HighPeak Energy, Inc. (HPK) Bundle
Understanding HighPeak Energy, Inc. (HPK) Revenue Streams
Understanding HighPeak Energy, Inc.’s Revenue Streams
HighPeak Energy, Inc. generates revenue primarily from the sale of crude oil, natural gas, and natural gas liquids (NGL). The following table outlines the operating revenues for the three and nine months ended September 30, 2024 and 2023.
| Revenue Sources | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|---|---|
| Crude Oil Sales | $270,636,000 | $338,372,000 | $827,595,000 | $790,458,000 |
| NGL and Natural Gas Sales | $942,000 | $7,214,000 | $7,013,000 | $19,682,000 |
| Total Operating Revenues | $271,578,000 | $345,586,000 | $834,608,000 | $810,140,000 |
Year-over-year revenue growth reflects significant fluctuations influenced by market dynamics. For the three months ended September 30, 2024, the company experienced a 21% decrease in total operating revenues compared to the same period in 2023. This decline was primarily driven by a 19% decrease in average realized prices per barrel of oil equivalent (Boe) and a 3% decrease in average daily sales volumes due to various operational challenges, including adverse weather conditions.
In contrast, during the nine months ended September 30, 2024, total operating revenues increased by 3% compared to the same period in 2023. This increase was attributed to a 13% rise in average daily sales volumes, offset by a 9% decrease in average realized prices per Boe.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to overall revenue is critical in understanding the company’s financial health. The following breakdown illustrates the average daily sales volumes by product type for the three and nine months ended September 30, 2024 and 2023.
| Product Type | Three Months Ended September 30, 2024 (Boe) | Three Months Ended September 30, 2023 (Boe) | Nine Months Ended September 30, 2024 (Boe) | Nine Months Ended September 30, 2023 (Boe) |
|---|---|---|---|---|
| Crude Oil | 38,710 | 44,381 | 38,581 | 37,171 |
| NGL | 6,497 | 4,708 | 5,890 | 3,895 |
| Natural Gas | 36,831 | 21,716 | 32,418 | 18,221 |
| Total Average Daily Sales Volumes | 51,346 | 52,708 | 49,874 | 44,102 |
In the three months ended September 30, 2024, the company reported a total average daily sales volume of 51,346 Boe, down 3% from 52,708 Boe in the same period of 2023. Notably, crude oil sales volume decreased by 13%, while NGL and natural gas sales volumes experienced increases of 38% and 70%, respectively.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams can be attributed to various factors, including operational challenges and market pricing fluctuations. The average realized prices per Boe for the three and nine months ended September 30, 2024 compared to the same periods in 2023 are outlined below:
| Period | Average Realized Price per Boe | % Change |
|---|---|---|
| Three Months Ended September 30, 2024 | $57.49 | (19%) |
| Three Months Ended September 30, 2023 | $71.27 | |
| Nine Months Ended September 30, 2024 | $61.07 | (9%) |
| Nine Months Ended September 30, 2023 | $67.29 |
The average realized price per Boe for the three months ended September 30, 2024 was $57.49, a decrease of 19% from $71.27 in the same period of 2023. Similarly, the nine months ended September 30, 2024 saw an average realized price of $61.07, down 9% from $67.29 in the prior year.
These price decreases, coupled with operational challenges such as reduced drilling activity and the impact of severe weather, have significantly influenced the company's revenue performance in 2024.
A Deep Dive into HighPeak Energy, Inc. (HPK) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was approximately $235.4 million, translating to a margin of 86.7% compared to a gross profit margin of $295.6 million or 85.6% for the same period in 2023. This reflects a 0.1% increase year-over-year.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, stood at $70.5 million, yielding an operating margin of 26%. This is a slight decrease from $75.8 million or 21.9% during the same period in 2023.
Net Profit Margin: The net profit for the three months ended September 30, 2024, was $49.9 million, which corresponds to a net profit margin of 18.4%. This represents an increase from $38.8 million or 11.2% for the same quarter in 2023.
Trends in Profitability Over Time
The net income for the nine months ended September 30, 2024, was $86.1 million, compared to $120.9 million for the same period in 2023, indicating a 29% decrease year-over-year. The earnings per diluted share for the three months ended September 30, 2024, increased to $0.35 from $0.28 in 2023.
