HighPeak Energy, Inc. (HPK): Business Model Canvas [11-2024 Updated]

HighPeak Energy, Inc. (HPK) stands at the forefront of the oil and gas industry, leveraging its strategic partnerships and advanced technologies to drive sustainable growth. This blog post delves into the intricacies of HPK’s Business Model Canvas, highlighting key elements such as its value propositions, customer segments, and revenue streams. Discover how this dynamic company navigates the complexities of energy production and market demands below.

HighPeak Energy, Inc. (HPK) - Business Model: Key Partnerships

Collaborations with local exploration firms

HighPeak Energy engages in collaborations with local exploration firms to enhance its resource acquisition and operational efficiencies. These partnerships allow the company to leverage local knowledge and reduce exploration risks. For instance, HighPeak has been involved in joint ventures in the Permian Basin, which is critical for its growth strategy in crude oil and natural gas exploration.

Strategic alliances with drilling contractors

HighPeak Energy has established strategic alliances with various drilling contractors to optimize its drilling operations. As of September 2024, the company operates using two drilling rigs and one frac crew, which are essential for its development activities in the Flat Top and Signal Peak areas of Texas. The alliances with contractors enable HighPeak to maintain operational flexibility and reduce costs associated with drilling operations.

Agreements with energy market participants

HighPeak has entered into significant agreements with energy market participants, such as crude oil purchasers and transporters. A notable agreement includes a contract with DK Trading & Supply, LLC, which involves a minimum volume commitment of approximately $138.7 million over ten years, starting from May 2024, based on the delivery of 23,500 barrels of oil per day. This contract is crucial for securing a steady revenue stream and managing market risks associated with fluctuating oil prices.

Partnerships for technology and service support

HighPeak Energy has formed partnerships for technology and service support to enhance its operational capabilities. In particular, the company has engaged with Pilot Exploration, Inc. for water treatment technology, which allows for the recycling of produced water in its operations. This partnership not only aids in environmental sustainability but also reduces operational costs. The agreement included a minimum volume commitment of 29.2 million barrels of produced water.

Partnership Type	Partner	Details	Financial Commitment
Local Exploration Firms	Various local firms	Joint ventures for resource acquisition	N/A
Drilling Contractors	Multiple contractors	Drilling operations support	N/A
Energy Market Participants	DK Trading & Supply, LLC	Crude oil marketing contract	$138.7 million over 10 years
Technology Support	Pilot Exploration, Inc.	Water treatment technology	Minimum volume of 29.2 million barrels

HighPeak Energy, Inc. (HPK) - Business Model: Key Activities

Exploration and production of oil and gas

HighPeak Energy engages in the exploration and production of crude oil and natural gas primarily in the Permian Basin. As of September 30, 2024, the company holds approximately 147,795 gross (137,207 net) acres, with about 65% of these acres held by production. The company operates around 97% of its net acreage and has a working interest averaging 93%.

Horizontal drilling and hydraulic fracturing

In the nine months ending September 30, 2024, HighPeak Energy successfully drilled and completed 55 gross (48.1 net) horizontal wells, of which 51 gross (41.4 net) were placed on production. The company utilized an average of two drilling rigs and one frac crew during this period. The Flat Top area accounted for 49 gross drilled wells, while the Signal Peak area contributed 6 gross drilled wells.

Metric	Q3 2024	Q3 2023	% Change
Average Daily Sales Volumes (Boe)	51,346	52,708	(3%)
Crude Oil (Bbls)	38,710	44,381	(13%)
NGL (Bbls)	6,497	4,708	38%
Natural Gas (Mcf)	36,831	21,716	70%

Maintenance of existing wells

HighPeak Energy is committed to the maintenance of existing wells to ensure optimal production levels. The company reported production costs for crude oil and natural gas of $35.4 million for Q3 2024, a decrease of 11% compared to Q3 2023. The production costs per Boe were $7.12, down 10% from $7.87 in the previous year.

Environmental compliance and reporting

HighPeak Energy adheres to stringent environmental compliance and reporting standards. In Q3 2024, the company's production and ad valorem taxes were $15.4 million, down 18% from $18.8 million in Q3 2023, reflecting efforts to manage costs effectively while complying with regulatory requirements.

Environmental Compliance Metrics	Q3 2024	Q3 2023	% Change
Production and Ad Valorem Taxes	$15,412	$18,839	(18%)
Exploration and Abandonment Costs	$362	$1,728	(79%)

HighPeak Energy, Inc. (HPK) - Business Model: Key Resources

Extensive leasehold positions in the Permian Basin

As of September 30, 2024, HighPeak Energy holds approximately 147,795 gross (137,207 net) acres in the Permian Basin, specifically in Howard and Borden Counties, Texas. About 65% of this acreage is held by production, with an average working interest of 93%. The company operates around 97% of its net acreage, with over 90% dedicated to horizontal wells with lateral lengths of 10,000 feet or greater.

