Q3 2025 Highpeak Energy Inc Earnings Call
Speaker #2: Good day and thank you for standing by . Welcome to the High Peak Energy . Third quarter 2025 Earnings Conference Call . At this time , all participants are in .
Speaker #2: Listen only mode . After the speakers 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 .
Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.
Speaker #2: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steven Tholen, Chief Financial Officer.
Speaker #2: Please go ahead .
Speaker #3: Good morning , everyone , and welcome to High Peak Energy's third quarter 2020 earnings call , representing High Peak today . Our president and CEO , Michael Hollis Executive Vice President Ryan Hightower .
Speaker #3: Executive Vice President Daniel Silver , Senior Vice president Chris Monday . And I am Steven Tholen the chief financial officer . During today's call , we may refer to our November investor presentation and our third quarter earnings release , which can be found on High Peaks website .
Speaker #3: 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 .
Speaker #3: 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 #3: 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 in our November Investor presentation .
Speaker #3: I will now turn the call over to our president and CEO , Mike Hollis . Thank you Steve .
Speaker #4: Good morning , everyone , and thank you for joining us today for High third quarter conference call . I'm going to start today's call with a brief overview of our third quarter results and a quick update of our current development activity .
Speaker #4: After which and more importantly , I want to use this opportunity to give you a glimpse into our company roadmap . Looking forward .
Speaker #4: With that said , before we start talking about High Peaks future , I'm proud to report that we delivered a solid third quarter results which tracked our internal expectations , production levels were consistent with the second quarter despite our reduced level of development activity .
Speaker #4: We only ran one rig through the entirety of the third quarter , drilled six wells and turned in line . Only nine wells .
Speaker #4: That's roughly two thirds of our tills that we had in Q1 and Q2 . Our CapEx was down 30% from Q2 . As a result of our deliberate reduction of development activity and was spot on with our internal estimates .
Speaker #4: We held our low per BOE consistent with our first half , 20 , 25 levels . And as we discussed on last quarter's call , we successfully amended and extended our term loan , pushed out debt maturities until 2028 , and materially increased our liquidity .
Speaker #4: Now, turning to current operations due to continued weakness in commodity prices and overall market volatility, we delayed picking our second rig back up until mid-October.
Speaker #4: A roughly one and a half month delay from our original plan . Now we plan to run both rigs throughout the fourth quarter before making a determination as to what the appropriate level of activity should be for 2026 , which will be heavily dependent on oil prices .
Speaker #4: DNC costs and overall market conditions. We recently finished our second successful frac completion on a six-well pad with an average lateral length of 15,000 feet.
Speaker #4: This operation went smoothly with high Peak recognizing cost savings per well of over $400,000 compared with our traditional frac technique , and we were even able to increase some efficiencies compared to our first simple frac job .
Speaker #4: More lateral footage completed per day . We utilized continuous pumping operations and averaged over 40 700ft of completed lateral footage per day . The operations team keeps delivering .
Speaker #4: We're very encouraged by the results that we've achieved to date. Utilizing the frac ops, we plan to tailor our 2026 development program to incorporate this completion technique more.
Speaker #4: Suffice it to say , High Peaks operations in well , performance are a well-oiled machine . That said , we will always find new , innovative optimization opportunities as we have always done our operations department will maintain a laser focus on low cost operations .
Speaker #4: Now , let's turn our focus to the future . I know you've all have heard from me and the other High Peak senior team members on these calls .
Speaker #4: In the past . But this is the first time I've had a chance to speak with you as the CEO . And I will very clearly lay out our vision for High Peak moving forward with our new chairman of the board and the entire team pulling in the same direction .
Speaker #4: We are moving forward with purpose and a sense of urgency . We're getting back to the basics . Running a tight , disciplined operation built on focus , efficiency and sound business sense .
Speaker #4: Our assets are strong , our people are capable , and our commitment to managing cash flow and capital is steadfast . Now , I won't sugarcoat it .
Speaker #4: Our debt is high and the market has told us exactly what it thinks about that for a while , we drifted without a clear long term plan , and it showed that changes .
Speaker #4: Now we're rolling up our sleeves to strengthen the balance sheet and rebuild the trust . The only way that works through steady , consistent results .
