Q3 2024 HighPeak Energy Inc Earnings Call
We are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again please.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today Stephens Dolan Chief Financial Officer. Please go ahead.
Stephens Dolan: Good morning, everyone and welcome to Hiseq Energy's third quarter 2024 earnings call.
Stephens Dolan: Representing high Tech today, our chairman and CEO, Jack Hightower, President Michael Hollis.
Stephens Dolan: And I'm Stephens.
Stephens Dolan: Chief Financial Officer.
Good day and thank you for standing by. Welcome to the High Peak Energy 2024 third quarter earnings conference call.
During today's call, we will make reference to our November investor presentation, and our third quarter earnings release, which can be found on high peaks website.
At this time, all participants aren't a listen only mode.
After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
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.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Steven Tholen, Chief Financial Officer, please go ahead.
<unk> forward looking statements and related risks and 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.
Steven Tholen: Good morning, everyone and welcome to High Peak Energy's third quarter of 2024 earnings call.
representing High Peak today, our chairman and CEO, Jack Hightower, President Michael Hollis, and I'm Steven Tholen, the Chief Financial Officer.
We will also refer to certain non-GAAP financial measures on today's call. So please see the reconciliations in the earnings release.
During today's call, we will make reference to our November Investor presentation and our third quarter earnings release which can be found on Hightpeaks website.
Stephens Dolan: In our November Investor presentation.
Speaker Change: I will now turn the call over to our chairman and CEO, Jack Hi, Tyler.
Jack Hi: Thank you Steve Good morning, ladies and gentlemen, and thank you for joining US today My prepared remarks will begin on slide four of our November investor presentation.
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.
Jack Hi: And after looking at our press release announcing our results I'm extremely excited to report yet again that high peak has achieved another solid quarter of execution across the board.
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.
Speaker Change: Heading into the 'twenty 'twenty four calendar year, we laid out a set of core values, including <unk>.
Speaker Change: Maintaining discipline operations strengthening our balance sheet and focus on maximizing shareholder value.
Many of which are beyond our control.
Steven Tholen: We will also refer to certain non-gap financial measures on today's call. So please see the reconciliation in earnings release and in our November Investor presentation.
Speaker Change: Our unwavering commitment to these values has driven our continued success.
Speaker Change: Operationally our drilling program program has continued to deliver strong well results and production levels have continued to outperform our initial expectations. This has resulted in another beat and rates of our production guidance this quarter and our operations team has remained aggressively focused on production.
Speaker Change: I will now turn the call over to our chairman and CEO, Jack Hightower.
Jack Hightower: Thank you Steve, good morning ladies and gentlemen, and thank you for joining us today. My proprietary remarks will again on slide four of our November Investor presentation.
Speaker Change: <unk> and reducing our cost structure across the board.
Speaker Change: Financially last quarter marks the fifth consecutive quarter that <unk> has generated positive free cash flow and true to our core values. We have utilized a substantial portion of our free cash flow to pay down absolute debt, while simultaneously executing our opportunistic share buyback program.
And after looking at our press release and seeing our results on extremely excited to report yet again, that Hightpeek has achieved another solid core of execution across the board.
Jack Hightower: heading into the 2024 calendar year we laid out a set up core values including
Maintaining this foot operations, strengthening our balance sheet and focus on maximizing shareholder values. Our unwavering commitment to these values has driven our continued success.
Speaker Change: As we set out at the beginning of the year.
Speaker Change: We continue to implement our primary objective has been increasing absolute shareholder value through improved operational results a return of capital strategy and ultimately through our strategic alternatives process.
Jack Hightower: Operational, our drilling program has continued to deliver strong well results, and production levels have continued to perform initial life spectations.
This has resulted in another beaten race of our production guidance this quarter. And our operations team has remained aggressively focused on production optimization and reducing our cost structure across the board.
Speaker Change: So now.
If youll turn to page five.
Speaker Change: Of the presentation.
Speaker Change: Third quarter was a huge.
Speaker Change: Another operational huge success for happy as our production volumes averaged over 51000 barrels of oil per day. This level was higher than our first and second quarter averages. This year, even taking into account the continuation of our moderated two rig development program.
An answerly last quarter marks the fifth consecutive quarter that Highthick has generated positive free cash flow.
Jack Hightower: and Trude Arcovay is we have utilized a substantial portion of our pre-cash flow to pay down absolute debt while simultaneously executing our opportunistic share-by-back program.
Speaker Change: Operations during the quarter were affected by a major storm akin to a 100 year flood that hit in early September.
Jack Hightower: As we set out as the beginning of the year.
Speaker Change: This storm caused some of our production volumes to be offline and translate it into our lease operating expense is running a little hot during the quarter due to remedial work associated with the storm damage. It's a true Testament to our operations team and our robust infrastructure system at a storm of this magnitude only.
Jack Hightower: We continue to implement our primary objective of increasing absolute shareholder value through improved operational results. A return of capital strategy and ultimately through our strategic alternatives process.
Speaker Change: Cause minimal shut in volumes and operational issues.
Jack Hightower: So now if you'll turn to page five.
Speaker Change: As you can see our fourth quarter is off to another strong start as production volumes have continued to average over 50000 barrels of oil per day, thus far we're continuing to see impressive results from our most recent wells, including our extension wells in the northern and northeastern flat top.
Jack Hightower: of the presentation.
Jack Hightower: The third quarter was a huge.
Another operational huge success for HAPP, as our production volumes average over 51,000 barrels of oil per day. This level was higher than our first and second quarter average is this year, even taking into account the continuation of our moderated two rig development program.
Speaker Change: We remain extremely excited about these areas.
Speaker Change: Of the field as well as our potential of upside zones.
Jack Hightower: Operations during the quarter were affected by major storm akin to a hundred year flood that hits in early September.
Speaker Change: Mike will provide additional details regarding our continued strong production levels and our recent well results later in the presentation.
Jack Hightower: This storm caused some of our production volumes to be offline and translate it into our least-apprenting expenses running a little hot during the quarter due to remedial work associated with the storm damage.
Speaker Change: Just like to reemphasize the major pause piece of these results.
Speaker Change: In addition, we continued to efficiently convert our products into value for the company as evidenced by our sustained peer leading EBITDAX per Boe our.
Jack Hightower: It's a true testimony to operations team in our robust infrastructure system. At a storm of this magnitude, it only calls minimal shut-in volumes in operational issues.
Speaker Change: Our third quarter results translated into happy converting 80% of our realized price per Boe into cash.
Jack Hightower: As you can see, our fourth quarter is off to another strong star as production volumes.
Speaker Change: We generated another strong quarter of free cash flow and we remain in a very healthy.
Jack Hightower: have continued to average over 50,000 bail of civil oil per day that's far. We're continuing to see impressive results from our most recent wells, including our extension wells and the northern and northern eastern flat town.
Speaker Change: Our financial position.
Speaker Change: Now I'm turning to slide six.
Speaker Change: And as you look at this slide you can realize the raise in the reaffirmation.
You remain extremely excited about these areas.
Mentioned earlier as a result of continued strong production volumes were going to yet again increase our full year 'twenty for production guidance. Our new range is 48050 1000 Boe per day.
Jack Hightower: of the field as well as our potential of fat zones.
Speaker Change: Michael provided additional details regarding our continued strong production levels and our recent well results later in the presentation. I just like to re-emphasize the major positive of these results.
Speaker Change: This range translates to over a 5% increase compared to our prior increase back in August and a 10% increase compared to our initial 24 guy.
Jack Hightower: In addition, we continue to efficiently convert our products into bags for the company.
Jack Hightower: and Evidence by our sustaining peer-leading ebodex per B o e. Our third quarter results translated into happy converting 80% of our realized price per B o e in the cash.
Speaker Change: This is due to our strong well performance and continued production optimization effort.
Speaker Change: We're also reaffirming our 24 lease operating expense and Capex guidance, which.
Jack Hightower: We generated another strong quarter of three cash flow and we remain in a very healthy financial position.
Speaker Change: Which we updated back in August our team continues to execute on optimizing our field wide operations and we remain optimistic there are still some incremental savings we can achieve going forward.
Jack Hightower: Now turning to slide six.
Jack Hightower: and as you look at this slide you can realize the rays in the reaffirmation. As I mentioned earlier as a result of continued strong production volumes, we're going to yet again increase our full year 24 production guidance.
Speaker Change: We expect our capital expenditures will fall within our narrow range of $540 to $580 million.
Speaker Change: We've now completed the bulk of our 2020 for infrastructure projects. So the vast majority of our capital expenses during the fourth quarter will be associated with drilling and completing wells.
