HighPeak Energy, Inc. Announces Acquisition of Howard County Properties

Source: www.gulfoilandgas.com 4/27/2022, Location: North America

HighPeak Energy, Inc. (“HighPeak”) (HPK) announced that it has entered into an agreement to acquire the Howard County assets of Hannathon Petroleum, LLC (“Hannathon”) and other non-operated working interest owners. HighPeak currently owns non-operated working interest in approximately 60% of the acquired gross acreage position.

Purchase consideration due to the sellers, subject to customary closing adjustments, is comprised of $255 million in cash and approximately 3.78 million shares of HighPeak’s common stock.

The cash portion of the consideration is expected to be funded with cash on hand and borrowings under the Company’s revolving credit facility. In connection with the close of this transaction and the annual Spring redetermination, HighPeak expects to receive consents from its bank group to substantially increase the aggregate elected commitments and borrowing base on its revolving credit facility. The transaction has an effective date of January 1, 2022 and is expected to close early in the third quarter of 2022.

The Company’s second strategic acquisition this year shows HighPeak’s willingness to enter the market for accretive bolt-on opportunities and adds further momentum to HighPeak’s growth strategy. Acquisition highlights include:

- Accelerated Development Runway – ability to leverage substantial infrastructure-in-place to accelerate pace of Signal Peak development; HighPeak expects to maintain Hannathon’s existing one rig drilling program on the acquired acreage through 2022

- Increased Scale and Depth of Inventory – bolt-on acquisition adds approximately 150 net locations and 18,600 net acres largely contiguous to the Company’s existing Signal Peak position with 2022E average production of 5 MBoe/d (85% liquids)

- Improved Cash Flow Generation – acquired at approximately a 3.0x multiple on 2022E EBITDAX with further uplift from synergies estimated at $70 million on a present value basis

Jack Hightower, HighPeak Chairman and Chief Executive Officer, commented, “We began our strategic expansion in the Signal Peak area in August 2021 by acquiring a non-operated ownership interest in these assets. Acquiring the balance of the working interest will bolster our drilling potential in the area and give us control of significant infrastructure to support, and accelerate, our development program in the region. This acquisition, coupled with our targeted leasing, has increased our total acreage position to over 91,000 net acres.”

Pro Forma 2022 Outlook
The Company’s 2022 guidance updated for the Hannathon acquisition is as follows:

Production (Boe/d)
Average production rate 32,000 – 37,500
Exit production rate 47,000 – 53,000
Total Capital Expenditures ($ million) $825 – $900

Jack Hightower continued, “We are very excited to report continued success in accretive consolidation and value creation for our shareholders. We look forward to our first quarter earnings call in May, which will provide additional guidance, technical information and recent results related to our drilling program in the Signal Peak area, which should continue to prove out the value of our position.”

Investor Presentation
A presentation highlighting the acquisition has been posted to the “Investor Relations” section of the HighPeak website at ir.highpeakenergy.com.

Approvals
The Hannathon Acquisition has been unanimously approved by the HighPeak Board of Directors, Hannathon Petroleum and the other non-operated working interest owners.

Advisors
Credit Suisse Securities (USA) LLC served as financial advisor to HighPeak Energy. Jefferies LLC acted as financial advisor to Hannathon. Akin Gump Strauss Hauer & Feld, LLP and Vinson & Elkins, LLP served as legal advisors for HighPeak Energy and Shearman & Sterling, LLP served as legal advisor for Hannathon.


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