S-4/A 1 hpe20200601_s4a.htm FORM S-4/A hpe20200510_s4a.htm

 

As filed with the Securities and Exchange Commission on July 2, 2020

 

Registration No. 333-235313


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 


 

AMENDMENT NO. 3 TO

FORM S-4

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 


 

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 


 

HighPeak Energy, Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware

1381

84-3533602

(State or other jurisdiction of
incorporation or organization)

(Primary Standard Industrial
Classification Code Number)

(I.R.S. Employer
Identification Number)

 

421 W. 3rd Street, Suite 1000
Fort Worth, Texas 76102
(817) 850-9200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


 

Jack Hightower
Chief Executive Officer
421 W. 3rd Street, Suite 1000
Fort Worth, Texas 76102
(817) 850-9200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

With a copy to:

G. Michael O’Leary
Taylor E. Landry
Hunton Andrews Kurth LLP
600 Travis Street, Suite 4200
Houston, Texas 77002
(713) 220-4200

 


 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon completion of the merger described in the proxy statement/prospectus contained herein.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) check the following box: ☒

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Large accelerated filer ☐   Accelerated filer ☐
Non-accelerated filer ☒      Smaller reporting company ☐
  Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

 


CALCULATION OF REGISTRATION FEE

 

Title of each class of securities
to be registered

Amount to be

registered

Proposed

maximum

offering price

per share

Proposed

maximum

aggregate offering

price (9)

Amount of

registration

fee (10)(11)

Common Stock, par value $0.0001 per share

10,012,629 (1)

N/A

$105,833,488

$13,737

Public Contingent Value Rights

5,012,629 (2)

N/A

N/A

(3)

Common Stock issuable upon Settlement of the Public Contingent Value Rights

10,651,837 (4)

N/A

$112,589,917

$14,614

Warrants to purchase Common Stock

328,888 (5)

N/A

N/A

(5)

Common Stock underlying Warrants

328,888 (6)

N/A

$3,476,346

$451

Total

20,993,354 (7)

N/A

$221,899,751 (8)

$28,802

 

 


 

(1)

Represents the number of shares of common stock, par value $0.0001 per share, of the registrant (“common stock”), issuable upon the completion of a merger contemplated as part of the business combination described herein (the “business combination”) involving Pure Acquisition Corp. (“Pure”). The number of shares of common stock to be registered includes (i) 5,000,000 shares of the common stock that are expected to be issued in such merger to holders of shares of Class B common stock, par value $0.0001 per share, of Pure (the “Class B Common Stock”) and (ii) 5,012,629 shares of common stock that are expected to be issued to existing shareholders in such merger to the holders of Class A common stock, par value $0.0001 per share, of Pure (the “Class A Common Stock” and, together with Class B Common Stock, “Pure Common Stock”) immediately prior to the merger of Pure with MergerSub (as defined in the accompanying proxy statement/prospectus).

(2)

Represents the maximum number of Public CVRs (as defined in the accompanying proxy statement/prospectus), that may be issued to the existing shareholders of Pure’s Class A Common Stock in connection with the merger (as further described in the accompanying proxy statement/prospectus), that are expected to be issued to Pure’s stockholders that own Class A Common Stock at the closing of the business combination.

(3)

Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required for the Public CVRs.

(4)

Represents the maximum total shares of common stock underlying the Public CVRs that may be issued to the existing shareholders of Pure’s Class A Common Stock in connection with the merger, which could be issued to any qualifying holder of the Public CVRs in connection with any settlement of the Preferred Return (as defined in the accompanying proxy statement/prospectus) on the applicable maturity date of such Public CVRs, which will occur on a date to be specified and which may be any date occurring during the period beginning on (and including) the two-year anniversary of the closing of the business combination and ending on (and including) the date that is thirty (30) months following the closing of the business combination, or in certain circumstances after the occurrence of certain change of control events with respect to our business, including certain mergers, consolidations and asset sales (as further described in the accompanying proxy statement/prospectus).

(5)

Reflects warrants to purchase 328,888 shares of the registrant’s common stock based on the maximum number of Pure’s public warrants that will become warrants of the registrant in connection with the business combination and the related assignment of Pure’s existing warrant agreement (as defined in the accompanying proxy statement/prospectus). Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required for the warrants of the registrant.

(6)

Reflects shares of common stock underlying the warrants of the registrant.

(7)

Represents the estimated maximum number of shares of common stock issuable as described in the foregoing.

(8)

Pursuant to Rule 457(c) and 457(f)(1) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to the product of (i) $10.57, the average of the high and low prices per share of Class A Common Stock, as reported on the Nasdaq Capital Market on June 25, 2020 and (ii) 20,993,354, the estimated maximum number of shares of Pure Common Stock that may be exchanged or converted for the securities being registered. For purposes of calculating the registration fee, the Class B Common Stock is treated as having the same value as the Class A Common Stock as each share of Class B Common Stock is automatically convertible into one share of Class A Common Stock upon the closing of the business combination.

(9)

Pursuant to Rule 457(c) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share is equal to $10.57, the average of the high and low prices per share of Class A Common Stock, as reported on the Nasdaq Capital Market on June 25, 2020.

(10)

The registration fee for the securities registered hereby has been calculated pursuant to Section 6(b) of the Securities Act, by multiplying the proposed maximum aggregate offering price for the securities by 0.0001298.

(11)

The registration fee for the securities registered hereby has been offset in accordance with Rule 457(b) by the fee of $104,887 paid in connection with the registration by the registrant of securities on a Registration Statement on Form S-4, filed with the Securities and Exchange Commission on December 2, 2019 (File  No. 333-235313).

 

 


 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 



 

 

 

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION, DATED JULY 2, 2020

 

PURE ACQUISITION CORP.
421 W. 3rd Street, Suite 1000
Fort Worth, Texas 76102

 

Dear Stockholders of Pure Acquisition Corp.:

 

You are cordially invited to attend the special meeting of the stockholders (the “special meeting”) of Pure Acquisition Corp. (“Pure”), which will be held on            , 2020, at            , Eastern Time, at                      . At the special meeting, Pure’s stockholders will be asked to consider and vote upon the following proposals:

 

 

The Business Combination Proposal— To consider and vote upon a proposal to approve and adopt the Business Combination Agreement (defined below) and the transactions contemplated thereby (the “business combination” and such proposal, the “Business Combination Proposal”) (Proposal No. 1):

 

 

a Business Combination Agreement (as amended and as may be further amended from time to time, the “Business Combination Agreement”), dated May 4, 2020, by and among (i) Pure, (ii) HighPeak Energy, Inc., a Delaware corporation and a wholly owned subsidiary of Pure (“HighPeak Energy”), (iii) Pure Acquisition Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of HighPeak Energy (“MergerSub”), (iv) HighPeak Energy, LP, a Delaware limited partnership (“HighPeak I”), (v) HighPeak Energy II, LP, a Delaware limited partnership (“HighPeak II”), (vi) HighPeak Energy III, LP, a Delaware limited partnership (“HighPeak III”), (vii) HPK Energy, LLC, a Delaware limited liability company (“HPK GP” and, together with HighPeak I, HighPeak II and HighPeak III, the “HPK Contributors”) and the general partner of HPK Energy, LP, a Delaware limited partnership (“HPK LP”), and an affiliate of HighPeak Pure Acquisition, LLC, a Delaware limited liability company (Pure’s “Sponsor”), and (viii) solely for the limited purposes specified therein, HighPeak Energy Management, LLC, a Delaware limited liability company (the “HPK Representative”), pursuant to which, among other things and subject to the terms and conditions contained therein, (a) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (b) each outstanding share of Class A Common Stock and Class B Common Stock of Pure (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) will be converted into the right to receive (A) one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any), and (B) solely with respect to each outstanding share of Class A Common Stock, (i) a cash amount equal to the amount, if any, by which the per-share redemption value of Class A Common Stock at the closing of the business combination (the “Closing”) exceeds $10.00 per share, in each case and (ii) one (1) Public CVR (as defined in the accompanying proxy statement/prospectus) for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (A), representing the right to receive additional shares of HighPeak Energy common stock (or such other specified consideration as is specified with respect to certain events) for Qualifying CVR Holders (as defined in the accompanying proxy statement/prospectus) if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the applicable maturity, which will occur on a date to be specified and which may be any date occurring during the period beginning on (and including) the two-year anniversary of the Closing and ending on (and including) the date that is thirty (30) months following the Closing, or in certain circumstances after the occurrence of certain change of control events with respect to our business, including certain mergers, consolidations and asset sales, as described in greater detail in the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus (with an equivalent number of shares of HighPeak Energy common stock held by certain HPK Contributors and their affiliates being collectively forfeited), (c) the HPK Contributors will (A) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock and the general partner interests in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (B) directly or indirectly contribute the outstanding Sponsor Loans (as defined in the accompanying proxy statement/prospectus) in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (d) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into the surviving corporation (as successor to Pure) with all interests in HPK LP being cancelled in exchange for no consideration; and

 

 

The Adjournment Proposal— To consider and vote upon a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal (the “Adjournment Proposal” and, together with the Business Combination Proposal, the “Proposals”) (Proposal No. 2).

 

The Pure Board, upon the unanimous recommendation (with one abstention) of the members of the special committee of the Pure Board (the “Pure Special Committee”), which consists of three independent members of the Pure Board, recommends that Pure stockholders vote “FOR” each of the Proposals. When you consider the recommendation of the Pure Board in favor of each of the Proposals, you should keep in mind that certain of Pure’s directors and officers have interests in the business combination that may conflict with your interests as a Pure stockholder. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”

 

1

 

Each of the Proposals is more fully described in the accompanying proxy statement/prospectus, which each Pure stockholder is encouraged to review carefully.

 

Pure’s Class A Common Stock and its warrants, which are exercisable for shares of Class A Common Stock under certain circumstances, are currently listed for trading on the Nasdaq Capital Market (the “Nasdaq”) under the symbols “PACQ” and “PACQW,” respectively. In addition, certain of Pure’s shares of Class A Common Stock and warrants currently trade as units consisting of one share of Class A Common Stock and one-half of one warrant, and are listed for trading on the Nasdaq under the symbol “PACQU.” Holders of units currently have the option to continue to hold units or separate their units into the component securities. Prior to the business combination, holders will need to have their brokers contact Continental Stock Transfer & Trust Company (Pure’s “Transfer Agent”) in order to separate the units into shares of Class A Common Stock and warrants. As a result of the business combination and pursuant to the warrant agreement, Pure’s warrants will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein. In connection with the business combination, Pure’s units will automatically separate into the component securities and will no longer trade as a separate security following the business combination. Upon the Closing, HighPeak Energy intends to list its common stock for trading on the Nasdaq Global Market or the New York Stock Exchange (“NYSE”) under the symbol “HPK.” HighPeak Energy also intends to list the Public CVRs on the Nasdaq Global Market or the NYSE. HighPeak Energy does not intend to list its warrants or the Private CVRs (as defined in the accompanying proxy statement/prospectus) for trading on the Nasdaq or any other national securities exchange. Additionally, in connection with the business combination, Pure’s Common Stock, units and warrants will be delisted from the Nasdaq, deregistered under the Exchange Act and cease to be publicly traded.

 

Pursuant to Pure’s Charter, Pure is providing the holders of shares of Class A Common Stock originally sold as part of the units issued in its initial public offering, which closed on April 17, 2018 (the “IPO” and such holders, the “public stockholders”), with the opportunity to elect to require that Pure redeem all or a portion of their shares of Class A Common Stock upon the Closing at a price per share, payable in cash, equal to the aggregate amount per share of Class A Common Stock then on deposit in the trust account (the “Trust Account”), divided by the number of then-outstanding shares of Class A Common Stock that were sold to the public stockholders in the IPO. The Trust Account holds or is anticipated to hold, as applicable, (i) the proceeds from the IPO and a concurrent private placement of warrants to Sponsor, (ii) the proceeds of certain loans from HighPeak Energy Holdings, LLC, a current subsidiary of HPK LP (“HighPeak Holdings”), pursuant to an agreement by Pure’s Sponsor to loan or cause an affiliate to loan to Pure or one of Pure’s subsidiaries (a) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the stockholder votes to approve the First Extension and Second Extension (each as defined in the accompanying proxy statement/prospectus), for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from October 17, 2019 until May 21, 2020, and (b) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus). As of June 25, 2020, an aggregate of $8,916,396 had been deposited into the Trust Account, pursuant to the Sponsor Loans (as defined in the accompanying proxy statement/prospectus), representing a $0.311 payment for each share of Class A Common Stock outstanding. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of May 31, 2020 of approximately $53.0 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.56. Public stockholders may elect to require that Pure redeem their shares even if they vote for the Business Combination Proposal.

 

Further, on May 8, 2020, pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HighPeak Energy Partners II, LP, a Delaware limited partnership (“HPEP II”), launched a warrant tender offer to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II. The warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II. HPEP II has previously conducted three warrant tender offers for Pure’s outstanding public warrants pursuant to the letter agreement described above, as a result of which an aggregate 20,371,112 public warrants were tendered and purchased by HPEP II. Pure’s Sponsor, HPEP II and the Company entered into a sponsor support agreement whereby Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration, which eliminates the substantial majority of all of our outstanding warrants. As a result of the business combination and pursuant to the warrant agreement, any of Pure’s remaining public warrants, held by persons other than HPEP II, will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein. HighPeak Energy does not intend to list its warrants for trading on the Nasdaq or any other national securities exchange.

 

HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into an amendment to the Business Combination Agreement on June 12, 2020 that provides for additional cash consideration to be paid as merger consideration to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share. HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into a second amendment to the Business Combination Agreement on July 1, 2020 that provides for the Public CVRs to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock, as well as the Private CVRs being issued to the Forward Purchase Investors and PIPE Investors, and other amendments.  For additional detail regarding the Contingent Value Rights, see the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus and the form of Public CVR Agreement and the Private CVR Agreement attached to the accompanying proxy statement/prospectus as Annex H-I and Annex H-II, respectively.

 

2

 

Currently, Pure’s Sponsor and independent directors own all of Pure’s outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined.

 

Pure is providing this proxy statement/prospectus and accompanying proxy card to its stockholders in connection with the solicitation of proxies to be voted at the special meeting. Your vote is very important. Whether or not you plan to attend the special meeting in person, and whether or not you tender your shares for redemption, please submit your proxy card without delay.

 

You are encouraged to read this proxy statement/prospectus carefully. In particular, you should review the matters discussed under the caption “Risk Factors” beginning on page 26 of this proxy statement/prospectus.

 

The approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, but the Adjournment Proposal requires only the affirmative vote of a majority of the holders of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, and actually cast at the special meeting.

 

If you sign, date and return your proxy card without indicating how you wish to vote, your shares will be voted “FOR” each of the Proposals presented at the special meeting. If you fail to return your proxy card or fail to submit your proxy by telephone or over the Internet, or fail to instruct your bank, broker or other nominee how to vote, and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the effect of a vote “AGAINST” the Business Combination Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal. If you are a stockholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE PURE REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO PURE’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE VOTE AT THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT/WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANKS OR BROKERS TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

 

Thank you for your consideration of these matters.

 

Sincerely,

 

Jack Hightower

Chairman and Chief Executive Officer

Pure Acquisition Corp.

 

3

 

Whether or not you plan to attend the special meeting and whether or not you tender your shares for redemption, please submit your proxy by completing, signing, dating and mailing the enclosed proxy card in the pre-addressed postage paid envelope or by using the telephone or Internet procedures provided to you by your broker or bank. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote in person, you must obtain a proxy from your broker or bank.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus is dated            , 2020, and is first being mailed to Pure stockholders on or about such date.

 

4

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION, DATED       , 2020

 

PURE ACQUISITION CORP.
421 W. 3rd Street, Suite 1000
Fort Worth, Texas 76102

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF PURE ACQUISITION CORP.

 

To Be Held On                  , 2020

 

To the Stockholders of Pure Acquisition Corp.:

 

NOTICE IS HEREBY GIVEN that the special meeting of the stockholders (the “special meeting”) of Pure Acquisition Corp. (“Pure”) will be held on           , 2020, at           , Eastern Time, at                     . At the special meeting, Pure’s stockholders will be asked to consider and vote upon the following proposals:

 

 

The Business Combination Proposal— To consider and vote upon a proposal to approve and adopt the Business Combination Agreement (defined below) and the transactions contemplated thereby (the “business combination” and such proposal, the “Business Combination Proposal”) (Proposal No. 1):

 

 

a Business Combination Agreement (as amended and as may be further amended from time to time, the “Business Combination Agreement”), dated May 4, 2020, by and among (i) Pure, (ii) HighPeak Energy, Inc., a Delaware corporation and a wholly owned subsidiary of Pure (“HighPeak Energy”), (iii) Pure Acquisition Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of HighPeak Energy (“MergerSub”), (iv) HighPeak Energy, LP, a Delaware limited partnership (“HighPeak I”), (v) HighPeak Energy II, LP, a Delaware limited partnership (“HighPeak II”), (vi) HighPeak Energy III, LP, a Delaware limited partnership (“HighPeak III”), (vii) HPK Energy, LLC, a Delaware limited liability company (“HPK GP” and, together with HighPeak I, HighPeak II and HighPeak III, the “HPK Contributors”) and the general partner of HPK Energy, LP, a Delaware limited partnership (“HPK LP”), and an affiliate of HighPeak Pure Acquisition, LLC, a Delaware limited liability company (Pure’s “Sponsor”), and (viii) solely for the limited purposes specified therein, HighPeak Energy Management, LLC, a Delaware limited liability company (the “HPK Representative”), pursuant to which, among other things and subject to the terms and conditions contained therein, (a) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (b) each outstanding share of Class A Common Stock and Class B Common Stock of Pure (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) will be converted into the right to receive (A) one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any), and (B) solely with respect to each outstanding share of Class A Common Stock, (i) a cash amount equal to the amount, if any, by which the per-share redemption value of Class A Common Stock at the closing of the business combination (the “Closing”) exceeds $10.00 per share, in each case and (ii) one (1) Public CVR (as defined in the accompanying proxy statement/prospectus) for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (A), representing the right to receive additional shares of HighPeak Energy common stock (or such other specified consideration as is specified with respect to certain events) for Qualifying CVR Holders (as defined in the accompanying proxy statement/prospectus) if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the applicable maturity, which will occur on a date to be specified and which may be any date occurring during the period beginning on (and including) the two-year anniversary of the Closing and ending on (and including) the date that is thirty (30) months following the Closing, or in certain circumstances after the occurrence of certain change of control events with respect to our business, including certain mergers, consolidations and asset sales, as described in greater detail in the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus (with an equivalent number of shares of HighPeak Energy common stock held by certain HPK Contributors and their affiliates being collectively forfeited), (c) the HPK Contributors will (A) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock and the general partner interests in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (B) directly or indirectly contribute the outstanding Sponsor Loans (as defined in the accompanying proxy statement/prospectus) in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (d) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into the surviving corporation (as successor to Pure) with all interests in HPK LP being cancelled in exchange for no consideration; and

 

 

The Adjournment Proposal— To consider and vote upon a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal (the “Adjournment Proposal” and, together with the Business Combination Proposal, the “Proposals”) (Proposal No. 2).

 

1

 

Only holders of record of Pure’s Class A Common Stock and Class B Common Stock at the close of business on           , 2020, are entitled to notice of the special meeting and to vote at the special meeting and any adjournments or postponements thereof. A complete list of Pure’s stockholders of record entitled to vote at the special meeting will be available for ten (10) days before the special meeting at Pure’s principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting.

 

Pursuant to Pure’s Charter, Pure is providing the holders of shares of Class A Common Stock originally sold as part of the units issued in its initial public offering, which closed on April 17, 2018 (the “IPO” and such holders, the “public stockholders”), with the opportunity to elect to require that Pure redeem all or a portion of their shares of Class A Common Stock upon the Closing at a price per share, payable in cash, equal to the aggregate amount per share of Class A Common Stock then on deposit in the trust account (the “Trust Account”), divided by the number of then-outstanding shares of Class A Common Stock that were sold to the public stockholders in the IPO. The Trust Account holds or is anticipated to hold, as applicable, (i) the proceeds from the IPO and a concurrent private placement of warrants to Sponsor, (ii) the proceeds of certain loans from HighPeak Energy Holdings, LLC, a current subsidiary of HPK LP (“HighPeak Holdings”), pursuant to an agreement by Pure’s Sponsor to loan or cause an affiliate to loan to Pure or one of Pure’s subsidiaries (a) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the stockholder votes to approve the First Extension and Second Extension (each as defined in the accompanying proxy statement/prospectus), for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from October 17, 2019 until May 21, 2020, and (b) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus). As of June 25, 2020, an aggregate of $8,916,396 had been deposited into the Trust Account, pursuant to the Sponsor Loans (as defined in the accompanying proxy statement/prospectus), representing a $0.311 payment for each share of Class A Common Stock outstanding. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of May 31, 2020 of approximately $53.0 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.56. Public stockholders may elect to require that Pure redeem their shares even if they vote for the Business Combination Proposal.

 

HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into an amendment to the Business Combination Agreement, on June 12, 2020, that provides for additional cash consideration to be paid as merger consideration to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share. HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into a second amendment to the Business Combination Agreement on July 1, 2020 that provides for the Public CVRs to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock, as well as the Private CVRs (as defined in the accompanying proxy statement/prospectus) being issued to Forward Purchase Investors and PIPE Investors and other amendments.  For additional detail regarding the Contingent Value Rights, see the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus and the form of Public CVR Agreement and Private CVR Agreement attached to the accompanying proxy statement/prospectus as Annex H-I and Annex H-II, respectively.

 

Further, on May 8, 2020, pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HighPeak Energy Partners II, LP, a Delaware limited partnership (“HPEP II”), launched a warrant tender offer to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II. The warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II. HPEP II has previously conducted three warrant tender offers for Pure’s outstanding public warrants pursuant to the letter agreement described above, as a result of which an aggregate 20,371,112 public warrants were tendered and purchased by HPEP II. Pure’s Sponsor, HPEP II and the Company entered into a sponsor support agreement whereby Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration, which eliminates the substantial majority of all of our outstanding warrants. As a result of the business combination and pursuant to the warrant agreement, any of Pure’s remaining public warrants, held by persons other than HPEP II, will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein. HighPeak Energy does not intend to list its warrants for trading on the Nasdaq or any other national securities exchange.

 

Currently, Pure’s Sponsor and independent directors own all of Pure’s outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined.

 

Pure will not consummate the business combination unless the Business Combination Proposal is approved at the special meeting. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

 

If you have any questions or need assistance voting your shares, please call Pure’s proxy solicitor, Morrow Sodali LLC, toll free at (800) 662-5200. Banks and brokerage firms, please call collect at (203) 658-9400.

 

                     , 2020

 

By Order of the Board of Directors

 

Jack Hightower

Chairman and Chief Executive Officer

 

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to be held on           , 2020: This notice of meeting and the related proxy statement/prospectus will be available at http://www.                    .