Jack Hightower: Our new range is 48,000 to 51,000 BOE's per day. This range translates to over a 5% increase compared to our prior increase back in August.
Speaker Change: On that note, our drilling and completions team is doing a tremendous job in achieving additional cost savings even compared to the lower cost level that we realized earlier this year.
Jack Hightower: and a 10% increase compared to our initial 24-guide.
Jack Hightower: This is Newtour Strong Well Performance and Continued Production Optimization Expert.
Speaker Change: I believe this is one of the critical areas of our business that not only differentiates from our peer group, but that is also being missed by the public investor Universe. Our current cost structure is significantly lower than our Midland basin peers, and alongside our strong well results absolutely.
Jack Hightower: We're also reaffirming our 24th Leeds Operating Expense and Catholic Skides.
Jack Hightower: which we updated back in August.
Jack Hightower: Our team continues to execute on optimizing our field wide operations and we remain optimistic there are still some incremental savings we can achieve going forward.
Speaker Change: Translates into our per well economics, competing with anyone in the Midland Basin.
Jack Hightower: We expect our Catholic expenditures will fall within our narrow range of 540 to 580 million.
Speaker Change: Mike will provide additional detail on this topic, but I want to take this opportunity to emphasize this point and to also call out great work that our drilling and completions team has achieved.
Jack Hightower: We've now completed the bulk of our 2024 infrastructure projects so the vast majority of our capital expenses during the fourth quarter will be associated with drilling and completing wells.
Speaker Change: The key takeaway is that we deliver extremely impressive results through the first three quarters of the year and I feel confident this trend will continue now.
Jack Hightower: On that note, our drilling and completion team is doing a tremendous job in achieving additional cost savings. Even compared to the lower cost levels that we realized earlier this year.
Speaker Change: Now I'll turn the call over to our President and my colleagues.
Mike: Now turning to slide seven.
Jack Hightower: I believe this is one of the critical areas of our business that not only differentiates from our peer group but that is also being missed by the public and bestiary universe.
Mike: Peace EBITDAX per BOE continues a commanding lead amongst our peer group.
Speaker Change: Said differently.
Speaker Change: No other public company can generate close to the same EBITDAX that high peak does on 50000 BOE a day.
Jack Hightower: Our current cost structure is significantly lower than our Midland Bayes and Pears. And alongside our strong-well results, absolutely translates into our per-well economics competing with anyone in the Midland Bayes.
Speaker Change: Thanks to our very oily mix and low opex.
Speaker Change: The cartoon on slide seven.
Jack Hightower: Michael provided this on detail on this topic, but I want to take this opportunity to emphasize this point. You can also call it great work that our drilling and completion team is achieving.
Speaker Change: Shows how efficiently high peak converge our oily Boe.
Speaker Change: In the cash.
Speaker Change: Starting from left to right on the slide.
Speaker Change: Hi, Pete BOE is 75% oil.
Jack Hightower: The key takeaway is that we deliver extremely impressive results to the first three quarters of the year, and I feel confident that this trend will continue. Now, I'll turn the call over to our President, my call.
Speaker Change: 88% liquids.
Speaker Change: Versus our peer average of 45% oil.
Speaker Change: Plus high peak efficiency of converting that higher realized price per Boe.
Speaker Change: Thanks, Jack. Now turning this slide seven.
Speaker Change: To EBITDAX is higher than our peers.
Jack Hightower: Hipeath Emedax for BOA continues a commanding lead amongst our peer groups.
Speaker Change: Peak converged 80%.
Speaker Change: Of our realized price.
Speaker Change: said differently, no other public company can generate close to the same ebidax that high-team does on 50,000 buis a day.
Speaker Change: To EBITDAX.
Speaker Change: That compares to our peers converting only 70%.
Speaker Change: Beginning with a significantly higher value than our peers and converting at a greater percentage of that price in EBITDAX Reis.
Jack Hightower: Thanks to our very oily mix in low-off acts.
Jack Hightower: The Cardinone Slide 7 shows how efficiently high-peak converts our oily BOEs in the cash.
Speaker Change: The result in a substantially higher EBITDAX per Boe.
Jack Hightower: Starting from left to right on the slide.
Speaker Change: And in our third quarter, our unhedged EBITDAX per BOE remained strong and differential at $45 68.
Jack Hightower: High Peaks BOE is 75% oil and 88% liquids.
Speaker Change: Per Boe.
Jack Hightower: First is our peer average of 45 percent oil.
Speaker Change: Hi, Peter EBITDAX per BOE continues to be over 65% higher than our peer group average.
Jack Hightower: Plus, high-teak efficiency of converting that higher-realized price for DOE to even that is higher than our peers.
Speaker Change: The operations team has done a fantastic job building one of the most efficient machines in the business.
Jack Hightower: High Peak Converse, 80% of our Realized Price.
Speaker Change: These efficiencies are extremely sticky.
Speaker Change: That I mean, they're here to stay.
Jack Hightower: The E-Badass.
Jack Hightower: That compares to our peers converting only 70%.
Speaker Change: This is very important when a company has multiple decades of sub $50 breakeven inventory to exploit.
Jack Hightower: Beginning with a significantly higher BLE values that are peers and converting at a greater percentage of that price into the EBITDAX.
Speaker Change: And equates to significant value creation.
Speaker Change: Jack mentioned, a 100 year flood.
Jack Hightower: Results in a substantially higher e-bidax per beauty.
Speaker Change: <unk> High peak, roughly 800 high oil cut Boe.
Jack Hightower: and there are third quarter of unhaged ebidax per bui remains strong and differential. At $45.68 per bui.
Speaker Change: During the third quarter.
Speaker Change: Per day.
Speaker Change: We also had an additional expense in Q3 for repairing that flood damage with fewer bow to allocate for the quarter.
Jack Hightower: Hipex, EvaDax for BLE continues to be over 65% higher.
Speaker Change: Had this not happened.
Jack Hightower: in our peer group average.
Speaker Change: We would be on pace to exit the quarter at or below the midpoint of the low guy.
Jack Hightower: The Operations Team has done a fantastic job building one of the most efficient machines in the business.
Speaker Change: This gives us confidence to reaffirm.
Jack Hightower: These efficiencies are extremely sticky.
Speaker Change: Hello Guy.
Speaker Change: Theres always wood to chop on the yellow front.
Jack Hightower: By that I mean they're here to stay.
Speaker Change: The team continues to find innovative ways to reduce costs, which will further widen the gap between <unk> and our peers.
Jack Hightower: This is very important when a company has multiple decades of sub $50 break even inventory to exploit and a great significant value creation.
Speaker Change: Now turning to slide eight.
Speaker Change: Let's talk about some recent well results.
Speaker Change: Jack mentioned a hundred-year flood. They call it high peak roughly 800.
Speaker Change: We are continuing to see very positive performance from wells in our northern and northeastern extension areas and flat to up as well as some of our upside target zones.
Jack Hightower: Puy Oil Cut B-O-E's during the third quarter.
Jack Hightower: for today.
Jack Hightower: We also had an additional expense in Q3 for repairing that flood damage with fewer BLEs to allocate for the quarter.
Speaker Change: Yeah.
Speaker Change: First let's discuss our catalyst well this well is high peaks first operated middle Sprayberry well.
Jack Hightower: Had this not happened.
Speaker Change: Our <unk> well achieved a max oil IP of roughly 1500 barrels of oil per day plus associated gas.
Jack Hightower: We would be on pace to exit the corner at our below the midpoint of the LW Guide.
Jack Hightower: This gives us confidence to reaffirm the L.O.E. Guide.
Speaker Change: Out of a two mile lateral.
Jack Hightower: There's always wood to chop on the yellow leaf run.
Speaker Change: Far exceeding our initial middle sprayberry expectations.
Jack Hightower: The team continues to find innovative ways to reduce calls which will further widen the gap between high-teach and our peers.
Speaker Change: And as you can see on the production chart on slide eight.
Speaker Change: <unk> well is also outperforming our bread and butter wolfcamp a type curve.
Jack Hightower: Now turning to slide eight.
Jack Hightower: Let's talk about some recent well results. We are continuing to see very positive performance from wells in our northern and north-eastern extension areas in fly-top, as well as some of our upside target zones.
Speaker Change: I would like to point out that the landing point.
Speaker Change: In the Middle Sprayberry formation is approximately 800 feet above where we land in the lower Sprayberry formation.
Speaker Change: Which we believe will allow us to efficiently and effectively developed areas of the field, where we already have drilled lower sprayberry wells without seeing any parent child influence.