Advanced drilling technology and equipment

HighPeak Energy utilizes advanced drilling technology to enhance its operational efficiency. As of September 30, 2024, the company was operating two drilling rigs and one frac crew. In the nine months ended September 30, 2024, the company successfully drilled and completed 55 horizontal wells (51 gross and 41.4 net), with a significant focus on optimizing production through its horizontal drilling program.

Skilled workforce with industry expertise

HighPeak Energy employs a skilled workforce that is essential for its operations in the competitive oil and gas sector. The company's human resources are critical in managing advanced drilling technologies and maintaining operational efficiency. This expertise is reflected in the company's production capabilities, where the average daily sales volume for the nine months ended September 30, 2024, was approximately 49,874 Boe, comprising 89% liquids production.

Financial resources from equity and debt financing

HighPeak Energy's financial strength is supported by robust cash flow generation and access to capital markets. For the nine months ended September 30, 2024, the company reported $550.9 million in net cash provided by operating activities. The total liabilities as of September 30, 2024, stood at $1.2 billion, with long-term debt netting to $953.8 million. The company plans a capital budget of approximately $540 to $580 million for 2024, aimed at drilling, completion, and infrastructure.

Key Resource	Details
Leasehold Positions	147,795 gross (137,207 net) acres in the Permian Basin; 65% held by production
Drilling Technology	Two drilling rigs and one frac crew; 55 horizontal wells drilled and completed in 2024
Workforce	Skilled workforce managing advanced drilling operations
Financial Resources	Net cash from operating activities: $550.9 million; Long-term debt: $953.8 million; 2024 capital budget: $540-$580 million

HighPeak Energy, Inc. (HPK) - Business Model: Value Propositions

High-quality crude oil and natural gas production

HighPeak Energy, Inc. focuses on the production of high-quality crude oil and natural gas, primarily operating in the Midland Basin of Texas. As of September 30, 2024, the company reported average daily sales volumes of 51,346 Boepd, a slight decrease of 3% from the previous year. The breakdown of sales volumes included 38,710 Bbls of crude oil, 6,497 Bbls of NGL, and 36,831 Mcf of natural gas.

Competitive pricing through efficient operations

HighPeak Energy maintains competitive pricing through operational efficiency. The weighted average realized crude oil price per barrel for the three months ended September 30, 2024, was $75.99, down from $82.87 in the same period of 2023. The company's production costs were $35.4 million for the quarter, reflecting a decrease in production and ad valorem taxes due to lower commodity prices. The total operating revenues for the third quarter of 2024 amounted to $271.6 million, compared to $345.6 million in 2023.

Commitment to sustainability and environmental stewardship

HighPeak Energy emphasizes sustainability and environmental stewardship in its operations. The company is focused on reducing its carbon footprint and improving operational efficiency. Their capital budget for 2024 is estimated between $540 million and $580 million, which will support drilling, completion, and environmental initiatives.

Strong operational performance in the Midland Basin

HighPeak's operational performance in the Midland Basin has been robust. The company operates approximately 97% of its net acreage, with significant production from horizontal wells. In the nine months ended September 30, 2024, HighPeak successfully completed 51 gross (41.4 net) horizontal wells. The company’s assets in the Midland Basin cover approximately 147,795 gross acres.

Metric	Q3 2024	Q3 2023	Change (%)
Average Daily Sales Volumes (Boepd)	51,346	52,708	-3%
Crude Oil Sales (Bbls)	38,710	44,381	-13%
NGL Sales (Bbls)	6,497	4,708	38%
Natural Gas Sales (Mcf)	36,831	21,716	70%
Weighted Average Realized Crude Oil Price ($/Bbl)	$75.99	$82.87	-8.5%
Total Operating Revenues ($ million)	$271.6	$345.6	-21.4%

HighPeak Energy, Inc. (HPK) - Business Model: Customer Relationships

Long-term contracts with major purchasers

HighPeak Energy has established significant long-term contracts with major purchasers for its crude oil production. In September 2024, the company entered into an amended and restated crude oil marketing contract with DK Trading & Supply, LLC. This contract includes a minimum volume commitment that totals $138.7 million based on the delivery of 23,500 barrels per day (Bopd) for the first ten years, with pricing escalating throughout the term. As of September 30, 2024, HighPeak delivered approximately 28,255 Bopd under this agreement, indicating strong compliance and a proactive approach to meeting contractual obligations.

Transparent communication regarding production and pricing

HighPeak Energy emphasizes transparent communication with its customers concerning production levels and pricing strategies. The average realized crude oil prices for the three months ended September 30, 2024, were $75.99 per barrel, down from $82.87 in the same period of 2023. Additionally, the company reported that its weighted average natural gas prices per Mcf fell to $0.42, compared to $1.89 in the prior year. Such transparency aids in building trust and ensuring customers are well-informed of market conditions affecting pricing.

