLOOK

* Hollis outlined a scenario-based 2026 framework: if long-term oil prices stay below $60 per barrel, "our focus will be exclusively on operating within cash flow... operating less than a 2-rig development program." For a base case of $60 to $70 per barrel, "our focus will be on free cash flow generation and prudently paying down our debt" with a likely 2-rig program maintaining current production volumes. In a bull case above $70, the focus remains on free cash flow and "accelerated debt paydown," with the possibility of slightly increased rig activity and moderate production growth. Hollis clarified, "We would have to be in this bull case scenario for quite some time and reach a reasonable leverage ratio before we would ever consider additional shareholder value initiatives."
* Management committed to a methodical and disciplined approach, stating, "We will not have a knee-jerk reaction to very short-term swings in pricing."

FINANCIAL RESULTS

* Hollis reported, "CapEx was down 30% from Q2 as a result of our deliberate reduction of development activity and was spot on with our internal estimates." He noted that production was consistent with the second quarter, and LOE per BOE remained stable versus the first half of the year. No explicit new financial figures were provided in the transcript for Q3.
* The company reiterated its success in cost control via simul-frac operations, citing savings of over $400,000 per well on the latest pad.

Q&A

* Jeffrey Robertson, Water Tower Research: Asked about the leverage plan and flexibility to address the term loan. Hollis responded that in the base case scenario, "we can generate significant free cash flow. Our term loan debt that we have today, we can pay down debt at par with no penalty."
* Robertson followed up on hedging in the context of managing cash flows. Hollis explained, "We want to be very -- what you will see from HighPeak is a much more systematic and methodical hedging program... I think looking forward to think somewhere in the 55% to 65% hedged at these kind of prices are probably what you would see HighPeak move towards."
* Nicholas Pope, ROTH Capital Partners: Inquired about changes in drilling focus. Hollis replied, "We're drilling Wolfcamp A, Lower Spraberry codeveloped...the split between Flat Top and Signal Peak is more based on the split of inventory, which is about 70-30."
* Pope asked about lease operating expenses and optimization with a slower program. Hollis stated, "We've gone into some of our wells and done some expense workovers and have seen some really good results from that."
* Robertson asked about the impact of carryover inventory on 2026 production. Hollis indicated that the additional wells drilled in Q4 would support Q1 and Q2 2026 production forecasts.
* Noah Hungness, BofA Securities: Asked about the recent S-3 filing. Ryan Hightower responded, "The sole reason for filing the S-3, our previous shelf registration statement that we had on file went stale and expired. So all we were doing was refreshing it. We have absolutely no intention of issuing any new shares anytime soon."
* Hungness requested details on the share distribution plan for 2026. Hightower said, "It will most likely start early in the year, but will last throughout the calendar year."

SENTIMENT ANALYSIS

* Analysts raised pointed questions about leverage, hedging flexibility, drilling focus, cost controls, and share distribution, reflecting cautious to slightly negative sentiment regarding debt management and share overhang. There was some interest in improved operational efficiencies and governance changes.
* Management adopted a candid and constructive tone, openly acknowledging past missteps, stating, "Our debt is high, and the market has told us exactly what it thinks about that," and emphasizing a disciplined turnaround. Tone was confident during prepared remarks but more measured and pragmatic in the Q&A, using phrases like "we will deliver" and "methodical and disciplined approach."
* Compared to the previous quarter, management's tone was more transparent and urgent regarding the need for structural changes, while analysts maintained a focus on liquidity and leverage.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw the formal appointment of Michael Hollis as permanent CEO and the addition of an independent Chairman, signaling a shift in governance structure and accountability compared to Q2.
* Guidance language evolved from optimism about refinancing and capital structure in Q2 to a more sober, scenario-based approach for 2026, emphasizing strict cash flow management and debt reduction.
* Analysts continued to probe around leverage, liquidity, and operational strategy in both quarters, but this quarter's questions highlighted persistent concerns about future share distributions and the potential for share overhang.
* Management's confidence has shifted to a more methodical and transparent style, openly addressing prior mistakes, governance reforms, and a commitment to operational discipline.

RISKS AND CONCERNS

* Hollis acknowledged, "Our debt is high, and the market has told us exactly what it thinks about that," and identified overleverage as a primary focus for improvement.
* Governance weaknesses were cited, with management detailing steps to improve oversight through independent Board committees and a new Chairman.
* Shareholder structure and low float were cited as risks, with management planning a measured distribution of shares from private partnerships over the next two years.
* Commodity price volatility remains a key business risk, and management committed to operating within cash flow and adjusting activity levels accordingly.
* Concerns about increasing gas and NGL production were addressed as a function of improved takeaway capacity, not reservoir issues.

FINAL TAKEAWAY

HighPeak Energy management emphasized a disciplined turnaround anchored in operational efficiency, strict cash flow management, and methodical debt reduction. Governance reforms, including the appointment of an independent Chairman, a new CEO, and independent Board committees, aim to rebuild market confidence. The company’s scenario-based approach for 2026 prioritizes maintaining flexibility and aligning capital allocation with long-term commodity price trends, while a measured share distribution plan seeks to address low float concerns. Management is candid about past overleverage and is committed to steady, transparent execution to deliver lasting value for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hpk/earnings/transcripts]

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