Jack Hightower: First, let's discuss our call as well. This well is Hightower's first operated Middle-Spray very well.
Jack Hightower: Our call as well achieved a max-oil IP of roughly 1500 barrels of oil per day plus associated gas out of a two mile ladder.
Speaker Change: We have identified approximately 300 middle sprayberry locations across our acreage.
Speaker Change: No we have obviously drilled through the middle Sprayberry formation on every well that we've drilled to date.
Jack Hightower: Far exceeding our initial middle-sweetberry expectations.
Speaker Change: Since all were drilled to deeper zones, we have collected extensive data on this one.
Jack Hightower: and as you can see on the production chart on slide eight.
Jack Hightower: The Callous Well is also outperforming our brand new butter Wolf Camp A type curve.
Speaker Change: And that makes this test a technical no brainer.
Speaker Change: Utilizing our current well cost in the initial performance of the <unk> well equate.
Jack Hightower: I would like to point out that the landing point.
Jack Hightower: In the middle-shray very formation is approximately 800 feet above where we land in the lower-shray very formation.
Speaker Change: Equates to a lot of additional high peak inventory that will breakeven at well below $50 a barrel.
Jack Hightower: which we believe will allow us to efficiently and effectively develop areas of the field where we already have drilled lower-spray very well without seeing any parent child influence.
Speaker Change: This middle Sprayberry inventory resides in our 2600 total well inventory that <unk> carries.
Speaker Change: But because these continued results like this and much of that inventory will surely migrate over and add to our current 1100 50 sub $50 breakeven locations.
Jack Hightower: We have identified approximately 300 middle spray-vary locations across our acreage.
Jack Hightower: Note, we have obviously drilled through the Middle Sprayberry formation on every well that we have drilled today.
Speaker Change: And I know that high peak and I believe that our investors and the industry as a whole would all agree that.
Jack Hightower: Since all we're drill to deeper zones, we have collected extensive data on this zone.
Speaker Change: That we would all take a 1500 barrel oil well per day at a cost well below $6 million and we would take those all day long.
Jack Hightower: and that makes this test a technical no brain.
Jack Hightower: Utilizing our current well-cost and the initial performance of the callous well, equates to a lot of additional high-peak inventory that will break even at well below $50 a barrel.
Speaker Change: We've also highlighted our Judah dwell on slide eight.
Speaker Change: This well is high peaks furthest east operated producing Wolfcamp a well.
Jack Hightower: This middle spray berry inventory resides in our 2600 total well inventory that Highty carries.
Speaker Change: Which is demonstrating very strong performance to date.
Speaker Change: This well reached an oil IP of 1700 barrels of oil per day plus associated gas.
Jack Hightower: But these continued results like this and much of that inventory will surely migrate over and add to our current $1150 sub-$50 break even locations.
Speaker Change: Over the first roughly five months of production since the well initially cut oil it has produced over 135000 barrels of oil.
Speaker Change: Outperforming the conservative type curve, we have for this area.
Jack Hightower: and I know that Highty and I believe that our investors and the industry as a whole would all agree.
Speaker Change: This data point is further proof.
Speaker Change: But our primary zones are good across our entire acreage position.
Jack Hightower: Then we would all take a 1500 barrel oil well per day at a cost, well below $6 million. And we would take those all day long.
Speaker Change: In addition, as we mentioned in last quarter's update the.
Speaker Change: The results of our first handful of wells in our northern most extension area of flat to up both in the Wolfcamp, a and lower sprayberry formations are continuing to exhibit very strong early performance.
Jack Hightower: We've also highlighted our Judith Well on Slide 8.
Jack Hightower: This well is high peaks furthest east, operated producing Wolf Camp A-Welts.
Speaker Change: We anticipate providing additional production details next quarter.
Jack Hightower: which has demonstrated very strong performance today.
Jack Hightower: This will reach an oil ID of 1700 barrels of oil per day plus associated gas.
Speaker Change: But as a preview are lower sprayberry and Wolfcamp a results in this extension area are performing as good as or better.
Jack Hightower: Over the first roughly five months of production since the well initially cut a oil, it has produced over 135,000 barrels of oil, outperforming the conservative type heard we have for this area.
Speaker Change: Then the core development and flat top.
Speaker Change: Nearly 10 miles south.
Speaker Change: Again, underscoring our already sizeable and differentiated inventory of sub $50 breakeven runway.
Jack Hightower: This data point is further proof.
Speaker Change: This area undeniably has legs now turning to slide nine.
Jack Hightower: that our primary zones are good across our entire acreage position.
Speaker Change: As Jack mentioned earlier, our drilling and completions group has done a tremendous job of reducing our cost structure to drill complete and equip our wells.
Jack Hightower: Thanks for watching!
Jack Hightower: In addition, as we mentioned in the last quarter's update,
Jack Hightower: The results of our first handful of wells in our northernmost extension area of Flattop, both in the Wolf Camp A and Lower Sprayberry Formations, are continuing to exhibit very strong early performance.
Speaker Change: All in D. C E. Nf that has facilities as well cost are currently running 9% below the cost we achieved in Q1 of this year.
Jack Hightower: We anticipate providing additional production details next quarter.
Speaker Change: We have seen the usual suspects contribute to those cost reductions rig.
Jack Hightower: But as a preview, our lower Sprayberry and Wolf Camp A results in this extension area are performing as good as, or better,
Speaker Change: Rig rates.
Speaker Change: Stimulation cost per pumping hour.
Speaker Change: OTC <unk> pricing.
Jack Hightower: then the core development in Flattop, nearly 10 miles south. Again, underscoring our already sizable and differentiated inventory of sub $50 breakeven runway.
Speaker Change: Fuel cost and incremental performance improvements.
Speaker Change: But let's talk a little about what folks are missing about high peaks call structure.
Speaker Change: Let's start from some a truth that everybody has bought into overtime.
Jack Hightower: This area, undeniably, has legs. Now turning to slide 9.
Speaker Change: That truth.
Speaker Change: Is that the Delaware basin is more expensive than the Midland basin proper to drilling complete wells.
Speaker Change: As Jack mentioned earlier, our drilling and completions group has done a tremendous job of reducing our cost structure to drill, complete, and equip our wells.
Speaker Change: To the tune of almost $3 million per well.
Jack Hightower: All in, D, C, E, and F that has facilities as well, costs are currently running 9% below the cost we achieved in Q1 of this year.
Speaker Change: Now the returns compete in both basins because of the production and value are almost proportional to the differences in cost.
Speaker Change: Midland basin cost or less due to the structural nature of the wells what does that mean.
Jack Hightower: We have seen the usual suspects contribute to those cost reductions.
Ray Graves: Ray Graves
Speaker Change: The Midland Basin is shallower as lower pressure requires less horsepower to complete the wells.
Jack Hightower: Stimulation costs per pumping hour, OTCG pricing,
Jack Hightower: fuel cost, and incremental performance improvements.
Speaker Change: The industry and investors have accepted this fact.
Speaker Change: But let's talk a little about what folks are missing about High Peak's call structure.
Speaker Change: Sources also do a decent job accounting for average regional descriptions of these costs.
Speaker Change: Let's start from a truth that everybody has bought into over time.
Speaker Change: However, utilizing a regional cost structure for high peak.
Speaker Change: That's truth.
Jack Hightower: is that the Delaware Basin is more expensive than the Midland Basin proper to drill and complete wells.
Speaker Change: Would lead the public to Miss the extraordinary efficiency value and runway that hiseq golfers.
Jack Hightower: to the tune of almost $3 million per well.
Speaker Change: So how does the Delaware basin to Midland Basin comparison relate to.
Jack Hightower: Now, the returns compete in both basins because the production and value are almost proportional to the differences in cost.
Speaker Change: To high peaks acreage, which resides on the eastern side of the Midland Basin.
Jack Hightower: Midland Basin costs are less due to the structural nature of the wells. What does that mean?
Speaker Change: We enjoy similar structural differences to the center part of the basin as the Midland Basin does to the Delaware Basin.
Jack Hightower: The Midland Basin is shallower, has lower pressure, requires less horsepower to complete the wells.
Speaker Change: Our zones are shallower than our peers out to the west in the Midland Basin.
Jack Hightower: The industry and investors have accepted this fact.
Speaker Change: Obviously that means less total footage to drill less pipe less cement.
Jack Hightower: Public sources also do a decent job accounting for average regional descriptions of these costs.
Speaker Change: Less time in variable cost all in this equates to less D. C D E and F call.