 

2

 

 

TABLE OF CONTENTS

 

CERTAIN DEFINED TERMS

ii

SUMMARY TERM SHEET

ix

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR PURE STOCKHOLDERS

xv

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

25

RISK FACTORS

26

COMPARATIVE SHARE INFORMATION

65

USE OF PROCEEDS 67

SECURITIES MARKET INFORMATION

68

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION OF HIGHPEAK ENERGY 69

SPECIAL MEETING OF PURE STOCKHOLDERS

85

PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL

89

PROPOSAL NO. 2—THE ADJOURNMENT PROPOSAL

146

SELECTED HISTORICAL FINANCIAL DATA OF PURE

147

INFORMATION ABOUT PURE

148

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PURE 159

SELECTED HISTORICAL FINANCIAL DATA OF THE PREDECESSORS

165

INFORMATION ABOUT THE TARGET ASSETS

166

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PREDECESSORS 189

MANAGEMENT AFTER THE BUSINESS COMBINATION

201

DESCRIPTION OF HIGHPEAK ENERGY SECURITIES

206

COMPARISON OF RIGHTS OF STOCKHOLDERS OF PURE AND HIGHPEAK ENERGY

214

BENEFICIAL OWNERSHIP OF SECURITIES

217

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

221

HOUSEHOLDING INFORMATION

228

PLAN OF DISTRIBUTION 228

TRANSFER AGENT AND REGISTRAR

228

LEGAL MATTERS

228

EXPERTS

228

SUBMISSION OF STOCKHOLDERS PROPOSALS

229

WHERE YOU CAN FIND ADDITIONAL INFORMATION

229

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1
ANNEX A: BUSINESS COMBINATION AGREEMENT A-1
ANNEX A-I: BUSINESS COMBINATION AGREEMENT FIRST AMENDMENT DATED JUNE 12, 2020 A-I-1
ANNEX A-II: BUSINESS COMBINATION AGREEMENT SECOND AMENDMENT DATED JULY 1, 2020 A-II-1
ANNEX B: FORM OF A&R CHARTER   B-1
ANNEX C: FORM OF A&R BYLAWS  C-1
ANNEX D: FORM OF STOCKHOLDERS’ AGREEMENT  D-1
ANNEX E: FORM OF REGISTRATION RIGHTS AGREEMENT  E-1
ANNEX F: FORM OF AMENDED AND RESTATED FORWARD PURCHASE AGREEMENT  F-1
ANNEX G: FORM OF LTIP G-1
ANNEX H-I: FORM OF PUBLIC CONTINGENT VALUE RIGHTS AGREEMENT H-I-1
ANNEX H-II: FORM OF PRIVATE CONTINGENT VALUE RIGHTS AGREEMENT H-II-1
ANNEX I: RESERVE REPORT OF HPK LP AS OF DECEMBER 31, 2019 I-1
ANNEX J: GLOSSARY OF OIL AND NATURAL GAS TERMS   J-1

 

i

 

CERTAIN DEFINED TERMS

 

Unless the context otherwise requires, references in this proxy statement/prospectus to:

 

 

“A&R Charter” are to the form of amended and restated certificate of incorporation of HighPeak Energy;

 

 

“business combination” are to the transactions contemplated by the Business Combination Agreement;

 

 

“Business Combination Agreement” are to the Business Combination Agreement, dated May 4, 2020, as amended by the Business Combination Agreement First Amendment and the Business Combination Agreement Second Amendment and as may be further amended from time to time, by and among Pure, HighPeak Energy, MergerSub, HighPeak I, HighPeak II, HighPeak III, HPK GP, and solely for the limited purposes specified therein, the HPK Representative, pursuant to which, among other things and subject to the terms and conditions contained therein, (i) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (ii) each outstanding share of Class A Common Stock and Class B Common Stock (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) of Pure will be converted into the right to receive (A) one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any), and (B) solely with respect to each outstanding share of Class A Common Stock, (I) a cash amount equal to the amount, if any, by which the per-share redemption value of Class A Common Stock at the Closing exceeds $10.00 per share, in each case and (II) one (1) Public CVR, for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (A), (iii) the HPK Contributors will (a) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock and the general partner interests in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (b) directly or indirectly contribute the outstanding Sponsor Loans in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing, and (iv) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into the surviving corporation (as successor to Pure) with all interests in HPK LP being cancelled in exchange for no consideration;

     
 

“Business Combination Agreement Amendments” are to the Business Combination Agreement First Amendment and the Business Combination Agreement Second Amendment;

 

 

“Business Combination Agreement First Amendment” are to the First Amendment to Business Combination Agreement, dated June 12, 2020, pursuant to which, among other things as described further in this proxy statement/prospectus, the parties to the Business Combination Agreement agreed to provide for additional merger consideration in cash to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share;

 

 

“Business Combination Agreement Second Amendment” are to the Second Amendment to Business Combination Agreement, dated July 1, 2020, pursuant to which, among other things as described further in this proxy statement/prospectus, the parties to the Business Combination Agreement agreed to provide for Contingent Value Rights to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock, as well as being issued to Forward Purchase Investors and PIPE Investors and other amendments;

 

 

“Business Combination Marketing Agreement” are to the Business Combination Marketing Agreement, dated as of April 12, 2018, by and among Pure, Oppenheimer & Co. Inc. and EarlyBirdCapital, Inc., as amended;

 

 

“Cash Consideration” are to the cash consideration, if any, to be paid to certain holders of Pure’s Class A Common Stock pursuant to the Business Combination Agreement First Amendment;

 

 

“Charter” are to the second amended and restated certificate of incorporation of Pure, as amended;

 

 

“Class A Common Stock” are to Pure’s Class A voting common stock, par value $0.0001 per share;

 

 

“Class B Common Stock” are to Pure’s Class B voting common stock, par value $0.0001 per share;

 

 

“Closing” are to the closing of the business combination;

 

 

“Closing Date” are to the date on which the Closing occurs;

 

 

“the Company,” “we,” “our” or “us” are to Pure, either individually or together with its consolidated subsidiaries, as the context requires, before the completion of the business combination, and to HighPeak Energy, either individually or together with its consolidated subsidiaries, as the context requires, after the completion of the business combination;

 

 

“Contingent Value Rights” or “CVRs” are to, collectively, the Private CVRs and the Public CVRs, each of which are contractual contingent value rights, representing the right of Qualifying CVR Holders to receive, in certain circumstances, additional shares of HighPeak Energy common stock (or, in limited circumstances, such other form as is provided for in the Contingent Value Rights Agreements), if necessary, to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited) and described in further detail in the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights”;

 

 

“Contingent Value Rights Agreements” are to, collectively, the Private CVR Agreement and the Public CVR Agreement;

 

 

“Cumulative Unlevered Free Cash Flow” are to the sum of EBITDAX less capital expenditures for the periods presented;

 

 

“CVR Holder” are to a person or entity in whose name a CVR is registered in the CVR register maintained by the Rights Agent at any date of determination;

 

ii

 

 

“CVR Maturity Date” are to (i) the date to be specified by HighPeak I, HighPeak II and Sponsor, which may be any date occurring during the period beginning on (and including) the second anniversary of the Closing and ending on (and including) the date that is thirty (30) months following the Closing, or (ii) in certain circumstances, the occurrence of certain change of control events with respect to our business, including certain mergers, consolidations and asset sales;

 

 

“CVR Sponsors” are to HighPeak Energy, Sponsor, HighPeak I and HighPeak II;

 

  “Debt Facility” are to a reserve-based lending facility that HighPeak Energy may assume or enter into in connection with the Closing;

 

 

“EBITDAX” are to earnings before interest, taxes, depreciation (or depletion), amortization and exploration expense;

 

 

“Escrow Agreement” are to an escrow agreement to be executed by the parties thereto substantially in the form attached to the Contingent Value Rights Agreements;

 

 

“Escrowed Shares” are to a number of shares of HighPeak Energy common stock equal to the maximum number of shares of HighPeak Energy common stock that could become issuable to CVR Holders pursuant to the terms of the Contingent Value Rights Agreements as determined as of the Closing Date;

 

 

“Extensions” are to, collectively, the First Extension, the Second Extension and the Third Extension;

 

 

“Extension Date” are to August 21, 2020;

 

 

“First Extension” are to Pure’s stockholders’ approval of Pure’s proposal to extend the date by which Pure must consummate an Initial Business Combination from October 17, 2019 to February 21, 2020;

 

 

“Forward Purchases” are to (a) prior to the execution of the Forward Purchase Agreement Amendment, the issuance and purchase of up to 15,000,000 shares of Pure’s Class A Common Stock and up to 7,500,000 forward purchase warrants pursuant to the terms of the Forward Purchase Agreement and (b) as of and following the execution of the Forward Purchase Agreement Amendment, the issuance and purchase of up to 15,000,000 shares of HighPeak Energy common stock and a corresponding number of Private CVRs on a one-for-one basis and up to 7,500,000 forward purchase warrants pursuant to the terms of the Forward Purchase Agreement Amendment; 

 

 

“Forward Purchase Agreement” are to (i), with respect to time periods prior to the execution of the Forward Purchase Agreement Amendment, that certain Forward Purchase Agreement, dated April 12, 2018, by and between Pure and HPEP I, pursuant to which, among other things, HPEP I is subscribed for an aggregate number of up to 15,000,000 units of Pure, consisting of one share of Class A Common Stock and one-half of one warrant to purchase one share of Class A Common Stock for $10.00 per unit, or an aggregate maximum amount of up to $150,000,000 immediately prior to or simultaneously with the closing of Pure’s Initial Business Combination and (ii) with respect to time periods at or after the execution of the Forward Purchase Agreement Amendment, the Forward Purchase Agreement Amendment, pursuant to which, among other things, the purchasers thereunder, which may include affiliates of HPEP I or unrelated third parties, will collectively have the right, but not the obligation, to purchase, in connection with the Closing, any number of forward purchase units, up to the maximum amount of forward purchase units permitted thereunder, which in any event will not exceed 15,000,000 forward purchase units, with each forward purchase unit consisting of one share of HighPeak Energy common stock, one Private CVR and one-half of one whole warrant (which whole warrant is exercisable for HighPeak Energy common stock), for $10.00 per forward purchase unit, or an aggregate maximum amount of up to $150,000,000;

 

 

“Forward Purchase Agreement Amendment” are to an Amended and Restated Forward Purchase Agreement, contemplated to be entered into prior to or in connection with the Closing by and among HighPeak Energy, third party assignees of HPEP I (which may include affiliates or non-affiliates of HPEP I) and, solely for the limited purposes specified therein, Pure and HPEP I, pursuant to which, among other things, (i) the Forward Purchase Agreement entered into by and between HPEP I and Pure will be amended and restated in its entirety as described further in this proxy statement/prospectus and (ii) the purchasers thereunder will collectively have the right, but not the obligation, to purchase, in connection with the Closing, any number of forward purchase units, up to the maximum amount of forward purchase units permitted thereunder, which in any event will not exceed 15,000,000 forward purchase units, with each forward purchase unit consisting of one share of HighPeak Energy common stock, one Private CVR and one-half of one whole warrant (which whole warrant is exercisable for HighPeak Energy common stock), for $10.00 per forward purchase unit, or an aggregate maximum amount of up to $150,000,000;

 

 

“Forward Purchase Investors” are to the qualified institutional buyers and accredited investors that would purchase forward purchase units pursuant to the Forward Purchase Agreement Amendment;

 

 

“forward purchase unit” are to each of the up to 15,000,000 units that may be issued under the Forward Purchase Agreement Amendment, each consisting of one share of HighPeak Energy common stock, one Private CVR and one-half of one whole warrant, which whole warrants are exercisable for HighPeak Energy common stock at an exercise price of $11.50 per share;

 

 

“forward purchase warrants” are to the up to 7,500,000 warrants exercisable for Class A Common Stock that may be issued pursuant to the Forward Purchase Agreement, or, as applicable, up to 7,500,000 warrants exercisable for HighPeak Energy common stock that may be issued pursuant to the Forward Purchase Agreement Amendment;

 

 

“founder shares” are to the aggregate 10,350,000 shares of Class B Common Stock, of which 10,206,000 are currently held by Pure’s Sponsor and 48,000 are currently held by each of Pure’s three independent directors, initially purchased by Pure’s Sponsor in connection with the organization of Pure, which are expected to be exchanged on a one-for-one basis for shares of HighPeak Energy common stock at the Closing, other than 5,350,000 of such founder shares held by Pure’s Sponsor that will be forfeited pursuant to the terms of the Sponsor Support Agreement;

 

iii

 

 

“Grenadier” are to Grenadier Energy Partners II, LLC, a Delaware limited liability company;

 

 

“Grenadier Contribution Agreement” are to the Contribution Agreement, dated as of November 27, 2019, as amended on February 6, 2020 (the “Grenadier Amendment”) and as subsequently terminated on April 24, 2020, by and among Grenadier, HighPeak Assets II, Pure, HighPeak Energy and, solely for the limited purposes specified in the that certain amendment dated February 6, 2020, the HPK Contributors and HPK Representative;

 

 

“HighPeak Assets I” are to HighPeak Energy Assets, LLC, a Delaware limited liability company;

 

 

“HighPeak Assets II” are to HighPeak Energy Assets II, LLC, a Delaware limited liability company;

 

 

“HighPeak Contributed Entities” are to HPK LP, HighPeak Holdings, HighPeak Assets I, HighPeak Assets II and the HighPeak Employer;

 

 

“HighPeak Entities” are to HPK LP, HighPeak Holdings, HighPeak Assets I and HighPeak Assets II;

 

 

“HighPeak Employer” are to HighPeak Energy Employees, Inc., a Delaware corporation;

 

 

“HighPeak Energy” are to HighPeak Energy, Inc., a Delaware corporation initially formed as a wholly owned subsidiary of Pure for the purpose of effecting the business combination;

 

 

“HighPeak Energy common stock” are to HighPeak Energy’s voting common stock, par value $0.0001 per share;

 

 

“HighPeak Funds” are to HighPeak I, HighPeak II and HighPeak III, collectively;

 

 

“HighPeak Group” are to Sponsor, the HPK Contributors and Jack Hightower and each of their respective affiliates and certain permitted transferees, collectively;

 

 

“HighPeak Holdings” are to HighPeak Energy Holdings, LLC, a Delaware limited liability company;

 

 

“HighPeak I” are to HighPeak Energy, LP, a Delaware limited partnership;

 

 

“HighPeak II” are to HighPeak Energy II, LP, a Delaware limited partnership;

 

 

“HighPeak III” are to HighPeak Energy III, LP, a Delaware limited partnership;

 

 

“HPEP I” are to HighPeak Energy Partners, LP, a Delaware limited partnership;

 

 

“HPEP II” are to HighPeak Energy Partners II, LP, a Delaware limited partnership;

 

 

“HPEP III” are to HighPeak Energy Partners III, LP, a Delaware limited partnership anticipated to be formed prior to or in connection with the Closing;

 

 

“HPK LP” are to HPK Energy, LP, a Delaware limited partnership;

 

 

“HPK GP” are to HPK Energy, LLC, a Delaware limited liability company and the general partner of HPK LP;

 

 

“HPK Contributors” are to the HighPeak Funds and HPK GP;

 

 

“HPK Representative” are to HighPeak Energy Management, LLC, a Delaware limited liability company;

 

 

“Initial Business Combination” are to Pure’s initial merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;

 

 

“initial stockholders” are to holders of Pure’s founder shares prior to the IPO, including Pure’s Sponsor and Pure’s three independent directors;

 

 

“IPO” are to Pure’s initial public offering of units, which closed on April 17, 2018;

 

iv

 

 

“management” or “management team” are to Pure’s officers and directors before the completion of the business combination, and to HighPeak Energy’s officers and directors after the completion of the business combination;

 

 

“MergerSub” are to Pure Acquisition Merger Sub, Inc., a Delaware corporation formed as a wholly owned subsidiary of HighPeak Energy for the purpose of effecting the business combination;

 

 

“Nasdaq” are to the Nasdaq Global Market;

 

 

“Original HPK Business Combination Agreement” are to the Business Combination Agreement, dated as of November 27, 2019, as amended on February 6, 2020 (the “HPK Amendment”) and as subsequently terminated on April 24, 2020, by and among Pure, HighPeak Energy, MergerSub, the HPK Contributors and, solely for the limited purposes specified therein, the HPK Representative;

 

 

“Parent Merger” are to the exchange by holders of Pure Common Stock for HighPeak Energy common stock pursuant to the Business Combination Agreement;

 

 

“PIPE Investment” are to the anticipated issuance and sale of up to an aggregate amount of 10,000,000 shares of HighPeak Energy common stock and a corresponding number of Private CVRs on a one-for-one basis in a private placement to the PIPE Investors, the proceeds of which would be used to fund a portion of the cash obligations of HighPeak Energy and its subsidiaries at and after the Closing;

 

 

“PIPE Investors” are to the qualified institutional buyers and accredited investors that would purchase HighPeak Energy common stock and Contingent Value Rights pursuant to the PIPE Investment;

 

 

“Principal Stockholder Group” are to Sponsor, the HighPeak Funds and Jack Hightower;

 

 

“Predecessors” are, for the period from October 1, 2019 through Closing, to HPK LP, and for the year ended December 31, 2019, 2018 and 2017 to HighPeak I;

 

 

“Private CVRs” are to Contingent Value Rights to be issued to PIPE Investors participating in the PIPE Investment and to Forward Purchase Investors pursuant to the Forward Purchase Agreement Amendment;

 

 

“Private CVR Agreement” are to the agreement contemplated to be entered into prior to or in connection with the Closing, by and among HighPeak Energy, HighPeak I, HighPeak II, Sponsor and the Rights Agent, which will govern the terms of the Private CVRs;

 

 

“private placement warrants” are to the warrants issued to Pure’s Sponsor in a private placement simultaneously with the closing of Pure’s IPO;

 

 

“Public CVRs” are to Contingent Value Rights that will be issued to holders of public shares in connection with the business combination and listed for trading on the Nasdaq;

 

 

“Public CVR Agreement” are to the agreement contemplated to be entered into prior to or in connection with the Closing, by and among HighPeak Energy, HighPeak I, HighPeak II, Sponsor and the Rights Agent, which will govern the terms of the Public CVRs;

 

 

“public shares” are to shares of Class A Common Stock sold by Pure as part of the units in the IPO (whether they were purchased in the IPO or thereafter in the open market);

 

 

“public stockholders” are to the holders of Pure’s public shares;

 

 

“public warrants” are to the warrants sold by Pure as part of the units in the IPO (whether they were purchased in the IPO or thereafter in the open market);

 

 

“Pure” are to Pure Acquisition Corp., a Delaware corporation;

 

 

“Pure Board” are to the board of directors of Pure;

 

 

“Pure Common Stock” are to, collectively, Class A Common Stock and Class B Common Stock;

 

 

“Pure Special Committee” are to the special committee of Pure’s board of directors consisting of three (3) independent directors;

 

 

“Qualifying CVR Holders” are to CVR Holders who have (i) provided certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retained (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing;

 

 

“Rights Agent” are to Continental Stock Transfer & Trust Company;

 

v

 

 

“Second Extension” are to Pure’s stockholders’ approval of Pure’s proposal to extend the date by which Pure must consummate an Initial Business Combination from February 21, 2020 to May 21, 2020;

 

 

“special meeting” are to the special meeting of the stockholders of Pure that is the subject of this proxy statement/prospectus and any adjournments or postponements thereof;

 

 

“Sponsor” are to HighPeak Pure Acquisition, LLC, a Delaware limited liability company, and subsidiary of HPEP I;

 

 

“Sponsor Loans” are to loans made by any HPK Contributor, any of the HighPeak Contributed Entities or another affiliate of Pure’s Sponsor, to Pure or one of its subsidiaries of (i) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the First Extension and Second Extension for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) from October 17, 2019 until May 21, 2020, (ii) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus) (such loans described in clauses (i) and (ii), “Sponsor Extension Loans”) and (iii) such other amounts as Pure and HighPeak Energy may agree upon with any HPK Contributor, any HighPeak Contributed Entity or another affiliate of Pure’s Sponsor (provided that in the case of obtaining approval of Pure of any such other amounts in excess of $5,000,000 in the aggregate, the Pure Special Committee shall approve in writing such amounts);

 

 

“Sponsor Support Agreement”  are to that certain Sponsor Support Agreement, dated as of May 4, 2020, by and among Pure’s Sponsor, HPEP II and the Company, pursuant to which (i) Pure’s Sponsor will forfeit (a) 5,350,000 founder shares for no consideration and (b) all of its private placement warrants for no consideration and (ii) HPEP II will forfeit all of its public warrants for no consideration;

 

 

“Target Assets” are, for periods from October 1, 2019 through Closing, to HPK LP, which, indirectly through its subsidiaries, holds certain rights, title and interests in oil and natural gas assets and cash, and for prior periods, are to such assets as held by the HighPeak Funds;

 

 

“Third Extension” are to Pure’s stockholders’ approval of Pure’s proposal to extend the date by which Pure must consummate an Initial Business Combination from May 21, 2020 to August 21, 2020;

 

 

“Transfer Agent” are to Continental Stock Transfer & Trust Company;

 

 

“units” are to units sold by Pure in the IPO, each of which consists of one share of Class A Common Stock and one-half of one public warrant;

 

 

“Unlevered Free Cash Flow” are to EBITDAX less capital expenditures for the period presented;

 

 

“voting common stock” are to Class A Common Stock and Class B Common Stock prior to the consummation of the business combination, and to HighPeak Energy common stock following the consummation of the business combination;

 

 

“warrant agreement” are to, with respect to time periods prior to the warrant agreement assignment, the warrant agreement, dated as of April 12, 2018, by and between Pure and Transfer Agent and, after the warrant agreement assignment, by and between HighPeak Energy and Transfer Agent;

 

 

“warrant agreement assignment” means the assignment of the warrant agreement by Pure to HighPeak Energy; and

 

 

“warrants” are to, prior to the business combination, to the warrants to purchase one share of Class A Common Stock at a price of $11.50 per share or, after the business combination, one share of HighPeak Energy common stock at a price of $11.50 per share.

 

For additional defined terms commonly used in the oil and natural gas industry and used in this proxy statement/prospectus, please see “Glossary of Oil and Natural Gas Terms” set forth in Annex J.

 

vi

 

We show the voting and economic interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus upon the Closing based on the assumptions set forth below and otherwise assuming two (2) redemption scenarios as follows:

 

Illustrative No Additional Redemption: This scenario, which we refer to as the “Illustrative No Additional Redemption Scenario,” assumes no shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 5,012,629 shares outstanding at Closing. It also assumes that approximately 5.0 million shares of HighPeak Energy common stock will be subscribed to and committed pursuant to the PIPE Investment and Forward Purchases prior to the effectiveness of this proxy statement/prospectus. Based on the approximately 10.0 million shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the subscriptions under the PIPE Investment and the Forward Purchases in this Illustrative No Additional Redemption Scenario, we would satisfy both the Minimum Aggregate Funding Availability and Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement) closing conditions. In addition, this Illustrative No Additional Redemption Scenario assumes the terms of our Debt Facility, with a borrowing base of approximately $60 million, will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and in effect at the Closing.

 

Maximum Redemption: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes that a total of 2,012,629 shares of Class A Common Stock are redeemed, which represents the number of shares that would need to be redeemed in order to reduce the number of outstanding shares to 3,000,000 shares, which is the minimum number of shares required to satisfy the Minimum Aggregate Funding Availability (as defined in the Business Combination Agreement) condition in the Business Combination Agreement, assuming $10.00 a share and assuming the PIPE Investment or Forward Purchases and Debt Facility described below. Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy shall have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the trust account (the “Trust Account”) (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of Pure, HighPeak Energy or MergerSub (collectively, the “Parent Parties”) resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties (which agreement, if any, must be approved by the Pure Special Committee). The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. The Company is currently pursuing a PIPE Investment, Forward Purchases and a Debt Facility to enhance HighPeak Energy’s liquidity at Closing, and we expect a minimum of 2.0 million shares of HighPeak Energy common stock to be subscribed to and committed in PIPE Investments or Forward Purchases prior to the effectiveness of this proxy statement/prospectus to meet the Minimum Equity Capitalization closing condition. We also expect to enter into a Debt Facility with a borrowing base of not less than $50 million, which we expect will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and to be in place at Closing. To the extent we enter into agreements with PIPE Investors for the PIPE Investment or Forward Purchase Investors’ purchase of forward purchase units for more than 2.0 million shares in the aggregate, we will increase the number of shares that may be redeemed in the Maximum Redemption Scenario by an equivalent number of shares committed to be issued in the PIPE Investment or the Forward Purchases, although a minimum of 1,100,000 unrestricted shares will be required in order to meet the Nasdaq’s initial listing requirements (among other requirements, including a market value of unrestricted publicly held shares of $18 million).

 

Unless otherwise specified, the statements regarding (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in this proxy statement/prospectus do not take into account (i) the public warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreements (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following:

 

 

(i)

the Closing occurs on July 31, 2020;

 

 

(ii)

at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming:

 

vii

 

 

(a)

overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on July 31, 2020 will collectively total an aggregate of $2.0 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing;

 

 

(b)

cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on July 31, 2020;

 

 

(c)

transaction expenses will be approximately $15 million; and

 

 

(d)

there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement;

 

 

(iii)

approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing. Assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures;

 

 

(iv)

no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement;

 

 

(v)

there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the PIPE Investments or purchases under the Forward Purchase Agreement assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively;

 

 

(vi)

no available debt capacity other than the Debt Facility assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario; and

 

 

(vii)

no warrants are tendered for purchase in the warrant tender offer.

