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HE

HighPeak Energy, Inc. (HPK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was operationally steady but financially mixed: sales volumes held ~47.8 MBoe/d with oil at 66%, LOE/Boe stable at $6.57, and capex cut 31% q/q to $86.6M, yet revenue fell to $188.9M and GAAP EPS was a loss due to a $25.4M debt extinguishment charge .
  • Versus S&P Global consensus, revenue missed ($188.9M vs $209.0M*) but normalized EPS (adjusted) beat ($0.03 vs $0.02*) as management adjusted for one‑offs; note the company’s reconciliation shows adjusted net income of $3.782M even though one paragraph references $2.9M (likely a typo) .
  • Balance sheet/liquidity improved: all debt maturities extended to September 2028 and liquidity increased by >$170M; management reiterated a discipline-first plan to operate within cash flow, prioritize debt paydown, and hedge methodically (55–65% at current prices) .
  • Strategic and governance reset: Michael Hollis named permanent CEO and Jason Edgeworth appointed independent Chairman; management outlined a 2026 framework (bear/base/bull cases) and plans to broaden float as PE funds distribute shares in 2026–27 .

What Went Well and What Went Wrong

What Went Well

  • Capital discipline and efficiency: capex cut >30% q/q to $86.6M; LOE/Boe remained $6.57; unhedged EBITDAX/Boe of $30.94 despite weaker prices .
  • Completions efficiency: second simul‑frac on a six‑well, 15k’ lateral pad achieved >$400K/well savings and ~4,700’/day pumped; COO plans broader use in 2026. “We are very encouraged…plan to tailor our 2026 development program to incorporate this completion technique more.” .
  • Financing/liquidity: maturities extended to 2028, liquidity +$170M; term loan prepayable at par post-call protection, enabling opportunistic deleveraging as FCF permits .

What Went Wrong

  • Revenue pressure and mix/prices: overall realized price/boe fell to $42.91 (from $57.49 in Q3’24 and $45.27 in Q2’25) driving revenue down to $188.9M vs $271.6M in Q3’24; liquids mix down to 83% and oil 66% .
  • GAAP earnings hit by one‑offs: $25.4M loss on extinguishment of debt tied to the August term loan amendment; GAAP diluted EPS −$0.15 .
  • Higher G&A from transition: G&A/Boe rose to $2.12, driven by legal and severance related to former CEO retirement; management acknowledged governance missteps and high leverage that need fixing .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$271.6 $200.4 $188.9
GAAP Diluted EPS ($)$0.35 $0.19 $(0.15)
Adjusted EPS ($)—$0.10 $0.03
EBITDAX ($USD Millions)—$156.0 $139.9
Avg Realized Price ($/Boe)$57.49 $45.27 $42.91

Versus S&P Global Consensus (Q3 2025):

MetricEstimateActual
Revenue ($USD Millions)$209.0*$188.9
Normalized/Primary EPS ($)$0.02*$0.03

Values retrieved from S&P Global.

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Sales Volumes (MBoe/d)53.1 48.6 47.8
Oil Mix (%)72% 70% 66%
Liquids Mix (%)86% 85% 83%
Avg Realized Price ($/Boe)$53.84 $45.27 $42.91
LOE ($/Boe)$6.61 $6.55 $6.57
Cash Costs ($/Boe)$11.94 $11.69 $11.97
Capex ($USD Millions)$179.8 $125.4 $86.6
Wells Drilled (gross)16 13 6
TILs (gross)13 14 9

Notes: Company reconciliation shows adjusted net income of $3.782M ($0.03/sh) in Q3; an earlier paragraph references $2.9M—reconciliations and EPS detail support $3.782M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActionChange
Production (Boe/d)FY 202548,000–50,500 (raised/narrowed in May) No update in Q2/Q3 releases; plan to run two rigs in Q4 and reassess 2026 based on oil prices Maintained
Dividend ($/share, quarterly)Ongoing$0.04 Declared $0.04 for Dec 23, 2025 payment Maintained
2026 Capital Framework2026—Bear (<$60 WTI): <2 rigs, operate within cash flow; Base ($60–$70): ~2 rigs, FCF to debt; Bull ($70+): modest growth, accelerated deleveraging New framework
Balance SheetN/A—All debt maturities extended to Sep 2028; liquidity +$170M Improved profile