Jack Hightower: However, utilizing a regional call structure for high-peak
Speaker Change: Our frac pressures are significantly lower than our other public peers in the Midland Basin.
Jack Hightower: would lead the public to miss the extraordinary efficiency, value, and runway that High Peak offers.
Speaker Change: Requiring far less horsepower.
Speaker Change: Fewer pump trucks, and therefore significantly less fuel.
Jack Hightower: So how does the Delaware Basin to Midland Basin comparison relate?
Speaker Change: Having access to all of the recycled stimulation fluid that we need.
Jack Hightower: to high peaks acreage.
Jack Hightower: which resides on the eastern side of the Midland Basin.
Speaker Change: Ultra local wet sand enhance our environmental stewardship and greatly reduce our capital requirements.
Jack Hightower: We enjoy similar structural differences to the center part of the basin as the Midland Basin does to the Delaware Basin.
Speaker Change: Those lower stimulation pressures roughly 30% lower.
Jack Hightower: Our zones are shallower than our peers out to the west in the Midland Basin.
Speaker Change: Allow <unk> to further optimize the tubular goods used which reduce any significantly reduce the additional savings are.
Jack Hightower: Obviously, that means less total footage to drill, less pipe, less cement, less time and variable cost.
Speaker Change: Our increase the additional savings for our wells that IP.
Jack Hightower: All in, this equates to less D, C, E, and E, an F call.
Speaker Change: So why is this important and water folks Missy.
Speaker Change: It's no secret that high peak.
Jack Hightower: Our frack pressures are significantly lower than our other public piers in the Midland Basin.
Speaker Change: <unk> generates significantly higher EBITDAX per Boe compared to our peers.
Jack Hightower: Requiring far less horsepower.
Speaker Change: Mainly driven by our high oil cut.
Jack Hightower: fewer pump trucks, and therefore significantly less fuel.
Speaker Change: But what's the read through.
Speaker Change: We've made similar oil recoveries.
Jack Hightower: Having access to all of the recycled simulation fluid that we need and ultra-local wet sand enhance our environmental stewardship and greatly reduce our capital requirements.
Speaker Change: But make less natural gas.
Speaker Change: However, gas and Ngls are only about 1% of high peaks total revenue.
Speaker Change: They are closer to 10% give or take of our peers revenue in the center part of the Midland Basin.
Jack Hightower: Those lower stimulation pressures.
Jack Hightower: roughly 30% lower.
Speaker Change: So distilling all of this down.
Jack Hightower: allow Hy-Pee to further optimize the tubular goods used which reduce and significantly reduce the additional savings or increase the additional savings for our wells at Hy-Pee.
Speaker Change: Being able to generate slightly less revenue per well I E. The gas.
Speaker Change: But doing it at less than 75% of the comparable cost.
Jack Hightower: So why is this important and what are folks missing?
Speaker Change: When the rates for generating shareholder value every time.
Jack Hightower: It's no secret that High Peak's BOEs generate significantly higher EBITDAX per BOE compared to our peers.
Speaker Change: And having multiple decades of this inventory.
Speaker Change: Will allow <unk> to continue this performance for the foreseeable future is the value that the market has yet to grasp now turning to slide 10.
Jack Hightower: mainly driven by our Hiawatha.
Jack Hightower: But what's the read-through?
Jack Hightower: We've made similar oil recoveries.
Speaker Change: ESG is ingrained in every aspect of high teens operational and strategic planning.
Jack Hightower: but make less natural gas.
Jack Hightower: However, gas and NGLs are only about 1% of High Peak's total revenue.
Speaker Change: We continue to build large central tank batteries that meet all regulatory requirements.
Jack Hightower: They are closer to 10%, give or take, of our peers' revenue in the center part of the Midland Basin.
Speaker Change: Use of 100% of ultra local wet sand, reducing cost and associated emissions.
Jack Hightower: So distilling all of this down.
Speaker Change: We continue to use recycled stimulation fluid and have the capacity to supply multiple frac crews.
Jack Hightower: being able to generate slightly less revenue per well, i.e. the gas, but doing it at less than 75% of the comparable cost
Speaker Change: We continue to build out oil infrastructure to our newer acreage blocks.
Speaker Change: Oil on pipe garners, a better realized price per barrel.
Jack Hightower: wins the race for generating shareholder value every time.
Jack Hightower: And having multiple decades of this inventory that will allow Hy-Pee to continue this performance for the foreseeable future is the value that the market has yet to grasp. Now turning the slides in.
Speaker Change: And reduces emissions.
Speaker Change: We have electrified field wide and continue to run our two rigs off of highlight power.
Speaker Change: Our solar farm Supplants 10000 metric tons of Cotwo per year.
Jack Hightower: ESG is ingrained in every aspect of high-peak operational and strategic planning.
Speaker Change: And the electricity from the solar farm is cheaper than grid power.
Speaker Change: So it also reduces high peaks Capex and Opex.
Jack Hightower: We continue to build large central tank batteries that meet all regulatory requirements.
Speaker Change: We have continued to expand our low pressure gas gathering system to high peaks, new acreage eliminating the need for flaring.
Jack Hightower: Use 100% of ultra-local wet sand, reducing cost and associated emissions. We continue to use recycled stimulation fluid and have the capacity to supply multiple fractures.
Speaker Change: With our gas gatherers addition of compression and processing throughput high peak has enjoyed lower field wide pressures equating to slightly higher natural gas production.
Jack Hightower: We continue to build out oil infrastructure to our newer acreage blocks.
Speaker Change: Hi Tech prioritizes ESG initiatives throughout all operational and governance decisions.
Jack Hightower: Oil on pipe garners a better realized price per barrel and reduces emissions.
Speaker Change: Doing the right thing is not only the right thing to do but more often than not it is also the right financial decision for our shareholders.
Jack Hightower: We have electrified field-wide and continue to run our two rigs off of high-line power.
Jack Hightower: Our solar farm supplants 10,000 metric tons of CO2 per year.
Speaker Change: With my comments now complete I'll turn the call back over to Jack to wrap things up.
Jack Hightower: And the electricity from the solar farm is cheaper than grid power.
Jack: Thanks, Mike and congratulations on another very successful quarter.
Jack Hightower: So it also reduces high peaks, CAPEX and OPEX.
Jack: Now if everybody would turn to slide 11.
Jack Hightower: We have continued to expand our low-pressure gas gathering system to High Peak's new acreage, eliminating the need for flaring.
Jack: Ladies and gentlemen, the important points the key takeaways I want to leave you with today are first we continued to execute on all cylinders. Our asset base continues to deliver strong production results total of oily high margin barrels.
Jack Hightower: With our gas gatherers addition of compression and processing throughput, High Peak has enjoyed lower field wide pressures equating to slightly higher natural gas production.
Speaker Change: We expect to maintain this trend going forward, which is why we are raising our production guidance again.
Jack Hightower: High Peak prioritizes ESG initiatives throughout all operational and governance decisions.
Speaker Change: Throughout the past year, we have been intensely focused on optimizing our field wide operations and expanding our world class infrastructure system to reach all areas of the field.
Jack Hightower: Doing the right thing is not only the right thing to do, but more often than not, it is also the right financial decision for our shareholders.
Speaker Change: These initiatives led to sustained operating cost reductions as evidenced by our results over the past four quarters.
Speaker Change: With my comments now complete, I'll turn the call back over to Jack to wrap things up.
Speaker Change: We have positioned the company for optimal value creation, we've amassed a sizeable highly contiguous acreage position, which is prime for large scale development.
Jack Hightower: Thanks, Mike, and congratulations on another very successful quarter.
Jack Hightower: Now, if everybody would turn to slide 11.
Speaker Change: We've continued to add organic high value of inventory, both through expanding our flat top acreage position and also through the delineation of some of our upside target zones, which we will continue this is truly one of the few remaining opportunities of significant scale and the most sought after.
Jack Hightower: Ladies and gentlemen, the important points, the key takeaways I want to leave you with today are first, we continue to execute on all cylinders. Our asset base continues to deliver strong production results full of oily high margin barrels.
Jack Hightower: We expect to maintain this trend going forward, which is why we're raising our production guidance again.
Speaker Change: Based in the country.
Speaker Change: We've rapidly grown our high margin oil weighted production and reserves to a significant level, we've delineated a long runway of high value sub $50 breakeven inventory.
Jack Hightower: Throughout the past year, we have been intensely focused on optimizing our field-wide operations and expanding our world-class infrastructure system to reach all areas of the field.
Speaker Change: That spans our entire lease hold position.
