Earnings call transcript: HighPeak Energy Q3 2025 reports lower EPS, stock falls

HighPeak Energy reported its third-quarter 2025 financial results, revealing a significant drop in earnings per share (EPS) compared to forecasts. The company posted an EPS of $0.03, falling short of the expected $0.19, marking an 84.21% negative surprise. Revenue also missed expectations, coming in at $188.86 million against a forecast of $226.48 million, a 16.61% shortfall. Following the announcement, HighPeak's stock price dropped by 13.56% to $5.29, reflecting investor disappointment.

Key Takeaways

• HighPeak Energy's Q3 2025 EPS of $0.03 significantly missed the forecast of $0.19.
• Revenue fell short of expectations by 16.61%, totaling $188.86 million.
• The stock price decreased by 13.56% following the earnings release.
• Operational efficiency remained a focus, with cost-saving measures and production optimization.
• The company plans to incorporate a new fracturing technique in 2026 to enhance efficiency.

Company Performance

HighPeak Energy's performance in Q3 2025 was marred by lower-than-expected financial results. Despite maintaining production levels consistent with the previous quarter, the company faced challenges due to reduced development activity. HighPeak ran only one rig throughout the quarter, drilling six wells and completing nine. Capital expenditures were reduced by 30% compared to Q2 2025, reflecting a cautious approach to spending.

Financial Highlights

• Revenue: $188.86 million, down from the forecasted $226.48 million.
• Earnings per share: $0.03, compared to the forecast of $0.19.
• Capital Expenditures: Decreased by 30% from Q2 2025.

Earnings vs. Forecast

HighPeak Energy's actual EPS of $0.03 fell significantly short of the $0.19 forecast, resulting in an 84.21% negative surprise. This miss is notable when compared to previous quarters, indicating potential challenges in meeting market expectations. Revenue also underperformed, missing projections by 16.61%.

Market Reaction

Following the earnings release, HighPeak Energy's stock price fell by 13.56% to $5.29. The stock had been trading at $6.12 prior to the announcement. This decline positions the stock near its 52-week low of $5.18, signaling investor concerns over the company's ability to meet forecasts and maintain growth.

Outlook & Guidance

Looking ahead, HighPeak Energy plans to focus on disciplined capital allocation and debt reduction in 2026. The company intends to incorporate a new simul frac technique to improve operational efficiency and reduce costs. HighPeak also aims to complete 16-18 wells as it enters the new year, depending on oil price fluctuations.

Executive Commentary

CEO Michael Hollis stated, "We are not in the business of chasing production for short-term gains. We are here to build a durable, well-run enterprise." He emphasized the company's focus on capital management and debt reduction, highlighting the importance of getting "our financial house in order first."

Risks and Challenges

• Oil Price Volatility: HighPeak's operational strategy is heavily dependent on oil prices, with different plans for bear, base, and bull market scenarios.
• Debt Management: While the company has extended debt maturities to 2028, managing debt levels remains a priority.
• Production Optimization: The success of new techniques and well optimization efforts will be crucial to maintaining production levels.
• Capital Allocation: The ability to allocate capital efficiently in a fluctuating market environment presents ongoing challenges.
• Market Sentiment: Investor confidence may be shaken by the earnings miss, impacting future stock performance.

Q&A

During the earnings call, analysts inquired about HighPeak's hedging strategy, which targets 55-65% hedged positions. Questions also focused on production optimization techniques and the implications of the company's S-3 filing, which was clarified as a routine registration renewal. Executives detailed plans for a measured share distribution from private equity partnerships, aiming to reassure investors about future stability.

Full transcript - Highpeak Energy Acquisition Corp (HPK) Q3 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the HighPeak Energy third quarter 2025 earnings conference call. At this time, all participants are in 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 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. 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. Please go ahead.

Steven Tholen, Chief Financial Officer, HighPeak Energy: Good morning, everyone, and welcome to HighPeak Energy's third quarter 2025 earnings call. Representing HighPeak today are President and CEO Michael Hollis, Executive Vice President Ryan Hightower, Executive Vice President Daniel Silver, Senior Vice President Chris Munday, and I'm 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 HighPeak's website. Today's call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. Please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control.

We will also refer to certain non-GAAP financial measures on today's call, so please see the reconciliations in the earnings release and in our November investor presentation. I will now turn the call over to our President and CEO, Michael Hollis.

