HighPeak Energy Announces the Closing of a $1.2B Term Loan Financing

Source: www.gulfoilandgas.com 9/15/2023, Location: North America

HighPeak Energy, Inc. (“HighPeak”) (HPK) announced the successful completion of a transformative debt refinancing. The Company entered into a senior secured term loan credit agreement (the “2023 Term Loan”) among the Company, as borrower, Texas Capital Bank (“Texas Capital”), as Administrative Agent, and Chambers Energy Management, LP (“Chambers”), as Collateral Agent. The 2023 Term Loan has an aggregate principal amount of $1.2 billion and a maturity date of September 30, 2026. In addition, the 2023 Term Loan provides us with the ability to enter into a super senior revolving credit facility in an amount up to $100 million, providing HighPeak with flexibility to further increase our committed financing.

Financing Update
The Company used a portion of the net proceeds from the 2023 Term Loan to fully repay its 10.000% Senior Notes due February 2024, its 10.625% Senior Notes due November 2024, its outstanding borrowings under its reserve-based credit facility dated as of December 17, 2020 (as amended from time to time, the “2020 Credit Agreement”), and intends to utilize the remaining proceeds for general corporate purposes. In connection with the termination of the 2020 Credit Agreement, all outstanding obligations for principal, interest and fees under the 2020 Credit Agreement were paid in full, and all liens securing such obligations and any letters of credit and hedging obligations, and guarantees of such obligations, were released.

Loans under the 2023 Term Loan bear interest at a rate per annum equal to the Adjusted Term SOFR (as defined in the 2023 Term Loan) plus an applicable margin of 7.50%. The loans are guaranteed by the Company and are secured by a first lien security interest in substantially all assets of the Company.

Key highlights of this milestone refinancing include:
Debt Maturity Extension: The 2023 Term Loan streamlines the Company’s capital structure, extends its debt maturities to September 2026 and secures its financial position in an everchanging banking market by providing financial certainty and removing the risks associated with standard borrowing base redeterminations.

Increased Liquidity: The refinancing, coupled with the ongoing increase in commodity prices, has significantly increased the Company’s liquidity and financial flexibility. HighPeak is currently generating free cash flow and expects to begin reducing its debt balance moving forward. Proforma for this refinancing and our recent public equity offering, our liquidity at June 30, 2023 would have been approximately $200 million.

Jack Hightower, HighPeak Chairman and CEO, commented on this significant development, saying, “This refinancing marks a pivotal moment in our company's journey. The combination of this debt refinancing and the equity offering completed in July demonstrates that stakeholders on all sides of the capital structure have a high level of confidence in our team and our asset base. We would like to thank Texas Capital, Chambers Energy, and the diversified, sophisticated energy lender group who did a tremendous amount of due diligence and analysis on our assets. This unparalleled transaction is one of the largest privately arranged financings for a public energy company. The unique structure provides the company with the ability to have a long-term capital plan, financial security, and great flexibility to repay the loan in advance. We are stronger, more resilient and equipped to seize opportunities in this dynamic energy market. We believe this newfound financial strength will enable the company to pursue strategic opportunities and drive shareholder value.”

Company Update
In connection with the announcement of the refinancing transaction, the Company provided the following operational update. The Company’s third-quarter production has continued to average over 50,000 Boe per day in line with our expectations. The Company also provided the following update to its proved developed reserves:

Reserve Category Proved Developed Producing (PDP)
Oil (MMBbl): 59.6 Gas (Bcf): 44.1 NGL (MMBbl): 10.6
Total (MMBoe): 77.5 % Liquids: 91% PV- 10(2)($B): $2.37
Proved Developed Non-Producing (PDNP)
Oil (MMBbl): 11.2 Gas (Bcf): 4.3 NGL (MMBbl): 1.2
Total (MMBoe): 13.1 % Liquids: 95% PV- 10(2)($B): $0.43
Total Proved Developed Reserves
Oil (MMBbl): 70.8 Gas (Bcf): 48.3 NGL (MMBbl): 11.7
Total (MMBoe): 90.6 % Liquids: 91% PV- 10(2)($B): $2.81

Hightower continued, “At current prices of around $90 per barrel, the value of our proved developed reserves increases to approximately $3.2 billion on a PV-10 basis. Our proved developed reserves have increased approximately 50% from year-end, which demonstrates the quality of our assets and our ability to effectively develop our acreage position. Our ongoing drilling campaign continues to highlight the value of our oil rich reservoirs and the differentiated economics associated with our large recoverable resource base. In response to favorable commodity conditions and increased financial resources, we are planning on adding a third drilling rig in the fourth quarter, further bolstering our capacity to develop and extract valuable energy resources. Our current third-quarter production of over 50,000 Boe per day would generate an annualized EBITDA run-rate of approximately $1.2 billion at current prices. The addition of another drilling rig underscores our commitment to responsible and efficient resource extraction, while our enhanced profitability will benefit our shareholders.”

TCBI Securities, Inc., doing business as Texas Capital Securities, served as financial advisor to HighPeak and sole arranger of the 2023 Term Loan. Texas Capital Bank is serving as Administrative Agent and Chambers Energy Management, LP, is serving as Collateral Agent for the 2023 Term Loan.

HighPeak remains dedicated to adhering to industry best practices in environmental sustainability, safety, and corporate responsibility throughout its operations.

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