Jack Hightower: These initiatives have led to sustained operating cost reductions as evidenced by our results over the past four quarters.
Speaker Change: Again, the scarcity of sub $50 per barrel breakeven inventory immense.
Jack Hightower: Second.
Jack Hightower: We have positioned the company for optimal value creation.
Speaker Change: The current market trend of extreme consolidation.
Jack Hightower: We've amassed a sizable, highly contiguous acreage position, which is prime for large-scale development.
Speaker Change: Top peak in a very unique and advantageous position.
Speaker Change: We've expanded our world class infrastructure system to our extension areas and we've worked with primary midstream partners to provide for the expansion of our in sale crude oil and natural gas gathering and takeaway capability.
Jack Hightower: We've continued to add organic high-value inventory both through expanding our flat-top acreage position and also through the delineation of some of our upside target zones, which we will continue.
Jack Hightower: This is truly one of the few remaining opportunities of significant scale in the most sought-after basin in the country.
Speaker Change: Which will support our black fulfill development and maintain our peer leading profit margins for decades to come.
Jack Hightower: We've rapidly grown our high-margin, oil-weighted production and reserves to a significant level. We've delineated a long runway of high-value, sub-$50 break-even inventory that spans our entire leasehold position.
Speaker Change: I cant give specific details at this time, but I do want to say that we are continuing to make significant progress in our strategic alternatives process and we remain very excited about the possibilities for high peak and our shareholders.
Jack Hightower: Again, the scarcity of sub-$50 per barrel breakeven inventory amidst the current market trend of extreme consolidation puts High Peak in a very unique and advantageous position.
Speaker Change: Now we will open up.
Speaker Change: The presentation to any questions that anybody might have.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Jack Hightower: We've expanded our world-class infrastructure system to our extension areas, and we've worked with primary midstream partners to provide for the expansion of our infill crude oil and natural gas gathering and takeaway capability.
Speaker Change: To withdraw your question. Please press star one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Our first question comes from the line of John White of Roth.
Jack Hightower: which will support life of field development and maintain our peer-leading profit margins for decades to come.
Speaker Change: Capital Your line is now open.
John White: Good morning, gentlemen, and congratulations on a very strong quarter.
Jack Hightower: I can't give specific details at this time, but I do want to say that we are continuing to make significant progress in our strategic alternatives process.
Speaker Change: Thank you.
Speaker Change:
Speaker Change: Focusing on <unk>.
Speaker Change: Slide eight and your catalysts $34 39.
Jack Hightower: and we remain very excited about the possibilities for High Peak and our shareholders.
Speaker Change: Great very well.
Speaker Change: Do you plan to offset that.
Jack Hightower: Now, we'll open up the presentation to any questions that anybody might have.
Speaker Change: And if so.
Speaker Change: To what direction and what would be the timing on.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: Offsetting this middle Sprayberry well.
Speaker Change: John This is Mike Hey, Thank you for the question obviously, we're extremely excited about the middle Sprayberry results.
Speaker Change: There is some.
Speaker Change: All fed data out little bit farther west you can see it on the on the map that we've instead on this slide.
Speaker Change: Thanks for tuning in. We'll see you next time.
Jack Hightower: Our first question comes from the line of John White of Roth MKM Capital. Your line is now open.
Speaker Change: Our catalyst well at 10000 feet in 500 barrels of oil a day is something that obviously, we would like to have more of so I think it would be reasonable to expect in the future that we would look for the right place to delineate and typically.
John White: Good morning, gentlemen, and congratulations on a very strong quarter. Thank you.
John White: Focusing on slide 8 and your CALUS 34-39, Mr. Brayberry, well,
Speaker Change: Again to just offset would be great and we think we would get a very similar result.
Jack Hightower: Do you plan to offset that and if so to what direction and what would be the timing on offsetting this middle spray very well?
Speaker Change: At this stage when it's early you would probably see us walk away from this well a couple of miles either north south or east to again draw a little bit more credence to a larger swath of our acreage that would be perspective.
Jack Hightower: John, this is Mike and hey thank you for the question. You know obviously we're extremely excited about the middle sprayer results.
Speaker Change: So to do a direct offset might not carry the same amount of weight, but the good news is we've got the data on all of those wells that we drilled through the middle Sprayberry and it looks perspective across the vast majority of our acreage. So I think it would be reasonable that we would move either.
Jack Hightower: There's some offset data out a little bit farther west, you can see it on the map that we've inset on this slide.
Jack Hightower: Our callous well at 10,000 feet and 1,500 barrels of oil a day is something that obviously we would like to have more of, so I think it would be reasonable to expect in the future that we would
Speaker Change: <unk>, south or east from where we are here and do a test sometime in the next quarter or two.
Jack Hightower: look for the right place to delineate.
Speaker Change: Okay next quarter or two.
Speaker Change: I appreciate that yes.
Jack Hightower: Again, to just offset would be great and we think we would get a very similar result. At this stage when it's early you would probably see us walk away from this well a couple miles either north-south or east.
Speaker Change: Yeah.
Speaker Change: On the.
Speaker Change: Due to 67 dash five.
Speaker Change: You've extended your Wolfcamp, a further to the east so for the Wolfcamp, a and the middle Sprayberry as you work your way North and east.
Jack Hightower: that would be perspective. So to do a direct offset might not carry the same amount of weight, but the good news is we've got the data on all of those.
Speaker Change: And the flat top block.
Speaker Change: You get strong well results. So you must feel pretty good about our about.
Speaker Change: How about this expansion.
Speaker Change: Absolutely John I've mentioned in the prepared remarks, a handful of wells in the far northern extension of flat to up those wells you again next quarter, we'll be able to have enough production data to kind of see where they do peak because some of these wells are still inclining in production today.
Jack Hightower: wells that we've drilled through the Meadows-Frayberry, and it looks perspective across the vast majority of our acreage. So I think it would be reasonable that we would move either north, south, or east from where we are here and do a test sometime in the next quarter or two.
Speaker Change: Thanks for watching!
Speaker Change: Okay, next quarter or two.
Speaker Change: So once they start to rollover will be able to kind of put in EUR curve on those and that would be something we'd feel comfortable letting letting.
Speaker Change: I appreciate that. You too.
Jack Hightower: on the
Speaker Change: Everybody know, but early time results look very similar to the kind of production chart that youre seeing here on slide eight for our wells up north.
Speaker Change: Judith67-5, you've extended your Wolf Camp A further to the east so for the Wolf Camp A and the Middle Spray Barrier as you work your way north and east
Speaker Change: Again as this is our farthest east operated Wolfcamp, a well if you look at the hash.
Speaker Change: in the flattop block, you continue to get strong, well results. So you must feel pretty good about this expansion.
Speaker Change: Fox that kind of sits to the south east of our flat top area I can't read the number here, but there is.
Speaker Change: Almost 30 wells that are in the <unk> and lower sprayberry and even some other zones that are producing farther east than high peak and you had a very similar result, even east of our acreage block that look just like our wells kind of in the center part of flat top so absolutely.
Speaker Change: Absolutely, John. You know I've mentioned in the prepared remarks a handful of wells in the far northern extension of Flat Top.
Speaker Change: Those wells
Speaker Change: You know, again, next quarter we'll be able to have enough production data to kind of see where they do peak because some of these wells are still inclining in production today.
Speaker Change: Really we feel very strongly that our inventory is good throughout all of our acreage here and that it supports the.
Speaker Change: So once they start to roll over, we'll be able to kind of put an EUR curve on those and that would be something when we feel comfortable letting everybody know. But early time results look very similar to the kind of production chart that you're seeing here on slide 8 for our wells up north.
Speaker Change: 1100, 50 wells that we currently have today that are sub $50 breakeven, but to that point I want to stress again that not in that number are very many middle Sprayberry wells I think we have it all.
Speaker Change: And again, as this is our farthest east-operated Wolf Camp A-Well, if you look at the hashed box that kind of sits to the southeast...
Speaker Change: Offset or two to this catalyst wells it sits in it.
Speaker Change: But outside of that the vast majority of the 300 middle Sprayberry is that we have identified.
Speaker Change: of our flattop area.
Speaker Change: Our not in our 1100 50 sub $50 breakeven. So as we go forward and drill some of those additional tests that you were asking about and assuming that we get similar results to what we've seen on the towers and all of our work in Petro physical and geological data suggests that it will be then.
Speaker Change: I can't read the number here, but there's, you know, almost 30 wells.
Jack Hightower: that are in the A and lower spray barrier and even some other zones.