 

If the actual facts are different than HighPeak Energy’s assumptions or the scenarios presented above, the (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in this proxy statement/prospectus will differ from those set forth in this proxy statement/prospectus and such differences may be material. For example, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors. However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

 

See “Risk Factors—Risks Related to HighPeak Energy and the Business Combination—Due to a variety of factors, some of which are beyond its control, HighPeak Energy may have lower liquidity at Closing than currently expected. This may cause HighPeak Energy to increase its borrowings at Closing to fund costs, fees and expenses associated with the business combination and increase its borrowings after Closing to fund capital expenditures or decrease its future capital expenditures, all of which could impact HighPeak Energy’s balance sheet and ability to develop its oil and gas assets.”

 

viii

 

SUMMARY TERM SHEET

 

This Summary Term Sheet, together with the sections entitled “Questions and Answers About the Proposals for Pure Stockholders” and “Summary of the Proxy Statement/Prospectus,” summarizes certain information contained in this proxy statement/prospectus but does not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus, including the attached annexes, for a more complete understanding of the matters to be considered at the special meeting.

 

 

Pure is a blank check company formed for the purpose of effecting an Initial Business Combination. For more information about Pure, see the sections entitled “Information About Pure” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Pure.”

 

 

There are currently 15,362,629 shares of Class A Common Stock and Class B Common Stock issued and outstanding, consisting of 5,012,629 public shares and 10,350,000 founder shares. The Sponsor will forfeit 5,350,000 founder shares pursuant to the terms of the Sponsor Support Agreement. In addition, there are currently outstanding warrants to purchase 30,980,000 shares of Class A Common Stock, consisting of public warrants to purchase 20,700,000 shares of Class A Common Stock and private placement warrants to purchase 10,280,000 shares of Class A Common Stock. Each whole warrant entitles the holder thereof to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to certain adjustments. Only whole warrants are exercisable. The warrants will become exercisable thirty (30) days after the completion of an Initial Business Combination, and will expire five (5) years after the completion of an Initial Business Combination or earlier upon redemption or liquidation. Once the warrants become exercisable, Pure may redeem the outstanding warrants, in whole but not in part, at a price of $0.01 per warrant, upon a minimum of thirty (30) days’ prior written notice of redemption to each warrant holder and if, and only if, the last sale prices of the Class A Common Stock equal or exceed $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any twenty (20) trading days within a thirty (30) trading day period ending on the third (3rd) trading day prior to the date Pure sends the notice of redemption to the warrant holders; and only if there is a current registration statement in effect with respect to the shares of Class A Common Stock issuable upon the exercise of such warrants. The private placement warrants, however, are non-redeemable so long as they are held by Pure’s Sponsor or its permitted transferees. Pursuant to the Sponsor Support Agreement, at Closing, (i) Sponsor will forfeit all 10,280,000 private placement warrants and (ii) HPEP II will forfeit all public warrants that it owns at such date, including any warrants tendered in the warrant tender offer in connection with the Closing, which eliminates the substantial majority of all of our outstanding warrants.

 

 

On October 10, 2019, Pure’s stockholders approved an extension of the date by which Pure must consummate an Initial Business Combination (the “First Extension”) from October 17, 2019 to February 21, 2020. Pure requested the First Extension in order to complete an Initial Business Combination. In connection with the First Extension, 3,594,000 shares of Class A Common Stock were redeemed, for a total value of $36,823,301 on October 11, 2019. On February 20, 2020, Pure’s stockholders approved a second extension of the date by which Pure must consummate an Initial Business Combination (the “Second Extension”) from February 21, 2020 to May 21, 2020. In connection with the Second Extension, 2,189,801 shares of Class A Common Stock were redeemed, for a total value of $22,811,431 on February 21, 2020. On May 15, 2020, Pure’s stockholders approved a third extension of the date by which Pure must consummate an Initial Business Combination (the “Third Extension” and, with the First Extension and the Second Extension, the “Extensions”) from May 21, 2020 to August 21, 2020. In connection with the Third Extension, 30,603,570 shares of Class A Common Stock were redeemed for a total value of $322,063,673 on May 18, 2020. Further, Pure’s Sponsor agreed to loan, or cause an affiliate to loan, Pure or one of Pure’s subsidiaries, (a) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the stockholder votes to approve the First Extension and Second Extension, for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from October 17, 2019 until May 21, 2020, and (b) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus).

 

ix

 

 

In connection with warrant tender offers conducted in connection with (i) the announcement of the special meeting of Pure’s stockholders to approve the First Extension, (ii) Pure’s announcement of the proposed business combination contemplated by the Original HPK Business Combination Agreement and the Grenadier Contribution Agreement and (iii) Pure’s announcement of the special meeting of Pure’s stockholders to approve the Second Extension, HPEP II accepted for purchase an aggregate of 20,371,112 public warrants tendered in connection therewith, resulting in HPEP II owning 20,371,112 public warrants as a result of the warrant tender offers. On May 8, 2020, in connection with the filing of the definitive proxy statement related to the special meeting of Pure’s stockholders to vote to approve the Third Extension and the announcement of this proposed business combination, HPEP II commenced a warrant tender offer to purchase the 328,888 public warrants currently outstanding and not owned by it. The current warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II.

 

 

On November 27, 2019, Pure, HighPeak Energy, MergerSub, the HPK Contributors and, solely for the limited purposes specified therein, the HPK Representative (together, the “HPK BCA Parties”) entered into the Original HPK Business Combination Agreement, and HighPeak Assets II, Pure, HighPeak Energy and, solely for the limited purposes specified in the that certain amendment dated February 6, 2020, the HPK Contributors and HPK Representative (together, the “Grenadier Parties”) entered into the Grenadier Contribution Agreement (which amended a Purchase and Sale Agreement, dated June 17, 2019, between Grenadier and HighPeak Assets II), with each agreement subsequently being amended on February 6, 2020.

 

 

On April 24, 2020, Pure and the other HPK BCA Parties, as well as the other Grenadier Parties, terminated the Original HPK Business Combination Agreement and the Grenadier Contribution Agreement in response to a significant change in market conditions as a result of the Coronavirus 2019 (“COVID-19”) pandemic and the related impact to the oil and gas industry as described in greater detail in the section entitled “Questions and Answers About the Proposals for Pure Stockholders—How were transaction structure and consideration in the business combination determined?”

 

 

On May 4, 2020, Pure and HighPeak Energy entered into the Business Combination Agreement, by and among Pure, HighPeak Energy, MergerSub, HighPeak I, HighPeak II, HighPeak III, HPK GP, and solely for limited purposes specified therein, the HPK Representative, pursuant to which, among other things and subject to the terms and conditions contained therein, (i) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (ii) each outstanding share of Class A Common Stock and Class B Common Stock of Pure (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) will be converted into the right to receive one share of HighPeak Energy common stock (and, following the execution of the Business Combination Agreement Amendments as described below, such other merger consideration as is specified therein), (iii) the HPK Contributors will (a) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock for total consideration of 75,000,000 shares of HighPeak Energy common stock, subject to the adjustments described in the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement,” and the general partner interest in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (b) directly or indirectly contribute the outstanding Sponsor Loans in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (iv) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into Pure with all interests in HPK LP being cancelled for no consideration. For additional information see “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement.”

 

 

HighPeak Energy will acquire the Target Assets pursuant to the Business Combination Agreement. Promptly after such acquisition, HighPeak Energy will cause HPK LP to merge with and into Pure with all interest in HPK LP being cancelled for no consideration.

 

x

 

 

As a result of the business combination and pursuant to the warrant agreement, Pure’s warrants (other than the warrants held by Pure’s Sponsor or HPEP II, which will be forfeited prior to the merger) will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein. HighPeak Energy does not intend to list its warrants for trading on the Nasdaq or any other national securities exchange.

 

 

On June 12, 2020 HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into the Business Combination Agreement First Amendment that provides for additional Cash Consideration to be paid as merger consideration to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share.

 

 

On July 1, 2020 HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into the Business Combination Agreement Second Amendment, which provides for, among other things, one (1) Public CVR, which shall be registered under the Securities Act and the Exchange Act, and listed for trading on the Nasdaq (the “Public CVRs”), to be issued as merger consideration for each one whole share of HighPeak Energy common stock (excluding any fractional shares) that is issued as merger consideration to holders of shares of Class A Common Stock. HighPeak Energy also contemplates that one (1) Private CVR will also be issued to any PIPE Investor or purchaser under the Forward Purchase Agreement Amendment for each share of HighPeak Energy common stock purchased in connection with the PIPE Investment or pursuant to the Forward Purchase Agreement Amendment, as applicable (the “Private CVRs”). The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the holder of CVRs with a 10% preferred simple annual return (based on a $10 per share price at Closing), subject to a floor downside per-share price of $4.00, at the CVR Maturity Date. Further, holders of public shares that participate in the business combination are being afforded additional liquidity in the form of Public CVRs, which HighPeak Energy intends to list on the Nasdaq or the NYSE at the Closing. This contingent consideration, if applicable, will only be issued to Qualifying CVR Holders. To be a Qualifying CVR Holder, a CVR Holder must (i) provide certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retain (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing. Under the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, up to 21,250,000 and 10,625,000 shares of HighPeak Energy’s common stock, respectively, may be issued by HighPeak Energy to satisfy the rights underlying the CVRs issued pursuant to the Business Combination Agreement Second Amendment, the PIPE Investment subscription agreements and the Forward Purchase Agreement Amendment. If any additional shares of HighPeak Energy common stock are issued to Qualifying CVR Holders following the CVR Maturity Date, HighPeak I, HighPeak II and Sponsor will collectively forfeit an equivalent number of Escrowed Shares to HighPeak Energy for cancellation.

 

 

In addition, HighPeak Energy is pursuing additional equity investment with certain accredited investors and institutional buyers either through the PIPE Investment or a transfer of obligations under the Forward Purchase Agreement Amendment, which, if successful, would close in connection with the business combination.

 

 

For more information about the post-combination company and the Target Assets, see the sections entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” and “Information About the Target Assets.”

 

 

It is anticipated that, upon consummation of the business combination, HPK LP will be HighPeak Energy’s “predecessor” for financial reporting purposes and that HighPeak I, the assets of which represent only a portion of the Target Assets, will be HPK LP’s “predecessor” for financial reporting purposes. For more information about HPK LP, HighPeak I and the Target Assets, see the sections entitled “Selected Historical Financial Information of the Predecessors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Predecessors” and “Information About the Target Assets.”

 

  Unless waived by the applicable parties to the Business Combination Agreement, the Closing is subject to a number of conditions for one or more parties set forth in the Business Combination Agreement, including, among others, there being at least $100 million of Minimum Aggregate Funding Availability, which must include at least $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement), receipt of the requisite approval of the stockholders of Pure, the closing of Pure’s offer, pursuant to this proxy statement/prospectus, to redeem shares of Pure’s Class A Common Stock, material compliance of the parties with their covenants, the representations and warranties of the parties being true and correct, subject to the materiality standards contained in the Business Combination Agreement, and the listing of certain shares of common stock on the Nasdaq or the NYSE, subject only to official notice of issuance. For more information regarding the conditions to the Closing, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination Agreement.”

 

 

The Business Combination Agreement may be terminated at any time prior to the consummation of the business combination upon agreement of the parties thereto, or for other reasons in specified circumstances. For more information about the termination rights under the Business Combination Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Termination Rights.”

 

 

The proposed business combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

xi

 

 

Under Pure’s Charter, in connection with any stockholder meeting called to approve a proposed Initial Business Combination, each public stockholder will have the right, regardless of whether he or she is voting for or against such proposed business combination, to demand that Pure convert his or her shares into the right to receive in cash a pro rata share of the Trust Account. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, telephone number and address to the Transfer Agent to require Pure to validly redeem its shares. Pure may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either (i) physically tender their certificates to Pure’s Transfer Agent or (ii) deliver their shares to the Transfer Agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the warrant tender offer documents or proxy materials sent in connection with the proposal to approve the business combination. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge the tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. In any event, shares tendered for redemption must be delivered not less than two (2) business days prior to the special meeting.

 

 

In connection with the business combination, HighPeak Energy intends to apply to list its common stock on the Nasdaq or the NYSE under the ticker symbol “HPK.” Additionally, in connection with the business combination, Pure’s Common Stock, units and warrants will be delisted from the Nasdaq, deregistered under the Exchange Act and cease to be publicly traded. HighPeak Energy also intends to list the Public CVRs on the Nasdaq or the NYSE. HighPeak Energy does not intend to list its warrants or the Private CVRs for trading on the Nasdaq or any other national securities exchange.

 

 

Pure’s board of directors (the “Pure Board”) considered various factors in determining whether to approve the Business Combination Agreement and the business combination, including the unanimous recommendation (with one abstention) of the Pure Special Committee for the Pure Board to approve the business combination. For more information about the Pure Board’s decision-making process, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Pure Board’s Reasons for the Approval of the Business Combination.”

 

 

The Business Combination Agreement contemplates the execution by certain parties of various agreements at the Closing, including, among others, the Stockholders’ Agreement and the Registration Rights Agreement, copies of which are attached to this proxy statement/prospectus as Annexes D and E, respectively. For more information about these agreements, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements.”

 

xii

 

 

The following table presents the share ownership of various holders of HighPeak Energy upon the Closing and based on the assumptions set forth below and otherwise assuming two (2) redemption scenarios as follows:

 

Illustrative No Additional Redemption: This scenario, which we refer to as the “Illustrative No Additional Redemption Scenario,” assumes no shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 5,012,629 shares outstanding at Closing. It also assumes that approximately 5.0 million shares of HighPeak Energy common stock will be subscribed to and committed pursuant to the PIPE Investment and Forward Purchases prior to the effectiveness of this proxy statement/prospectus. Based on the approximately 10.0 million shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the subscriptions under the PIPE Investment and the Forward Purchases in this Illustrative No Additional Redemption Scenario, we would satisfy both the Minimum Aggregate Funding Availability and Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement) closing conditions. In addition, this Illustrative No Additional Redemption Scenario assumes the terms of our Debt Facility, with a borrowing base of approximately $60 million, will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and in effect at the Closing.

 

Maximum Redemption: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes that a total of 2,012,629 shares of Class A Common Stock are redeemed, which represents the number of shares that would need to be redeemed in order to reduce the number of outstanding shares to 3,000,000 shares, which is the minimum number of shares required to satisfy the Minimum Aggregate Funding Availability (as defined in the Business Combination Agreement) condition in the Business Combination Agreement, assuming $10.00 a share and assuming the PIPE Investment or Forward Purchases and Debt Facility described below. Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy shall have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties (which agreement, if any, must be approved by the Pure Special Committee). The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. The Company is currently pursuing a PIPE Investment, Forward Purchases and a Debt Facility to enhance HighPeak Energy’s liquidity at Closing, and we expect a minimum of 2.0 million shares of HighPeak Energy common stock to be subscribed to and committed in PIPE Investments or Forward Purchases prior to the effectiveness of this proxy statement/prospectus to meet the Minimum Equity Capitalization closing condition. We also expect to enter into a Debt Facility with a borrowing base of not less than $50 million, which we expect will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and to be in place at Closing. To the extent we enter into agreements with PIPE Investors for the PIPE Investment or Forward Purchase Investors’ purchase of forward purchase units for more than 2.0 million shares in the aggregate, we will increase the number of shares that may be redeemed in the Maximum Redemption Scenario by an equivalent number of shares committed to be issued in the PIPE Investment or the Forward Purchases, although a minimum of 1,100,000 unrestricted shares will be required in order to meet the Nasdaq’s initial listing requirements (among other requirements, including a market value of unrestricted publicly held shares of $18 million).

 

Holders

 

Illustrative No

Additional

Redemption (1)

   

% of

Total

   

Maximum

Redemption (1)

   

% of

Total

 
                                 

Public Stockholders

    5,012,629       5.49 %     3,000,000       3.48 %

HighPeak Group

                               

Sponsor (2)

    4,856,000       5.32 %     4,856,000       5.63 %

HPK Contributors

    76,250,000       83.56 %     76,250,000       88.41 %

HighPeak Group Total

    81,106,000       88.88 %     81,106,000       94.04 %

Independent Directors

    144,000       0.16 %     144,000       0.17 %

PIPE Investors/Forward Purchase Investors

    4,987,371       5.47 %     2,000,000       2.32 %
                                 

Total

    91,250,000       100.00 %     86,250,000       100.00 %

 

 


 

(1) The numbers set forth in the table above do not take into account (i) the public warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreements (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following: (i) the Closing occurs on July 31, 2020; (ii) at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming: (a) overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on July 31, 2020 will collectively total an aggregate of $2.0 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing; (b) the cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on July 31, 2020; (c) transaction expenses will be approximately $15 million and (d) there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement; (iii) approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing, which assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (iv) no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (v) no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement; (vi) there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the PIPE Investments or purchases under the Forward Purchase Agreement assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; (vii) no available debt capacity other than the Debt Facility assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; and (viii) no warrants are tendered for purchase in the warrant tender offer.

 

xiii

 

(2) Shares owned upon conversion of founder shares at consummation of the business combination and the forfeiture by Sponsor of 5,350,000 founder shares pursuant to the Sponsor Support Agreement.

 

If the actual facts are different than HighPeak Energy’s assumptions or the scenarios presented above, the interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus set forth above will differ and such differences may be material.

 

For example, unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy is required to have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties. The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. See “Risk Factors—Risks Related to HighPeak Energy and the Business Combination—Due to a variety of factors, some of which are beyond its control, HighPeak Energy may have lower liquidity at Closing than currently expected. This may cause HighPeak Energy to increase its borrowings at Closing to fund costs, fees and expenses associated with the business combination and increase its borrowings after Closing to fund capital expenditures or decrease its future capital expenditures, all of which could impact HighPeak Energy’s balance sheet and ability to develop its oil and gas assets.”

 

Further, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors. However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

 

The scenarios above do not give effect to the potential exercise of any warrants. We do not expect the exercise of any of our public warrants outstanding after the Closing to have a material impact on our outstanding shares or Sponsor ownership given Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration pursuant to the Sponsor Support Agreement, which eliminates the substantial majority of all of our outstanding warrants. For example, if HighPeak Energy assumes all outstanding public warrants (other than those subject to forfeiture) were exercised following completion of the business combination, with aggregate gross proceeds to HighPeak Energy of approximately $3.8 million, then the ownership of the public shareholders would increase by less than 1%. Further, if HighPeak I, HighPeak II and Sponsor are required to forfeit shares of HighPeak Energy common stock in connection with the issuance of shares of HighPeak Energy common stock pursuant to the Contingent Value Rights Agreements, the ownership percentage of the HighPeak Group would be materially reduced.

 

Please see the section entitled “Summary of the Proxy Statement/Prospectus—Impact of the Business Combination on Public Float” and “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” for further information.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR PURE STOCKHOLDERS

 

The following questions and answers briefly address some commonly asked questions about the Proposals to be presented at the special meeting of stockholders of Pure, including the proposed business combination. The following questions and answers do not include all of the information that is important to Pure stockholders. Pure urges its stockholders to read carefully this entire proxy statement/prospectus, including the annexes and other documents referred to herein.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

Pure stockholders are being asked in connection with the special meeting of stockholders to consider and vote upon, among other things, a proposal to approve and adopt the Business Combination Proposal, including the Business Combination Agreement, as amended by the Business Combination Agreement Amendments and as may be further amended from time to time, pursuant to which, among other things and subject to the terms and conditions contained therein, (i) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (ii) each outstanding share of Class A Common Stock and Class B Common Stock (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) of Pure will be converted into the right to receive (a) one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any), and (b) solely with respect to each outstanding share of Class A Common Stock, (A) a cash amount equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share, in each case and (B) one (1) Public CVR for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (a), representing the right to receive additional shares of HighPeak Energy common stock (or such other consideration as is specified with respect to certain events) for Qualifying CVR Holders if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited), (iii) the HPK Contributors will (a) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock and the general partner interests in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (b) directly or indirectly contribute the outstanding Sponsor Loans in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (iv) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into the surviving corporation (as successor to Pure) with all interests in HPK LP being cancelled in exchange for no consideration.

 

If the transactions contemplated by the Business Combination Agreement are completed, HighPeak Energy will own and operate the assets and businesses currently conducted by Pure and HPK LP and you will receive the right to receive one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any) and one (1) Public CVR for each share of Class A Common Stock or Class B Common Stock that you held immediately prior to the Closing, and, pursuant to the warrant agreement, each outstanding public warrant and private placement warrant of Pure held immediately prior to the Closing will entitle the holder thereof to purchase one share of HighPeak Energy common stock following the Closing on the terms set forth therein; provided, however, that all public warrants and private placement warrants held by Pure’s Sponsor or HPEP II immediately prior to the merger effective time will be forfeited for no consideration and cancelled immediately prior to the merger effective time. After the Closing, the HighPeak Energy common stock and the Public CVRs are expected to be listed for trading on the Nasdaq or the NYSE.

 

Copies of the Business Combination Agreement (as well as the Business Combination Agreement Amendments) are attached to this proxy statement/prospectus as Annex A, Annex A-I and Annex A-II, respectively, and incorporated by reference herein. This proxy statement/prospectus and its annexes contain important information about the proposed business combination and the other matters to be acted upon at the special meeting. Holders of Class A Common Stock and Class B Common Stock are entitled to vote on all proposals in this proxy statement/prospectus. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

 

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will be held on                     , 2020, at                      , Eastern Time, at                     .

 

Q:

What is being voted on at the special meeting?

 

A:

Pure stockholders will vote on the following proposals at the special meeting:

 

 

The Business Combination Proposal— To consider and vote upon a proposal to approve and adopt the Business Combination Agreement and the transactions contemplated thereby (Proposal No. 1).

 

 

The Adjournment Proposal— To consider and vote upon a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal (Proposal No. 2).

 

xv

 

Q:

What will happen in the business combination?

 

A:

Pure and HighPeak Energy entered into the Business Combination Agreement, as amended by the Business Combination Agreement Amendments and as may be further amended from time to time, pursuant to which, among other things, and subject to the terms and conditions contained therein, HighPeak Energy has agreed to acquire the Target Assets. Under the terms of the Business Combination Agreement, at the Closing, (i) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (ii) each outstanding share of Class A Common Stock and Class B Common Stock of Pure (other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor) will be converted into the right to receive (a) one share of HighPeak Energy common stock, and (b) solely with respect to each outstanding share of Class A Common Stock, (A) a cash amount equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share, in each case and (B) one (1) Public CVR for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (a), representing the right to receive additional shares of HighPeak Energy common stock (or such other consideration as is specified with respect to certain events) for Qualifying CVR Holders if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited), (iii) the HPK Contributors will (a) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock for total consideration of 75,000,000 shares of HighPeak Energy common stock (the “Unadjusted Shares”), subject to certain adjustments described in the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement” and the general partner interest in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (b) directly or indirectly contribute the outstanding Sponsor Loans in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (iv) following the consummation of the foregoing transactions, HighPeak Energy will cause HPK LP to merge with and into Pure with all interests in HPK LP being cancelled for no consideration. As a result of the business combination and pursuant to the warrant agreement, Pure’s warrants will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein; provided, however, that all public warrants and private placement warrants held by Pure’s Sponsor or HPEP II immediately prior to the merger effective time will be forfeited for no consideration and cancelled immediately prior to the merger effective time. For more detailed information on the consideration to be given and the other terms and conditions of the Business Combination Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement.”

 

Based on the assumptions set forth under “—Certain Defined Terms,” we currently expect HighPeak Energy to issue approximately 76,250,000 shares of HighPeak Energy common stock to the HPK Contributors at Closing, which reflects the 75,000,000 shares of HighPeak Energy common stock and estimated additional shares of HighPeak Energy common stock to be issued as adjustments pursuant to the Business Combination Agreement.

 

For more information about the Business Combination Agreement, the consideration to be received by the HPK Contributors, and the business combination generally, see the section entitled “Proposal No. 1—The Business Combination Proposal.”

