Adjusting Development Plan to Accelerate Free Cash Flow Generation
HighPeak is adjusting its development plans in response to lower oil prices and accelerate its path to free cash flow. The company's original FY23 capital program envisioned running six rigs and operating three frac crews. Three rigs and one frac crew have been dropped and management plans to drop back to two rigs by the end of 2Q23. During 2H23, the company intends to maintain two active rigs and two frac spreads. Management designed the revised development plan to generate free cash flow in 2H23 and 2024. Total capital expenditures for 2023 are now expected to fall to $950-1,035 million, compared with the January plan that called for $1,150-1,260 million. The company plans to turn in line (TIL) 105-155 gross operated wells, compared with the prior plan of 135-145. The FY24 capital expenditure forecast is $870-930 million, unchanged from January 2023, based on the same TIL count... Concerns about the company's options to refinance the 10.0% notes amid a lower oil price environment have pressured HighPeak's shares over the past few months. Some of the pressure could be relieved by eliminating the refinancing overhang as discussed in this report.
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