Jack Hightower: that are producing farther east than high peak.
Jack Hightower: and you have very similar results even east of our acreage block that look just like our wells kind of in the center part of flattop. So absolutely we feel very strongly that our inventory is good throughout all of our acreage here and that it supports the
Speaker Change: Youll start to see us move more of those wells into the sub $50 breakeven category and that's important to know that we're only drilling with two rigs.
Jack Hightower: 1150 wells that we currently have today that are sub $50 breakeven but to that point I want to stress again that not in that number
Speaker Change: Thats about 48% to 50 wells a year to date high peak drills fleets.
Speaker Change: And if you are adding a couple of hundred into your sub $50 breakeven category I would suspect in the next year or so we will have even more inventory.
Jack Hightower: are very many middle sprayberry wells. I think we have an offset or two to this callus well that sits in it. But outside of that, the vast majority of the 300 middle sprayberries that we have identified
Speaker Change: Tier one in anybody's portfolio than what we have today with the results we're seeing.
Speaker Change: Yeah.
Jack Hightower: are not in our $1,150, sub $50 break even. So as we go forward and drill some of those additional tests that you were asking about, and assuming that we get similar results to what we've seen on the callus, and all of our rock and petrophysical and geological data suggest that it will be.
Speaker Change: Well.
Speaker Change: Good luck with that nice slide nice explanations I appreciate it you bet.
Speaker Change: Alright.
Speaker Change: Thank you John.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Jeff Robertson of Water Tower Research. Your line is now open.
Jack Hightower: Then you'll start to see us move more of those wells into the sub-$50 break-even category. And that's important to know that we're only drilling with two rigs.
Jeff Robertson: Thanks, Mike to further the conversation with respect to slide eight.
Jeff Robertson: On both the <unk> well in the Judith well.
Jack Hightower: That's about 48 to 50 wells a year that High Peak Drills completes.
Jeff Robertson: What can you take from there.
Jeff Robertson: The long penetrations in the data you got what wells, the well was drilling and now the performance.
Jack Hightower: And if you're adding a couple hundred into your sub-$50 break-even category, I would suspect in the next year or so, we will have even more inventory that's Tier 1 in anybody's portfolio than what we have today with the results we're seeing.
Jeff Robertson: And use that to help de risk the locations that you're that you're.
Speaker Change: That you have.
Speaker Change: You bet, Jeff the Great News is obviously, while we were drilling the wells.
Speaker Change: Acted very similar and you wouldn't know that you were drilling five miles east or six miles east of our first wolfcamp, a and lower sprayberry, well that we drilled five or six years ago.
Speaker Change: Well, uh, good luck with that. Nice slide. Nice explanations. I appreciate it. I'll try to call back.
Speaker Change: So again, it's very consistent from an operational standpoint on the drilling and completion side, obviously, we gather our log data as well as cutting samples through every one of these wells and we can look at the maturation of the oil. So again, we feel very confident that all the way out to the east.
Speaker Change: Thank you, John.
Speaker Change: One moment for our next question.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jeff Robertson of Water Tower Research. Your line is now open.
Jeff Robertson: Thanks Mike. To further that conversation with respect to slide 8
Jeff Robertson: on both the Calliswell and the Judith Wells.
Speaker Change: As well as all the way up to the North and look at the end of the day I'm, a very pragmatic guy I like to see oil and the stock tank. We can do all the science, we won which de risks the initial dollars that we invest to test.
Jack Hightower: What can you take from the log penetrations and the data you got while the well was drilling and now the performance and use that to help de-risk the locations that you have?
Speaker Change: But the real tariff is whats the commerciality of the well and how much oil shows up for sale in that stock tank. We have proved that all the way out to the east and to the north.
Mike: You bet, Jeff. You know, the great news is, obviously, while we were drilling the wells, they acted very similar, and you wouldn't know that you were drilling five miles east or six miles east of our first Wolf Camp A Lower Sprayberry Well that we drilled five or six years ago.
Speaker Change: Substantiates, our large inventory that high peak.
Speaker Change: Mike does the performance of the Judith well so far.
Jack Hightower: So, again, it's very consistent from an operational standpoint on the drilling and completion side. Obviously, we gather our log data as well as cutting samples through every one of these wells and we can look at the maturation of the oil, so, again, we feel very confident all the way out to the east.
Speaker Change: Versus your type curve.
Speaker Change: Reflect any kind of a change in the way the well was drilled in a way that actually the well was stimulated or is that geology petro.
Speaker Change: Spectra physics.
Speaker Change: So a couple of things there Jeff.
Speaker Change: It is a parent well by itself that's one.
Jeff Robertson: as well as all the way up to the north. And look, at the end of the day, I'm a very pragmatic guy. I like to see oil in the stock tank. We can do all the science we want, which derisks the initial dollars that we invest to test.
Speaker Change: If we had drilled 12 wells around it all at the same time, what I suspect there would be a 5% difference in performance give or take probably so that plays a small piece what I will say is every day, we are tweaking our completion landing perforation scheme.
Jeff Robertson: But the real test is what's the commerciality of the well and how much oil shows up for sale in that stock tank. We have proved that all the way out to the east and to the north that substantiates our large inventory that Hy-Pee has.
Speaker Change: Everything we're trying to optimize with every new data point that we get do we suspect that the rock is any different here than what we have back to the west.
Speaker Change: Not enough to make a.
Speaker Change: A large enough difference had we done all of the things we're doing today on the <unk> well on our very first of all I think we would've got a better result, even on the very first well, which was that Jasmine well that we've drilled so I think it's just an evolution over time, but when we have a very consistent sand.
Speaker Change: Mike, does the performance of the Judith well so far?
Speaker Change: versus your tight curve reflect any kind of a change in the way the well was drilled and the way the well was actually stimulated or is that geology and petrophysics?
Speaker Change: So, a couple things there, Jeff. It is a parent well by itself, that's one. If we had drilled 12 wells around it all at the same time, would I suspect there would be a 5% difference in performance, give or take? Probably. So that plays a small piece. What I will say is every day we are tweaking our completion, landing, perforation scheme.
Speaker Change: Box and you're starting to see little bit better performance on these wells as well as our base production, but we don't want to forget our production guys, they're doing a fantastic job on keeping well uptime as well as cost being able to keep these wells producing in reducing our LOE.
Speaker Change: So all of those things kind of come together.
Speaker Change: everything we're trying to optimize with every new data point that we get? Do we suspect that the rock is any different here than what we have back to the West?
Speaker Change: To build the efficiency of the machine that we have here at IP did I think is very differential.
Speaker Change: But I think what youre going to see is over time. These wells will continue to get incrementally better from all of the day to day changes that we're looking at.
Jack Hightower: not enough to make a large enough difference. Had we
Jack Hightower: done all of the things we're doing today on the Judith well on our very first well I think we would have got a better result even
Speaker Change: Yes.
Speaker Change: Also just to add on to that if you just study looking backwards in the Permian basin, whether it's Midland Basin, Delaware Basin are Mark 54 years of drilling wells out here.
Jack Hightower: on the very first well, which was the jasmine well that we had drilled.
Jack Hightower: So I think it's just an evolution over time, but when we have a very consistent sandbox and you're starting to see a little bit better performance on these wells, as well as our base production. I mean, we don't want to forget our production guys. They're doing a fantastic job.
Speaker Change: I realize that you improve your performance with time, you have technological changes and our operations team and our drilling and our completion guys.
Speaker Change: We're up to speed and if you look at the industry performance and then look at our performance your expectation can be that youre going to see significant improvements in the future as we go forward and increasing performance and increasing recoveries. So we're really excited about.
Jack Hightower: on keeping well uptime, as well as cost, being able to keep these wells producing and reducing our LOE. So all of those things kind of come together to...
Jack Hightower: to build the efficiency of the machine that we have here at High Peak. It, I think, is very differential, but I think what you're going to see is over time these wells will continue to get incrementally better from all of the day-to-day changes that we're looking at.
Speaker Change: The basic rock and what where can recover from that rock.
Speaker Change: And Jeff this might be.
Speaker Change: Another times are another opportunity to jump in and kind of run back over this.
Speaker Change: Also, just to add on to that, if you just study looking backwards in the Permian Basin, whether it's Midland Basin, Delaware Basin, or my 54 years of drilling wells out here,
Speaker Change: Because again, it's something we see as we talk to investors.
Speaker Change: It's sometimes hard to understand and believe and again when you look at.
Speaker Change: Public data public data does a really good job when everything looks the same I E.
Jack Hightower: you realize that you improve your performance with time.
