HighPeak Energy, Inc.

Thank you for standing by and welcome to the High Peak Energy third quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Stephen Tholen, Chief Financial Officer. Please go ahead, sir.

Thank you and good morning, everyone, and welcome to High Peak Energy's third quarter 2022 conference call. Representing High Peak today are Chairman and CEO Jack Hightower, President Michael Hollis, Vice President of Business Development Ryan Hightower, and I am Stephen Tholen, the Chief Financial Officer. During today's call, we will make reference to our November investor presentation, and our third quarter 2022 earnings release, which can be found on High Peak's website at www.highpeakenergy.com. Today's call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. so please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control. We will also refer to certain non-GAAP financial measures on today's call, so please see the reconciliations and the earnings release and our third quarter investor presentation. I will now turn the call over to our Chairman and CEO, Jack Hightower.

Steve, thank you very much and welcome ladies and gentlemen. I'm going to start by saying basically that we've continued to grow the production in all aspects of the business. This has been a great quarter. What we're most proud of is a 63% increase from second quarter average production to our fourth quarter to date average rate of over 35,750 barrels of oil per day. No other company has been able to generate that kind of growth while maintaining a conservative balance sheet and staying below one turn of debt to EBITDA. That's in keeping with our plan. We've grown our acreage position, we've grown production, we've grown cash flow, and we continue to substantially add to approved reserves as we expand our development program across the entirety of our acreage block in several different zones. Our average 2022 well results are outperforming our prior year results, which is unlike lots of companies in the Midland Basin. This speaks to the quality of our reservoirs in both Flat Top and Signal Peak and our technical team's continued learnings as we progress across our development program. All this is despite the supply chain constraints, inflationary pressures that our industry as a whole has been facing over the past year. It's both a tribute and a testament to our team, our asset base, our high liquids cut, and the performance of our wells and the reservoir that we're drilling these wells to. We expect this growth to continue as we move forward. Another thing I'm extremely proud of is how High Peak has navigated these obstacles and been able to deliver this level of consistent growth. We are absolutely a differentiated growth story and will continue to execute our business plan. Now, if you'll turn to slide four of the investor presentation, I'll give you additional details. Most of you are familiar with this slide. We keep it in context of looking at our acreage position expanding, the fact that we have two identical big acreage blocks. Our sales volumes average 26,250 barrels a day for the third quarter, an increase of 19% compared to the second quarter. But in looking at long term, that's a 220% increase increase year over year compared with the third quarter of 2021. our current production rate has significantly increased since the end of the third quarter and has averaged 35 750 barrels of debt today in the fourth quarter tremendous increase at the end of the third quarter we had an additional 57 wells in various stages of drilling and completion which once placed online will continue to support our current production growth trajectory. We've averaged over six rigs and three frack crews as planned throughout the entirety of the quarter. And we did all this continuing to maintain our leading margins as our third quarter unhedged cash operating margin was $72.01 per barrel. We've continued to expand our acreage position also, which I'm really proud of. It now sits at over 105,000 net acres. This is a 68% increase compared to year end 2021, but almost 8,000 acre increase since the last quarter. We have a high networking interest position across the block and we operate roughly 98% of our acreage. which allows us to control our own destiny. And by that, anytime we wanna drill a well, we can drill a well. We can do what we wanna do on our acreage plot. It's also worth noting that even factoring in our additional leases, we can hold this entire acreage position together with less than two rigs in our annual drilling program. So this is a long-term position we have And we're not under pressure to have to develop it when prices are down. We've also been busy in the capital markets recently. In a very short period of time, we raised a total of $435 million. And as you all know, it's a very challenging capital market environment. The financings include $85 million of equity private placement, the majority of which came from management and our largest legacy investors, And I'm gonna talk about that a little bit more in my closing remarks. We increased our borrowing base from 400 million to 550 million with elected commitments of 525 during our annual fall redetermination. And that's increasing. We also added new banks to the facility and brought in Wells Fargo as the new lead bank. I wanna take this opportunity to thank Fifth Third for their support and leadership over the past few years. as the former lead bank of our facility. And I'll remind everyone, we started with an initial borrowing base of $40 million in size, and that's now grown to $550 million in less than two years. And so we want to thank them also for their continued commitment in our facility going forward. We recently closed a private placement of 225 million senior unsecured notes, which we're really proud of. We got good terms on that, and we like the people that we're dealing with on our senior unsecured notes. There's a lot of potential unpredictability in the global economy at the moment. There's talks of recession on the horizon, there's service cost inflation, supply chain bottlenecks, government regulation, and short-term volatility in commodity prices. However, taking all these factors into account, we want to make sure the company is positioned to protect against any sustained market disruptions. We're a company that is focused on responsible growth, and we continue to monitor the market as we progress with our development program. We're very fortunate in that we have the flexibility to increase or decrease development activity as merited by sustained changes in market conditions. Now turning to slide five, and you can see four different categories of differentiated growth and what's happening to High Peak today. We're continuing to grow our production base and cash flow at an impressive rate. High Peak is definitely a differentiated growth story. Our drilling program is operating on all cylinders. We're creating significant shareholder value. That's not reflected in our stock price right now, but we're going to talk about that too. We've come a long way in a relatively short period of time. We're a substantially different company today than we were at the beginning of this year. If you take our fourth quarter production rate, it equates to an estimated run rate of over $930 million. That's over 70% increase compared to the second quarter. We're approaching a billion dollars in EBITDA run rate, and that in and of itself should be a major catalyst for our stock price. High peak provides great exposure to both growth and increases in oil prices. For example, any $5 increase in oil equates to approximately $55 million increase in annual EBITDA. And that's not EBITDA growing. That's EBITDA as it is with our production rate right now today. This should equate to roughly $2 plus per share increase in our stock price. Our successful drilling program continues to deliver high margin organic production growth in a very tightly supplied global oil market. I'll say again, High Peak is a differentiated growth story and it's taking advantage of current market environment in order to create maximum value to our shareholders. And then I'm gonna turn the story over to Mike Hollis, our president, and he's gonna tell you about what's going on with the growth of High Peak and the operational aspects. Thanks, Jack.