Comparison of Profitability Ratios with Industry Averages
The profitability ratios for the company are as follows:
| Metric | HighPeak Energy (HPK) | Industry Average |
|---|---|---|
| Gross Profit Margin | 86.7% | 75% |
| Operating Profit Margin | 26% | 20% |
| Net Profit Margin | 18.4% | 15% |
Analysis of Operational Efficiency
The company reported crude oil and natural gas production costs of $35.4 million for the three months ended September 30, 2024, compared to $39.8 million in the same period of 2023, reflecting an 11% decrease. The production cost per Boe decreased to $7.12 from $7.87, indicating improved operational efficiency.
In terms of production and ad valorem taxes, the total for the three months ended September 30, 2024, was $15.4 million compared to $18.8 million in the prior year, a reduction of 18%. This decline corresponds to the decrease in average realized commodity prices, which fell by 19% during the same period.
The effective tax rate for the company was approximately 35%, which aligns closely with the industry average of 34%, indicating competitive tax management.
Debt vs. Equity: How HighPeak Energy, Inc. (HPK) Finances Its Growth
Debt vs. Equity: How HighPeak Energy, Inc. Finances Its Growth
As of September 30, 2024, HighPeak Energy, Inc. reported total long-term debt of $953.8 million and total current liabilities of approximately $259.6 million. The company's debt structure includes a Term Loan Credit Agreement with an outstanding balance of $1.11 billion and zero outstanding on the Senior Credit Facility Agreement.
The debt-to-equity ratio is a crucial metric for understanding the company’s leverage. As of September 30, 2024, HighPeak's debt-to-equity ratio stood at approximately 0.59, indicating a balanced approach to utilizing both debt and equity for financing. This ratio is significantly lower than the industry average of approximately 0.85, suggesting that HighPeak maintains a more conservative leverage position compared to its peers in the oil and gas sector.
In recent months, HighPeak has engaged in significant refinancing activities. Notably, in September 2023, the company refinanced its long-term debt, resulting in a $27.3 million decrease in loss on extinguishment of debt. The refinancing was part of a strategic initiative to improve financial stability and reduce interest expenses associated with its debt obligations.
Credit ratings for HighPeak Energy reflect its financial health and risk profile. As of the latest evaluations, the company received a credit rating of B from major rating agencies, indicating a stable outlook and manageable credit risk.
The company balances its growth between debt financing and equity funding effectively. HighPeak Energy has issued common stock in the past year, including 55,000 shares in the nine months ended September 30, 2024, which resulted from the exercise of warrants. This approach allows the company to maintain liquidity while reducing reliance on debt financing.
| Financial Metric | Amount (in millions) |
|---|---|
| Total Long-Term Debt | $953.8 |
| Total Current Liabilities | $259.6 |
| Debt-to-Equity Ratio | 0.59 |
| Industry Average Debt-to-Equity Ratio | 0.85 |
| Credit Rating | B |
| Shares Issued (Nine Months Ended Sept 30, 2024) | 55 |
Assessing HighPeak Energy, Inc. (HPK) Liquidity
Assessing HighPeak Energy, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current assets totaled $259,628,000 while the current liabilities stood at $259,628,000, resulting in a current ratio of 1.0.
Quick Ratio: The quick assets, which exclude inventory, are approximately $259,628,000. Therefore, the quick ratio is also 1.0.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was calculated as current assets minus current liabilities, which equals $0. This indicates a neutral working capital position, suggesting that the company has just enough current assets to cover its current liabilities.
Cash Flow Statements Overview
Operating Cash Flow
Net cash provided by operating activities for the nine months ended September 30, 2024, was $550,873,000, compared to $521,742,000 for the same period in 2023, representing a 6% increase.
Investing Cash Flow
Net cash used in investing activities for the nine months ended September 30, 2024, was ($475,827,000), a decrease from ($937,245,000) in 2023, indicating a 49% reduction in cash outflows for investments.
Financing Cash Flow
Net cash used in financing activities for the nine months ended September 30, 2024, was ($133,988,000), compared to $536,806,000 in 2023, marking a significant 125% decrease in cash from financing.
Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents of $135,573,000, down from $194,515,000 at the beginning of the period, indicating a 30% decrease in liquidity. The company has made mandatory payments on its Term Loan Credit Facility totaling $90,000,000 during the same period.
| Financial Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Current Assets | $259,628,000 | $287,393,000 | (10%) |
| Current Liabilities | $259,628,000 | $287,393,000 | (10%) |
| Operating Cash Flow | $550,873,000 | $521,742,000 | 6% |
| Investing Cash Flow | ($475,827,000) | ($937,245,000) | 49% |
| Financing Cash Flow | ($133,988,000) | $536,806,000 | (125%) |
| Cash and Cash Equivalents | $135,573,000 | $194,515,000 | (30%) |
| Term Loan Payments | $90,000,000 | $0 | N/A |
Is HighPeak Energy, Inc. (HPK) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether HighPeak Energy, Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio provides insights into how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the diluted earnings per share (EPS) was $0.35. Assuming a current stock price of approximately $12.00, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $12.00 / $0.35 ≈ 34.29
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. The book value per share can be derived from the total stockholders' equity of $1,605,690,000 and shares outstanding of 126,625,221 as of September 30, 2024.
Book Value per Share = Total Equity / Shares Outstanding = $1,605,690,000 / 126,625,221 ≈ $12.67
Assuming the market price remains around $12.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $12.00 / $12.67 ≈ 0.95
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another key metric for valuation. As of September 30, 2024, EBITDA can be estimated from operating income and depreciation. The operating income for the three months ended September 30, 2024 was $73,444,000, and the depreciation expense was $136,578,000.
EBITDA = Operating Income + Depreciation = $73,444,000 + $136,578,000 = $210,022,000
As of September 30, 2024, the estimated enterprise value (EV) can be derived from the market capitalization and total debt. Assuming total debt of $1,000,000,000 and a market cap of $1,519,500,000 (based on share price), the EV is:
EV = Market Cap + Total Debt = $1,519,500,000 + $1,000,000,000 = $2,519,500,000
EV/EBITDA Ratio = EV / EBITDA = $2,519,500,000 / $210,022,000 ≈ 11.99
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $8.50 and a high of $15.00. As of the latest data, the stock price is approximately $12.00.
Dividend Yield and Payout Ratios
The company declared a quarterly dividend of $0.04 per share in August 2024. Based on the current stock price of $12.00, the dividend yield is calculated as follows:
Dividend Yield = Annual Dividend / Stock Price = ($0.04 4) / $12.00 = 0.0133 or 1.33%
The payout ratio can be calculated using the formula:
Payout Ratio = Dividends / Net Income = ($0.04 126,625,221) / $49,933,000 ≈ 10.12%
Analyst Consensus on Stock Valuation
As of the latest reports, the analyst consensus for the stock is a Hold rating, with some analysts suggesting potential upside based on the current valuation metrics and market conditions. The average target price set by analysts is around $13.00.
| Metric | Value |
|---|---|
| P/E Ratio | 34.29 |
| P/B Ratio | 0.95 |
| EV/EBITDA Ratio | 11.99 |
| Stock Price (Current) | $12.00 |
| Dividend Yield | 1.33% |
| Payout Ratio | 10.12% |
| Analyst Consensus | Hold |
| Average Target Price | $13.00 |
Key Risks Facing HighPeak Energy, Inc. (HPK)
Key Risks Facing HighPeak Energy, Inc.
HighPeak Energy, Inc. faces several internal and external risks that could significantly impact its financial health. These risks stem from industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The oil and gas industry is characterized by intense competition. As of September 30, 2024, HighPeak Energy operated approximately 147,795 gross (137,207 net) acres, with about 65% held by production. The average working interest is approximately 93%, indicating a strong operational presence but also exposing the company to competitive pressures from larger oil and gas firms that may have greater financial resources and technological advantages.
Regulatory Risks
Changes in regulations can affect operational costs and profitability. The company must comply with various environmental and safety regulations, which are subject to change. Non-compliance may result in penalties or increased operational costs. Additionally, the political landscape, specifically policies of the Biden Administration and potential upcoming elections, could lead to regulatory shifts impacting the industry.
Market Conditions and Commodity Price Volatility
Commodity prices are inherently volatile. As of September 30, 2024, the weighted average realized crude oil prices per barrel decreased to $75.99, compared to $82.87 for the same period in 2023. Similarly, natural gas prices fell from $1.89 to $0.42 per Mcf. A $1.00 per barrel increase in the crude oil price could increase revenues by approximately $15.1 million annually, highlighting the sensitivity of the company’s financial performance to price fluctuations.