Jack Hightower: You have technological changes.
Speaker Change: Delaware proper in the Midland Basin proper so youre public sources do a pretty good job of saying how much people are spending because that data is made public.
Jack Hightower: and our operations team and our drilling guys and our completion guys.
Jack Hightower: are up to speed. And if you look at the industry's performance and then look at our performance.
Speaker Change: Again with high peak.
Jack Hightower: Your expectation can be that you're going to see significant improvements in the future as we go forward in increasing performance and increasing recovery. So we're really excited
Speaker Change: Part of this is we had to put some money in for infrastructure over the last four years or five mobile MAU and it's paying dividends today.
Speaker Change: Net capital front and going forward that infrastructure is in place. We just now have to tie into that whenever we drill a new well.
Jack Hightower: about the basic rock and what we can recover from that rock. And Jeff, this might be another time or another opportunity to jump in and kind of run back over this.
Speaker Change: But I talked a little bit about those structural differences why they're so important to economics.
Speaker Change: And for high peak.
Jack Hightower: Because, again, it's something we see as we talk to investors that, you know, it's sometimes hard to...
Speaker Change: Again, we've got very similar structural differences to the center part of the Midland Basin as that center part of the Midland Basin has to the Delaware Basin.
Jack Hightower: understanding and belief and when again when you look at
Speaker Change: And those structural train changes as I went through kind of pressures and what it takes to Frac. These wells in the tubular goods you have to have how much horsepower and fuel when you take all of those into consideration.
Jeff Robertson: public data, you know, public data does a really good job when everything looks the same, i.e. the Delaware proper and the Midland Basin proper. So, you know, your public sources do a pretty good job of saying how much people are sending because that data is made public.
Speaker Change: When you look at some of these wells that again can produce 1500 barrels of oil a day and calls well under $6 million of world sleep. Those economics will compete with anything in either one of those two basins.
Jeff Robertson: Again, with Hy-P, you know, part of this is we had to put some money in for infrastructure over the last four years, a sizable amount, and it's paying dividends today.
Jack Hightower: But on that capital front and going forward, that infrastructure is in place. We just now have to tie into it whenever we drill a new well. But I talked a little bit about those structural differences and why they are so important to economics. And for Hypee,
Speaker Change: So I think that is a piece that folks are having a hard time, believing it's something in the Midland basin can produce that well and be that cost to complete.
Speaker Change: And Mike your cost or the cost differences versus a central part of the Midland Basin is further up on the shelf a little bit right. So it's not quite as steep.
Jack Hightower: Again, we've got very similar structural differences to the center part of the Midland Basin as that center part of the Midland Basin has to the Delaware Basin.
Mike: That's correct.
Speaker Change: Coming to the eastern side of the basin.
Jack Hightower: and those structural drain changes as I went through, kind of pressures and what it takes to crack these welds and the tubular goods you have to have, how much horsepower and fuel. When you take all of those into consideration
Speaker Change: Roughly a 100 foot per mile of debt that you'd move up so as you go farther into the base and you could be a <unk> thousand 15 to 100 or more feet deeper.
Speaker Change: In different streams of those casings have to be set at different spots.
Speaker Change: And some of that has to do with some of the legacy drilling that was done in these areas.
Jack Hightower: Those economics will compete with anything in either one of those two basins So I think that is a piece that folks are having a hard time Believing that something in the Midland Basin can produce that well and be that cost to complete
Speaker Change: For instance, if you take some of the operators in the middle part of the base and they're having to drill the vertical part of their horizontal well through a what we used to call. The sprayberry are the wolfberry play that has been around for 50 years. So a lot of depletion has happened in these vertical parts.
Speaker Change: And Mike, your cost differences versus the central part of the Midland Basin is you're further up on the shelf a little bit, right? So it's not quite as deep.
Speaker Change: The center part of the basin, which require different practices and cost to drill through it we're high teens acreage bids any development that was done in this area was much deeper than the zones were drilling two so none of that depletion has taken it taken place all of that.
Mike: That's correct. As we're coming to the eastern side of the basin, it's, you know, roughly a hundred foot per mile of depth that you move up. So as you go farther into the basin, you could be a thousand, fifteen hundred or more feet deeper.
Speaker Change: <unk> two less pipe that we need less time to drill these wells Thats again, why our two rigs can drill.
Speaker Change: and different strings of those casings have to be set at different spots.
Speaker Change: An average of 24 to 25 wells per year per rig.
Speaker Change: And some of that has to do with some of the legacy drilling that was done in these areas. For instance, if you take some of the operators in the middle part of the basin, they're having to drill the vertical part of their horizontal well.
Speaker Change: And an average lateral length of about 13000 feet. So again it all comes out in our numbers in all of the math works out.
Speaker Change: But again, it's just we noticed that people are having a hard time, believing that that differential is as big as it is but we've got the data and the well performance to show that.
Mike: through a
Mike: what we used to call the sprayberry or the wolfberry play that has been around for 50 years. So a lot of depletion has happened in these vertical parts of the center part of the basin which require different practices and cost to drill through it.
Speaker Change: And then lastly on that Mike your acreage block on page a little bit.
Speaker Change: It's still got a little bit more than it was one of your previous presentations are you still I guess.
Mike: where Hypee's Acres is.
Mike: Any development that was done in this area was much deeper than the zones we're drilling to, so none of that depletion has taken place.
Speaker Change: One it reflects the confidence in the northern part of this acreage position excuse me, but are you still seeing opportunities too.
Mike: All that equates to less pipe that we need, less time to drill these welds. That's, again, why our two rigs can drill.
Speaker Change: To pick up offset acreage at reasonable prices.
Jeff Robertson: Jeff Our land Department does a yeoman's job every day.
Jack Hightower: You know an average of 24 to 25 wells per year per rig
Speaker Change: Obviously with the well results we have I mean look our industry does a whole lot of close to <unk> right you get a good well youre trying to pick a group Jeff around it.
Mike: at an average lateral length of about 13,000 feet. So again, it all comes out in our numbers and all of the math works out.
Speaker Change: We have enough data in the area to know where we want to have that acreage. In these guys are doing a great job picking it up.
Jack Hightower: But again, it's just we notice that people are having a hard time believing that the differential is as big as it is But we've got the data and the well-performance to show that
Speaker Change: So I think it's reasonable to expect over time Youll see us.
Speaker Change: Little bit more.
Speaker Change: On this chart, our math is showing great a little bit more grey on there over time as we are picking up and filling in as well as even where there is some great. We're just picking up additional ownership in some of those blocks. So we really like our position in kind of eastern Howard in Borden County, and these wells.
Jeff Robertson: And then lastly on that, Mike, your acreage block on page eight a little bit.
Speaker Change: It's filled in a little bit more than it was, I think, in one of your previous presentations. Are you still, I guess that one, it reflects your confidence in the northern part of this acreage position. Excuse me, but are you still seeing opportunities to...
Speaker Change: Results are fantastic.
Jack Hightower: to pick up offset acreage at reasonable prices.
Speaker Change: Thank you.
Speaker Change: You know, Jeff, our land department does a yeoman's job, you know, every day. Obviously, with the well results we have, I mean, look, our industry does a whole lot of closeology, right? You get a good well, you're trying to pick acreage up around it.
Speaker Change: You bet. Thank you Jeff.
Speaker Change: This concludes the question and answer session I would now like to turn it back to Jack High Tower, Chief Executive Officer for closing remarks.
Speaker Change: Thank you, ladies and gentlemen, I would like to reemphasize the key takeaways from today's call.
Jack Hightower: We have enough data in the area to know where we want to have that acreage and these guys are doing a great job picking it up.
Speaker Change: First operationally, we're executing on all cylinders, we will continue to strive for incremental improvements going forward.
Speaker Change: Second our strong well performance is continuing to outperform our initial expectations.
Jack Hightower: So I think it's reasonable to expect over time you'll see a little bit more of this
Speaker Change: Third we've expanded our truly world class infrastructure system to our extension areas.
Jack Hightower: On this chart our map is showing gray, a little bit more gray on there over time as we're picking up and filling in as well as even where there's some gray we're just picking up additional ownership in some of those blocks.
Speaker Change: Which will help maintain our lower cost structure and our pure leading profit margins for the entire block of our field.
Jack Hightower: So, we really like our position in Eastern Howard and Borden County, and these well results are fantastic.
Speaker Change: Fourth with the success of our new Middle Sprayberry, well in our northern extension area Wells and flat top combined with our lower capital cost structure, we're adding significant highly economic inventory to our already deep portfolio as.