 

In addition, HighPeak Energy is pursuing additional equity investment with certain accredited investors and institutional buyers either through the PIPE Investment or a transfer of obligations under the Forward Purchase Agreement Amendment, which, if successful, would close in connection with the business combination. For more information, see “Questions and Answers About the Proposals for Pure Stockholders—Will HighPeak Energy obtain new financing in connection with the business combination? If so, what are the anticipated material terms of such financing?”

 

On April 12, 2018, Pure entered into the Forward Purchase Agreement with HPEP I. At or prior to the Closing, the Forward Purchase Agreement will be amended and restated in its entirety pursuant to the Forward Purchase Agreement Amendment and the purchasers thereunder (which may include affiliates of HPEP I or unrelated third parties) will collectively have the right, but not the obligation, to purchase, in connection with the Closing, any number of forward purchase units, up to the maximum amount of forward purchase units permitted thereunder, which in any event will not exceed 15,000,000 forward purchase units, for $10.00 per forward purchase unit or aggregate gross proceeds of up to $150 million. The purchasers have no obligation to purchase any forward purchase units in connection with the business combination and may unilaterally terminate the Forward Purchase Agreement Amendment prior to the Closing.

 

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Prior to the Initial Business Combination, HighPeak Energy intends to adopt the HighPeak Energy, Inc. Long Term Incentive Plan (the “LTIP”), and it is anticipated that Pure, as HighPeak Energy’s sole shareholder, will approve the LTIP. Following the Closing, HighPeak Energy will continue to sponsor the LTIP. As described further under “Proposal No. 1—The Business Combination Proposal—Related Arrangements—HighPeak Energy, Inc. Long Term Incentive Plan,” the LTIP provides for potential grants of options, dividend equivalents, cash awards and substitute awards to employees, directors and service providers of HighPeak Energy, as well as stock awards to directors of HighPeak Energy. The LTIP will be administered by the HighPeak Energy Board or a committee thereof.

 

Subject to adjustment in accordance with the terms of the LTIP, a number of shares of HighPeak Energy common stock equal to 13% of the outstanding shares of HighPeak Energy common stock on the effective date of the LTIP (the “Share Pool”) are reserved and available for delivery with respect to Awards, and 1,300 shares of HighPeak Energy common stock will be available for the issuance of shares upon the exercise of ISOs (as defined in the LTIP). On January 1, 2021 and January 1 of each calendar year occurring thereafter and prior to the expiration of the LTIP, the Share Pool will automatically be increased by (i) the number of shares of HighPeak Energy common stock issued pursuant to the LTIP during the immediately preceding calendar year and (ii) 13% of the number of shares of HighPeak Energy common stock that are newly issued by HighPeak Energy (other than those issued pursuant to the LTIP) during the immediately preceding calendar year.

 

Q:

What are the Contingent Value Rights?

 

 

A:

The Contingent Value Rights are contractual rights to receive a contingent payment (in the form of additional shares of HighPeak Energy common stock, or as otherwise specified in the Contingent Value Rights Agreements) in certain circumstances that will be issued to the holders of shares of Pure’s Class A Common Stock participating in the business combination, PIPE Investors participating in the PIPE Investment pursuant to applicable subscription agreements and Forward Purchase Investors purchasing forward purchase units pursuant to the Forward Purchase Agreement Amendment. The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the CVR Holders with a 10% preferred simple annual return (based on a $10 per share price at Closing), subject to a floor downside per-share price of $4.00 (such return, the “Preferred Return”), at the CVR Maturity Date. Further, holders of public shares that participate in the business combination are being afforded additional liquidity in the form of Public CVRs, which HighPeak Energy intends to list on the Nasdaq or the NYSE at Closing. This contingent consideration, if applicable, will only be issued to Qualifying CVR Holders. To be a Qualifying CVR Holder, a CVR Holder must (i) provide certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retain (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing. Under the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, up to 21,250,000 and 10,625,000 shares of HighPeak Energy common stock, respectively, may be issued by HighPeak Energy to satisfy the Preferred Returns with respect to the CVRs issued pursuant to the Business Combination Agreement Second Amendment, the PIPE Investment subscription agreements and the Forward Purchase Agreement Amendment. If any additional shares of HighPeak Energy common stock are issued to Qualifying CVR Holders following the CVR Maturity Date to satisfy their Preferred Returns, HighPeak I, HighPeak II and Sponsor will collectively forfeit an equivalent number of Escrowed Shares to HighPeak Energy for cancellation. The Preferred Returns could entitle the Qualifying CVR Holder to receive up to 2.125 shares of HighPeak Energy common stock per Public CVR, with respect to the Public CVRs, or per share of HighPeak Energy common stock received at the Closing and held (subject to certain limited permitted transfers) through the CVR Maturity Date and corresponding Private CVR, with respect to Private CVRs (such Public CVR, solely with respect to Public CVRs, or shares of HighPeak Energy common stock and corresponding Private CVRs, solely with respect to Private CVRs, as applicable, “Preferred Return Shares and corresponding CVRs”). . By way of example, if the CVR Maturity Date were set at the second anniversary of the Closing, the price of HighPeak Energy’s common stock were $12.00 or higher on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would not issue any additional shares of HighPeak Energy common stock to such Qualifying CVR Holders. However, if the CVR Maturity Date were set at the date that is thirty (30) months following the Closing, the price of HighPeak Energy’s common stock were $4.00 or lower on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would issue an additional 31,875,000 shares of HighPeak Energy common stock (or 2.125 shares of HighPeak Energy common stock per Preferred Return Share and corresponding CVR, representing an aggregate value at the downside price of $4.00 per share of up to $127.5 million (i.e., in an amount sufficient to provide a 10% preferred simple annual return with respect to 15,000,000 Preferred Return Shares and corresponding CVRs)), collectively, to such Qualifying CVR Holders and HighPeak I, HighPeak II and Sponsor would collectively forfeit an equivalent number of shares to HighPeak Energy for cancellation. Within three (3) business days following the Closing, HighPeak I, HighPeak II and Sponsor will collectively place a number of shares of HighPeak Energy common stock in escrow equal to the maximum number of additional shares of HighPeak Energy common stock issuable pursuant to the Contingent Value Rights Agreements, which Escrowed Shares will be released either to HighPeak Energy for cancellation in connection with the satisfaction of any Preferred Returns or back to HighPeak I, HighPeak II and Sponsor, collectively, as applicable, following the CVR Maturity Date. Please see “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” for additional detail regarding the Contingent Value Rights and the Contingent Value Rights Agreements.

 

Q:

How were transaction structure and consideration in the business combination determined?

 

A:

Following the IPO, representatives of Pure and the HighPeak Group contacted and were contacted by a number of individuals and entities, including Grenadier, with respect to business combination opportunities and engaged with several possible target businesses with respect to potential transactions. After a series of discussions, Grenadier advised representatives of Pure that it would not be pursuing a transaction with Pure in exchange for cash and shares of Pure Common Stock given the total proposed consideration and the timing and uncertainty of closing due to the requirement for Pure stockholder approval. Representatives of Pure and the HighPeak Group nevertheless concluded that Grenadier was an attractive investment opportunity irrespective of whether Pure ultimately participated in a business combination, so, to address Grenadier’s concerns, the parties began to instead discuss an all-cash acquisition of the assets of Grenadier (the “Grenadier Assets”) by funds controlled by the HighPeak Group, rather than Pure. Given the complementary nature of the HighPeak Contributed Entities’ assets to those of Grenadier and the flexibility for HighPeak Assets II to assign its rights and obligations under the Grenadier Contribution Agreement or for the HPK Contributors to directly or indirectly contribute the counterparty, HighPeak Assets II, to Pure in connection with a future negotiated business combination, if so desired, the original Grenadier Purchase Agreement was signed by HighPeak Assets II and Grenadier on June 17, 2019, providing for an initial target closing date of August 19, 2019 with the ability to extend such Closing Date to the date that is seventy-five (75) days after the execution date. Thereafter, certain representatives of the HighPeak Group engaged in conversations with the independent directors serving on the Pure Board and discussed, among other things, a proposal to combine the assets of HPK LP (the “HighPeak Assets”) and the Grenadier Assets in a business combination with Pure, where the HPK Contributors would receive equity interests in exchange for the HighPeak Assets and concurrently use Pure’s cash to consummate the closing of the Grenadier Contribution Agreement. The parties subsequently amended the agreements to provide that Grenadier would agree to take a certain amount of consideration in equity as opposed to cash and to extend the outside date to a date after May 21, 2020, among other things.

 

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, which have caused a significant decrease in activity in the global economy and the demand for oil and natural gas. Also in March 2020, the Organization of Petroleum Exporting Countries and other oil producing nations (“OPEC+”) were unable to reach an agreement on production levels for crude oil, at which point Saudi Arabia and Russia initiated efforts to aggressively increase production. The convergence of these events created the unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply. While OPEC+ agreed in April to cut production, these cuts and other reduced capital expenditures by non-OPEC+ members have not offset the significant decrease in demand related to the COVID-19 pandemic. As a result, the price of oil has remained extremely depressed and available storage and transportation capacity for production is increasingly limited and may be completely unavailable in the near future. The imbalance between the supply of and demand for oil, lack of available storage, as well as the uncertainty around the extent and timing of an economic recovery, have caused extreme market volatility and a substantial adverse effect on commodity prices and available financing for oil and gas companies. In light of this substantial change in market conditions, on April 24, 2020, Pure, and the several other parties thereto, terminated the Original HPK Business Combination Agreement and the Grenadier Contribution Agreement.

 

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Thereafter, certain representatives of the HighPeak Group engaged in conversations with the Pure Special Committee and discussed, among other things, a proposal to combine the Target Assets alone in a business combination with Pure, where the HPK Contributors would receive equity interests and no cash in exchange for the Target Assets. The new proposed value of the HighPeak Funds’ contributed properties was reduced from the value in the Original HPK Business Combination Agreement of $892 million (taking into account expected adjustments for capital expenditures and other items under the Original HPK Business Combination Agreement) to $750 million despite significant capital expenditures that increased HighPeak Group’s operated horizontal well count from two (2) wells to twenty-three (23) wells. This increase drove significant increases in reserves and production capability. The reasoning of the HighPeak Group behind the lower value of the offer for the HighPeak Funds’ contributed assets is due to deteriorated market conditions driven by the effects of the COVID-19 pandemic and the OPEC+ oil price war and the HighPeak Funds’ related expectations regarding the pace of their drilling program. The valuation analyses performed by the Deal Team (as defined below) and discussed with the Pure Special Committee was a holistic analysis based on a broad variety of quantitative and qualitative factors, including, but not limited to, comparable company analysis, the estimated transaction metrics for recent comparable transactions in HighPeak Energy’s areas of operation, expectations regarding future pricing and demand for oil and natural gas, expectations regarding future well results and other factors. As such, the Pure Special Committee believes that the Transaction (as defined below) is fair from a financial point of view to, and in the best interests of, Pure’s stockholders based on its analysis of quantitative and qualitative factors discussed with the Deal Team, including, but not limited to, the comparable company analysis and the estimated transaction metrics for recent comparable transactions in HighPeak Energy’s areas of operation. See “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination” for additional details regarding the valuation analysis completed in connections with entry into the Business Combination Agreement and “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination—The Pure Board’s Reasons for the Approval of the Business Combination” for additional detail regarding the quantitative and qualitative factors discussed with the Deal Team.

 

The Deal Team, HighPeak Energy and the HighPeak Funds also determined to provide third party participants in the business combination with a significant valuation protection through the issuance of Contingent Value Rights.  See the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” for more information regarding the Contingent Value Rights.

 

Q:

What risks does HighPeak Energy face in light of the COVID-19 pandemic and the recent decline in commodity prices?

 

A:

HighPeak Energy’s business may be materially adversely affected by the recent COVID-19 pandemic. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and HighPeak Energy’s business could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors, vendors and service providers are unavailable to consummate the transaction in a timely manner. The extent to which COVID-19 impacts the business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination may be materially adversely affected. Further, our ability to consummate the business combination may be materially adversely affected if the recent significant decrease in commodity prices persists for a prolonged period.

 

After the consummation of the business combination, HighPeak Energy could face substantial hardship in the event effects of COVID-19 and recent commodity price declines persist.  

 

For example, prices decreased to a level in April 2020 that caused the HPK Contributors to halt their drilling program and to curtail a substantial portion of their existing production, as well. It is uncertain when prices will return to levels at which the HPK Contributors or HighPeak Energy would be willing to execute their drilling program and resume producing from existing shut-in wells. However, prices have since increased and HighPeak Energy management is currently evaluating resuming production from some or all of its currently shut-in wells and will continue to monitor the extent by which prices continue to increase and/or stabilize prior to resuming production and any capital expenditure program. In addition, HighPeak Energy may be unable to fund its expected capital expenditure program. HighPeak Energy has evaluated multiple development scenarios under multiple potential commodity price assumptions. Under its three (3) rig development scenario, HighPeak Energy would expect to make approximately $350 to $400 million of capital expenditures in the twelve (12) months following the expected July 31, 2020 Closing. The ability to make these capital expenditures will be highly dependent on the price of oil and available funding as HighPeak Energy is only expected to have available liquidity of approximately $115 million in the Illustrative No Additional Redemption Scenario assuming approximately $30 million is drawn on the Debt Facility to fund payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 which will be made prior to or at Closing and approximately $55 million in the Maximum Redemption Scenario assuming $30 million is drawn on the Debt Facility to fund payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 and which will be made prior to or at Closing. Liquidity at Closing may be up to $35 million less based on execution of the permitted interim capital budget and timing of the related payments. See discussion of the “Illustrative No Additional Redemption Scenario” and the “Maximum Redemption Scenario” in the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy.” Commodity prices have already partially recovered from their April lows, with an average WTI spot price of $37.45 per Bbl for the first six (6) days of June 2020.  If commodity prices remain at these levels for a sustained period, HighPeak Energy intends to resume drilling a three (3) rig program after the Closing, but also recognizes that commodity prices remain highly volatile and that its liquidity will likely be limited, and as a result, there is no certainty that HighPeak Energy will operate three (3) rigs post-Closing.  For detail regarding sensitivity cases for a zero (0), one (1) and two (2) rig program over the same periods, see “Proposal No. 1—The Business Combination Proposal—Unaudited Prospective Financial, Operating and Reserve Information Provided to the Pure Board in Connection with Signing the Business Combination Agreement.”

 

For additional information, see “Risk Factors—Risks Related to the Target Assets—Oil, natural gas and NGL prices are volatile. Sustained periods of low, or further declines in, oil, natural gas and NGL prices could adversely affect HighPeak Energy’s business, financial condition and results of operations and its ability to meet its capital expenditure obligations and other financial commitments” and “—Recent COVID-19 and other pandemic outbreaks could negatively impact HighPeak Energy’s business and results of operations.”

 

xviii

 

Q:

Why is Pure providing its stockholders with the opportunity to vote on the business combination?

 

A:

As a result of the structure of the business combination as a merger of Pure with MergerSub, approval by Pure’s stockholders of the business combination is required under Delaware corporate law. In addition, under Pure’s Charter, Pure must provide all public stockholders with the opportunity to have their shares redeemed upon the consummation of an Initial Business Combination either in conjunction with a tender offer or in conjunction with a stockholder vote with respect to such Initial Business Combination. Pure has elected to provide its public stockholders with the opportunity to have their shares redeemed in connection with Pure’s required stockholder vote rather than a tender offer. Therefore, Pure is seeking to obtain the approval of its stockholders of the Business Combination Proposal, as required by Delaware corporate law, and are allowing public stockholders to effectuate redemptions of their public shares in connection with the Closing. Pure will not consummate the business combination unless the Business Combination Proposal is approved at the special meeting.

 

Q:

What conditions must be satisfied to complete the business combination?

 

A:

There are a number of closing conditions for one or more parties in the Business Combination Agreement, including, among others, receipt of the requisite approval by the stockholders of Pure and the written consents of Pure, as the sole stockholder of HighPeak Energy, and of HighPeak Energy, as the sole stockholder of MergerSub (which written consents of Pure and HighPeak Energy were delivered within 24 hours after execution of the Business Combination Agreement), there being at least $100 million of Minimum Aggregate Funding Availability, which must include at least $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement), the closing of Pure’s offer, pursuant to this proxy statement/prospectus, to redeem shares of Class A Common Stock, material compliance of the parties with their covenants, the representations and warranties of the parties being true and correct, subject to the materiality standards contained in the Business Combination Agreement, and the approved listing of certain shares of HighPeak Energy common stock on the NYSE or the Nasdaq, upon official notice of issuance. For more information regarding the conditions to the Closing, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination Agreement.”

 

Q:

How will HighPeak Energy be managed and governed following the business combination?

 

A:

Following the consummation of the business combination, Jack Hightower will serve as Chief Executive Officer, Rodney L. Woodard will serve as Chief Operating Officer, Michael L. Hollis will serve as President and Steven W. Tholen will serve as Chief Financial Officer of HighPeak Energy. For more information, see the section entitled “Management After the Business Combination.” Immediately prior to the business combination, HighPeak Energy Management, LLC, which is owned by Mr. Hightower and certain other individuals, will sell HighPeak Employer to HPK LP, which, subject to certain limited conditions, will then be contributed to HighPeak Energy in the business combination. HighPeak Employer employs all of the personnel that provide services to the HighPeak Funds and their subsidiaries, including the HighPeak Contributed Entities. As a result, HighPeak Energy will be managed by the executive officers named above and employees who have historically provided services to the HighPeak Funds, including operating the Target Assets.

 

The board of directors of HighPeak Energy (the “HighPeak Energy Board”) will consist of a sole director, Jack Hightower, prior to the Closing. Under the Business Combination Agreement, the HPK Contributors have the right until five (5) business days prior to the effectiveness of this proxy statement/prospectus to designate to HighPeak Energy a list of individuals that HPK LP wants to be appointed to the HighPeak Energy Board, effective as of the Closing. To the extent that the HPK Contributors timely deliver such a designation, HighPeak Energy and the HighPeak Energy Board will be obligated under the Stockholders’ Agreement to take all necessary action to effect such appointments, and the designated directors and officers will be listed in a subsequent amendment to this proxy statement/prospectus. Under the Stockholders’ Agreement, the Principal Stockholder Group will be entitled to appoint four (4) directors to the HighPeak Energy Board for so long as it holds greater than 35% of the shares of HighPeak Energy’s voting stock outstanding. For more information, see the sections entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements—Stockholders’ Agreement” and “Management After the Business Combination.”

 

xix

 

Q:

Will HighPeak Energy obtain new financing in connection with the business combination? If so, what are the anticipated material terms of such financing?

 

A:

In connection with the entry into the Business Combination Agreement, HighPeak Energy intends to enter into subscription agreements with certain qualified institutional buyers and accredited investors and/or the Forward Purchase Agreement Amendment with, among others, certain purchasers, pursuant to which, among other things, HighPeak Energy would agree to issue and sell, pursuant to the PIPE Investment and/or the Forward Purchase Agreement Amendment, up to an aggregate of 15,000,000 shares of HighPeak Energy common stock and forward purchase units, and an equivalent number of Private CVRs, to such investors for anticipated aggregate gross proceeds of up to $150 million. For more information, see “Proposal No. 1—The Business Combination Proposal—Related Agreements—Subscription Arrangements.”

 

In connection with the PIPE Investment and Forward Purchases and in order to secure their participation in the business combination, the Company will issue PIPE Investors participating in the PIPE Investment and Forward Purchase Investors purchasing forward purchase units pursuant to the Forward Purchase Agreement Amendment one (1) Private CVR for each share of HighPeak Energy common stock purchased thereunder. Public CVRs will also be issued as part of the merger consideration to holders of shares of Pure’s Class A Common Stock participating in the business combination. The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the CVR Holders with a 10% preferred simple annual return (based on a $10 per share price at Closing), subject to a floor downside per-share price of $4.00 (such return, the “Preferred Return”), at the CVR Maturity Date. Further, holders of public shares that participate in the business combination are being afforded additional liquidity in the form of Public CVRs, which HighPeak Energy intends to list on the Nasdaq or NYSE and may be traded following the Closing. This contingent consideration, if applicable, will only be issued to Qualifying CVR Holders.  To be a Qualifying CVR Holder, a CVR Holder must (i) provide certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retain (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing. Under the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, up to 21,250,000 and 10,625,000 shares of HighPeak Energy common stock, respectively, may be issued by HighPeak Energy to satisfy the Preferred Returns with respect to the CVRs issued pursuant to the Business Combination Agreement Second Amendment, the PIPE Investment subscription agreements and the Forward Purchase Agreement Amendment. If any additional shares of HighPeak Energy common stock are issued to Qualifying CVR Holders following the CVR Maturity Date to satisfy their Preferred Returns, HighPeak I, HighPeak II and Sponsor will collectively forfeit an equivalent number of Escrowed Shares to HighPeak Energy for cancellation. The Preferred Returns could entitle the Qualifying CVR Holder to receive up to 2.125 shares of HighPeak Energy common stock per Public CVR, with respect to the Public CVRs, or per share of HighPeak Energy common stock received at the Closing and held (subject to certain limited permitted transfers) through the CVR Maturity Date and corresponding Private CVR, with respect to Private CVRs. By way of example, if the CVR Maturity Date were set at the second anniversary of the Closing, the price of HighPeak Energy’s common stock were $12.00 or higher on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would not issue any additional shares of HighPeak Energy common stock to such Qualifying CVR Holders. However, if the CVR Maturity Date were set at the date that is thirty (30) months following the Closing, the price of HighPeak Energy’s common stock were $4.00 or lower on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would issue an additional 31,875,000 shares of HighPeak Energy common stock (or 2.125 shares of HighPeak Energy common stock per Preferred Return Share and corresponding CVR, representing an aggregate value at the downside price of $4.00 per share of up to $127.5 million (i.e., in an amount sufficient to provide a 10% preferred simple annual return with respect to 15,000,000 Preferred Return Shares and corresponding CVRs)), collectively, to such Qualifying CVR Holders and HighPeak I, HighPeak II and Sponsor would collectively forfeit an equivalent number of shares to HighPeak Energy for cancellation. Within three (3) business days following the Closing, HighPeak I, HighPeak II and Sponsor will collectively place a number of shares of HighPeak Energy common stock in escrow equal to the maximum number of additional shares of HighPeak Energy common stock issuable pursuant to the Contingent Value Rights Agreements, which Escrowed Shares will be released either to HighPeak Energy for cancellation in connection with the satisfaction of any Preferred Returns or back to HighPeak I, HighPeak II and Sponsor, collectively, as applicable, following the CVR Maturity Date. Please see below an illustration of the aggregate number of additional shares of HighPeak Energy common stock that would be issuable to a Qualifying CVR Holder under a number of price scenarios assuming that such Qualifying CVR Holder held one (1) Preferred Return Share and a corresponding CVR at the CVR Maturity Date (and shown for scenarios in which the CVR Maturity Date is on either the second anniversary of Closing or the date that is thirty (30) months following Closing):

 

CVR Maturity Date set at the second anniversary of the Closing Date

 

(The share reference price is based on the “Reference Price” as defined in the Contingent Value Rights Agreements, other than the reference prices that are below $4.00, which are shown for illustrative purposes only)

 

 

 

Share Reference

Price

 

 

Preferred Return

Shares and

Corresponding

CVRs

Total

Corresponding

Escrowed

Shares

Total

Corresponding

Escrowed

Shares Available

for Forfeiture to

HighPeak

Energy

Shares of

HighPeak

Energy Common

Stock to be

Issued to

Applicable

Qualifying CVR

Holder

Total Value to

Applicable

  Qualifying CVR

Holder

$12.50

1

2.125

2.000

0.000

$12.50

$12.00

1

2.125

2.000

0.000

$12.00

$11.00

1

2.125

2.000

0.091

$12.00

$10.00

1

2.125

2.000

0.200

$12.00

$9.00

1

2.125

2.000

0.333

$12.00

$8.00

1

2.125

2.000

0.500

$12.00

$7.00

1

2.125

2.000

0.714

$12.00

$6.00

1

2.125

2.000

1.000

$12.00

$5.00

1

2.125

2.000

1.400

$12.00

$4.00

1

2.125

2.000

2.000

$12.00

$3.33

1

2.125

2.000

2.000

$10.00

$3.00

1

2.125

2.000

2.000

$9.00

 

xx

 

CVR Maturity Date set at the date that is thirty (30) months following the Closing Date

 

 

 

Share Reference

Price

 

 

Preferred Return

Shares and

Corresponding

CVRs

Total

Corresponding

Escrowed

Shares

Total

Corresponding

Escrowed

Shares Available

for Forfeiture to

HighPeak

Energy

Shares of

HighPeak

Energy Common

Stock to be

Issued to

Applicable

Qualifying CVR

Holders (1)

Total Value to

 Applicable

Qualifying CVR

Holders

$12.50

1

2.125

2.125

0.000

$12.50

$12.00

1

2.125

2.125

0.042

$12.50

$11.00

1

2.125

2.125

0.136

$12.50

$10.00

1

2.125

2.125

0.250

$12.50

$9.00

1

2.125

2.125

0.389

$12.50

$8.00

1

2.125

2.125

0.563

$12.50

$7.00

1

2.125

2.125

0.786

$12.50

$6.00

1

2.125

2.125

1.083

$12.50

$5.00

1

2.125

2.125

1.500

$12.50

$4.00

1

2.125

2.125

2.125

$12.50

$3.20

1

2.125

2.125

2.125

$10.00

$3.00

1

2.125

2.125

2.125

$9.38

 


 

(1) Calculated based on a 2.5 year period rather than a specific number of days occurring during such thirty (30) month period. This amount may vary slightly depending upon the actual date of the Closing and the applicable months that are covered in the thirty (30) month period.