Speaker #4: We know talk doesn't cut it in this business . Results do . And we will deliver . Now , the first step in figuring out where you're heading is being very honest about where you stand and how you got there .
Speaker #4: Now , we've done a lot of things right , and I want to tip my hat to the team for the hard work and follow through .
Speaker #4: But we also have some issues we need to face head on . No sense pretending otherwise . At the end of the day , the management , the board , and every one of us at High Peak owned the results we have delivered to date .
Speaker #4: The good , the bad . And everything in between . It's ours to fix and to build upon . So let's reflect on what we have done well over the past five years , and also what needs improvement .
Speaker #4: You can refer to page six of our investor presentation . So what have we done right over the past five years ? What we've assembled a high quality asset base and one of the most desired basins in the world , composed of two highly contiguous acreage positions with oil rich inventory allowing for cost effective extended lateral development and strong IRR .
Speaker #4: We've done a great job operationally maximizing efficiencies and developing a lean cost structure to drive enhanced economics . I would put our operational efficiency against any public company in the space .
Speaker #4: We have also delineated a long runway of highly economic multi bench , oily inventory that is primed for full scale capital efficient development .
Speaker #4: These are all great attributes and I want to commend the High Peak employees , management and even our investors for believing in the team in this area .
Speaker #4: But now let's look at some areas where we have misstepped and now need to improve . We are a controlled company , which has led to poor governance , quality scores and high risk potential from the likes of ES Louis and some notable rating agencies .
Speaker #4: At times we had a growth at all cost mentality , even in the face of commodity price weakness . This ends now . This last view of cash management led us to overusing leverage and resulted in high cost of capital .
Speaker #4: Finally , what we've heard loud and clear from our investors is that our short term focus on the business has eroded market confidence .
Speaker #4: We own these weaknesses, plain and simple, and we have a plan to set them right. So what does that look like?
Speaker #4: Well, some of these fixes we can tackle right now, and we've already started. Others are going to take a little time and patience.
Speaker #4: This isn't something that happens overnight . We see it like climbing a set of stairs . One solid step leads to the next .
Speaker #4: The first one is already behind us . We have reset our governance and put the right structure in place . That gives us the footing to run this company .
Speaker #4: The correct way . With discipline , accountability and good old fashioned business sense . We're not trying to reinvent the wheel here . Our focus is simple generate steady , sustainable cash flow .
Speaker #4: Pay down our debt the smart way and keep our financial house in order . Lucky for us , we've got a solid asset base that gives us the horsepower to get it done .
Speaker #4: And as we follow through , step by step , I believe we will earn back the market's confidence , the right way by doing exactly what we said we would do and sticking to our long term plan .
Speaker #4: Now , let's talk a little bit more about each of these areas needing improvement . If you take a step back and look at any public company , there are three levels of control .
Speaker #4: First , you have the board of directors providing direction and oversight . Second , you have management team directing the day to day operations .
Speaker #4: And finally , you have the shareholders who bring accountability and real time feedback to the organization . Previously , all three of these control groups were effectively consolidated or led by a single individual .
Speaker #4: Again , this has led to poor governance scores by proxy advisory firms and credit agencies . However , over the last few months we have made key changes in each of these areas .
Speaker #4: First , as most of you know , we've had a change at the top effective immediately . I have accepted the role of permanent president and CEO of HighPeak Energy, Inc. , and I've got to say , I'm proud of how this team has stepped up .
Speaker #4: Several folks in senior management have really grabbed the reins and leaned into the vision . It's been all hands on deck , and I couldn't ask for a stronger group to work alongside .
Speaker #4: We have made several changes to the senior management levels , and I want to congratulate several of these employees on their new roles and titles .
Speaker #4: Second , we are pleased to welcome our new independent chairman , Jason Edgeworth . It's been a genuine pleasure working alongside him . Jason brings strong leadership , clear perspective and a shared passion for the company's long term success .
Speaker #4: I am confident with full alignment between the board and management and shareholders . We will drive high tech forward with focus and alignment to shareholder value .
Speaker #4: Third , unlike in recent past , we now have a fully independent board committees in place consistent with best practices for non-controlled companies .