Responsive customer service for buyers of crude oil and gas

HighPeak maintains a responsive customer service framework to address inquiries and concerns from buyers promptly. For the three months ending September 30, 2024, the company reported operating revenues of $271.6 million, which reflects its ability to sustain customer relationships through effective service. The company also focuses on minimizing downtime and ensuring that customers receive their products in a timely manner, which is critical in the oil and gas industry.

Engagement with stakeholders on environmental practices

HighPeak Energy engages actively with stakeholders regarding its environmental practices, recognizing the importance of sustainability in modern energy production. The company has been proactive in addressing environmental concerns, which is reflected in its operational strategies. For instance, during the nine months ended September 30, 2024, HighPeak incurred $1.2 million in repairs related to environmental compliance and damage control, indicating a commitment to maintaining operational integrity while addressing environmental impacts.

Aspect	Details
Long-term Contracts Value	$138.7 million (with DK Trading & Supply)
Average Realized Crude Oil Price (3Q 2024)	$75.99 per barrel
Average Realized Natural Gas Price (3Q 2024)	$0.42 per Mcf
Operating Revenues (3Q 2024)	$271.6 million
Environmental Repair Costs (9M 2024)	$1.2 million

HighPeak Energy, Inc. (HPK) - Business Model: Channels

Direct sales to refining and marketing companies

HighPeak Energy, Inc. engages in direct sales to refining and marketing companies as a primary channel for its crude oil and natural gas products. For the nine months ended September 30, 2024, the company reported crude oil sales of $827.6 million, with a significant portion attributed to these direct sales efforts.

Participation in energy trading markets

The company actively participates in energy trading markets to optimize its sales strategy. As of September 30, 2024, HighPeak's average daily sales volumes were 51,346 barrels of oil equivalent (Boe), which included a mix of crude oil, natural gas liquids (NGL), and natural gas. The weighted average realized prices for the three months ended September 30, 2024, were $75.99 per barrel for crude oil, $21.14 per barrel for NGL, and $0.42 per Mcf for natural gas.

Use of third-party transportation and storage services

HighPeak Energy utilizes third-party transportation and storage services to facilitate the delivery of its products. The company has entered into a marketing contract with DK Trading & Supply, LLC, which includes a minimum volume commitment of $138.7 million over ten years, based on the gross piped barrels delivered. This contract is crucial for ensuring the efficient movement of crude oil from production sites to refineries.

Digital platforms for investor relations and communications

HighPeak Energy employs digital platforms to enhance investor relations and communication with stakeholders. The company's cash provided by operating activities totaled $550.9 million for the nine months ended September 30, 2024, reflecting strong operational performance. The company also declared a quarterly dividend of $0.04 per share in August 2024, amounting to $5 million in total dividends paid.

Channel	Description	Financial Impact (2024)
Direct Sales	Sales to refining and marketing companies	$827.6 million in crude oil sales
Energy Trading	Participation in energy markets	Average daily sales of 51,346 Boe
Third-party Services	Transportation and storage services	Minimum volume commitment of $138.7 million
Digital Platforms	Investor relations and communications	Cash provided by operations: $550.9 million

HighPeak Energy, Inc. (HPK) - Business Model: Customer Segments

Major oil and gas refineries

HighPeak Energy, Inc. (HPK) serves major oil and gas refineries by supplying crude oil and natural gas. The company’s crude oil sales for the three months ended September 30, 2024, were $270.6 million, a decrease from $338.4 million during the same period in 2023. For the nine months ended September 30, 2024, crude oil sales totaled $827.6 million, compared to $790.5 million in the previous year.

Industrial consumers of natural gas

Industrial consumers are critical to HighPeak's customer segments, as they require substantial natural gas supplies for operations. In the three months ending September 30, 2024, the average daily natural gas sales volume reached 36,831 Mcf, representing a 70% increase from 21,716 Mcf in the same quarter of 2023. The total natural gas sales for the nine months ended September 30, 2024, amounted to $7.0 million, down from $19.7 million in the same period of 2023.

Energy traders and brokers

HighPeak Energy also engages with energy traders and brokers who facilitate the buying and selling of energy commodities. For the nine months ended September 30, 2024, the company reported average daily sales volumes of 51,346 Boe, a slight decrease from 52,708 Boe in the same period of 2023. The company’s operational revenues during this period totaled $834.6 million, reflecting market conditions and pricing fluctuations.

Institutional and retail investors

HighPeak Energy attracts both institutional and retail investors by offering dividends and equity growth opportunities. The company declared a quarterly dividend of $0.04 per share in August 2024, which resulted in approximately $5.0 million in dividends paid. As of September 30, 2024, the company's net income was $49.9 million, translating to earnings per diluted share of $0.35.