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Capital discipline & rig cadenceDropped to 1 rig May–Aug; flexibility to adjust; do same work with less Ran 1 rig in Q3; added second mid‑Oct; will run 2 rigs through Q4 then set 2026 cadence by price/costs Stable discipline; cautious into 2026
Simul‑frac efficiencyFirst simul‑frac saved ~$400K/well; plan to expand usage Second simul‑frac successful; >$400K/well savings; 4,700’/day; integrate into 2026 plan Scaling up
Governance & leadershipJack Hightower on medical leave; focus on capital structure optimization Hollis named CEO; independent Chair; board committees fully independent; explicit plan to fix governance Governance reset
Leverage & liquidityAmended/extended term loan & RCF to 2028; par prepay flexibility Emphasis on FCF-driven deleveraging; base case delevers; maturities to 2028 confirmed De‑risked maturities
Hedge strategySystematic hedging; ~50%+ volumes hedged; gas swaps at ~$4.43 Methodical layering, 55–65% hedged at current prices; added basis hedges More structured
Costs/LOELOE down 3% q/q in Q1; stable in Q2 LOE steady $6.57/Boe; G&A/Boe higher on CEO transition Operating costs stable; one‑off G&A
Middle SpraberryType curve outperformance; < $50/bbl breakevens; delineation ongoing Continued multi‑bench development (Wolfcamp A, Lower & Middle Spraberry) Constructive delineation
Macro/tariffsOCTG tariffs modestly impact AFEs; other cost deflation offsets Price framework explicitly drives 2026 cadence Macro‑driven pacing

Management Commentary

  • “Our debt is high, and the market has told us exactly what it thinks about that… We will rebuild trust… through steady, consistent results.” — Michael Hollis, CEO .
  • “We recently finished our second successful simul frac… cost savings per well of over $400,000… averaged over 4,700 feet of completed lateral footage per day.” — Hollis .
  • “In the base case… we can generate significant free cash flow… we can pay down debt at par with no penalty.” — Hollis (Q&A) .
  • “We will be very methodical… 55%–65% hedged at these kind of prices… protect our capital budget and the dividend.” — Hollis (Q&A) .
  • “At any reasonable cadence, our oil percentage should trend closer to 70%.” — Hollis .

Q&A Highlights

  • Deleveraging plan: Base case ($~65 WTI) enables significant FCF to reduce term loan at par; corporate decline expected to fall 1.5–2% annually as base matures, improving credit profile .
  • Hedging framework: More systematic layering, 55–65% hedged at current prices; opportunistic increases if prices spike; basis hedges added; goal to protect capital program and dividend .
  • 2026 activity cadence: 2 rigs through Q4; 2026 cadence set by oil price; potentially 1.5–1.7 rigs if in bear/base; 16–18 DUCs expected to carry into 2026, supporting H1 production .
  • Asset focus: Capital split ~70% Flat Top / 30% Signal Peak consistent with inventory; co‑develop Wolfcamp A & Lower Spraberry with 5–10% Middle Spraberry .
  • Optimization: Elevated expense/capital workovers in recent quarters to boost recoveries; examples include pump replacements, cleanouts, and drawdown adjustments improving well performance .
  • Other: Shelf (S‑3) filing was a routine refresh; no plans to issue equity; PE funds plan measured LP distributions throughout 2026 (and 2027 for Fund I) to improve float .

Estimates Context

  • S&P Global consensus vs actual (Q3 2025): revenue $209.0M* vs $188.9M (miss), normalized EPS $0.02* vs $0.03 (beat). GAAP EPS −$0.15 driven by $25.4M loss on extinguishment tied to debt amendment . Values retrieved from S&P Global.
  • Implications: Models may lower realized price assumptions and revenue run‑rate near‑term; normalized EPS quality supported by cost control and hedges, but elevated interest expense and G&A one‑offs weighed on GAAP results .

Key Takeaways for Investors

  • Execution remains solid: volumes steady, LOE stable, and capex throttled, cushioning FCF in a softer price tape; simul‑frac adoption is a tangible capital efficiency lever heading into 2026 .
  • Governance and strategy reset under new CEO/Chair enhances credibility; clear 2026 price‑contingent framework and independent committees are positives for risk perception .
  • Balance sheet path is defined: maturities pushed to 2028 with par prepay optionality; base‑case FCF earmarked for deleveraging; watch hedge cadence and interest-rate trajectory .
  • Near-term stock drivers: revenue miss vs normalized EPS beat, coupled with leadership changes and deleveraging roadmap—expect narrative to hinge on proof of sustained FCF and debt reduction.
  • Mix/price sensitivity: weaker realized prices and lower oil percentage pressured revenue; management targets oil mix ~70% over time; basis and gas hedges help stabilize cash flows .
  • Non‑GAAP clarity matters: reconciliations support $3.782M adjusted net income ($0.03/sh) despite a conflicting paragraph; anchor on the reconciliation for EPS normalization .
  • Watchlist into Q4/H1’26: two rigs through Q4, 16–18 DUCs available into 2026, and methodical hedge layering—execution on these should support trajectory and multiple .

Additional Documents Reviewed

  • 8‑K earnings press release and financials (Nov 5, 2025) .
  • Q3 2025 earnings call transcript (Nov 6, 2025) .
  • Q2 2025 press release and call excerpts (Aug 11–12, 2025) .
  • Q1 2025 press release and call excerpts (May 12–13, 2025) .
  • CEO transition 8‑K (Sept 16, 2025) .
  • Q3 earnings date announcement (Oct 20, 2025) .