 

As described above, the financing proceeds may also include purchases of forward purchase units under the Forward Purchase Agreement, however, the purchasers have no obligation to purchase any forward purchase units in connection with the business combination and may unilaterally terminate the Forward Purchase Agreement prior to the Closing.

 

HighPeak Energy also intends to either assume a Debt Facility that the HPK Contributors may enter into prior to the business combination, or to enter into a Debt Facility in connection with the consummation of the business combination. The HPK Contributors may draw on the Debt Facility prior to Closing, in which HighPeak Energy would assume such outstanding loans, and HighPeak Energy expects to draw on the Debt Facility from time to time as circumstances warrant (including, if necessary or appropriate, to fund costs, fees and expenses (including the fees and expenses payable pursuant to the Business Combination Marketing Agreement (as defined below)) associated with the business combination (including such transaction expenses of the HPK Contributors and their affiliates pursuant to the Business Combination Agreement (as defined below)) and for working capital and general corporate purposes) and may potentially utilize other sources of debt financing. HighPeak Energy will disclose the terms of any Debt Facility and any other debt financing it obtains in a future amendment to this proxy statement/prospectus.

 

The proceeds of cash in the Trust Account and received pursuant to the PIPE Investment and the Forward Purchase Agreement, if any, and, if appropriate, from borrowing under the Debt Facility will be used to fund the Cash Consideration, the costs, fees and expenses (including the fees and expenses payable pursuant to the Business Combination Marketing Agreement, dated as of April 12, 2018, by and among Pure, Oppenheimer & Co. Inc. and EarlyBirdCapital, Inc. (as further amended, the “Business Combination Marketing Agreement”)) associated with the business combination (including such transaction expenses of the HPK Contributors and their affiliates pursuant to the Business Combination Agreement) and for working capital and general corporate purposes. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements.”

 

Q:

What is the anticipated impact to HighPeak Energy of the Contingent Value Rights?

 

A.

The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the CVR Holder with a 10% preferred simple annual return (based on a $10 per share price at Closing), subject to a floor downside per-share price of $4.00, at the CVR Maturity Date. Further, holders of public shares that participate in the business combination are being afforded additional liquidity in the form of Public CVRs, which HighPeak Energy intends to list on the Nasdaq or NYSE and may be traded following the Closing. However, this contingent consideration, if applicable, will only be issued to Qualifying CVR Holders. To be a Qualifying CVR Holder, a CVR Holder must (i) provide certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retain (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing. As a result of the Private CVRs issued to PIPE Investors and Forward Purchasers, such shareholders will be incentivized to hold their shares of HighPeak Energy common stock until at least the CVR Maturity Date. This could result in reduced trading of HighPeak Energy’s common stock, resulting in a less liquid market that could lead to price volatility and inefficiency with respect to trading of HighPeak Energy’s common stock despite the fact that HighPeak Energy’s public float at Closing, assuming no redemptions, would be approximately $50 million. For more information see “Risk Factors — As a result of the incentives created by the Private CVRs to hold shares of HighPeak Energy common stock through the CVR Maturity Date, the liquidity of the market for HighPeak Energy’s common stock may be limited and may impact the price of a share of HighPeak Energy common stock.” Further, there is a risk that, if shares of HighPeak Energy common stock are required to be issued to CVR Holders at the CVR Maturity Date, the market for HighPeak Energy’s common stock could experience volatility resulting from a significant amount of shares being issued simultaneously. For more information see “Risk Factors—CVRs may entitle CVR Holders to shares of HighPeak Energy common stock at the CVR Maturity Date, which would increase the number of shares eligible for future resale in the public market.” Lastly, HighPeak Energy cannot predict the extent to which trading of the Public CVRs will lead to an illiquid trading market with respect to such CVRs or whether the market price of the Public CVRs will be volatile following the Closing.

 

xxi

 

Q:

Other than the new financing discussed above, are there any arrangements to help ensure that HighPeak Energy will have sufficient funds, together with the proceeds in the Trust Account, to fund its drilling program following the business combination?

 

A.

Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that there is not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to the Parent Parties resulting from the PIPE Investment and the Forward Purchases, if any, and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties. The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) plus the cash proceeds attributable to the PIPE Investment and the Forward Purchases, if any.

 

As a result, the business combination could still close if there were, among other things, fewer equity sales, higher redemptions by public stockholders or greater aggregate Cash Consideration than currently anticipated, each of which could have a significant impact on the sources and uses set forth above and the actual liquidity of HighPeak Energy at the Closing. See “Risk Factors—Risks Related to HighPeak Energy and the Business Combination—Due to a variety of factors, some of which are beyond its control, HighPeak Energy may have lower liquidity at Closing than currently expected. This may cause HighPeak Energy to increase its borrowings at Closing to fund costs, fees and expenses associated with the business combination and increase its borrowings after Closing to fund capital expenditures or decrease its future capital expenditures, all of which could impact HighPeak Energy’s balance sheet and ability to develop its oil and gas assets.”

 

HighPeak Energy expects to fund its forecasted capital expenditures following Closing with (i) the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), plus (ii) any cash on-hand of the HighPeak Contributed Entities as of the Closing (without duplication as described below), plus (iii) the amount of cash proceeds attributable to the PIPE Investment, forward purchase units (if any) and any other issuance of Class A Common Stock or HighPeak Energy common stock prior to or at the Closing, plus (iv) a Debt Facility (if any), plus (v) cash generated by operations. HighPeak Energy has evaluated multiple development scenarios under multiple potential commodity price assumptions. Under its three (3) rig development scenario, HighPeak Energy would expect to make approximately $350 to $400 million of capital expenditures in the twelve (12) months following the expected July 31, 2020 Closing. The ability to make these capital expenditures will be highly dependent on the price of oil and available funding as HighPeak Energy is only expected to have available liquidity of $115 million in the Illustrative No Additional Redemption Scenario assuming approximately $30 million is drawn on the Debt Facility to fund payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 which will be made prior to or at Closing and approximately $55 million in the Maximum Redemption Scenario assuming $30 million is drawn on the Debt Facility to fund payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 and which will be made prior to or at Closing. Liquidity at Closing may be up to $35 million less based on execution of the permitted interim capital budget and timing of the related payments. See discussion of the “Illustrative No Additional Redemption Scenario” and the “Maximum Redemption Scenario” in the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy.”  Commodity prices have already partially recovered from their April lows, with an average WTI spot price of $37.45 per Bbl for the first six (6) days of June 2020.  If commodity prices remain at these levels for a sustained period, HighPeak Energy intends to resume drilling a three (3) rig program after the Closing, but also recognizes that commodity prices remain highly volatile and that its liquidity will likely be limited, and as a result, there is no certainty that HighPeak Energy will operate three (3) rigs post-Closing.  For detail regarding sensitivity cases for a zero (0), one (1) and two (2) rig program over the same periods, see “Proposal No. 1—The Business Combination Proposal—Unaudited Prospective Financial, Operating and Reserve Information Provided to the Pure Board in Connection with Signing the Business Combination Agreement.”

 

HighPeak Energy periodically reviews the applicable capital expenditures and adjusts its budget and its allocation based on liquidity, drilling results, leasehold acquisition opportunities and commodity prices. Because HighPeak Energy operates a high percentage of its acreage, capital expenditure amounts and timing are largely discretionary and within its control. HighPeak Energy determines its capital expenditures depending on a variety of factors, including, but not limited to, the success of its drilling activities, prevailing and anticipated prices for oil and natural gas, lease expirations, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, drilling and acquisition costs and the level of participation by other working interest owners. A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows. Additionally, if HighPeak Energy curtails or reallocates priorities in its drilling program, it may lose a portion of its acreage through lease expirations. However, in the event of any such curtailment or reallocation of priorities, HighPeak Energy would expect to prioritize lease retention to minimize any expirations. Furthermore, HighPeak Energy may be required to remove some portion of its reserves currently booked as PUDs if such changes in planned capital expenditures means HighPeak Energy will be unable to develop such reserves within five (5) years of their initial booking.

 

xxii

 

Q:

What equity stake will current Pure stockholders, the HighPeak Group and the PIPE Investors hold in HighPeak Energy following the consummation of the business combination?

 

A:

The following table presents the share ownership of various holders of HighPeak Energy upon the Closing and based on the assumptions set forth below and otherwise assuming two (2) redemption scenarios as follows:

 

Illustrative No Additional Redemption: This scenario, which we refer to as the “Illustrative No Additional Redemption Scenario,” assumes no shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 5,012,629 shares outstanding at Closing. It also assumes that approximately 5.0 million shares of HighPeak Energy common stock will be subscribed to and committed pursuant to the PIPE Investment and Forward Purchases prior to the effectiveness of this proxy statement/prospectus. Based on the approximately 10.0 million shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the subscriptions under the PIPE Investment and the Forward Purchases in this Illustrative No Additional Redemption Scenario, we would satisfy both the Minimum Aggregate Funding Availability and Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement) closing conditions. In addition, this Illustrative No Additional Redemption Scenario assumes the terms of our Debt Facility, with a borrowing base of approximately $60 million, will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and in effect at the Closing.

 

Maximum Redemption: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes that a total of 2,012,629 shares of Class A Common Stock are redeemed, which represents the number of shares that would need to be redeemed in order to reduce the number of outstanding shares to 3,000,000 shares, which is the minimum number of shares required to satisfy the Minimum Aggregate Funding Availability (as defined in the Business Combination Agreement) condition in the Business Combination Agreement, assuming $10.00 a share and assuming the PIPE Investment or Forward Purchases and Debt Facility described below. Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy shall have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties (which agreement, if any, must be approved by the Pure Special Committee). The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. The Company is currently pursuing a PIPE Investment, Forward Purchases and a Debt Facility to enhance HighPeak Energy’s liquidity at Closing, and we expect a minimum of 2.0 million shares of HighPeak Energy common stock to be subscribed to and committed in PIPE Investments or Forward Purchases prior to the effectiveness of this proxy statement/prospectus to meet the Minimum Equity Capitalization closing condition. We also expect to enter into a Debt Facility with a borrowing base of not less than $50 million, which we expect will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and to be in place at Closing. To the extent we enter into agreements with PIPE Investors for the PIPE Investment or Forward Purchase Investors’ purchase of forward purchase units for more than 2.0 million shares in the aggregate, we will increase the number of shares that may be redeemed in the Maximum Redemption Scenario by an equivalent number of shares committed to be issued in the PIPE Investment or the Forward Purchases, although a minimum of 1,100,000 unrestricted shares will be required in order to meet the Nasdaq’s initial listing requirements (among other requirements, including a market value of unrestricted publicly held shares of $18 million).

 

 

xxiii

 

Holders

 

Illustrative No Additional Redemption (1)

   

% of Total

   

Maximum

Redemption (1)

   

% of Total

 
                                 

Public Stockholders

    5,012,629       5.49 %     3,000,000       3.48 %

HighPeak Group

                               

Sponsor (2)

    4,856,000       5.32 %     4,856,000       5.63 %

HPK Contributors

    76,250,000       83.56 %     76,250,000       88.41 %

HighPeak Group Total

    81,106,000       88.88 %     81,106,000       94.04 %

Independent Directors

    144,000       0.16 %     144,000       0.17 %

PIPE Investors/Forward Purchase Investors

    4,987,371       5.47 %     2,000,000       2.32 %
                                 

Total

    91,250,000       100.00 %     86,250,000       100.00 %

 

 


 

(1) The numbers set forth in the table above do not take into account (i) the public warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreements (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following: (i) the Closing occurs on July 31, 2020; (ii) at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming: (a) overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on July 31, 2020 will collectively total an aggregate of $2.0 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing; (b) the cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on July 31, 2020; (c) transaction expenses will be approximately $15 million and (d) there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement; (iii) approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing, which assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (iv) no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (v) no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement; (vi) there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the PIPE Investments or purchases under the Forward Purchase Agreement assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; (vii) no available debt capacity other than the Debt Facility assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; and (viii) no warrants are tendered for purchase in the warrant tender offer.

 

(2) Shares owned upon conversion of founder shares at consummation of the business combination and the forfeiture by Sponsor of 5,350,000 founder shares pursuant to the Sponsor Support Agreement.

 

If the actual facts are different than HighPeak Energy’s assumptions or the scenarios presented above, the interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus set forth above will differ and such differences may be material. For example, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors.  However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

 

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The scenarios above do not give effect to the potential exercise of any warrants. We do not expect the exercise of any of our public warrants outstanding after Closing to have a material impact on our outstanding shares or Sponsor ownership given Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration pursuant to the Sponsor Support Agreement, which eliminates the substantial majority of all of our outstanding warrants. For example, if HighPeak Energy assumes all outstanding public warrants (other than those subject to forfeiture) with aggregate gross proceeds to HighPeak Energy of approximately $3.8 million, then the ownership of the public shareholders would increase by less than 1%. Further, if HighPeak I, HighPeak II and Sponsor are required to forfeit shares of HighPeak Energy common stock in connection with the issuance of shares of HighPeak Energy common stock pursuant to the Contingent Value Rights Agreements, the ownership percentage of the HighPeak Group would be materially reduced.

 

The public warrants and forward purchase warrants, if any, will become exercisable thirty (30) days after the completion of an Initial Business Combination and will expire five (5) years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation. Further, on May 8, 2020, pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HPEP II, launched a warrant tender offer to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II. The warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II.

 

Please see the sections entitled “Summary of the Proxy Statement/Prospectus—Impact of the Business Combination on Public Float” and “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” for further information.

 

Q:

Will my rights as a stockholder of HighPeak Energy be different from my rights as a stockholder of Pure?

 

A:

Yes, there are certain material differences between your rights as a stockholder of Pure and your rights as a stockholder of HighPeak Energy. You are urged to read the sections entitled “Description of HighPeak Energy Securities” and “Comparison of Rights of Stockholders of Pure and HighPeak Energy.”

 

Q:

Does the Pure Board, including the independent members thereof, recommend that Pure’s stockholders approve the business combination and the related Proposals?

 

A:

Yes. The Pure Board, upon the unanimous recommendation (with one abstention) of the Pure Special Committee, which consists of three independent members of the Pure Board, recommends that Pure stockholders vote “FOR” each of the Proposals. When you consider the recommendation of the Pure Board in favor of each of the Proposals, you should keep in mind that certain of Pure’s directors and officers have interests in the business combination that may conflict with your interests as a Pure stockholder and that Gregory Colvin, a member of the Pure Board, abstained from voting with respect to the Proposals for personal reasons. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”

 

Q:

Did the Pure Special Committee or Pure Board obtain a fairness opinion in determining whether or not to proceed with the business combination?

 

A:

No. Neither the Pure Special Committee nor the Pure Board received a fairness opinion from an independent financial advisor or accounting firm before their respective approval of the business combination. See the sections entitled “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination” and “Proposal No. 1—The Business Combination Proposal—The Pure Board’s Reasons for the Approval of the Business Combination.”

 

Q:

What happens if I sell my shares of Class A Common Stock before the special meeting?

 

A:

The record date for the special meeting is earlier than the date that the business combination is expected to be completed. If you transfer your shares of Class A Common Stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of your shares of Class A Common Stock because you will no longer be able to deliver them for cancellation upon consummation of the business combination in accordance with the provisions described in this proxy statement/prospectus. If you transfer your shares of Class A Common Stock prior to the record date, you will have no right to vote those shares at the special meeting or seek redemption of those shares.

 

xxv

 

Q:

How has the announcement of the business combination affected the trading price of Pure units, Class A Common Stock and warrants?

 

A:

On May 1, 2020, the last trading date before the public announcement of the business combination, Pure’s public units, Class A Common Stock and warrants closed at $10.48, $10.40 and $1.01, respectively, and the trading date immediately prior to the date of this proxy statement/prospectus, Pure’s units, Class A Common Stock and warrants closed at $        , $        and $        , respectively.

 

Q:

Following the business combination, will HighPeak Energy’s securities trade on a stock exchange?

 

A:

HighPeak Energy anticipates that upon the Closing, HighPeak Energy will apply to list its common stock for trading on the Nasdaq or the NYSE under the ticker symbol “HPK.” HighPeak Energy also intends to list the Public CVRs on the Nasdaq or the NYSE. HighPeak Energy does not intend to list its warrants or the Private CVRs for trading on the Nasdaq or any other national securities exchange. Additionally, in connection with the business combination, Pure’s Common Stock, units and warrants will be delisted from the Nasdaq, deregistered under the Exchange Act and cease to be publicly traded.

 

Q:

What vote is required to approve the Proposals presented at the special meeting?

 

A:

The approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, but the Adjournment Proposal requires only the affirmative vote of a majority of the holders of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, and actually cast at the special meeting.

 

Q:

May Pure’s Sponsor, directors, officers, advisors or their affiliates purchase shares in connection with the business combination?

 

A:

In connection with the stockholder vote to approve the proposed business combination, Pure’s Sponsor, directors, officers, advisors or their respective affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the Initial Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that the seller, although still the record holder of Pure’s shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that Pure’s Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the selling stockholder’s per share pro rata portion of the Trust Account. Further, if HPEP I assigns any of its rights under the Forward Purchase Agreement to one or more of its affiliates pursuant to the Forward Purchase Agreement Amendment, such affiliates, collectively with all purchasers under the Forward Purchase Agreement Amendment, will have the right, but not the obligation, to purchase, in connection with the Closing, any number of forward purchase units, up to the maximum amount of forward purchase units permitted thereunder, which in any event will not exceed 15,000,000 forward purchase units, with each forward purchase unit consisting of one share of HighPeak Energy common stock, one Private CVR and one-half of one whole warrant, which whole warrant is exercisable for HighPeak Energy common stock. The purchasers have no obligation to purchase any forward purchase units in connection with the business combination and may unilaterally terminate the Forward Purchase Agreement prior to the Closing.

 

Q:

How many votes do I have at the special meeting?

 

A:

Pure’s stockholders are entitled to one vote at the special meeting for each share of Class A Common Stock or Class B Common Stock held of record as of           , 2020, the record date for the special meeting. As of the close of business on the record date, there were           outstanding shares of Class A Common Stock, which are held by public stockholders, and 10,350,000 outstanding shares of Class B Common Stock, of which 10,206,000 shares are held by Pure’s Sponsor and 48,000 shares are held by each of Pure’s independent directors. Under a letter agreement entered into at the IPO, Sponsor and Pure’s independent directors have agreed to vote their founder shares “FOR” the business combination.

 

xxvi

 

Q:

What constitutes a quorum at the special meeting?

 

A:

A quorum of Pure stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares of common stock are represented in person or by proxy at the meeting. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the special meeting in person. Abstentions (but not broker non-votes) will be counted towards the quorum requirement. If there is no quorum, a majority of the votes present at the special meeting may adjourn the special meeting to another date.

 

Q:

How will Pure’s Sponsor, directors and officers vote?

 

A:

Pure expects that its Sponsor, officers and directors will vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the Proposals. In fact, under a letter agreement entered into at the IPO, Sponsor and Pure’s independent directors have agreed to vote their founder shares “FOR” the business combination. Currently, Pure’s Sponsor and independent directors own all outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding Class A Common Stock and Class B Common Stock.

 

Q:

What interests do Pure’s Sponsor and its current officers and directors have in the business combination?

 

A:

In considering the recommendation of the Pure Board to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, Pure’s Sponsor and certain of Pure’s directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders. Pure’s directors, including the members of the Pure Special Committee, were aware of and considered these interests in evaluating the business combination and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include:

 

 

the fact that Pure’s Sponsor and certain HPK Contributors will deliver the Escrowed Shares into escrow and will collectively forfeit a number of Escrowed Shares equivalent to any additional shares of HighPeak Energy common stock that HighPeak Energy issues to satisfy the Preferred Return of any Qualifying CVR Holders, if needed;

 

 

the fact that the HPK Contributors and parties to the Business Combination Agreement are affiliates of Pure’s Sponsor and ultimately controlled by Jack Hightower, and Pure’s Sponsor and its affiliates, including the HPK Contributors, are expected to collectively own, prior to taking into account any adjustment relating to any shares that may be issued (or forfeited) pursuant to the Contingent Value Rights Agreements, approximately 94.04% to 88.88% of HighPeak Energy following the Closing, based on an assumed range of 5,000,000 to 10,000,000 shares of HighPeak Energy common stock owned by parties other than Sponsor and its affiliates as of Closing;

 

 

the fact that Pure’s Sponsor, officers and directors will lose their entire investment in Pure if an Initial Business Combination is not completed;

 

 

the fact that Pure’s Sponsor, officers and directors have agreed not to require Pure to redeem any of the shares of Class A Common Stock held by them in connection with a stockholder vote to approve the business combination;

 

 

the fact that Pure’s Sponsor paid an aggregate of $25,000 for its founder shares, which if unrestricted and freely tradable would be valued at approximately $51,327,920 based on the closing price of Pure’s Class A Common Stock on June 25, 2020, taking into account the forfeiture of certain founder shares pursuant to the Sponsor Support Agreement;

 

 

if the Trust Account is liquidated, including in the event Pure is unable to complete an Initial Business Combination within the required time period, Pure’s Sponsor has agreed to indemnify Pure to ensure that the proceeds in the Trust Account are not reduced below $10 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which Pure has entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

xxvii

 

 

the fact that Pure’s Sponsor has agreed to loan, or cause an affiliate to loan, Pure or one of Pure’s subsidiaries, (i) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the First Extension and Second Extension for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) from October 17, 2019 until May 21, 2020, (ii) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (such loans described in clauses (i) and (ii), the Sponsor Extension Loans) and (iii) such other amounts as Pure and HighPeak Energy may agree upon with any HPK Contributor, any HighPeak Contributed Entity or another affiliate of Pure’s Sponsor (provided that in the case of obtaining approval of Pure of any such other amounts in excess of $5,000,000 in the aggregate, the Pure Special Committee shall approve in writing such amounts). Pure and Pure’s Sponsor intend that all Sponsor Loans will be cancelled in connection with the Closing;

 

 

the fact that HPEP II commenced a warrant tender offer to purchase Pure’s outstanding public warrants, held by persons other than HPEP II, for $1.00 per public warrant (exclusive of commissions) in cash on May 8, 2020;

 

 

the fact that holders of public warrants not purchased by HPEP II in connection with the warrant tender offer will have $1.00 in cash distributed to them per public warrant from an amount placed in escrow by Sponsor at the time of the IPO in connection with the redemption of Pure’s public shares that will occur if Pure is unable to consummate a business combination;

 

 

the fact that Jack Hightower will serve as Chief Executive Officer and Chairman of the HighPeak Energy Board, Steven W. Tholen will serve as Chief Financial Officer, Michael L. Hollis will serve as President and Rodney L. Woodard will serve as Chief Operating Officer of HighPeak Energy following the business combination;

 

 

the right of the HPK Contributors to designate to Pure, until five (5) business days prior to the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part, a list of directors that the HPK Contributors want appointed to the HighPeak Energy Board, effective as of the Closing;

 

 

the right of the Principal Stockholder Group, pursuant to the Stockholders’ Agreement, to appoint a specified number of directors to the HighPeak Energy Board until the termination of the Stockholders’ Agreement;

 

 

the fact that each of Pure’s independent directors owns 48,000 founder shares that were purchased from Pure’s Sponsor at $0.002 per share, which if unrestricted and freely tradeable would be valued at approximately $507,360 based on the closing price of Pure’s Class A Common Stock on June 25, 2020;

 

 

the fact that none of Pure’s officers or directors may participate in the formation of, or become a director or officer of, any other blank check company until Pure has entered into a definitive agreement regarding an Initial Business Combination or fails to complete an Initial Business Combination by August 21, 2020;

 

 

the fact that at the Closing, Pure’s Sponsor, officers and directors will be reimbursed for out-of-pocket expenses incurred in connection with activities on Pure’s behalf, such as identifying, investigating and consummating an Initial Business Combination and that affiliates of Pure’s Sponsor will be reimbursed for certain of their own transaction expenses pursuant to the Closing. However, if Pure fails to consummate the business combination, they will not have any claim against the Trust Account for reimbursement and Pure will most likely not be able to reimburse these expenses if a business combination is not completed. As of May 31, 2020, the Sponsor, and Pure’s officers and directors, and their affiliates had incurred approximately $135,000 in reimbursable expenses, and they may incur additional expenses in the future;

 

xxviii

 

 

the fact that Jack Hightower and other members of Pure’s management team hold interests in HPK LP, and acquired the oil and gas interests owned by HighPeak Assets I and HighPeak Assets II at an aggregate cost that is less than the valuation of the same assets in the Business Combination Agreement; and

 

 

the fact that Pure is a party to a registration rights agreement with Pure’s Sponsor and certain of its directors, which provides for registration rights to such parties, and HighPeak Energy will enter into a new registration rights agreement with the Principal Stockholder Group and certain of HighPeak Energy’s directors in connection with the business combination.