Michael Hollis, President and CEO, HighPeak Energy: Thank you, Steve. Good morning, everyone, and thank you for joining us today for HighPeak's 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, after which, and more importantly, I want to use this opportunity to give you a glimpse into our company roadmap looking forward. With that said, before we start talking about HighPeak's future, I'm proud to report that we delivered solid third quarter results, which tracked our internal expectations. Production levels were consistent with the second quarter despite our reduced level of development activity. We only ran one rig through the entirety of the third quarter, drilled six wells, and turned in line only nine wells. 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. We held our LOE per BOE consistent with our first half 2025 levels. 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. 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, a roughly one-and-a-half-month delay from our original plan. 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, D&C cost, and overall market conditions.

We recently finished our second successful simul frac completion on a six-well pad with 15,000-foot average lateral lengths. This operation went smoothly, with HighPeak recognizing cost savings per well of over $400,000 compared with our traditional zipper frac technique. We were even able to increase some efficiencies compared to our first simul frac job: more lateral footage completed per day. We utilized continuous pumping operations and averaged over 4,700 feet of completed lateral footage per day. The operations team keeps delivering. We are very encouraged by the results that we have achieved to date utilizing the simul frac ops, and we plan to tailor our 2026 development program to incorporate this completion technique more. Suffice it to say, HighPeak's operations and 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. Now let's turn our focus to the future. I know you've all heard from me and the other HighPeak senior team members on these calls in the past. This is the first time I've had a chance to speak with you as the CEO. I will very clearly lay out our vision for HighPeak moving forward. With our new Chairman of the Board and the entire team pulling in the same direction, 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. Our assets are strong, our people are capable, and our commitment to managing cash flow and capital is steadfast. I won't sugarcoat it.

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 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. 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. 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. 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 HighPeak own the results we have delivered to date: the good, the bad, and everything in between. It's ours to fix and to build upon. Let's reflect on what we have done well over the past five years and also what needs improvement. You can refer to page six of our investor presentation. What have we done right over the past five years? We've assembled a high-quality asset base in 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 IRRs. 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 E&P space.

have also delineated a long runway of highly economic, multi-bench, oily inventory that is primed for full-scale, capital-efficient development. These are all great attributes, and I want to commend the HighPeak employees, management, and even our investors for believing in the team in this area. 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 ISS, Glass Lewis, and some notable rating agencies. At times, we had a growth-at-all-costs mentality, even in the face of commodity price weakness. This ends now. This lax view of cash management led us to overusing leverage and resulted in high cost of capital. Finally, what we have heard loud and clear from our investors is that our short-term focus on the business has eroded market confidence.

We own these weaknesses, plain and simple, and we have a plan to set them right. What does that look like? Some of these fixes we can tackle right now. And we've already started. Others are going to take a little time and patience. This isn't something that happens overnight. We see it like climbing a set of stairs. One solid step leads to the next. 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 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. 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. 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. Sticking to our long-term plan. 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. First, you have the board of directors providing direction and oversight. Second, you have a management team directing the day-to-day operations. 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.

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. 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. I've got to say, I'm proud of how this team has stepped up. 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. 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. 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. I am confident with full alignment between the board, management, and shareholders. We will drive HighPeak forward with focus and alignment to shareholder value. Third. Unlike in recent past, we now have fully independent board committees in place consistent with best practices for non-controlled companies. 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. 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 creation for HighPeak and its shareholders. Now, regarding the shareholders. There are some major changes planned.

As you may know, HighPeak, the public company, is majority owned by two private equity partnerships: HighPeak Energy Partners One and HighPeak Energy Partners Two. 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 HighPeak Two being distributed first in 2026 and HighPeak One in 2027. 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 HighPeak stock, which should assist our low float issue.

With all of these changes, we plan to effectively split the three forms of control: management, the board, and the shareholder base into independent 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. 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. 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. As you know, commodity prices have a very direct effect on profitability. Despite improvements in operational efficiencies and cost structure, commodity prices are the single biggest factor in changes to our cash flow. 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. I want to point out that the oil price laid out on the slide is our long-term price. 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. We will take a methodical and disciplined approach. Let's start with the bear case scenario, which we are currently close to right now. 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. This level of activity would lead to a moderate decline in overall production volumes.