Speaker #4: These include the Compensation Committee , the nominating and Governance Committee , and of course , the Audit Committee . This structure strengthens oversight and reinforces our commitment to transparency , accountability and integrity in everything we do .
Speaker #4: I want to emphasize again that both management and the board are completely aligned in our priorities. We share one clear goal driving long-term success and sustainable value.
Speaker #4: Creation for high Peak . And its shareholders . Now , regarding the shareholders , there are some major changes planned . As you may know , High Peak , the public company , is majority owned by two private equity partnerships , High Peak Energy Partners , one and High Peak Energy Partners two .
Speaker #4: These two partnerships own and control over 75 million of our 125 million outstanding common shares , as was recently disclosed . These partnerships plan to begin methodically distributing shares over the next two years , with High Peak two being distributed first in 2026 and High Peak 1 in 2027 .
Speaker #4: It is important to note most of the limited partners have a long term investment mindset . While we anticipate most of these shares will continue to be held by the limited partners , it will potentially provide an opportunity for some larger institutions and investors to be able to invest in High peak stock , which should assist our low float issue .
Speaker #4: With all of these changes, we plan to effectively split the three forms of control management: the board and the shareholder base into independent.
Speaker #4: But fully aligned groups . Now , continuing on the topic of accountability , management will operate under clearly defined , measurable goals and our compensation will be directly tied to our performance against those objectives .
Speaker #4: We are in the process of finalizing our 2026 roadmap , which will outline these performance metrics and align our incentives with long term value creation .
Speaker #4: You can expect this framework to be in place and active in early 2026 . Now let's talk a little more about sound business principles .
Speaker #4: As you know, commodity prices have a very direct effect on profitability. So, despite improvements in operational efficiencies and cost structure, commodity prices are the single biggest factor in changes to our cash flow.
Speaker #4: So how are we going to navigate this volatile commodity market in our slide deck on page nine , we have laid out a very simple yet common sense approach , and I want to point out that the oil price laid out on the slide are long term pricing .
Speaker #4: Again , we are taking a long term approach to capital discipline . All that to say , we will not have a knee jerk reaction to very short term swings in pricing .
Speaker #4: We will take a methodical and disciplined approach. Let's start with the bear case scenario, which we are currently close to right now.
Speaker #4: In the event long term oil prices are below $60 a barrel , our focus will be exclusively on operating within cash flow . This means on the CapEx front , that we will be operating less than a two rig development program .
Speaker #4: This level of activity would lead to a moderate decline in overall production volumes , but this goes without saying . There's absolutely no need to focus on growing production in an oversupplied or weak market .
Speaker #4: Again , we have a long term view on value creation , and there is no reason to overdevelop or accelerate in drilling . Our high value inventory in a low commodity price environment .
Speaker #4: Now , as far as liquidity is concerned , in the face of sustained low oil price environment , anything is on the table .
Speaker #4: We will preserve liquidity. Now, moving to the base case scenario of long-term oil prices in the $60 to $70 per barrel range.
Speaker #4: Our focus will be on free cash flow generation and prudently paying down our debt . On the CapEx front , this would most likely equate to a .
Speaker #4: Two rig development program , resulting in maintaining current production volumes . Now , on the liquidity front , we would maintain our current dividend and use the additional free cash flow for a modest debt .
Speaker #4: Paydown strategy in a bull case scenario of $70 plus oil , our focus will still be on increased free cash flow generation and accelerated debt .
Speaker #4: Paydown on the CapEx program , we would likely be two rigs . Or just slightly more , leading to moderate production growth . And on the liquidity front , it would allow us to accelerate debt , pay .
Speaker #4: But let me be clear, we would have to be in this bull case scenario for quite some time and reach a reasonable leverage ratio before we would ever consider additional shareholder value initiatives.
Speaker #4: We will get our financial house in order . First , as I said earlier , these are basic business principles , but I wanted to lay them out in a very clear and concise manner .
Speaker #4: This will be the framework for our high level roadmap for 2026 and beyond . Now we have listened to our constituents , shareholders , creditors , rating agencies and peers in the industry and we've combined we have compiled some of these comments that we've heard .
Speaker #4: And hear often , and we've laid them out on slide ten of our company presentation . Now we're fully aware of the challenges in front of us from geographical positioning of our assets to cost of capital to questions surrounding the company's potential strategic options .