 

Q:

What are the relationships between Pure and Sponsor and its affiliates?

 

A:

Sponsor owns 10,206,000 shares of Class B Common Stock and private placement warrants to purchase 10,280,000 shares of Class A Common Stock for $11.50 per share. In connection with the Business Combination Agreement, each outstanding share of Class A Common Stock and Class B Common Stock (other than 5,350,000 shares of Class B Common Stock owned by Sponsor that will be forfeited) will be converted into the right to receive (i) one share of HighPeak Energy common stock and, (ii) solely with respect to each outstanding share of Class A Common Stock, (A) a cash amount equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share and (B) one (1) Public CVR for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to the merger, representing the right to receive additional shares of HighPeak Energy common stock (or such other consideration as is specified with respect to certain events) for Qualifying CVR Holders if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited), and, pursuant to the warrant agreement, each outstanding public warrant and private placement warrant held immediately prior to the Closing (other than the public warrants and private placement warrants held by Pure’s Sponsor or HPEP II immediately prior to the merger effective time which will be forfeited) will entitle the holder thereof to purchase one share of HighPeak Energy common stock. The sole member of Sponsor is HPEP I. The general partner of HPEP I is HighPeak Energy Partners GP, LP, whose general partner is HighPeak GP, LLC (“HP GP I”). Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP I and is one of three managers of HP GP I. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP I at any given time, which acts by majority vote. In addition to approval by HP GP I, certain items require approval of the limited partner advisory committee.

 

In addition to being the sole member of Sponsor, HPEP I is party to the current Forward Purchase Agreement pursuant to which it has agreed to purchase up to 15,000,000 units, consisting of 15,000,000 shares of Class A Common Stock and 7,500,000 forward purchase warrants, for aggregate consideration of up to $150 million. At or prior to the Closing, the Forward Purchase Agreement will be amended and restated in its entirety in the form of the Forward Purchase Agreement Amendment and the purchasers thereunder (which may or may not include affiliates of HPEP I) will collectively have the right, but not the obligation, to purchase, in connection with the Closing, any number of forward purchase units, up to the maximum amount of forward purchase units permitted thereunder, which in any event will not exceed 15,000,000 forward purchase units, with each forward purchase unit consisting of one share of HighPeak Energy common stock, one Private CVR and one-half of one whole warrant (which whole warrant is exercisable for HighPeak Energy common stock), for $10.00 per forward purchase unit, or an aggregate maximum amount of $150 million. The purchasers have no obligation to purchase any forward purchase units in connection with the business combination and may unilaterally terminate the Forward Purchase Agreement prior to Closing.

 

HPEP II owns 20,371,112 public warrants (all of which will be forfeited immediately prior to the Merger Effective Time), which were acquired pursuant to the completed warrant tender offers, to purchase 20,371,112 shares of Class A Common Stock for $11.50 per share. Pursuant to the Sponsor Support Agreement, HPEP II has agreed to surrender and forfeit for no consideration all of the public warrants that it owns. The general partner of HPEP II is HighPeak Energy Partners GP II, LP, whose general partner is HighPeak GP II, LLC (“HP GP II”). Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP II and is one of three managers of HP GP II. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP II at any given time, which acts by majority vote. In addition to approval by HP GP II, certain items require approval of the limited partner advisory committee. Similarly, the general partner of HPEP III is HighPeak Energy Partners GP III, LP, whose general partner is HighPeak GP III, LLC (“HP GP III”). Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP III and is one of three managers of HP GP III. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP III at any given time, which acts by majority vote. In addition to approval by HP GP III, certain items require approval of the limited partner advisory committee.

 

xxix

 

Additionally, the HPK Contributors and HPK Representative, are parties to the Business Combination Agreement along with Pure and the several other parties thereto are affiliates of Sponsor.

 

In addition, Pure’s Sponsor has agreed to loan, or cause an affiliate to loan, Pure or one of Pure’s subsidiaries, (i) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the First Extension and Second Extension for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) from October 17, 2019 until May 21, 2020, (ii) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (such loans described in clauses (i) and (ii), the Sponsor Extension Loans) and (iii) such other amounts as Pure and HighPeak Energy may agree upon with any HPK Contributor, any HighPeak Contributed Entity or another affiliate of Pure’s Sponsor (provided that in the case of obtaining approval of Pure of any such other amounts in excess of $5,000,000 in the aggregate, the Pure Special Committee shall approve in writing such amounts). For example, if Pure completes a business combination on July 31, 2020, Pure’s Sponsor would make aggregate Sponsor Extension Loans of approximately $9.1 million. Accordingly, if Pure completes a business combination on July 31, 2020, then the redemption amount per public share as of July 31, 2020 would be approximately $10.64 per public share, in comparison to the redemption amount as of May 31, 2020 (net of permitted liabilities) of approximately $10.56 per public share.

 

Q:

What happens if I vote against the Business Combination Proposal?

 

A:

If the Business Combination Proposal is not approved and Pure does not otherwise consummate an alternative business combination by August 21, 2020, under its Charter, Pure will be required to (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible but not more than ten (10) business days thereafter, redeem shares held by public stockholders, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including Sponsor Extension Loans and interest earned on the funds in the Trust Account and not previously released to Pure to fund working capital requirements and/or to pay taxes (less up to $50,000 of interest to pay dissolution expenses) divided by the number of then-outstanding shares held by public stockholders, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Pure Board, dissolve and liquidate, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

 

Pure expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had elected to have their shares redeemed in connection with the business combination, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and requirements of other applicable law. The initial stockholders and Pure’s officers and directors have entered into a letter agreement, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if Pure fails to complete the business combination.

 

In the event of liquidation, there will be no distribution with respect to Pure’s outstanding warrants. However, the escrow agent will purchase all of the public warrants held by parties other than HPEP II for $1.00 per public warrant.

 

xxx

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of Class A Common Stock, you may elect to require that Pure redeem all or a portion of your public shares upon the completion of Pure’s Initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, which will be inclusive of an amount equal to the Sponsor Extension Loans and interest earned on the funds held in the Trust Account and not previously released to pay franchise and income taxes, divided by the number of then-outstanding public shares, subject to the limitations described herein. Pure’s Charter provides that in no event will Pure redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Unlike some other blank check companies, Pure has no specified maximum redemption threshold and there is no other limit on the amount of public shares for which you can require redemption. However, unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy is required to have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties. The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. Under the Illustrative No Additional Redemption Scenario, we must issue 4,987,371 shares of HighPeak Energy common stock pursuant to the PIPE Investment or the Forward Purchases or close our Debt Facility for approximately $50 million in the aggregate to meet the Minimum Aggregate Funding Availability and Minimum Equity Capitalization closing conditions under the Business Combination Agreement. Under the Maximum Redemption Scenario, we have assumed we will issue 2,000,000 shares of HighPeak Energy common stock pursuant to the PIPE Investment or the Forward Purchases and close our Debt Facility for $50 million in the aggregate to meet the Minimum Aggregate Funding Availability and Minimum Equity Capitalization closing condition under the Business Combination Agreement. See discussion of the “Illustrative No Additional Redemption Scenario” and the “Maximum Redemption Scenario” in the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy.”

 

Pure’s Sponsor, directors and officers have agreed to waive their redemption rights with respect to any shares of Pure’s capital stock they may hold in connection with the consummation of the business combination, and the founder shares will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of May 31, 2020 of approximately $53.0 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.56. Additionally, shares properly tendered for redemption will only be redeemed if the business combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including the Sponsor Extension Loans and interest earned on the funds held in the Trust Account and not previously released to Pure to fund its working capital requirements) in connection with the liquidation of the Trust Account or if Pure subsequently completes a different business combination on or prior to August 21, 2020.

 

Q:

Will how I vote affect my ability to exercise redemption rights?

 

A:

No. You may exercise your redemption rights whether you vote your shares of Class A Common Stock for or against or abstain on the Business Combination Proposal or any other proposal described in this proxy statement/prospectus. As a result, the business combination can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose to participate in the business combination holding shares in a company with a potentially less liquid trading market, fewer stockholders and less cash.

 

Q:

How do I exercise my redemption rights?

 

A:

In order to exercise your redemption rights, you must (i) if you hold public units, separate the underlying public shares and public warrants and (ii) prior to                     , Eastern Time, on                      , 2020, tender your shares physically or electronically and submit a request in writing that Pure redeem your public shares for cash to Continental Stock Transfer & Trust Company, the Transfer Agent, at the following address:

 

Continental Stock Transfer & Trust Company

1 State Street—30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

 

xxxi

 

The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, telephone number and address to the Transfer Agent to validly redeem its shares.

 

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is Pure’s understanding that stockholders should generally allot at least two (2) weeks to obtain physical certificates from the Transfer Agent. However, Pure does not have any control over this process and it may take longer than two (2) weeks. Stockholders who hold their shares in street name will have to coordinate with their respective banks, brokers or other nominees to have the shares certificated or delivered electronically.

 

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to the Transfer Agent prior to the date set forth in this proxy statement/prospectus, or to deliver their shares to the Transfer Agent electronically using the Depository Trust Company’s (the “DTC”) Deposit/Withdrawal At Custodian (DWAC) system. The requirement for physical or electronic delivery prior to the special meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the business combination is approved.

 

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee, and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether stockholders seeking to exercise redemption rights are required to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated. Shares tendered for redemption must be delivered not less than two (2) business days prior to the special meeting.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

The U.S. federal income tax consequences of the redemption depend on a holder’s particular facts and circumstances. See the section entitled “Proposal No. 1—The Business Combination Proposal—U.S. Federal Income Tax Considerations.” You are urged to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

 

Q:

Are there any other material U.S. federal income tax consequences to holders of Pure Common Stock and holders of Pure warrants that are expected to result from the business combination?

 

A:

In general, it is intended that the business combination qualify as a tax-deferred transaction except to the extent of the Cash Consideration. The Company intends to treat the Cash Consideration as taxable boot received in the exchange of Pure Common Stock for HighPeak Energy common stock. However, it is possible that the Cash Consideration could be treated as a distribution (potentially taxable as a dividend) from either Pure or HighPeak Energy. Although the matter is not free from doubt, a holder of Pure warrants may recognize gain with respect to its Pure warrants as a result of the business combination. You are strongly urged to read the section entitled “Proposal No. 1—The Business Combination Proposal—U.S. Federal Income Tax Considerations,” and to consult with a tax advisor to determine the particular U.S. federal, state, local or foreign income or other tax consequences of the business combination to you.

 

Q:

If I am a warrant holder, can I exercise redemption rights with respect to my warrants?

 

A:

No. The holders of Pure’s warrants have no rights to require redemption of their Pure warrants. However, on May 8, 2020, pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HPEP II, launched a warrant tender offer to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II. The warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II.

 

Q:

Do I have appraisal rights if I object to the proposed business combination?

 

A:

No. There are no appraisal rights available to holders of Class A Common Stock or Class B Common Stock in connection with the business combination.

 

xxxii

 

Q:

What happens to the funds deposited in the Trust Account after consummation of the business combination?

 

A:

Pure intends to use a portion of the funds held in the Trust Account to pay (i) certain transaction expenses of Pure, HighPeak Energy and the HPK Contributors and its affiliates, (ii) tax obligations, (iii) the redemption price of any public shares tendered to Pure for redemption and (iv) the Cash Consideration. The remaining balance in the Trust Account will be transferred to HighPeak Energy and/or its subsidiaries in connection with the business combination. These remaining funds, together with the proceeds from the PIPE Investment and the Forward Purchase Agreement, if any, cash in the HighPeak Contributed Entities and other cash contemplated in connection with the business combination, including any available debt proceeds under a Debt Facility or otherwise, will be used by HighPeak Energy to fund costs, fees and expenses (including the fees and expenses payable pursuant to the Business Combination Marketing Agreement) associated with the business combination (including such transaction expenses of the HPK Contributors and their affiliates pursuant to the Business Combination Agreement) and for working capital and general corporate purposes. See the section entitled “Proposal No. 1—The Business Combination Proposal” for additional information.

 

Q:

What happens if the business combination is not consummated or is terminated?

 

A:

There are certain circumstances under which the Business Combination Agreement may be terminated. See the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Termination Rights” for additional information regarding the parties’ specific termination rights. In accordance with Pure’s Charter, if an Initial Business Combination is not consummated by August 21, 2020, Pure will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible but not more than ten (10) business days thereafter, redeem shares held by public stockholders, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including Sponsor Extension Loans and interest earned on the funds in the Trust Account and not previously released to Pure to fund working capital requirements and/or to pay taxes (less up to $50,000 of interest to pay dissolution expenses) divided by the number of then-outstanding shares held by public stockholders, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Pure Board, dissolve and liquidate, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

 

Pure expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had elected to have their shares redeemed in connection with the business combination, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and requirements of other applicable law. The initial stockholders and Pure’s officers and directors have entered into a letter agreement, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if Pure fails to complete the business combination.

 

In the event of liquidation, there will be no distribution with respect to Pure’s outstanding warrants. Accordingly, the warrants will expire worthless.

 

Q:

When is the business combination expected to be consummated?

 

A:

It is currently anticipated that the business combination will be consummated promptly following the special meeting to be held on          , 2020, provided that all the requisite stockholder approvals are obtained and other conditions to the consummation of the business combination have been satisfied or waived. For information regarding the conditions to the Closing, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination Agreement.”

 

xxxiii

 

Q:

What do I need to do now?

 

A:

You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the section entitled “Risk Factors” and the annexes, and to consider how the business combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

Q:

How do I vote?

 

A:

If you were a holder of record of Class A Common Stock or Class B Common Stock on          , 2020, the record date for the special meeting, you may vote with respect to the Proposals in person at the special meeting or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your bank, broker or other nominee to ensure that votes related to the shares you beneficially own are properly counted. You must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the special meeting and vote in person, obtain a proxy from your broker, bank or nominee.

 

Q:

What will happen if I abstain from voting or fail to vote at the special meeting?

 

A:

At the special meeting, Pure will count (i) a properly executed proxy marked “ABSTAIN” with respect to a particular proposal and (ii) a person that attends the special meeting in person but does not vote as present for purposes of determining whether a quorum is present. For purposes of approval, failure to vote or an abstention will have the effect of a vote “AGAINST” the Business Combination Proposal, but will have no effect on the Adjournment Proposal. If you fail to return your proxy card or fail to submit your proxy by telephone or over the Internet, or fail to instruct your bank, broker or other nominee how to vote, and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the effect of a vote “AGAINST” the Business Combination Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal.

 

Q:

What will happen if I sign and submit my proxy card without indicating how I wish to vote?

 

A:

Signed and dated proxies received by Pure without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders.

 

Q:

If I am not going to attend the special meeting in person, should I submit my proxy card instead?

 

A:

Yes. Whether you plan to attend the special meeting or not, please read this proxy statement/prospectus carefully, and vote your shares by completing signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. Under the rules of various national and regional securities exchanges, your banks, brokers or other nominees cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Pure believes the Proposals presented to the stockholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

xxxiv

 

Q:

May I change my vote after I have submitted my executed proxy card?

 

A:

Yes. You may change your vote by sending a later-dated, signed proxy card at the address listed below so that it is received by Pure’s Chief Financial Officer prior to the special meeting or by attending the special meeting in person and voting at the special meeting. You also may revoke your proxy by sending a notice of revocation to Pure’s Chief Financial Officer, which must be received prior to the special meeting.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to ensure that your vote is cast with respect to all of your shares.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the Proposals or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact:

 

Pure Acquisition Corp.

421 W. 3rd Street, Suite 1000

Fort Worth, Texas 76102

Tel: 817-850-9200

 

You may also contact the proxy solicitor at:

 

Morrow Sodali LLC

470 West Avenue, 3rd Floor

Stamford, Connecticut 06902

Individuals call: 800-662-5200

Banks and brokers call: 203-658-9400

Email: PACQ.info@morrowsodali.com

 

To obtain timely delivery, Pure’s stockholders must request the materials no later than two (2) business days prior to the special meeting.

 

You may also obtain additional information about Pure from documents filed with the United States Securities and Exchange Commission (the “SEC”) by following the instructions in the section entitled “Where You Can Find Additional Information.”

 

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Pure’s Transfer Agent prior to the special meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the delivery of your stock, please contact:

 

Continental Stock Transfer & Trust Company

1 State Street—30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

 

xxxv

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Pure will pay the cost of soliciting proxies for the special meeting. Pure has engaged Morrow Sodali LLC (“Morrow Sodali”) to assist in the solicitation of proxies for the special meeting. Pure has agreed to pay Morrow Sodali a fee of $32,500, plus disbursements. Pure will reimburse Morrow Sodali for reasonable out-of-pocket expenses and will indemnify Morrow Sodali and its affiliates against certain claims, liabilities, losses, damages and expenses. Pure will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Class A Common Stock and Class B Common Stock for their expenses in forwarding soliciting materials to beneficial owners of Class A Common Stock and Class B Common Stock and in obtaining voting instructions from those owners. Pure’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

 
xxxvi

 

 

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

 

This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the business combination and the Proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus carefully, including the annexes. See also the section entitled “Where You Can Find Additional Information.”

 

As discussed further herein, HighPeak Energy expects to acquire the Target Assets from the HPK Contributors pursuant to the business combination. Unless the context otherwise requires, with respect to descriptions of the financials and operations of the Target Assets, references herein to “we,” “us” or “our” relate, prior to the business combination, to the Target Assets as owned and operated by HPK LP or, prior to their respective acquisitions thereby, by the HighPeak Funds and, following the business combination, to the Target Assets as owned and operated by HighPeak Energy.

 

This proxy statement/prospectus includes certain terms commonly used in the oil and natural gas industry, which are defined elsewhere in this proxy statement/prospectus in “Glossary of Oil and Natural Gas Terms” set forth in Annex J.

 

Business Overview

 

HighPeak Energy is an independent oil and natural gas company engaged in the acquisition, development and production of oil, natural gas and NGL reserves. The Target Assets are primarily located in Howard County, Texas, which lies within the northeastern part of the oil-rich Midland Basin. The Midland Basin is a sub basin of the prolific Permian Basin and is a geologically attractive operating area due to its stacked, proven hydrocarbon-bearing formations that are prime for multi-bench horizontal development. The Midland Basin is further characterized by a favorable operating environment, formations with high oil and liquids-rich natural gas content, a well-developed network of oilfield service providers, access to a large network of midstream gathering, processing and transportation pipelines, and long-lived reserves with consistent geologic attributes and reservoir quality. Horizontal production in Howard County has the highest percentage of oil content and the highest oil production compounded annual growth rate, beginning in the first quarter of 2016 through January 2020, of any county in the Midland Basin based on Pure’s interpretation of IHS Markit data available.

 

HighPeak Energy’s objective is to maximize asset value by generating capital efficient production growth, with consideration to near-term oil prices while achieving industry leading operating margins. HighPeak Energy also intends to generate attractive full-cycle returns on capital employed. At Closing, HighPeak Energy is required to have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement), which it expects to use in combination with its cash flow, borrowings under any Debt Facility and other available funds to fund its development drilling program. HighPeak Energy will strive to maintain a conservative balance sheet and low leverage as measured by a multiple of its debt to EBITDAX and as measured as a percent of total capitalization.

 

HighPeak Energy is led by its Chairman and CEO, Jack Hightower, an industry veteran with over 49 years of experience in the oil and natural gas industry, primarily in the Permian Basin managing multiple exploration and production (“E&P”) platforms and generating strong returns despite industry cycles by consistently applying a disciplined, risk-adjusted approach designed to balance capital preservation with value creation. Mr. Hightower has an established track record of implementing disciplined growth strategies and generating equity holder growth in both public and private companies. Upon Closing, Mr. Hightower will be joined by a highly qualified team of experienced, oil and gas professionals, many of whom have technical and operational experience in the Permian Basin and have worked with Mr. Hightower previously.

 

1

 

Overview of the Target Assets

 

After reviewing numerous marketed and unmarketed business combination opportunities across various oil rich and natural gas rich hydrocarbon basins in the United States, Pure decided to focus on the Midland Basin and specifically the Howard County area of the Midland Basin due to its belief, based on its experience and industry reports, that the area provides superior economics. Further, over the last eight decades the Howard County area of the Midland Basin was partially developed with vertical wells using conventional methods, and has recently experienced significant redevelopment activity in the Lower Spraberry and Wolfcamp A formations utilizing modern horizontal drilling technology, with some operators having additional success developing the Middle Spraberry, Jo Mill, Wolfcamp B and Wolfcamp D formations, through the use of modern, high-intensity hydraulic fracturing techniques, decreased frac spacing, increased proppant usage and increased lateral lengths. Additional considerations included favorable geology, attractive reservoir profiles, commercial drilling and completion well costs, lengthy production history, low gas-to-oil ratios, robust take-away capacity and flexibility, oil marketing opportunities which provide for low differentials, and the potential to assemble large contiguous acreage blocks providing economies of scale for an active drilling development program, produced water disposal systems, ability to potentially install a scalable produced water reclamation system, and infrastructure and facilities cost savings. We have been among the leaders in extending this redevelopment to the eastern edge of Howard County, and we believe in our ability to create significant value in the prolific oil-rich area of the north eastern Midland Basin. According to Pure’s interpretation of IHS Markit data available through December 31, 2019, Howard County has the highest oil mix percentage and margins across the Midland Basin with the most rapid growth in oil volumes of all the major counties in the Midland Basin. We also believe there are significant consolidation opportunities throughout the Midland Basin, and more specifically in Howard County and counties to the west and south with material assets either privately held or contained within public company asset portfolios potentially available for acquisition that provide for potential, accretive bolt-on opportunities.