This goes without saying there's absolutely no need to focus on growing production in an oversupplied or weak market. 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. Now, as far as liquidity is concerned, in the face of a sustained low oil price environment, anything is on the table. We will preserve liquidity. Now, moving to the base case scenario of long-term oil prices in the $60-$70 barrel range, 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 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 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 paydown. On the CapEx program, we would likely be two rigs or just slightly more, leading to moderate production growth. On the liquidity front, it would allow us to accelerate debt paydown. 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. 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.

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. We have compiled some of these comments that we have heard and hear often, and we have laid them out on slide 10 of our company presentation. We are 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. The key question is how to begin to rebuild and sustain market confidence. We are not ignoring the realities of our situation. Instead, we are facing them head-on. I want to take a moment to address several of the most common concerns we often hear. I want to do that openly and directly. Number one. Eastern Midland Basin is unproven.

HighPeak has drilled over 350 horizontal wells, and it produced over 90 million BOEs from those wells. Third-party organizations are now recognizing well performance, cost differences, i.e., profitability, and inventory quality and scale. HighPeak's and offset operators' track records over the last several years have dispelled this comment. Number two. You guys have a growth-at-all-cost mentality. As I previously said, there were many times in our history that may have been the focus. I think HighPeak has been consistent over the last couple of years in trying to maintain our current level of production and show the market that we're going to operate within cash flow. Number three, HighPeak is over-levered. That is a true statement. We are over-levered for the size of company we are today, and this is one of our primary focuses moving forward.

We are working to address this issue in a thoughtful and methodical way. 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. Number four. You're starting to have GOR issues as your percentage gas production is increasing. We have seen increases in gas and NGL production. 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 sales.

I would also like to remind everybody that our % 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 new pads. At any reasonable cadence, our oil percentage should trend closer to 70%. Number five. HighPeak has no float in their stock. I hear this one a lot. Typically, it's, "I own it in my personal account, but I can't own it in my fund." This has been a serious issue that we have faced for some time now. We have done some things in the past that may have exacerbated the problem. 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 HighPeak partnerships.

We are going to be measured and deliberate in how we solve this problem. It cannot be fixed overnight. Number six, HighPeak has been for sale for years. HighPeak 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 a long-term strategy of operating within cash flow, exercising disciplined decision-making, and maintaining measured, controlled execution. Our focus remains on building sustainable value for our shareholders over the long term. Final one. HighPeak is a controlled company, and there is no oversight. As I've highlighted earlier in the call today, we're very encouraged by the progress we've made over the last few months. 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. These steps strengthen oversight, enhance accountability, and position HighPeak Energy for long-term sustainable value creation. Now, in conclusion, our company is 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. We're allocating capital with discipline, managing costs with precision. Maintaining a relentless focus on efficiency. Our asset base gives us the flexibility to operate within cash flow, generate sustainable free cash, reduce debt, and continue building value 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, 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. Thank you. With my comments now complete, we'll open the call up for questions.

Steven Tholen, Chief Financial Officer, HighPeak Energy: Thank you. As a reminder, to ask a question at this time, please 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. Our first question comes from the line of Jeff Robertson with Water Tower Research. Your line is now open.

Michael Hollis, President and CEO, HighPeak Energy: 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?

Ryan Hightower, Executive Vice President, HighPeak Energy: Absolutely, Jeff. No, great question. Obviously, the free cash flow generation is going to be dictated mostly by the oil price that we garner from the market. HighPeak is doing all the things we can control from cost management to capital deployment. Again, as you have pointed out, in that kind of base case scenario, we can generate significant free cash flow. Our term loan debt that we have today, we can pay down debt at par with no penalty. 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. Now, if you look farther into the future, again, it could be a year, it could be more, as we continue to delever 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, call it 1.5%-2% a year. Today, we sit kind of mid to high 30% decline rate. That changes your credit profile and again, opens you up to potentially more normal way financing into the future. Again, Jeff, today and into the very near future, our goal is capital management and paying down debt.

Michael Hollis, President and CEO, HighPeak Energy: How do hedges fit into those goals, Mike? I know you've got an average swap price on some of your production for 2026 at about $63 a barrel.

Ryan Hightower, Executive Vice President, HighPeak Energy: Yes, sir. Could you repeat that? Our speaker was cutting out a little bit there, Jeff. I'm sorry.

