Dividend Hike; Estimate Update
HighPeak declared a quarterly common stock dividend of $0.04 per share on February 5, 2024, a 60% increase from the prior dividend of $0.025 per share. The 1Q24 dividend will be paid on March 25, 2024, to shareholders of record as of March 1, 2024. The board also authorized a $75-million common stock repurchase program effective through December 31, 2024. Repurchases, if any, could be funded with available operating cash flows, working capital, and borrowings under the company’s super priority revolving credit facility. The dividend increase and the share repurchase combine to underscore management’s plan to structure HighPeak’s FY24 development plan to generate free cash flow. Our current working model assumes a three-rig program in 2024; however, we expect management to adjust the program to the economic environment to focus on free cash flow. We expect management to provide its FY24 operating outlook in early March along with 4Q23 financial results. We are updating our 4Q23 estimates to reflect NYMEX reference oil price of $78.32/bbl, compared with our prior estimate of $85/bbl. For FY24, our estimates incorporate an average NYMEX oil price of $79.50/bbl. Oil accounts for 84% of our 4Q23 production estimate and 96% of estimated 4Q23 revenue. Our updated estimates are outlined in Figures 1 to 3. Our modeling assumptions imply HighPeak could generate material free cash flow in FY24, which could aid management’s long-term strategic goals of delivering value for shareholders (Figure 4).
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