 

The Target Assets primarily include certain rights, title and interests in oil and natural gas assets located primarily in Howard County. As of March 31, 2020, the Target Assets consisted of generally contiguous leasehold position of approximately 61,302 gross (51,295 net) acres covering various subsurface depths. Approximately 93% of the net acreage is operated by HPK LP and approximately 97% of the net operated acreage provides for horizontal well locations with lateral lengths of 10,000 feet or greater in the formations covered by the Target Assets. As of March 31, 2020, we had identified a total of approximately 495 gross (400 net) operated drilling locations in either the Wolfcamp A and/or Lower Spraberry formations across the Target Assets based on 880 foot spacing with six (6) wells per mile in each respective formation. HPK LP’s development drilling plan is initially focused on the horizontal drilling development of the Wolfcamp A and Lower Spraberry formations utilizing multi-well pad development to lower drilling and completion cycle times, create infrastructure and facility economies of scale, reduce overall costs, and to optimize and maximize oil and gas recoveries, return on investment, and value creation. In addition, HPK LP has interest in approximately 132 gross (36 net) non-operated drilling locations in either the Wolfcamp A or Lower Spraberry formations and has identified approximately 1,210 gross (840 net) potential drilling locations, including approximately 296 gross (80 net) non-operated drilling locations, in the Middle Spraberry, Wolfcamp B, Jo Mill, Wolfcamp C1, Wolfcamp C-Hutto and the Wolfcamp D formations across the Target Assets which provide for substantial upside potential. Please see “Information About the Target Assets—Development of Proved Undeveloped Reserves—Drilling Locations” for an explanation of our methodology in calculating identified drilling locations. For more information about the risks associated with our identified drilling locations, see “Risk Factors—Risks Related to the Target Assets—The identified drilling locations on the Target Assets are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, we may not have sufficient capital to drill all such locations.” For the three months ended March 31, 2020, the average net daily production of 1,428 Boe/d from the Target Assets consisted of approximately 86%, 9% and 5% of oil, NGLs and natural gas, respectively. Due in part to the COVID-19 pandemic and low commodity prices, as of March 31, 2020 and June 25, 2020, we were operating zero (0) rigs and the majority of our production was shut in. However, prices have since increased and we are currently evaluating resuming production from some or all of our currently shut-in wells and will continue to monitor the extent by which prices continue to increase and/or stabilize prior to resuming production and any capital expenditure program.

 

2

 

Summary Historical and Pro Forma Financial and Operating Data of HighPeak Energy

 

The following table presents summary historical audited financial information of Pure and summary unaudited pro forma financial information for HighPeak Energy after giving effect to the business combination, assuming two (2) redemption scenarios as follows:

 

 

Illustrative No Additional Redemption: This scenario, which we refer to as the “Illustrative No Additional Redemption Scenario,” assumes no shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 5,012,629 shares outstanding at Closing. It also assumes that approximately 5.0 million shares of HighPeak Energy common stock will be subscribed to and committed pursuant to the PIPE Investment and Forward Purchases prior to the effectiveness of this proxy statement/prospectus. Based on the approximately 10.0 million shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the subscriptions under the PIPE Investment and the Forward Purchases in this Illustrative No Additional Redemption Scenario, we would satisfy both the Minimum Aggregate Funding Availability and Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement) closing conditions. In addition, this Illustrative No Additional Redemption Scenario assumes the terms of our Debt Facility, with a borrowing base of approximately $60 million, will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and in effect at the Closing.

 

 

Maximum Redemption: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes that a total of 2,012,629 shares of Class A Common Stock are redeemed, which represents the number of shares that would need to be redeemed in order to reduce the number of outstanding shares to 3,000,000 shares, which is the minimum number of shares required to satisfy the Minimum Aggregate Funding Availability (as defined in the Business Combination Agreement) condition in the Business Combination Agreement, assuming $10.00 a share and assuming the PIPE Investment or Forward Purchases and Debt Facility described below. Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy shall have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties (which agreement, if any, must be approved by the Pure Special Committee). The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. The Company is currently pursuing a PIPE Investment, Forward Purchases and a Debt Facility to enhance HighPeak Energy’s liquidity at Closing, and we expect a minimum of 2.0 million shares of HighPeak Energy common stock to be subscribed to and committed in PIPE Investments or Forward Purchases prior to the effectiveness of this proxy statement/prospectus to meet the Minimum Equity Capitalization closing condition. We also expect to enter into a Debt Facility with a borrowing base of not less than $50 million, which we expect will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and to be in place at Closing. To the extent we enter into agreements with PIPE Investors for the PIPE Investment or Forward Purchase Investors’ purchase of forward purchase units for more than 2.0 million shares in the aggregate, we will increase the number of shares that may be redeemed in the Maximum Redemption Scenario by an equivalent number of shares committed to be issued in the PIPE Investment or the Forward Purchases, although a minimum of 1,100,000 unrestricted shares will be required in order to meet the Nasdaq’s initial listing requirements (among other requirements, including a market value of unrestricted publicly held shares of $18 million).

 

3

 

The unaudited pro forma condensed combined consolidated statement of operations of HighPeak Energy for the three months ended March 31, 2020 combines the historical statements of operations of Pure and HPK LP for the three months ended March 31, 2020, giving effect to the Transactions as if they had been consummated on January 1, 2019. The unaudited pro forma condensed combined consolidated statement of operations of HighPeak Energy for the year ended December 31, 2019 combines the historical statements of operations of Pure, HPK LP, HighPeak I and HighPeak II for the year ended December 31, 2019, giving effect to the Transactions as if they had been consummated on January 1, 2019.  The unaudited pro forma condensed combined consolidated balance sheet of HighPeak Energy as of March 31, 2020 combines the historical balance sheets of Pure and HPK LP as of March 31, 2020, giving effect to the Transactions as if they had been consummated on March 31, 2020. For more information, please see the sections entitled “Selected Historical Financial Information of Pure” and “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy.”

 

   

Three Months Ended March 31, 2020

   

Year Ended December 31, 2019

 
   

Pure

   

Pro Forma Combined (Assuming Illustrative No Additional Redemption)

   

Pro Forma Combined (Assuming Maximum Redemption)

   

Pure

   

Pro Forma Combined (Assuming Illustrative No Additional Redemption)

   

Pro Forma Combined (Assuming Maximum Redemption)

 

Operating Revenues:

                                               

Crude oil sales

  $     $ 4,524     $ 4,524     $     $ 8,568     $ 8,568  

Natural gas and NGL sales

          99       99             489       489  

Total operating revenues

          4,623       4,623             9,057       9,057  

Operating Expenses:

                                               

Lease operating

          2,389       2,389             4,562       4,562  

Production and other taxes

          308       308             508       508  

Depletion, depreciation and amortization

          3,356       3,356             4,013       4,013  

Accretion of asset retirement obligation

          34       34             158       158  

General and administrative

    30       2,428       2,428       120       7,304       7,304  

Exploration and abandonments

          3       3             3,606       3,606  

General expenses and franchise taxes

    1,235       50       50       3,104       200       200  

Total operating expenses

    1,265       8,568       8,568       3,224       20,351       20,351  

Operating loss

    (1,265

)

    (3,945

)

    (3,945

)

    (3,224

)

    (11,294

)

    (11,294

)

Other income (expense):

                                               

Interest income

    1,183                   8,739       107       107  

Interest (expense)

          (663

)

    (653

)

          (2,640

)

    (2,600

)

Total other income (expense), net

    1,183       (663

)

    (653

)

    8,739       (2,533

)

    (2,493

)

Income before income tax expense

    (82

)

    (4,608

)

    (4,598

)

    5,515       (13,827

)

    (13,787

)

Income tax (expense) benefit

    (229

)

    968       966       (1,730

)

    2,904       2,895  

Net income (loss)

  $ (311

)

  $ (3,640

)

  $ (3,632

)

  $ 3,785     $ (10,923

)

  $ (10,892

)

Weighted average number of common shares outstanding

                                               

Class A Common Stock

    36,819       91,250       86,250       40,583       91,250       86,250  

Class B Common Stock

    10,350                   10,350              

Net income per common share

                                               

Basic and diluted income (loss) per common share, Class A

  $ 0.02     $ (0.04

)

  $ (0.04

)

  $ 0.16     $ (0.12

)

  $ (0.13

)

Basic and diluted income (loss) per common share, Class B

  $ (0.11

)

  $     $     $ (0.28

)

  $     $  

Balance Sheet Data (at end of period)

                                               

Current assets

  $ 108     $ 112,994     $ 63,194                          

Oil and gas properties, net

          453,661       453,661                          

Other assets

    373,863                                      

Total assets

  $ 373,971     $ 566,655     $ 516,855                          

Current liabilities

  $ 11,064     $ 23,583     $ 23,583                          

Long-Term liabilities

          78,125       78,325                          

Class A Common Stock subject to possible redemption (1)

    357,907                                          

Stockholders’ equity

    5,000       464,947       414,947                          

Non-controlling interests

                                         

Total liabilities and equity

  $ 373,971     $ 566,655     $ 516,855                          

Other Financial Information

                                               

Adjusted EBITDAX(2)

          $ (552

)

  $ (552

)

          $ (3,410

)

  $ (3,410

)

 


(1)

Does not give effect to the redemption of 30,603,570 shares of Class A Common Stock in connection with the Third Extension which took place in May 2020.

(2)

Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation of Adjusted EBITDAX to net income, see “Non-GAAP Financial Measure” below.

 

4

 

Non-GAAP Financial Measure

 

Adjusted EBITDAX (“Adjusted EBITDAX”) is a non-GAAP financial measure and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with United States generally accepted accounting principles (“GAAP”) or as an alternative to net cash provided by operating activities as a measure of Pure’s profitability or liquidity. Pure believes Adjusted EBITDAX is useful because it allows external users of the consolidated financial statements of Pure, such as industry analysts, investors, lenders and rating agencies, to effectively evaluate the operating performance of Pure, compare the results of operations from period to period and against Pure’s peers without regard to financing methods, hedging positions or capital structure and because it highlights trends that may not otherwise be apparent when relying solely on GAAP measures. Adjusted EBITDAX is an important supplemental measure of performance that is frequently used by others in evaluating companies in the oil and natural gas industry. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Pure’s presentation of Adjusted EBITDAX should not be construed as an inference that Pure’s results will be unaffected by unusual or non-recurring items. Pure’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

 

The following table presents a reconciliation of Adjusted EBITDAX to net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP (amounts are in thousands).

 

   

Three Months Ended March 31, 2020

   

Year Ended December 31, 2019

 
   

Pro Forma Combined

 

Adjusted EBITDAX reconciliation to net (loss) income:

               

Net income (loss)

  $ (3,640

)

  $ (10,923

)

Income tax expense (benefit)

    (968

)

    (2,904

)

Depletion, depreciation and amortization

    3,356       4,013  

Accretion of asset retirement obligation

    34       158  

Exploration and abandonment cost

    3       3,606  

Interest and other expense

    663       2,640  

Adjusted EBITDAX

  $ (552

)

  $ (3,410

)

 

 

The following table presents summary pro forma operating data for Pure for the three months ended March 31, 2020 and the year ended December 31, 2019 after giving effect to the business combination, as if the Transactions occurred on January 1, 2019, respectively. See the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” in evaluating the information presented below.

 

   

Three Months

Ended March 31, 2020

   

Year Ended

December 31, 2019

 

Sales volumes:

               

Oil (MBbls)

    111       159  

Natural gas liquids (MBbls)

    12        

Natural gas (MMcf)

    41       271  

Total (MBoe)

    130       204  

Average sales price:

               

Oil (per Bbl)

  $ 40.76     $ 53.79  

Natural gas liquids (per Bbl)

  $ 12.29       n/a  

Natural gas (per Mcf)

  $ 0.07     $ 1.81  

Total (per Boe)

  $ 35.58     $ 44.31  

Average daily sales volumes:

               

Oil (Bbls/d)

    1,220       436  

Natural gas liquids (Bbls/d)

    134        

Natural gas (Mcf/d)

    445       741  

Average daily sales volumes (Boe/d)

    1,428       560  

Average unit costs per Boe:

               

Lease operating expenses

  $ 18.39     $ 22.32  

Production and other taxes

  $ 2.37     $ 2.49  

Depletion - oil and gas properties

  $ 25.47     $ 19.63  

General and administrative expenses

  $ 18.69     $ 35.73  

 

5

 

Summary Historical Reserve Data of the Target Assets

 

The following table presents summary historical data with respect to the estimated net proved reserves for the Target Assets based on SEC pricing as of December 31, 2019. The reserve estimates attributable to the Target Assets as of December 31, 2019 presented below are based on a reserve report of the Target Assets prepared by Cawley, Gillespie & Associates, Inc. (“CG&A”) (the “2019 Reserve Report”), a copy of which is attached to this proxy statement/prospectus as Annex I. See the section entitled “Information About the Target Assets” in evaluating the material presented below.

 

   

Oil (MBbls)

   

Natural Gas (MMcf)

   

NGL (MBbls)

   

Total (MBoe)

 

Estimated Proved Reserves(1)

                               

Total Proved Developed

    4,091       1,952       548       4,964  

Total Proved Undeveloped

    5,281       2,702       801       6,533  

Total Proved Reserves

    9,372       4,654       1,349       11,497  

 


(1)

The estimated net proved reserves as of December 31, 2019 were determined using average first-day-of-the month prices for the prior twelve (12) months in accordance with SEC rules. For oil and NGL volumes, the average WTI spot price of $55.69 per barrel as of December 31, 2019 was adjusted for quality, transportation fees and a regional price differential. For natural gas volumes, the average Henry Hub spot price of $2.578 per MMBtu as of December 31, 2019 was adjusted for energy content, transportation fees and a regional price differential. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the Target Assets were $50.57 per barrel of oil, $21.17 per barrel of NGL and $0.10 per Mcf of natural gas as of December 31, 2019.

 

6

 

Parties to the Business Combination

 

HighPeak Energy, Inc.

 

HighPeak Energy is a Delaware corporation initially formed on October 29, 2019, as a wholly owned subsidiary of Pure, solely for the purpose of combining the businesses currently conducted by Pure and HPK LP. Upon the Closing, HighPeak Energy will operate and control the business and affairs of the HighPeak Contributed Entities, and consolidate its financial and operating results with Pure and the HighPeak Contributed Entities.

 

In connection with the Closing, HighPeak Energy expects to apply to list its common stock on the Nasdaq or the NYSE under the symbol “HPK.” HighPeak Energy also intends to list the Public CVRs on the Nasdaq or the NYSE. HighPeak Energy does not intend to list its warrants or the Private CVRs for trading on the Nasdaq or any other national securities exchange.

 

The mailing address of HighPeak Energy’s principal executive office is 421 W. 3rd Street, Suite 1000, Fort Worth, Texas 76102. HighPeak Energy’s telephone number is (817) 850-9200.

 

Pure Acquisition Corp.

 

Pure is a Delaware corporation formed on November 13, 2017, for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. After the Closing, Pure will become a wholly owned subsidiary of HighPeak Energy.

 

Pure’s Class A Common Stock, warrants and units are traded on the Nasdaq Capital Market under the ticker symbols “PACQ,” “PACQW” and “PACQU,” respectively. In connection with the Closing and pursuant to the Business Combination Agreement, each of Pure’s outstanding shares of Class A Common Stock and Class B Common Stock, other than certain shares of Class B Common Stock that will be surrendered for cancellation by Pure’s Sponsor, will be converted into the right to receive (i) one share of HighPeak Energy common stock and (ii) solely with respect to each outstanding share of Class A Common Stock, (A) a cash amount equal to the amount, if any, by which the per-share redemption value of Class A Common Stock at the Closing exceeds $10.00 per share and (B) one (1) Public CVR, for each one (1) whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (i), representing the right to receive additional shares of HighPeak Energy common stock (or such other consideration as is specified with respect to certain events) for Qualifying CVR Holders if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited).

 

The mailing address of Pure’s principal executive office is 421 W. 3rd Street, Suite 1000, Fort Worth, Texas 76102. Pure’s telephone number is (817) 850-9200.

 

For more information about Pure, see the sections entitled “Information About Pure” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Pure.”

 

Target Assets

 

HPK Energy, LP was formed on August 28, 2019 for the purpose of acquiring certain of the HighPeak Contributed Entities.

 

HighPeak I and HighPeak II were formed in June 2014 and March 2018, respectively, in each case for the purpose of acquiring and developing interests in producing oil and natural gas properties located in North America. HighPeak I, through its wholly-owned subsidiaries, HighPeak Assets I and HighPeak Holdings, acquired primarily leasehold acreage and existing vertical producing wells, through several acquisitions and an organic leasing campaign throughout 2017, 2018 and 2019. HighPeak II through its wholly-owned subsidiary, HighPeak Assets II, acquired primarily leasehold acreage and existing vertical producing wells, through an organic leasing campaign throughout 2018 and 2019. Effective October 1, 2019, HighPeak I contributed HighPeak Assets I and HighPeak Holdings to HPK LP and HighPeak II contributed cash and HighPeak Assets II to HPK LP in exchange for HPK LP limited partnership units. On November 27, 2019, HighPeak III contributed cash to HPK LP in exchange for HPK LP limited partnership units. HighPeak Management, LLC will sell HighPeak Employer to HPK LP immediately prior to the Closing, and HPK LP will then be contributed to HighPeak Energy in the business combination. Following the contribution to HighPeak Energy of the partnership interests of HPK LP, HighPeak Energy will cause HPK LP to merge with and into the surviving corporation (as successor to Pure) with all interests in HPK LP being cancelled for no consideration. The HighPeak Funds had 33 full-time employees dedicated to operating the HighPeak Contributed Entities as of March 31, 2020. In connection with the business combination, HighPeak Energy will acquire HighPeak Employer, which is the entity that employs all of the employees dedicated to operating the HighPeak Contributed Entities, and intends to retain the majority of said employees to operate the Target Assets following the Closing.

 

7

 

Unless otherwise indicated, financial and operating information in this proxy statement/prospectus relating to (i) the Predecessor or the Target Assets for the period from October 1, 2019 to Closing consist of the historical results of HPK LP, (ii) the Predecessor for periods prior to October 1, 2019 consist of the historical results of HighPeak I, and (iii) the Target Assets for periods prior to October 1, 2019 consist of the combined historical results of HighPeak I and HighPeak II. For more information about the Target Assets, see the sections entitled “Information About the Target Assets” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Predecessors.”

 

The Business Combination

 

On May 4, 2020, Pure and HighPeak Energy entered into the Business Combination Agreement, as amended by the Business Combination Agreement Amendments, pursuant to which, among other things, and subject to the terms and conditions contained therein, (i) MergerSub will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy, (ii) each outstanding share of Class A Common Stock and Class B Common Stock of Pure (other than certain shares of Class B Common Stock that will be forfeited by Pure’s Sponsor immediately prior to the merger) will be converted into the right to receive (a) one share of HighPeak Energy common stock, and (b) solely with respect to each outstanding share of Class A Common Stock, (I) a cash amount equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share, in each case and (II) one (1) Public CVR for each one (1) whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock pursuant to clause (a), representing the right to receive additional shares of HighPeak Energy common stock (or such other consideration as is specified with respect to certain events) for Qualifying CVR Holders if necessary to satisfy a 10% preferred simple annual return, subject to a floor downside per-share price of $4.00, as measured at the CVR Maturity Date (with an equivalent number of shares of HighPeak Energy common stock held by HighPeak I, HighPeak II and Sponsor being collectively forfeited),  (iii) the HPK Contributors will (a) contribute their limited partner interests in HPK LP to HighPeak Energy in exchange for HighPeak Energy common stock for total consideration of 75,000,000 shares of HighPeak Energy common stock, subject to the adjustments described in the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement” and the general partner interest in HPK LP to either HighPeak Energy or a wholly owned subsidiary of HighPeak Energy in exchange for no consideration, and (b) directly or indirectly contribute the outstanding Sponsor Loans in exchange for HighPeak Energy common stock and such Sponsor Loans, if any, will be cancelled in connection with the Closing and (iv) HighPeak Energy will cause HPK LP to merge with and into Pure with all interests in HPK LP being cancelled for no consideration.

 

For more information about the Business Combination Agreement, the consideration to be received by HPK Contributors and the business combination generally, see the section entitled “Proposal No. 1—The Business Combination Proposal.”

 

Conditions to the Closing

 

Under the Business Combination Agreement, the obligations of the parties to consummate the transactions contemplated thereby are subject to a number of closing conditions, including the following: (i) the termination of the waiting period (or expiration thereof) under the HSR Act (as defined below), although the parties to the Business Combination Agreement have determined that no filing is required under the HSR Act (as defined below); (ii) the absence of specified adverse laws, injunctions or orders; (iii) the requisite approval by Pure’s stockholders, and the written consents of Pure, as the sole stockholder of HighPeak Energy, and of HighPeak Energy, as the sole stockholder of MergerSub (which written consents of Pure and HighPeak Energy were provided within 24 hours after execution of the Business Combination Agreement); (iv) the completion of the offer by Pure to redeem shares of Class A Common Stock issued in the IPO for cash in accordance with the organizational documents of Pure and the terms of the Business Combination Agreement and as described elsewhere in this proxy statement/prospectus; (v) there being at least $100 million of Minimum Aggregate Funding Availability, which must include at least $50 million in Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement); (vi) the representations and warranties of the HPK Contributors, in the case of Pure, HighPeak Energy and MergerSub, and Pure, HighPeak Energy and MergerSub, in the case of the HPK Contributors, being true and correct, subject to the materiality standards contained in the Business Combination Agreement; (vii) material compliance by the HPK Contributors, in the case of Pure, HighPeak Energy and MergerSub, and Pure, HighPeak Energy and MergerSub, in the case of the HPK Contributors, with their respective covenants under the Business Combination Agreement; and (viii) delivery by the other parties of documents and other items required to be delivered by each such party at the Closing. Additionally, the HPK Contributors’ obligations to consummate the transactions contemplated by the Business Combination Agreement are also subject to the conditions that (a) the shares of HighPeak Energy common stock issuable to the HPK Contributors and as merger consideration pursuant to the Business Combination Agreement are approved for listing for trading on the NYSE or the Nasdaq, subject only to official notice of issuance thereof and (b) Pure shall have transferred, or as of the Closing shall transfer, to HighPeak Energy certain cash (net of payments made in connection with stock redemptions and certain expenses). For more information regarding the conditions to the Closing of the Business Combination Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination Agreement.”

 

8

 

Regulatory Matters

 

The parties to the Business Combination Agreement have determined that no filing is required under the Hart-Scott Rodino Antitrust Improvement Act of 1976 (the “HSR Act”), which would otherwise prevent the parties thereto from completing the business combination until required information and materials were furnished to the Antitrust Division of the Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) and specified waiting period requirements had been satisfied. In addition, neither Pure nor HighPeak Energy are aware of any material federal or state regulatory approvals that are required for completion of the business combination.

 

Termination Rights

 

The Business Combination Agreement may be terminated at any time prior to the Closing (i) by mutual written consent of Pure and the HPK Contributors or (ii) by any party upon the occurrence of any of the following: (a) if any governmental entity issues any order, decree, ruling or injunction or takes any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the Business Combination Agreement and such order, decree, ruling or injunction or other action shall have become final and nonappealable or if there shall be adopted any law that makes consummation of the transactions contemplated by the Business Combination Agreement illegal or otherwise prohibited; provided, however, that the right to terminate shall not be available to the terminating party if the failure to fulfill any material covenant or agreement under the Business Combination Agreement by Pure, HighPeak Energy or MergerSub (in the case where an HPK Contributor is the terminating party) or the HPK Contributors (in the case where Pure, HighPeak Energy or MergerSub is the terminating party) has been the cause of or resulted in the circumstances described in the foregoing; (b) in the event that any breach of a representation, warranty or covenant by Pure, HighPeak Energy or MergerSub (in the case where Pure, HighPeak Energy or MergerSub is the terminating party) or the HPK Contributors (in the case where an HPK Contributor is the terminating party) would cause the failure of a condition relating to such matters, and such breach cannot or has not been cured by the earlier of thirty (30) days after notice is given and August 21, 2020; provided, however, that neither the party terminating nor its affiliates is also in breach of the Business Combination Agreement; (c) if, after the final adjournment of the special meeting at which a vote of Pure’s stockholders has been taken, the Business Combination Proposal does not receive the requisite votes to be approved; and (d) if the transactions have not been consummated on or before 5:00 p.m., Houston time on August 21, 2020; provided, however, that the right to terminate pursuant to this clause (d) will not be available to the terminating party if failure to fulfill any material covenant or agreement by Pure, HighPeak Energy or MergerSub (in the case where Pure, HighPeak Energy or MergerSub is the terminating party) or the HPK Contributors (in the case where an HPK Contributor is the terminating party) has been the cause of or resulted in the failure of the consummation of the transactions.