Speaker Change: Thank you.
Speaker Change: You bet. Thank you, Jeff.
Speaker Change: This concludes the question and answer session. I would now like to turn it back to Jack Hightower, Chief Executive Officer.
Speaker Change: As we continue to delineate our other upsides zones, and we mentioned those things in the past we're convinced that our field has upwards of 1 billion barrels of oil equivalent of net recoverable resource in place all of these things translate to high peak being positioned to Cree.
Speaker Change: for closing remarks.
Jack Hightower: Thank you. Ladies and gentlemen, I'd like to reemphasize the key takeaways from today's call. First, operationally we're executing on all cylinders. We will continue to strive for incremental improvements going forward.
Jack Hightower: Second, our strong well performance is continuing to outperform initial expectations.
Speaker Change: The optimal value for our shareholders our inventory competes with any of our peers in the Permian basin.
Jack Hightower: Third, we've expanded our truly world-class infrastructure system to our extension areas.
Speaker Change: Our would also fit nicely within any potential suitors portfolio. So again, thanks for joining us today.
Jack Hightower: which will help maintain our lower cost structure and our peer leading profit margins for the entire life of our field.
Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Jack Hightower: Fourth, with the success of our new middle Sprayberry well and our northern extension area wells and flat top, combined with our lower capital cost structure, we're adding significant highly economic inventory to our already deep portfolio.
Jack Hightower: As we continue to delineate our other upside zones, and we've mentioned those things in the past, we're convinced that our field has upwards of 1 billion barrels of oil equivalent of net recoverable resource in place.
Jack Hightower: All these things translate to High Peak being positioned to create optimal value for our shareholders.
Jack Hightower: Our inventory competes with any of our peers in the Permian Basin or would also fit nicely within any potential suitors portfolio. So again, thanks for joining us today.
Speaker Change: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
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Speaker Change: Good day and thank you for standing by. Welcome to the High Peak Energy 2024 Third Quarter Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Steven Tholen, Chief Financial Officer. Please go ahead. Thank you.
Steven Tholen: Good morning, everyone. And welcome to High Peak Energy's third quarter 2024 earnings call.
Speaker Change: Representing High Peak today are Chairman and CEO Jack Hightower, President Michael Hollis, and I'm Steven Tholen, the Chief Financial Officer.
Speaker Change: During today's call we will make reference to our November investor presentation and our third quarter earnings release which can be found on Hypeek's website.
Speaker Change: Today's call participants may make certain forward-looking statements relating to the company's financial condition.
Speaker Change: Results of Operations, Expectations, Plans, Goals, Assumptions, and Future Performance.
Speaker Change: 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.
LEO PARENTE: many of which are beyond our control.
LEO PARENTE: We will also refer to certain non-GAAP financial measures on today's call. So please see the reconciliations in the earnings release and in our November investor presentation.
Speaker Change: I will now turn the call over to our Chairman and CEO, Jack Hightower.
Jack Hightower: Thank you, Steve. Good morning, ladies and gentlemen, and thank you for joining us today. My prepared remarks will begin on slide four of our November investor presentation.
Jack Hightower: And after looking at our press release and seeing our results, I'm extremely excited to report yet again that High Peak has achieved another solid quarter of execution across the board.
Jack Hightower: Heading into the 2024 calendar year, we laid out a set of core values, including maintaining discipline operations, strengthening our balance sheet, and focus on maximizing shareholder value. Our unwavering commitment to these values has driven our continued success.
Jack Hightower: Operationally, our drilling program has continued to deliver strong well results and production levels have continued to outperform initial expectations.
LEO PARENTE: This has resulted in another beat and raise of our production guidance this quarter, and our operations team has remained aggressively focused on production optimization and reducing our cost structure across the board.
LEO PARENTE: Financially, last quarter marks the fifth consecutive quarter that High Peak has generated positive free cash flow.
Jack Hightower: And true to our core values, we have utilized a substantial portion of our pre-cash flow to pay down absolute debt while simultaneously executing our opportunistic share buyback program.
LEO PARENTE: as we set out at the beginning of the year.
LEO PARENTE: We continue to implement our primary objective of increasing absolute shareholder value through improved operational results, a return of capital strategy, and ultimately through our strategic alternatives process.
LEO PARENTE: Thank you.
LEO PARENTE: So now, if you'll turn to page 5.
Jack Hightower: of the presentation. The third quarter was a huge, another operational huge success for High Peak, as our production volumes averaged over 51,000 barrels of oil per day. This level was higher than our first and second quarter averages this year, even taking into account the continuation of our moderated two-rig development program.
Jack Hightower: Operations during the quarter were affected by a major storm akin to a hundred-year flood that hit in early September.
Jack Hightower: This storm caused some of our production volumes to be offline and Translated into our lease operating expenses running a little hot during the quarter due to remedial work associated with the storm damage
Jack Hightower: It's a true testament to our operations team and our robust infrastructure system that a storm of this magnitude only caused minimal shut-in volumes and operational issues.
Jack Hightower: As you can see, our fourth quarter is off to another strong start as production volumes have continued to average over 50,000 barrels of oil per day thus far.
Jack Hightower: We're continuing to see impressive results from our most recent wells, including our extension wells in the northern and northeastern flattop.
Jack Hightower: We remain extremely excited about these areas.
Jack Hightower: of the field, as well as our potential of upside zones.
Jack Hightower: Mike will provide additional details regarding our continued strong production levels and our recent well results later in the presentation. I just like to re-emphasize the major positives of these results.
Jack Hightower: In addition, we continue to efficiently convert our products into value for the company as evidenced by our sustained peer-leading EBITDAX per BOE. Our third quarter results translated into high peak converting 80% of our realized price per BOE into cash.
Jack Hightower: We generated another strong quarter of free cash flow and we remain in a very healthy financial position.
Jack Hightower: Thank you.
Jack Hightower: Now turning to slide six.
Jack Hightower: And as you look at this slide, you can realize the raise and the reaffirmation. As I mentioned earlier, as a result of continued strong production volumes, we're going to yet again increase our full year 24 production guidance.
Jack Hightower: Our new range is 48,000 to 51,000 BOEs per day. This range translates to over a 5% increase compared to our prior increase back in August and a 10% increase compared to our initial 24 guide.
Jack Hightower: This is due to our strong well performance and continued production optimization efforts.
Jack Hightower: We're also reaffirming our 24 lease operating expense and CAPEX guidance.
Jack Hightower: which we updated back in August.
Jack Hightower: Our team continues to execute on optimizing our field-wide operations, and we remain optimistic there are still some incremental savings we can achieve going forward.
Jack Hightower: We expect our capital expenditures will fall within our narrow range of $540 to $580 million.
Jack Hightower: We've now completed the bulk of our 2024 infrastructure projects, so the vast majority of our capital expenses during the fourth quarter will be associated with drilling and completing wells.
Jack Hightower: On that note, our drilling and completions team is doing a tremendous job in achieving additional cost savings, even compared to the lower cost levels that we realized earlier this year.
Jack Hightower: I believe this is one of the critical areas of our business that not only differentiates from our peer group, but that is also being missed by the public investor universe.
Jack Hightower: Our current cost structure is significantly lower than our Midland Basin peers and alongside our strong well results absolutely translates into our per-well economics competing with anyone in the Midland Basin.
Jack Hightower: Mike will provide additional detail on this topic, but I want to take this opportunity to emphasize this point and to also call out great work that our drilling and completions team is achieving.
Jack Hightower: The key takeaway is that we delivered extremely impressive results in the first three quarters of the year, and I feel confident that this trend will continue. Now I'll turn the call over to our president, Mike Hollis.
Mike Hollis: Thanks, Jack. Now turning to slide seven.
Mike Hollis: High Peaks EBIDAX per BOE continues a commanding lead amongst our peer group.
Jack Hightower: Said differently, no other public company can generate close to the same EBITDAX that High Peak does on 50,000 BOEs a day.
Jack Hightower: Thanks to our very oily mix and low op-ex.
Jack Hightower: The cartoon on slide 7 shows how efficiently Hypeak converts our oily DOEs into cash.
Jack Hightower: starting from left to right on the slide.
Jack Hightower: High Peaks BOE is 75% oil and 88% liquids.
Jack Hightower: versus our peer average of 45% oil.
Jack Hightower: Plus, high peak efficiency of converting that higher realized price per BOE to EBITDAX is higher than our peers.
Jack Hightower: High Peak Converts 80% of our realized price.
Jack Hightower: to EBITDAX.
Jack Hightower: that compares to our peers converting only 70%.