Michael Hollis, President and CEO, HighPeak Energy: 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 work toward your leverage goals? I know you have some, I think, minimum requirements, but I'm just curious how you think about that as you go forward.

Ryan Hightower, Executive Vice President, HighPeak Energy: You bet. No, great question, Jeff. We want to be very—what you will see from HighPeak is a much more systematic and methodical hedging program. Obviously, we do have some minimum requirements that we will continue to have to hedge a little bit into the future 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 of quarters back. There were fantastic prices in the $4-4.3 range. We've also hedged some basis differentials. I think what you'll see as prices continue to stay in this lower range, it'll be very methodical and small slices that we will layer on. Again, you tend to see less when prices are low.

When prices move up a little bit, I think you're going to see us layer on a little bit more. We want to protect our capital budget. We want to protect the dividend as it sits today, again, in this kind of base case, $60-$70 range. I think looking forward, to think somewhere in the 55%-65% hedged at these kind of prices are probably what you would see HighPeak move towards. Obviously, if we had a spike in commodity prices, you may see us push that above that hedge percentage going forward.

Steven Tholen, Chief Financial Officer, HighPeak Energy: Thank you. Our next question comes from the line of Noah Hungness with Bank of America. Your line is now open. Noah, your line is open. Please check your mute button. Our next question comes from the line of Nicholas Pope with Roth Capital. Your line is now open.

Good morning, everyone.

Michael Hollis, President and CEO, HighPeak Energy: Good morning.

Sounds like there's some phone problems. Curious, as you kind of look at this plan and you look at the flex that you have at different oil kind of environments, you brought that second rig back. Curious if there's changes in how you're thinking about where kind of within the acreage footprint you're going to be drilling or what you're going to be drilling. If the focus changes in those different scenarios, maybe between Flat Top, Signal Peak, or even in the different formations, how much flexibility is there and how much does the pricing affect what and where you're drilling these different scenarios?

Ryan Hightower, Executive Vice President, HighPeak Energy: No. Great question, Nick. The good thing is, we're drilling Wolf Camp A, Lower Sprayberry, co-developed. Think 5%-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 in the recent kind of year or so, it's about 70% up at Flat Top and 25%-30% in Signal Peak. That also fits with what our inventory in each one of those zones are between Flat Top and Signal Peak. Returns are very similar between the two areas in all these zones. Again, we approach it as a co-development program. The split between Flat Top and Signal Peak is more based on the split of inventory, which is about 70-30.

Got it. That makes sense. As you kind of look at the base, I mean, at least operating expenses have been, I mean, almost flat the last six quarters. I mean, curious if there's opportunities for going back into wells, seeing an uptick in workovers, field maintenance type work as you're maybe shifting a little bit away from a more active drilling program. Does field optimization kind of—you talked about 350 wells that have been drilled in this eastern extension of the Midland. Curious how that might change with kind of maybe a slower development program.

No. Great question. We're ahead of you on that. If you look at the last kind of two quarters, you'll see some expense workover spend that was a little higher than what it had been in Q1 of this year or Q4 of the previous year. Where we were normally running kind of $0.80 per BOE, somewhere in that range, we've been $1 or a little bit more the last two quarters. As we've pulled back on that capital program, there are some capital workovers that we have done as well. Think very, very high rate of return work. We've gone into some of our wells and done some expense workovers and have seen some really good results from that. Again, while we've pulled back activity on the drilling complete side, we have gone back and optimized our production base.

We will continue at a little bit lower pace going forward because we hit all of the large items that we had on our list the last quarter or so. There will be additional work every quarter that we will continue to focus on to keep that efficiency high.

Those expense workovers that you kind of highlighted, and I know you break out somewhat, is that production optimization or is that kind of remediation type work? What's the kind of mix of?

The answer there, Nick, will be yes and yes. Usually what you have is you'll have a well that may be struggling with a pump that's two years old. 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. For instance, when that will happen, obviously you would have an expense cost to go replace that or change the artificial lift. We will take the opportunity at that point to go in, do a little bit of clean out on the well, maybe a little bit of what I call small pump jobs, nothing like a frac job, a little acid and things like that, to be able to optimize that production. Then we typically lower where we pump the well from.