Customer Segment	Q3 2024 Sales (in million $)	Q3 2023 Sales (in million $)	9M 2024 Sales (in million $)	9M 2023 Sales (in million $)	Average Daily Sales Volume (Boe)
Major oil and gas refineries	270.6	338.4	827.6	790.5	51,346
Industrial consumers of natural gas	0.94	7.2	7.0	19.7	36,831 Mcf
Energy traders and brokers	N/A	N/A	834.6	810.1	51,346
Institutional and retail investors	N/A	N/A	N/A	N/A	N/A

HighPeak Energy, Inc. (HPK) - Business Model: Cost Structure

Exploration and Production Costs

For the nine months ended September 30, 2024, HighPeak Energy incurred exploration costs of $103.7 million and development costs of $348.2 million, leading to total finding and development costs of $462.2 million. The crude oil and natural gas production costs for the three months ended September 30, 2024, were reported at $35.4 million, reflecting a decrease from $39.8 million in the same period of 2023.

Cost Type	Amount (in millions)
Exploration Costs	$103.7
Development Costs	$348.2
Total Finding and Development Costs	$462.2
Production Costs (Q3 2024)	$35.4
Production Costs (Q3 2023)	$39.8

General and Administrative Expenses

HighPeak Energy reported general and administrative expenses of $4.97 million for the three months ended September 30, 2024, down from $6.93 million in the same quarter of 2023. For the nine months ended September 30, 2024, these expenses totaled $14.39 million, an increase from $11.95 million in 2023. The stock-based compensation expense during the same quarter was $3.75 million, significantly lower than $14.06 million in the comparable quarter of 2023.

Expense Type	Q3 2024 (in millions)	Q3 2023 (in millions)
General and Administrative Expenses	$4.97	$6.93
Stock-Based Compensation	$3.75	$14.06

Capital Expenditures for Drilling and Infrastructure

HighPeak Energy's capital expenditures for the nine months ended September 30, 2024, amounted to $451.8 million, primarily allocated for drilling, completion, and infrastructure. The expected capital budget for 2024 is projected to be in the range of $540 to $580 million.

Capital Expenditure Category	Amount (in millions)
Capital Expenditures (2024)	$451.8
Projected Capital Budget (2024)	$540 - $580

Debt Servicing Costs

As of September 30, 2024, HighPeak Energy reported an outstanding balance of $1.11 billion on its Term Loan Credit Agreement. The interest expense for the three months ended September 30, 2024, was $42.6 million. The company incurred a loss on extinguishment of debt totaling $27.3 million during the nine months ended September 30, 2023.

Debt Servicing Item	Amount (in millions)
Outstanding Debt (Term Loan)	$1,110.0
Interest Expense (Q3 2024)	$42.6
Loss on Extinguishment of Debt	$27.3 (2023)

HighPeak Energy, Inc. (HPK) - Business Model: Revenue Streams

Sales of crude oil and natural gas

HighPeak Energy's primary revenue stream is derived from the sales of crude oil and natural gas. For the three months ended September 30, 2024, the company reported:

Revenue Source	Revenue ($ thousands)
Crude Oil Sales	270,636
NGL and Natural Gas Sales	942
Total Operating Revenues	271,578

The average daily sales volumes for crude oil, NGL, and natural gas during the same period were:

Commodity	Volume (Bbls/Mcf)	Percentage Change
Crude Oil	38,710	(13)%
NGL	6,497	38%
Natural Gas	36,831	70%

Revenue from natural gas liquids (NGLs)

The revenue from NGLs is significant for HighPeak Energy. The average realized price for NGLs per barrel for the three months ended September 30, 2024, was:

Period	Average Price per Bbl ($)	Percentage Change
September 2024	21.14	5%
September 2023	20.08	-

For the nine months ended September 30, 2024, the total revenue from NGLs was reported at $7,013,000, compared to $19,682,000 during the same period in 2023.

Potential earnings from joint ventures and partnerships

HighPeak Energy engages in joint ventures and partnerships that may contribute to its revenue streams. The company entered into a crude oil marketing contract with DK Trading & Supply, LLC, which includes a minimum volume commitment totaling $138.7 million based on gross piped barrels delivered over ten years. The company has delivered approximately 28,255 Bopd under this contract since May 2024.

Income from financial instruments related to energy trading

HighPeak Energy utilizes derivative financial instruments to hedge against price fluctuations in crude oil and natural gas. As of September 30, 2024, the estimated fair value of the outstanding open derivative financial instruments was a net asset of $22.9 million. During the nine months ended September 30, 2024, the company recognized a net derivative loss of $23.4 million, including a $11.5 million mark-to-market loss.

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.