 

For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Termination Rights.”

 

Indemnification

 

Under the Business Combination Agreement, the parties have agreed to indemnify one another with respect to such indemnifying party’s exercise of its access rights under the Business Combination Agreement and such indemnified party’s cooperation in connection with the registration statement on Form S-4 of HighPeak Energy and the proxy statement/prospectus included therein and financing matters. Additionally, HighPeak Energy has agreed to indemnify, following the Closing, the directors and officers of the HighPeak Contributed Entities or such persons as are or were serving at the request of a HighPeak Contributed Entity as a director or officer of another corporation, partnership, limited liability company, joint venture, employee benefit plan, trust or other enterprise against certain claims arising out of such individuals serving in such positions. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Indemnification; Survival of Representations, Warranties and Covenants; Releases.”

 

Other Arrangements

 

HighPeak Charter. At or prior to the effective time of the merger of MergerSub with and into Pure (the “Merger Effective Time”), HighPeak Energy will amend and restate its certificate of incorporation to provide for, among other things, (i) an increase in the number of authorized shares of HighPeak Energy common stock to 600,000,000 shares and HighPeak Energy preferred stock to 10,000,000 shares, (ii) the ability of HighPeak Energy’s stockholders to act by written consent if certain conditions are met, and (iii) establishment of a staggered board structure for the HighPeak Energy Board. There are certain material differences between your rights as a stockholder of Pure and your rights as a stockholder of HighPeak Energy. Pure urges you to read the sections entitled “Description of HighPeak Energy Securities” and “Comparison of Rights of Stockholders of Pure and HighPeak Energy.” The full text of the proposed A&R Charter is attached to this proxy statement/prospectus as Annex B.

 

9

 

Stockholders’ Agreement. Concurrently with the Closing, HighPeak Energy and the Principal Stockholder Group will enter into a Stockholders’ Agreement (the “Stockholders’ Agreement”) which will govern certain rights and obligations following the Closing. Under the Stockholders’ Agreement, the Principal Stockholder Group will be entitled to appoint a specified number of directors to the HighPeak Energy Board so long as the HighPeak Group meets certain ownership criteria outlined in the Stockholders’ Agreement. For more information about the Stockholders’ Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements—Stockholders’ Agreement.” The full text of the proposed Stockholders’ Agreement is attached to this proxy statement/prospectus as Annex D.

 

Registration Rights Agreement. In connection with the Closing, HighPeak Energy will enter into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Principal Stockholder Group and its three (3) independent directors, Sylvia K. Barnes, M. Gregory Colvin and Jared S. Sturdivant (such parties being collectively referred to in connection with the Registration Rights Agreement as the “Holders”), pursuant to which HighPeak Energy will be required to, among other things and subject to certain conditions, register for resale under the Securities Act of 1933, as amended (the “Securities Act”), all or any portion of the shares of HighPeak Energy common stock that the Holders hold, and may acquire thereafter. For more information about the Registration Rights Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements—Registration Rights Agreement.” The full text of the proposed Registration Rights Agreement is attached to this proxy statement/prospectus as Annex E.

 

HighPeak Energy Long Term Incentive Plan. Prior to the Initial Business Combination, HighPeak Energy intends to adopt the LTIP, and it is anticipated that Pure, as HighPeak Energy’s sole shareholder, will approve the LTIP. Following the Closing, HighPeak Energy will continue to sponsor the LTIP. As described further under “Proposal No. 1—The Business Combination Proposal— Related Arrangements— HighPeak Energy, Inc. Long Term Incentive Plan,” the LTIP provides for potential grants of options, dividend equivalents, cash awards and substitute awards to employees, directors and service providers of HighPeak Energy, as well as stock awards to directors of HighPeak Energy. The LTIP will be administered by the HighPeak Energy Board or a committee thereof.

 

Subject to adjustment in accordance with the terms of the LTIP, the Share Pool is reserved and available for delivery with respect to Awards, and 1,300 shares of common stock will be available for the issuance of shares upon the exercise of ISOs (as defined in the LTIP). On January 1, 2021 and January 1 of each calendar year occurring thereafter and prior to the expiration of the LTIP, the Share Pool will automatically be increased by (i) the number of shares of common stock issued pursuant to the LTIP during the immediately preceding calendar year and (ii) 13% of the number of shares of common stock that are newly issued by HighPeak Energy (other than those issued pursuant to the LTIP) during the immediately preceding calendar year. The full text of the proposed LTIP is attached to this proxy statement/prospectus as Annex G.

 

Contingent Value Rights. The Contingent Value Rights are contractual rights to receive a contingent payment (in the form of additional shares of HighPeak Energy common stock, or as otherwise specified in the Contingent Value Rights Agreement) in certain circumstances that will be issued to the holders of shares of Pure’s Class A Common Stock participating in the business combination, PIPE Investors participating in the PIPE Investment pursuant to applicable subscription agreements and Forward Purchase Investors purchasing forward purchase units pursuant to the Forward Purchase Agreement Amendment. The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the CVR Holders with a 10% preferred simple annual return (based on a $10 per share price at Closing), subject to a floor downside per-share price of $4.00 (such return, the “Preferred Return”), at the CVR Maturity Date. Further, holders of public shares that participate in the business combination are being afforded additional liquidity in the form of Public CVRs, which HighPeak Energy intends to list on the Nasdaq or the NYSE at the Closing. This contingent consideration, if applicable, will only be issued to Qualifying CVR Holders.  To be a Qualifying CVR Holder, a CVR Holder must (i) provide certain documentation and certifications required under the Contingent Value Rights Agreements and (ii) in the case of the Private CVRs, retain (subject to certain limited permitted transfers) its shares of HighPeak Energy common stock received at the Closing through the CVR Maturity Date, which could be up to 2.5 years following the Closing. Under the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, up to 21,250,000 and 10,625,000 shares of HighPeak Energy common stock, respectively, may be issued by HighPeak Energy to satisfy the Preferred Returns with respect to the CVRs issued pursuant to the Business Combination Agreement Second Amendment, the PIPE Investment subscription agreements and the Forward Purchase Agreement Amendment. If any additional shares of HighPeak Energy common stock are issued to Qualifying CVR Holders following the CVR Maturity Date to satisfy their Preferred Returns, HighPeak I, HighPeak II and Sponsor will collectively forfeit an equivalent number of Escrowed Shares to HighPeak Energy for cancellation. The Preferred Returns could entitle the Qualifying CVR Holder to receive up to 2.125 shares of HighPeak Energy common stock per Public CVR, with respect to the Public CVRs, or per share of HighPeak Energy common stock received at the Closing and held (subject to certain limited permitted transfers) through the CVR Maturity Date and corresponding Private CVR, with respect to Private CVRs.  By way of example, if the CVR Maturity Date were set at the second anniversary of the Closing, the price of HighPeak Energy’s common stock were $12.00 or higher on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would not issue any additional shares of HighPeak Energy common stock to such Qualifying CVR Holders. However, if the CVR Maturity Date were set at the date that is thirty (30) months following the Closing, the price of HighPeak Energy’s common stock were $4.00 or lower on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 Preferred Return Shares and corresponding CVRs at such CVR Maturity Date, HighPeak Energy would issue an additional 31,875,000 shares of HighPeak Energy common stock (or 2.125 shares of HighPeak Energy common stock per Preferred Return Share and corresponding CVR, representing an aggregate value at the downside price of $4.00 per share of up to $127.5 million (i.e., in an amount sufficient to provide a 10% preferred simple annual return with respect to 15,000,000 Preferred Return Shares and corresponding CVRs)), collectively, to such Qualifying CVR Holders and HighPeak I, HighPeak II and Sponsor would collectively forfeit an equivalent number of shares to HighPeak Energy for cancellation. Within three (3) business days following the Closing, HighPeak I, HighPeak II and Sponsor will collectively place a number of shares of HighPeak Energy common stock in escrow equal to the maximum number of additional shares of HighPeak Energy common stock issuable pursuant to the Contingent Value Rights Agreements, which Escrowed Shares will be released either to HighPeak Energy for cancellation in connection with the satisfaction of any Preferred Returns or back to HighPeak I, HighPeak II and Sponsor, collectively, as applicable, following the CVR Maturity Date. Please see below an illustration of the aggregate number of additional shares of HighPeak Energy common stock that would be issuable to a Qualifying CVR Holder under a number of price scenarios assuming that such Qualifying CVR Holder held one (1) Preferred Return Share and a corresponding CVR at the CVR Maturity Date (and shown for scenarios in which the CVR Maturity Date is on either the second anniversary of Closing or the date that is thirty (30) months following Closing):

 

10

 

CVR Maturity Date set at the second anniversary of the Closing Date

 

(The share reference price is based on the “Reference Price” as defined in the Contingent Value Rights Agreements, other than the reference prices that are below $4.00, which are shown for illustrative purposes only)

 

 

 

Share Reference

Price

 

 

Preferred Return

Shares and

Corresponding

CVRs

Total

Corresponding

Escrowed

Shares

Total

Corresponding

Escrowed

Shares

Available

for Forfeiture to

HighPeak

Energy

Shares of

HighPeak

Energy Common

Stock to be

Issued to

Applicable

Qualifying CVR

Holders

Total Value to

Applicable

Qualifying CVR

Holders

$12.50

1

2.125

2.000

0.000

$12.50

$12.00

1

2.125

2.000

0.000

$12.00

$11.00

1

2.125

2.000

0.091

$12.00

$10.00

1

2.125

2.000

0.200

$12.00

$9.00

1

2.125

2.000

0.333

$12.00

$8.00

1

2.125

2.000

0.500

$12.00

$7.00

1

2.125

2.000

0.714

$12.00

$6.00

1

2.125

2.000

1.000

$12.00

$5.00

1

2.125

2.000

1.400

$12.00

$4.00

1

2.125

2.000

2.000

$12.00

$3.33

1

2.125

2.000

2.000

$10.00

$3.00

1

2.125

2.000

2.000

$9.00

 

CVR Maturity Date set at the date that is thirty (30) months following the Closing Date

 

 

 

Share Reference

Price

 

 

Preferred Return

Shares and

Corresponding

CVRs

Total

Corresponding

Escrowed

Shares

Total

Corresponding

Escrowed

Shares Available

for Forfeiture to

HighPeak

Energy

Shares of

HighPeak

Energy Common

Stock to be

Issued to

Applicable

Qualifying CVR

Holders (1)

Total Value to

Applicable

Qualifying CVR

Holders

$12.50

1

2.125

2.125

0.000

$12.50

$12.00

1

2.125

2.125

0.042

$12.50

$11.00

1

2.125

2.125

0.136

$12.50

$10.00

1

2.125

2.125

0.250

$12.50

$9.00

1

2.125

2.125

0.389

$12.50

$8.00

1

2.125

2.125

0.563

$12.50

$7.00

1

2.125

2.125

0.786

$12.50

$6.00

1

2.125

2.125

1.083

$12.50

$5.00

1

2.125

2.125

1.500

$12.50

$4.00

1

2.125

2.125

2.125

$12.50

$3.20

1

2.125

2.125

2.125

$10.00

$3.00

1

2.125

2.125

2.125

$9.38

 


 

(1) Calculated based on a 2.5 year period rather than a specific number of days occurring during such thirty (30) month period. This amount may vary slightly depending upon the actual date of the Closing and the applicable months that are covered in the thirty (30) month period.

 

11

 

Interests of Certain Persons in the Business Combination

 

In considering the recommendation of the Pure Board and Pure Special Committee to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, Pure’s Sponsor and certain of Pure’s directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders. Pure’s directors were aware of and considered these interests in evaluating the business combination and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include:

 

 

the fact that Pure’s Sponsor and certain HPK Contributors will deliver the Escrowed Shares into escrow and will collectively forfeit a number of Escrowed Shares equivalent to any additional shares of HighPeak Energy common stock that HighPeak Energy issues to satisfy the Preferred Return of any Qualifying CVR Holders, if needed;

 

 

the fact that the HPK Contributors and parties to the Business Combination Agreement are affiliates of Pure’s Sponsor and ultimately controlled by Jack Hightower, and Pure’s Sponsor and its affiliates, including the HPK Contributors, are expected to collectively own, prior to taking into account any adjustment relating to any shares that may be issued (or forfeited) pursuant to the Contingent Value Rights Agreements, approximately 94.04% to 88.88% of HighPeak Energy following the Closing, based on an assumed range of 5,000,000 to 10,000,000 shares of HighPeak Energy common stock owned by parties other than Sponsor and its affiliates as of Closing;

 

 

the fact that Pure’s Sponsor, officers and directors will lose their entire investment in Pure if an Initial Business Combination is not completed;

 

 

the fact that Pure’s Sponsor, officers and directors have agreed not to require Pure to redeem any of the shares of Class A Common Stock held by them in connection with a stockholder vote to approve the business combination;

 

 

the fact that Pure’s Sponsor paid an aggregate of $25,000 for its founder shares, which if unrestricted and freely tradable would be valued at approximately $51,327,920 based on the closing price of Pure’s Class A Common Stock on June 25, 2020, taking into account the forfeiture of certain founder shares pursuant to the Sponsor Support Agreement;

 

 

if the Trust Account is liquidated, including in the event Pure is unable to complete an Initial Business Combination within the required time period, Pure’s Sponsor has agreed to indemnify Pure to ensure that the proceeds in the Trust Account are not reduced below $10 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which Pure has entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

 

the fact that Pure’s Sponsor has agreed to loan, or cause an affiliate to loan, Pure or one of Pure’s subsidiaries, (i) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the First Extension and Second Extension for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) from October 17, 2019 until May 21, 2020, (ii) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension; (such loans described in clauses (i) and (ii), the Sponsor Extension Loans) and (iii) such other amounts as Pure and HighPeak Energy may agree upon with any HPK Contributor, any HighPeak Contributed Entity or another affiliate of Pure’s Sponsor (provided that in the case of obtaining approval of Pure of any such other amounts in excess of $5,000,000 in the aggregate, the Pure Special Committee shall approve in writing such amounts). Pure and Pure’s Sponsor intend that all Sponsor Loans will be cancelled in connection with the Closing;

 

 

 

the fact that HPEP II commenced a warrant tender offer to purchase Pure’s outstanding public warrants, held by persons other than HPEP II, for $1.00 per public warrant (exclusive of commissions) in cash on May 8, 2020;

 

12

 

 

the fact that holders of public warrants not purchased by HPEP II in connection with the warrant tender offer will have $1.00 in cash distributed to them per public warrant from an amount placed in escrow by Sponsor at the time of the IPO in connection with the redemption of Pure’s public shares that will occur if Pure is unable to consummate a business combination;

 

 

the fact that Jack Hightower will serve as Chief Executive Officer and Chairman of the HighPeak Energy Board, Steven W. Tholen will serve as Chief Financial Officer, Michael L. Hollis will serve as President and Rodney L. Woodard will serve as Chief Operating Officer of HighPeak Energy following the business combination;

 

 

the right of the HPK Contributors to designate to Pure, until five (5) business days prior to the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part, a list of directors that the HPK Contributors want appointed to the HighPeak Energy Board, effective as of the Closing;

 

 

the right of the Principal Stockholder Group, pursuant to the Stockholders’ Agreement, to appoint a specified number of directors to the HighPeak Energy Board until the termination of the Stockholders’ Agreement;

 

 

the fact that each of Pure’s independent directors owns 48,000 founder shares that were purchased from Pure’s Sponsor at $0.002 per share, which if unrestricted and freely tradeable would be valued at approximately $507,360 based on the closing price of Pure’s Class A Common Stock on June 25, 2020;

 

 

the fact that none of Pure’s officers or directors may participate in the formation of, or become a director or officer of, any other blank check company until Pure has entered into a definitive agreement regarding an Initial Business Combination or fails to complete an Initial Business Combination by August 21, 2020;

 

 

the fact that at the Closing, Pure’s Sponsor, officers and directors will be reimbursed for out-of-pocket expenses incurred in connection with activities on Pure’s behalf, such as identifying, investigating and consummating an Initial Business Combination and that affiliates of Pure’s Sponsor will be reimbursed for certain of their own transaction expenses pursuant to the Closing. However, if Pure fails to consummate the business combination, they will not have any claim against the Trust Account for reimbursement and Pure will most likely not be able to reimburse these expenses if a business combination is not completed. As of May 31, 2020, the Sponsor, and Pure’s officers and directors, and their affiliates had incurred approximately $135,000 in reimbursable expenses, and they may incur additional expenses in the future;

 

 

the fact that Jack Hightower and other members of Pure’s management team hold interests in HPK LP, and acquired the oil and gas interests owned by HighPeak Assets I and HighPeak Assets II at an aggregate cost that is less than the valuation of the same assets in the Business Combination Agreement; and

 

 

the fact that Pure is a party to a registration rights agreement with Pure’s Sponsor and certain of its directors, which provides for registration rights to such parties, and HighPeak Energy will enter into a new registration rights agreement with the Principal Stockholder Group and certain of HighPeak Energy’s directors in connection with the business combination.

 

Redemption Rights

 

At the special meeting called to approve an Initial Business Combination, public stockholders may seek to redeem their shares, regardless of whether they vote for or against the proposed business combination, for their pro rata share of the aggregate amount then on deposit in the Trust Account as of two (2) business days prior to the consummation of the Initial Business Combination, less any taxes then due but not yet paid. Pure’s Charter does not provide a specified maximum redemption threshold, except in no event will Pure redeem its public shares in an amount that would cause Pure’s net tangible assets to be less than $5,000,001.

 

Pure may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either (i) physically tender their certificates to Pure’s Transfer Agent or (ii) deliver their shares to the Transfer Agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, in each case prior to a date set forth in the warrant tender offer documents or proxy materials sent in connection with the proposal to approve the business combination. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, telephone number and address to Continental to validly redeem its shares. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge the tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. In any event, shares tendered for redemption must be delivered not less than two (2) business days prior to the special meeting.

 

13

 

Warrant Tender Offer

 

In connection with the First Extension and Second Extension and the announcement of the business combination contemplated by the Original HPK Business Combination Agreement and the Grenadier Contribution Agreement, HPEP II has conducted three (3) warrant tender offers to purchase for $1.00 per public warrant (exclusive of commissions), the outstanding warrants issued as part of the units in Pure’s IPO, as a result of which an aggregate 20,371,112 public warrants have been tendered and purchased by HPEP II.

 

On May 8, 2020, in connection with the filing of the definitive proxy statement related to the special meeting of Pure’s stockholders to vote to approve the Third Extension, HPEP II commenced a fourth warrant tender offer to purchase the 328,888 public warrants currently outstanding and not owned by it. The warrant tender offer is not conditioned upon any minimum number of public warrants being tendered and will expire on July 31, 2020, unless extended by HPEP II.

 

Impact of the Business Combination on HighPeak Energy’s Public Float

 

The following table presents the share ownership of various holders of HighPeak Energy upon the Closing and based on the assumptions set forth below and otherwise assuming two (2) redemption scenarios as follows:

 

 

Illustrative No Additional Redemption: This scenario, which we refer to as the “Illustrative No Additional Redemption Scenario,” assumes no shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 5,012,629 shares outstanding at Closing. It also assumes that approximately 5.0 million shares of HighPeak Energy common stock will be subscribed to and committed pursuant to the PIPE Investment and Forward Purchases prior to the effectiveness of this proxy statement/prospectus. Based on the approximately 10.0 million shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the subscriptions under the PIPE Investment and the Forward Purchases in this Illustrative No Additional Redemption Scenario, we would satisfy both the Minimum Aggregate Funding Availability and Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement) closing conditions. In addition, this Illustrative No Additional Redemption Scenario assumes the terms of our Debt Facility, with a borrowing base of approximately $60 million, will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and in effect at the Closing.

 

 

Maximum Redemption: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes that a total of 2,012,629 shares of Class A Common Stock are redeemed, which represents the number of shares that would need to be redeemed in order to reduce the number of outstanding shares to 3,000,000 shares, which is the minimum number of shares required to satisfy the Minimum Aggregate Funding Availability (as defined in the Business Combination Agreement) condition in the Business Combination Agreement, assuming $10.00 a share and assuming the PIPE Investment or Forward Purchases and Debt Facility described below. Unless waived by the applicable parties to the Business Combination Agreement, it is a condition to Closing under the Business Combination Agreement that HighPeak Energy shall have not less than $100 million of Minimum Aggregate Funding Availability, which must include not less than $50 million of Minimum Equity Capitalization (as such terms are defined in the Business Combination Agreement). The Minimum Aggregate Funding Availability is measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), the cash proceeds to any of the Parent Parties resulting from the PIPE Investment and Forward Purchases and the aggregate amount of committed debt financing (including amounts drawn thereon and amounts available for future draws) for the Parent Parties and the HighPeak Contributed Entities, excluding the Sponsor Loans unless otherwise agreed by the parties (which agreement, if any, must be approved by the Pure Special Committee). The Minimum Equity Capitalization is also measured at Closing and includes the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration) and the cash proceeds to any Parent Party resulting from the PIPE Investment and Forward Purchases. The Company is currently pursuing a PIPE Investment, Forward Purchases and a Debt Facility to enhance HighPeak Energy’s liquidity at Closing, and we expect a minimum of 2.0 million shares of HighPeak Energy common stock to be subscribed to and committed in PIPE Investments or Forward Purchases prior to the effectiveness of this proxy statement/prospectus to meet the Minimum Equity Capitalization closing condition. We also expect to enter into a Debt Facility with a borrowing base of not less than $50 million, which we expect will be committed and substantially negotiated prior to the effectiveness of this proxy statement/prospectus and to be in place at Closing. To the extent we enter into agreements with PIPE Investors for the PIPE Investment or Forward Purchase Investors' purchase of forward purchase units for more than 2.0 million shares in the aggregate, we will increase the number of shares that may be redeemed in the Maximum Redemption Scenario by an equivalent number of shares committed to be issued in the PIPE Investment or the Forward Purchases, although a minimum of 1,100,000 unrestricted shares will be required in order to meet the Nasdaq’s initial listing requirements (among other requirements, including a market value of unrestricted publicly held shares of $18 million).

 

14

 

Holders

 

Illustrative No Additional Redemption (1)

   

% of Total

   

Maximum

Redemption (1)

   

% of Total

 
                                 

Public Stockholders

    5,012,629       5.49 %     3,000,000       3.48 %

HighPeak Group

                               

Sponsor (2)

    4,856,000       5.32 %     4,856,000       5.63 %

HPK Contributors

    76,250,000       83.56 %     76,250,000       88.41 %

HighPeak Group Total

    81,106,000       88.88 %     81,106,000       94.04 %

Independent Directors

    144,000       0.16 %     144,000       0.17 %

PIPE Investors/Forward Purchase Investors

    4,987,371       5.47 %     2,000,000       2.32 %
                                 

Total

    91,250,000       100.00 %     86,250,000       100.00 %

 


 

(1) The numbers set forth in the table above do not take into account (i) the public warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreements (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following: (i) the Closing occurs on July 31, 2020; (ii) at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming: (a) overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on July 31, 2020 will collectively total an aggregate of $2.0 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing; (b) the cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on July 31, 2020; (c) transaction expenses will be approximately $15 million and (d) there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement; (iii) approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing, which assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (iv) no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (v) no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement; (vi) there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the PIPE Investments or purchases under the Forward Purchase Agreement assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; (vii) no available debt capacity other than the Debt Facility assumed in each of the Illustrative No Additional Redemption Scenario and the Maximum Redemption Scenario, respectively; and (viii) no warrants are tendered for purchase in the warrant tender offer.

 

(2) Shares owned upon conversion of founder shares at consummation of the business combination and the forfeiture by Sponsor of 5,350,000 founder shares pursuant to the Sponsor Support Agreement.

 

If the actual facts are different than HighPeak Energy’s assumptions or the scenarios presented above, the (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in this proxy statement/prospectus will differ and such differences may be material. For example, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors. However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

 

15

 

The scenarios above do not give effect to the potential exercise of any warrants. We do not expect the exercise of any of our public warrants outstanding after the Closing to have a material impact on our outstanding shares or Sponsor ownership given Sponsor and HPEP II will forfeit all of their private placement warrants and public war