We will move down in the hole so that we can pull down the pressure we're pumping these wells at to a lower point, i.e., giving more drive from the reservoir into our well. We're seeing great results from that. Some of these wells we're actually pumping deep into the curve, lowering our point that we're drawing that fluid from by as much as 250-300 feet. With the reservoir we have with a little bit higher permeability, we're seeing great results from that. You don't see it day one. It takes time, but you're going to start seeing better and better recoveries from these wells.

Gotcha. I appreciate it. I'll.

Yes, sir. Thanks, guys.

Thanks, guys.

You bet.

Conference Operator: Thank you. As a reminder to ask a question at this time, please press star 11 on your touchstone telephone. Our next question comes from the line of Jeff Robertson with Water Tower Research. Your line is now open.

Michael Hollis, President and CEO, HighPeak Energy: Thanks, Mike. Just to follow up, you said you're going to keep the second rig at least through the end of December. Can you just talk about how the carryover inventory will impact production, at least in the first half or maybe first three quarters of 2026?

Ryan Hightower, Executive Vice President, HighPeak Energy: Yes, sir. Absolutely. We picked up the second rig October 15th. Just kind of a rule of thumb for where we are at in the basin, we typically drill two wells a month per rig. That will get us an additional five to six wells. We are drilling a little more than two per month now. Call it five to six wells that we will have drilled in the fourth quarter in addition to the one rig program that will carry into 2026. Again, we are not talking about 2026 activity per se. Obviously, we laid out in the prepared remarks a kind of high-level overview, bear base and bull case that will flow through our decisions on how we guide for 2026. Again, it is a little early. We would like to see where oil prices kind of level out over the next month or so.

To your point, bringing over those five wells, because again, anything you drill in the fourth quarter typically does not come online until the first quarter or early second quarter. As we look into 2026, we will have somewhere in the range of 16-18 ducks or wells in some form of completion that roll into 2026. Again, supporting that kind of Q1 and Q2 production forecast.

Michael Hollis, President and CEO, HighPeak Energy: Thank you.

Ryan Hightower, Executive Vice President, HighPeak Energy: Yes, sir.

Conference Operator: Thank you. Our next question comes from the line of Noah Hungness with Bank of America. Your line is now open.

Morning. For my first question here. You guys yesterday filed an S-3. Could you maybe just talk about what the reasoning behind that was and if you had any plans with that moving forward?

Ryan Hightower, Executive Vice President, HighPeak Energy: Yeah. Hey, Noah, this is Ryan. Great question. The sole reason for filing the S3, our previous shelf registration statements that we had on file went stale and expired. All we were doing was refreshing it. We have absolutely no intention of issuing any new shares anytime soon.

Great. 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 sub-$60 to drop activity or between that $60-$70 to move into that base case? Is it a month? Is it a few weeks? Just how are you thinking about that?

A couple of ways we're thinking about it, Noah. Obviously, it's a multivariate problem. You could have a couple of days. You could even have a month. When you look at this year, we've probably averaged, I don't know, $63, $64 for the whole year. That would put you pretty squarely in between the bear and base case. Again, these aren't hard lines. There's going to be some squish between them. If I look into 2026, even if you were in the bear case, something less than two rigs, again, remember you pick up, it's kind of like a, they call it a dip switch, on or off, right? You pick a rig up, it's on. You lay it down, it's off. In order to get something that's less than two, kind of infers something more than one.

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. 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. In reality, I would foresee if we drill, and with board approval, obviously, if we chose to do more than one rig and we are 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. You may see us keep the second rig for some months into 2026.

It would be determined by kind of oil price and long-term outlook, as well as just the whole macro environment that we're in. It's very volatile right now. I want to make sure that we keep that kind of long-term prudent look of what's going on in the market.

Gotcha. And just one more question. Could you maybe add some details around the distribution plan for 2026? Just regarding HighPeak Energy Partners Two? 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 if you could give that?

Yeah. Hey, Noah, this is Ryan again. Really good question. At this point, I do not think we are prepared 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. Again, most of the limited partners have a very long-term investment mindset here. It is nothing that causes us any concern from any kind of share overhang. We do not expect anybody to rush to sell by any means, especially at current share prices. We will be very strategic and methodical about it. It will most likely start early in the year, but will last throughout the calendar year.

Really helpful stuff, guys. Thank you.

Conference Operator: Thank you. I'm currently showing no further questions at this time. This does conclude today's call. Thank you all for your participation, and you may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.