Note 17 - Subsequent Events

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE 17. Subsequent Events

Gas Purchase Contract Amendment. In January 2022, the Company amended the gas purchase contract governing the majority of the Signal Peak area with DCP Operating Company, LP (“DCP”) whereby it added and removed certain dedicated acreage and more importantly, agreed to a minimum volume commitment between January 1, 2022 and March 31, 2023 of 1.2 Bcf to DCP in return for DCP installing new natural gas gathering lines to the wells currently being drilled and completed. The monetary commitment if the Company never delivers any volumes under the agreement is $300,000.

Dividends and dividend equivalents. In February 2022, the Company paid a quarterly dividend of $0.025 per share of common stock outstanding which resulted in a total of $2.4 million in dividends being paid on February 25, 2022. In addition, under the terms of the LTIP, the Company paid a dividend equivalent per share to all vested stock option holders of $214,000 in February 2022 and will accrue a dividend equivalent per share to all unvested stock option holders which is payable upon vesting of up to an additional $31,000 in August 2022, $2,000 in November 2022 and $2,000 in November 2023, assuming no forfeitures. In addition, the Company will accrue an additional combined $53,000 in dividends on the restricted stock issued to management directors and equity-based bonus awards issued to non-director employees in November 2021 that will be payable upon vesting in November 2024.

Issuance of Senior Unsecured Notes. In February 2022, the Company completed a private placement of $225.0 million principal amount of 10.00% Senior Unsecured Notes due 2024 (the “2024 Notes”). Net proceeds after discounts and customary fees were approximately $203.9 million that will be used to pay off the Revolving Credit Facility, fund the Company’s 2022 capital budget and for general corporate purposes. The 2024 Notes have not been registered under the Securities Act, or any state securities laws, and unless so registered, the securities may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The 2024 Notes are expected to be eligible for trading by qualified institutional buyers and accredited investors under Rule 144A under the Securities Act and persons outside the United States pursuant to Regulation S under the Securities Act.

Revolving Credit Facility. In February 2022 simultaneous with the issuance of the aforementioned 2024 Notes, the Company entered into the Third Amendment to the Credit Agreement to among other things, (i) reduce the borrowing base from $195.0 million to $138.8 million and (ii) modify the terms of the Credit Agreement to reduce the aggregate elected commitments from $195.0 million to $138.8 million. The syndicate of banks in the credit facility and the commitment percentages remained the same, with Fifth Third remaining as the administrative agent.

Derivative financial instruments. In February 2022, the Company entered into additional crude oil derivative financial instruments. After giving effect to these new contracts, the Company’s outstanding crude oil derivative contracts and the weighted average crude oil prices per barrel for those contracts are as follows:

	2022										2023
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total		First Quarter		Second Quarter		Total
Crude Oil Price Swaps - WTI: (a)
Volume (MBbls)		966.4		1,039.8		456.4		487.4		2,950.0		441.0		200.2		641.2
Price per Bbl	$	69.26	$	71.96	$	75.15	$	70.14	$	71.27	$	70.05	$	57.22	$	66.04

Acquisitions. During the first quarter 2022, the Company entered into a series of agreements with various third parties to acquire various oil and gas properties contiguous to its Flat Top operating area, which in the aggregate, consist of approximately 9,500 net acres, associated estimated production of approximately 2,500 Boe/d, approximately 40 additional horizontal drilling locations, three salt-water disposal wells, infield produced fluid pipelines and rights to local non-potable water sourcing of approximately 35,000 barrels per day. The combined purchase price for the acquisitions, subject to customary purchase price adjustments, is up to 7.73 million shares of HighPeak common stock and $4 million in cash. The acquisitions are expected to close late in the first quarter and early in the second quarter of 2022. All of the acquisitions are expected to be accounted for as asset acquisitions and all costs associated with the transactions will be capitalized.