HighPeak Energy, Inc.

Good day, and thank you for standing by. Welcome to the High Peak Energy 2022 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, the CFO, Stephen Tholen. Mr. Tholen, please go ahead.

Thank you. Good morning, everyone, and welcome to High Peak Energy's fourth quarter 2022 earnings 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 March investor presentation and our fourth quarter 2022 earnings release, which can be found on High Peak's website. 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 in the earnings release and our March investor presentation. I will now turn the call over to our Chairman and CEO, Jack Hightower.

Thanks, Steve, and good morning, ladies and gentlemen, and we want to thank you for joining our call today. As we go forward and think about the last year, it's just amazing that we've had such a banner year, but also I want to emphasize that everybody's aware that we have began our process for strategic alternatives, and we'll talk a little bit about that today, but I want to just point out that we posted great year-end 2022 results. Hopefully you've had a chance to look at your press release and you can see that our expectations further substantiate our long-term strategic plan. If I look back on 2022, unquestionably we've had a banner year. We increased our business in a really responsible and multi-pronged approach. both through the drill bit and through strategic accretive acquisitions. That's how we on a balanced approach with organic growth through drilling and also through our accretive acquisitions. We've moved from 61,000 acres at the end of 2021 to over 112,000 acres today. We grew our acreage position, but we also delineated the majority of our acquired acreage in multiple zones across our entire position. We increased our production. We increased cash flow. We increased approved reserves over the past 12 months at rates that no one else in the industry has been able to achieve. And we did this by maintaining a very healthy balance sheet. We also continued to improve our productivity of our primary reservoirs as evidenced by our 2022 vintage wells outperform our 2021 and 2020 well results. We're really proud of the fact that we've been able to continue improving through our operational efficiency, our learning about how to treat this rock in terms of completion, and through larger drilling pads, infill child locations, and a higher percentage of wells in our Signal Peak area. which we continue to be very excited about. We maintain our peer leading margins and actually increased our cash margins throughout last year as our operating teams continue to make large strides in reducing our lease operating expenses and total cash costs. This is tremendous improvements and continued improvements to be able to do this into the future. I'm really proud of our organization. We have a lean organization. Everybody continues to work hard. Their efforts towards cost reduction on both sides of the equation, maximizing capital efficiency, lowering operating expenses, and optimizing well performance, which we are actually one of the few teams in the Permian Basin that are actually improving on our well performance. and the seamless asset integration which allowed the company to accomplish these milestones in 2022. It was a challenging year due to many factors. We had serious inflationary pressures. We had supply chain disruptions just like the rest of our peers did. But we navigated through these challenges and actually improved. We ended on a high note and we fully expect this momentum to continue in 2023. We're going to stay focused on optimizing shareholder value, optimizing our returns, and optimizing our accomplishments relative to our business. The first slide I want to talk about is on page four of the deck. And this is similar to our last slide that we talked about in our third quarter. Very similar, but I think the important thing, is that our production averaged 37,300 barrels a day, which is a 42% increase over the third quarter. A 150% increase compared to last year's fourth quarter. That is unprecedented growth. We still have lumpy production. We go up one quarter, we maintain the next quarter. We're going to continue having lumpy production. Don't multiply that 40% increase four quarters in a row. But if you just think about we hit our guidance, we're going to continue hitting our guidance throughout this year. We exited the year at close to 40,000 barrels a day, which was at the high end of our guidance. We also had somewhere between 1,000 and 2,000 barrels a day curtailed throughout the fourth quarter due to some midstream expansion projects. And if it was not for that, we would have surpassed our high end on both our average and exit production guidance ranges. We increased our proof reserves 92% year over year to 123 million barrels of oil. And we continue to expand our acreage footprint, which is now over 112,000 acres, with line of sight for additional increases there so we're getting good contiguous add-ons as we expand our acreage blocks we have two contiguous acreage blocks with high working interest we're set up for long laterals we've been averaging somewhere around 12,000 to 12,500 foot laterals our capital efficiency on our development program will allow us to hold our entire acreage position with one to one and a half rigs. As you can see, we had several wells in progress at the end of the year, which will all come online during the first half of 2023. Presently, we have almost 57 wells that are in the process of drilling and completion. So that wells that are already drilled and being in progress are gonna substantially add to our production as we go forward this year. We had several additional wells in progress that help us substantiate our confidence in achieving production guidance numbers. Very, very many of these are in other zones. So, and as you can see, looking at financial statistics on this slide, we're projecting a billion, 525 million exiting fourth quarter this year. And this is utilizing $90 a barrel, which is a price basically that is being utilized by most of our peers for budgeting purposes or prices, even though we recognize prices are below that right now. And then we exit fourth quarter of 24 with almost $2 billion in EBITDA. Great improvement as we go. The next slide five, and I'm going to try to go through these fairly quickly to just hit the highlights on these slides. But slide five is a differentiated growth story that takes us from overspending to actually having pre-cash flow in this year's business. I've had people ask me, when is that going to take place? And the answer is, we just don't know because we don't have a crystal ball as to where oil prices are going to be. But if the analysts and our own internal projections are correct, we will start seeing free cash flow in the second half of next year. We are on course to reach that inflection point. with material free cash flow generation. It's just a function of is it this 90 days, the next 90 days, when is that going to take place? Our asset base has actually grown organically from zero to 40,000 barrels per day over the past two years. There's no way to prove high rock quality better than exhibiting substantial production volumes. And by executing our plan, At the end of this year, we'll have an EBITDA run rate of over a billion and a half dollars at a reasonable oil price. In addition, we will be positioned to continue increasing our production next year and with a reasonable growth rate similar to the rig cadence that we presently have. And that gives us roughly a billion dollars of free cash flow on a $90 price per barrel in next year's business. At that point in time, our free cash flow yield and investment rates will compete with anyone in our industry. So as you can see, I'm very excited about what's taking place in the company. And I'm going to turn the call over to Mike now to talk about our margins and provide you with an operational update. Mike? Thanks, Jack.