Speaker #4: Now , the key question is how to begin to rebuild and sustain market confidence . We're not ignoring the realities of our situation .
Speaker #4: Instead , we're facing them head on . And I want to take a moment to address several of the most common concerns . We often hear .
Speaker #4: I want to do that openly and directly . Number one , Eastern Midland Basin is unproven . High peak is drilled over 350 horizontal wells , and it produced over 90 million from those wells and third party organizations are now recognizing well performance cost differences , I profitability and inventory quality and scale high peaks and offset operators track records over the last several years have dispelled this comment .
Speaker #4: Number two , you guys have a growth at all costs mentality . As a previous previously said , there were many times in our history that may have been the focus , but I think High Peak has been consistent over the last couple years in trying to maintain our current level of production and show the market that we're going to operate within cash flow .
Speaker #4: Number three . High Peak is Overlevered . That is a true statement . We are overlevered for the size of company . We are today .
Speaker #4: And this is one of our primary focuses. Moving forward, we are working to address this issue in a thoughtful and methodical way.
Speaker #4: Hopefully you've gotten that sense through this call that operating within cash flow and paying down debt are absolutely top of our list . And major focuses of our major areas of focus .
Speaker #4: Number four , you're starting to have geo issues as your percentage , gas production is increasing . We have seen increases in gas and NGL production .
Speaker #4: However , this is primarily due to historical takeaway issues that have been solved as our gas midstream partners increase their takeaway capacity and we have connected all of our central tank batteries to our gathering system and our gatherers have lowered field wide pressures , has allowed more oil and gas or more gas and liquids to flow to cells .
Speaker #4: I would also like to remind everybody that our percent oil production will fluctuate from quarter to quarter at times due to where our completion operations are taking place and the timing associated with turning online .
Speaker #4: New pads . But at any reasonable cadence , our oil percentage should trend closer to 70% . Number five , High Peak has no float in their stock .
Speaker #4: Now I hear this one a lot . Typically it's I own it . My personal account , but I can't own it in my fund .
Speaker #4: Now, this has been a serious issue that we have faced for some time now, and we have done some things in the past that may have exacerbated the problem.
Speaker #4: However , we are working to fix this issue as it is extremely important . Moving forward . I've already discussed the methodical distribution plan for the two high peak partnerships .
Speaker #4: We are going to be measured and deliberate in how we solve this problem . It cannot be fixed overnight . Number six , High Peak has been for sale for years .
Speaker #4: High peak is a publicly traded company and as such we are always open to evaluating value enhancing opportunities . That said , again , I want to be very clear , the board and management are fully aligned and unwavering in our commitment to long term strategy of operating within cash flow , exercising disciplined decision making and maintaining measured , controlled execution .
Speaker #4: Our focus remains on building sustainable value for our shareholders over the long term . Final one high peak is a controlled company and there is no oversight as of highlighted earlier in the call today , we're very encouraged by the progress we've made over the last few months .
Speaker #4: We have we have established fully independent board committees , appointed an independent chairman and put in place a clear plan starting in 2026 to transition away from being a controlled company .
Speaker #4: These steps strengthen oversight , enhance accountability and position high peak for long term sustainable value creation . Now , in conclusion , our company is in the midst in the midst of a meaningful transformation , one centered on stronger governance and accountability and a long term focus on creating value for our shareholders .
Speaker #4: We're allocating capital with discipline , managing costs with precision , and maintaining relentless focus on efficiency . Our asset base gives us the flexibility to operate within cash flow , generate sustainable , free cash , reduced debt and continue building value .
Speaker #4: The right way . We are not in the business of chasing production for short term gains . We are here to build a durable , well-run enterprise , one that applies sound business principles and puts every dollar to work where it drives the greatest return through disciplined execution , clear direction and a unified team .
Speaker #4: We're positioning this company to perform in any environment. We are proud of what we have built, confident in where we are headed, and focused on delivering lasting value for our shareholders, employees, and partners.
Speaker #4: Thank you . And with my comments now complete , we'll open the call up for questions .
Speaker #2: Thank you . As a reminder to ask a question at this time , please press star one one on your telephone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from the line of Jeff Robertson with Water Tower Research .