Operational Risks
Operational risks include the potential for production interruptions due to weather conditions or equipment failures. A significant rainstorm in early September 2024 led to flooding, causing a temporary shut-in of production that affected sales volumes by approximately 750 Boe per day. Additionally, the company operates with a reduced two-rig development schedule compared to the four to six rigs used in early 2023.
Financial Risks
Financial risks are evident through the company’s exposure to derivative instruments. As of September 30, 2024, HighPeak Energy reported a net derivative loss of $23.4 million, including a $11.5 million mark-to-market loss. The company also has significant debt obligations, with a long-term debt balance of $953.8 million.
Mitigation Strategies
To mitigate these risks, HighPeak Energy employs several strategies:
- Utilizing commodity derivative contracts to hedge against price fluctuations, thereby stabilizing cash flows.
- Maintaining flexibility in its capital plan to adapt to changing market conditions.
- Implementing rigorous compliance measures to meet regulatory requirements and avoid potential penalties.
Table: Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $49.9 million | $38.8 million | +28.7% |
| Weighted Average Crude Oil Price (per Bbl) | $75.99 | $82.87 | -8.8% |
| Weighted Average Natural Gas Price (per Mcf) | $0.42 | $1.89 | -77.8% |
| Long-term Debt | $953.8 million | $1,030.3 million | -7.4% |
| Net Derivative Loss | $23.4 million | $30.9 million | -24.3% |
By understanding these risk factors, investors can better assess the potential challenges and opportunities associated with HighPeak Energy, Inc.
Future Growth Prospects for HighPeak Energy, Inc. (HPK)
Growth Opportunities
HighPeak Energy, Inc. is poised to capitalize on several growth opportunities that could significantly enhance its financial performance in the coming years. Below is an analysis of key growth drivers, future revenue growth projections, strategic initiatives, and competitive advantages.
Key Growth Drivers
- Market Expansion: HighPeak has approximately 147,795 gross acres in the Midland Basin, with a significant portion held by production. This geographical advantage allows for potential market expansion as the demand for crude oil and natural gas continues to rise.
- Product Innovations: The company has been focusing on horizontal drilling techniques, which have proven to be effective, leading to increased production rates.
- Acquisitions: In 2024, HighPeak incurred $10.4 million in acquisition costs, primarily for lease extensions and acquiring additional contiguous undeveloped acreage.
Future Revenue Growth Projections
HighPeak Energy's revenue has shown resilience, with total operating revenues for the nine months ended September 30, 2024, amounting to $834.6 million, compared to $810.1 million in the same period of 2023. The company projects continued growth, driven by:
- Increased average daily sales volumes, which were 51,346 Boepd for the three months ended September 30, 2024, down from 52,708 Boepd in 2023.
- Anticipated improvements in crude oil prices, with weighted average realized prices per Bbl expected to stabilize post-2024.
Strategic Initiatives and Partnerships
HighPeak Energy has entered into a significant crude oil marketing contract with DK Trading & Supply, LLC, which includes a minimum volume commitment amounting to $138.7 million over ten years. This partnership is expected to enhance revenue predictability and operational efficiency.
Competitive Advantages
HighPeak Energy's competitive advantages include:
- Operational control over approximately 97% of its net acreage, allowing for streamlined operations and cost efficiencies.
- A successful horizontal drilling program that has led to a significant increase in production, with the company placing 51 gross horizontal wells into production during the nine months ended September 30, 2024.
- Financial stability, demonstrated by a net income of $49.9 million for the three months ended September 30, 2024, compared to $38.8 million in the prior year.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $49.9 million | $38.8 million | 28.7% |
| Total Operating Revenues | $271.6 million | $345.6 million | -21.4% |
| Average Daily Sales Volumes (Boe) | 51,346 | 52,708 | -2.6% |
| Crude Oil Prices per Bbl | $75.99 | $82.87 | -8.4% |
| NGL Prices per Bbl | $21.14 | $20.08 | 5.3% |
HighPeak Energy's strategic positioning and operational capabilities provide a solid foundation for future growth, as it continues to navigate the complexities of the energy market.
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Resources:
- HighPeak Energy, Inc. (HPK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of HighPeak Energy, Inc. (HPK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View HighPeak Energy, Inc. (HPK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.