HighPeak Energy(HPK) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an average production of over 53,000 BOEs per day, a 6% increase compared to Q4 [6] - EBITDA for the quarter reached nearly $200 million, reflecting a 10% increase from the previous quarter [6][13] - Cash margins improved due to a 3% decrease in lease operating expenses quarter over quarter [7] Business Line Data and Key Metrics Changes - The drilling team spud 20 wells during the quarter, exceeding the initial plan of 12 wells [10] - The average spud to spud timing improved from 14 days to about 11 days, representing over a 20% efficiency gain [8] - The company is building additional drilled but uncompleted (DUC) inventory, with a work in progress well count of 28 at the end of the first quarter [11] Market Data and Key Metrics Changes - The cost of tubular goods is expected to rise by approximately 3% due to tariffs, impacting overall AFE by roughly 2% [17] - The company is experiencing low single-digit overall declines in well costs, despite the increased tubular goods prices [19] Company Strategy and Development Direction - The company is narrowing its production guidance and raising the bottom end due to strong Q1 performance [8] - A decision was made to drop one of the two rigs for four months to manage operational DUCs and maintain capital discipline [14][15] - The company plans to implement simul frac operations to further reduce development costs and improve efficiency [20] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the current market environment and indicated flexibility to adjust the development program as needed [15][29] - The company remains in a healthy financial position with no near-term debt maturities and is focused on optimizing its capital structure [28][29] - Management emphasized the importance of maintaining a long-term outlook on value creation despite market volatility [29] Other Important Information - The company has achieved a 400% reserve replacement ratio over the past three years, primarily through organic growth [21] - High Peak's profitability is highlighted as superior compared to peers, driven by a better cost structure [22] Q&A Session Summary Question: Impact of simul frac on per foot D&C cost - Management explained that simul frac could reduce completion time from 25-28 days to 11-14 days, resulting in approximately$ 250,000 savings per well [32][36][39] Question: Update on well results in Borden County - Management reported positive performance from eight wells in Borden County, with new wells showing a 20% improvement in production compared to the previous year [40][42] Question: Economic development locations with Middle Spraberry - Management indicated that they have about 200 Middle Spraberry wells in inventory, with expectations to move many into the sub $50 breakeven category [47][49] Question: Impact of 2025 development plan changes on 2026 - Management noted that maintaining efficiencies will depend on working closely with vendor partners and market conditions [50][51] Question: Production guidance increase rationale - The increase in production guidance was attributed to strong Q1 performance and the expectation of continued efficiency gains [52][54] Question: Balance sheet recapitalization goals - Management discussed the importance of optimizing capital structure and the potential for significant free cash flow generation in the coming years [56][60]