Speaker #2: Your line is now open .
Speaker #5: Thank you . Good morning . Mike , can you talk in the context of your leverage plan , how you think that unfolds over 2026 under , say , your $65 scenario and how much flexibility that might give you or give the company to address the term loan .
Speaker #4: Absolutely . Jeff . No . Great question . Obviously , the the free cash flow generation is going to be dictated mostly by the oil price that that we garner from the market .
Speaker #4: High peak is doing all the things we can control from cost management to capital deployment . But again , as you've pointed out in that kind of base case scenario , we can generate significant free cash flow .
Speaker #4: Our term loan debt that we have today , we can pay down debt at par with no penalty . So as we generate free cash flow in that scenario , look for us to do that again , which will reduce absolute debt as well as reduce our leverage ratio .
Speaker #4: Now, if you look farther into the future again, it could be a year or it could be more. As we continue to deliver for the company and as we continue to progress, and our production base ages, what you'll see is our corporate decline rate will come down.
Speaker #4: Call it a percent and a half to 2% a year. Today we sit at kind of a mid to high 30% decline rate.
Speaker #4: That changes your credit profile . And again opens you up to potentially more normal way financing into the future . But again Jeff today and into the very near future , our goal is capital management .
Speaker #4: And paying down debt .
Speaker #5: How the hedges fit into those into those goals . Mike , I know you've got , I think , an average swap price on some of your production for 26 at about $63 a barrel .
Speaker #4: Yes , sir . And could you repeat that ? Our speaker was cutting out a little bit there . Jeff , I'm sorry .
Speaker #4: .
Speaker #5: Sure . Just basically , how do you think about hedging in the context of managing cash flows in a $60 , $65 per barrel price environment to to work toward your leverage goals ?
Speaker #5: I know you have some , I think minimum requirements , but I'm just curious how you think about that as you go forward .
Speaker #4: You bet . No . Great question , Jeff . We want to be very what you will see from High Peak is a much more systematic and methodical hedging program .
Speaker #4: You know, obviously we do have some minimum requirements that we will continue to have to hedge a little bit into the future.
Speaker #4: Each quarter . But those are small pieces . Now . We'll always be opportunistic if that opportunity were to come along . You'll notice that we layered on some gas hedges a couple quarters back that were , you know , fantastic prices in the 443 range .
Speaker #4: We've also hedged some basis differentials , but I think what you'll see in the as prices continue to stay in this lower range , it'll be very methodical and small slices that we would layer on .
Speaker #4: Again, you tend to see less when prices are low, and then when prices move up a little bit, I think you're going to see us layer on a little bit more.
Speaker #4: We want to protect our capital budget. We want to protect the dividend as it sits today. Again, in this kind of base.
Speaker #4: Case , 60 to $70 range . But I think looking forward to think somewhere in the 55 to 65% hedged at these kind of prices are probably what you would see .
Speaker #4: High peak move towards . Obviously , if we had a spike in commodity prices , you may see us push that above that hedge percentage going forward .
Speaker #2: Thank you .
Speaker #6: Thank you .
Speaker #2: Our next question comes from the line of Noah Huggins with Bank of America. Your line is now open. Noah, your line is open.
Speaker #2: Please check your mute button. Our next question comes from the line of Nicholas Pope with Roth Capital. Your line is now open.
Speaker #7: Good morning everyone . Good morning . Sounds like there's some phone problems . Curious as you kind of look at this plan and you look at the the flex that you have with different at different oil kind of environments .
Speaker #7: You brought that second rig back . Curious if there's changes in how you're thinking about where kind of within the the acreage footprint you're going to be drilling or what you're going to be drilling and if the focus changes in those different scenarios , you know , maybe between flat top , single peak or even in the different formations , like how much flexibility is there in how much does does the pricing affect what and where you're drilling these , these different scenarios ?
Speaker #4: No great question , Nick . The good thing is we're drilling , Wolfcamp a lower Sprayberry co-developed think 5% to 10% that we will drill in the middle , Sprayberry zone , whether we run one and a half rigs or two rigs that split will not change in what we drill now , where we drill , if you look at the split of the capital deployment that we've had and the recent kind of year or so , it's about 70% up at flat top and 25 , 30% in signal peak .
Speaker #4: That also fits with what our inventory in each one of those zones is; between Flat Top and Signal Peak, returns are very similar between the two areas.
Speaker #4: And all these zones . So again , we approach it as a Co program . And the split between flat top and signal peak is more based on the split of inventory , which is about 7030 .
Speaker #7: Got it . That that makes sense . As you as you kind of look at the base I mean your lease operating expenses has been I mean , almost flat the last six quarters .
Speaker #7: I mean , curious if there's . Opportunities for going back into Wells , seeing an uptick in Workovers field maintenance type , type work as you're , you know , maybe shifting a little bit away from , from a more active drilling program .
Speaker #7: To field optimization , kind of , you know , you talked about 350 wells that you've that have been drilled in this , this eastern extension of the Midland .
Speaker #7: Curious how that might change with with kind of maybe a slower development program ?
Speaker #4: No. Great question. And we're ahead of you on that. So if you look at the last kind of two quarters, you'll see some expense workover spend.
Speaker #4: That was a little higher than what it had been . Kind of Q1 of this year , Q4 of the previous year . So where we would normally running kind of $0.80 per boe somewhere in that range , we've been a dollar or a little bit more the last two quarters .
Speaker #4: So as we've pulled back on that capital program now , there are some capital workovers that we have done as well . But think very , very high rate of return work .
Speaker #4: So we've gone into some of our wells and done some expense workovers and have seen some really good results from that . So again , while we've pulled back activity on the drilling complete side , we have gone back and optimized our production base .
Speaker #4: And we'll continue at a little bit lower pace going forward because we hit all the large items that we had on our list.
Speaker #4: The last quarter or so, but there will be additional work every quarter that we will continue to focus on to keep that efficiency high.
Speaker #7: And those expense workovers that you kind of highlighted . And I know break out somewhat , is that production optimization or is that kind of remediation type work ?
Speaker #7: Is that what the kind of mix of?
Speaker #4: So the answer there , Nick , will be . Yes . And yes . So usually what you have is you'll have a well , that may be struggling with a pump that's two years old .
Speaker #4: And again, the fact that we are able to get run lives of two-plus years out of these pumps is almost unheard of in the Permian Basin.
Speaker #4: But for instance , when that will happen , we obviously you would have an expense cost to go replace that or change the artificial lift .
Speaker #4: We'll take the opportunity at that point to go in , do a little bit of cleanout on the well , maybe a little bit of what I call small .
Speaker #4: Pump jobs, you know, nothing like a frack job. A little acid and things like that to be able to optimize that production.
Speaker #4: And then we typically lower where we pump the well from . So we will move down in the hole so that we can pull down the pressure where pumping these wells at to a lower point , i.e. giving more drive from the reservoir into our well .
Speaker #4: And we're seeing great results from that. Some of these wells were actually pumping deep into the curve, lowering our point that we're drawing that fluid from by as much as 250 to 300 ft.
Speaker #4: And with the reservoir we have with a little bit higher permeability , we're seeing great results from that . So you don't see it day one .
Speaker #4: It takes time , but you're going to start seeing better and better recoveries from these wells .
Speaker #7: Gotcha. I appreciate it. I'll.
Speaker #4: Yes .
Speaker #7: Sir . Great questions . Thanks , guys .
Speaker #4: You bet .
Speaker #2: Thank you . As a reminder to ask a question at this time , please press star one one on your touchtone telephone . Our next question comes from the line of Jeff Robertson with water research .
Speaker #2: Your line is now open.
Speaker #5: Thanks , Mike . Just to follow up , you said you're going to keep the second rig . At least through the end of December .
Speaker #5: Can you talk about how the carryover inventory will impact production, at least in the first half, or maybe the first three quarters of 2026?
Speaker #4: Yes, sir. Absolutely. So we picked up the second rig on October 15th, just kind of a rule of thumb for where we're at in the basin.
Speaker #4: We typically drilled two wells a month per rig . So that'll get us an additional 5 to 6 wells , drilled a little more than two per month .
Speaker #4: Now . So call it 5 to 6 wells that we will have drilled in the fourth quarter . In addition to the one rig program that will carry into 2026 .
Speaker #4: Again , we're we're not talking about 2026 activity per se . Obviously , we laid out in the prepared remarks a kind of high level overview , bare base and bull case that will flow through our decisions on how we guide for 2026 .
Speaker #4: Again, it's a little early. We'd like to see where oil prices kind of level out over the next month or so.
Speaker #4: But to your point , bringing over those five wells because again , anything you drill in the fourth quarter typically doesn't come on until the first quarter or early second quarter .
Speaker #4: As we look into 2026, we will have somewhere in the range of 16 to 18 ducks, or wells in some form of completion, that roll into 2026.
Speaker #4: Again , supporting that kind of Q1 and Q2 production forecast .
Speaker #5: Thank you .
Speaker #4: Yes , sir .
Speaker #2: Thank you . Our next question comes from the line of Noah Huggins with Bank of America . Your line is now open .
Speaker #8: Good morning . For my first question here , you guys , yesterday filed an S3 . Could you maybe just talk about what the reasoning behind that was and if you had any plans with that moving forward ?
Speaker #9: Yeah . Hey , Noah , this is Ryan . Great question . The sole reason for filing the S3 or previous shelf registration statement that we had on file went stale .
Speaker #9: And it expired. So, all we were doing was refreshing it. We have absolutely no intention of issuing any new shares anytime soon.
Speaker #8: Great . And then , you know , given that we're kind of on the border here of your base and bear case , how long do you need to see prices kind of either sub60 to drop activity or , you know , between that 60 to 70 to , you know , move into that base case ?
Speaker #8: Is it a month? Is it a few weeks? Just how are you thinking about that?
Speaker #4: So a couple of ways we're thinking about it , Noah . And and obviously there's it's a multivariate problem . You know , obviously you could have a couple days .
Speaker #4: You could even have a month . When you look at this year , you know , we've probably averaged I don't know , 63 , $64 for the whole year .
Speaker #4: You know , that would put you pretty squarely in the in between the bear base case . Again , these aren't hard lines .
Speaker #4: You know , there's going to be some some squish between them . But if I look into 2026 , even if you were in the bear case , something less than two rigs .
Speaker #4: Again , remember , you pick up it's kind of like a they call it a dip switch on or off . Right . So you pick a rig up , it's on .
Speaker #4: You lay it down , it's off . So in order to get something that's less than two kind of infers something more than one .
Speaker #4: So call it one and a half . The way you would do that is drill with two rigs for a portion of the year , and then lay it down .
Speaker #4: Now , kind of when I answered the question for Jeff on timing , when you drill these wells and when you bring them on are important for production throughout the quarters of the year .
Speaker #4: So in reality , I would foresee if we drill or , you know , and with board approval , obviously , if we chose to do more than one rig and we're in kind of the one and a half to 1.7 rigs for next year based on whatever the oil prices look like toward the end of the year , we would most likely have that second rig going for the first portion of the year .
Speaker #4: So you may see us keep the second rig for some months into 2026 , and then it would be determined by , you know , kind of oil price and long term outlook , as well as just the whole macro environment that we're in .
Speaker #4: It's very volatile right now . So want to make sure that we keep that kind of long term , prudent look of what's going on in the market .
Speaker #8: Gotcha . And just one more question . Could you maybe add some details around the the distribution plan for 26 ? Just regarding high peak Energy partners to is this going to be just a single drop down to the LPs in one go and then just rough idea on timing within the year .
Speaker #8: If you could give that .
Speaker #9: Yeah . Hey Noah , this is Ryan again . You know , really good question . At this point , I don't think we're prepared to to lay out the exact plan , but the plan , like Mike said during his prepared remarks , is to be very methodical , which most likely translates to us slowly metering them out to the different LPs throughout the calendar year .
Speaker #9: Again , most of the limited partners have a very long term investment mindset here . So it's nothing that causes us any concern from a kind of share overhang .
Speaker #9: We don't expect anybody to to rush to sell by any means , especially , you know , current share prices . But we will be very strategic and methodical about it .
Speaker #9: And it will, you know, most likely start early in the year, but will last throughout the calendar year.
Speaker #8: Really helpful guys . Thank you .
Speaker #2: Thank you . And I'm currently showing no further questions at this time . This does conclude today's call . Thank you all for your participation .