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Note 16 - Subsequent Events
3 Months Ended
Mar. 31, 2022
Notes to Financial Statements  
Subsequent Events [Text Block]

NOTE 16. Subsequent Events

 

Hannathon Acquisition. In April 2022, the Company announced the signing of a purchase and sale agreement to acquire approximately 18,600 net acres from Hannathon Petroleum, LLC (“Hannathon”) and other non-operated working interest owners where HighPeak currently owns non-operated working interests in approximately 60% of the acquired gross acreage position. The acquired acreage position is largely contiguous to the Company’s existing Signal Peak area with significant existing production, cash flow and produced water handling infrastructure. Purchase consideration due to the sellers, subject to customary closing adjustments, is comprised of $255.0 million in cash and approximately 3.8 million shares of HighPeak Energy common stock. The cash consideration is anticipated to be funded through increased commitments under its Revolving Credit Facility and is expected to close early in the third quarter of 2022 and be accounted for as an asset acquisition.

 

Dividends and dividend equivalents. In April 2022, the board of directors of the Company declared a quarterly dividend of $0.025 per share of common stock outstanding which will result in a total of $2.6 million in dividends being paid on May 25, 2022. In addition, under the terms of the LTIP, the Company will pay a dividend equivalent per share to all vested stock option holders of $214,000 in May 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.

 

Warrant exercises. Subsequent to March 31, 2022 through May 4, 2022, the Company has received an additional $6.9 million in proceeds from the exercise of 602,669 warrants and has issued 602,669 shares of HighPeak Energy common stock to the warrant holders as a result. In addition, the Company has issued an additional 290,465 shares of HighPeak Energy common stock as a result of a warrant holder completing a cashless exercise of 526,300 warrants. This brings the outstanding number of warrants to 8,293,772 subsequent to quarter end

 

Water treatment.  In May 2022, the Company entered into a one-year agreement beginning on July 1, 2022 with Pilot, whose President and CEO is an outside director of the Company, to utilize Pilot’s proprietary water treatment technology in the Company’s Flat Top area to treat produced water such that it can be reused in the Company’s completion operations or sold to third parties for their completion operations. During the term of the agreement, the Company has agreed to a minimum volume commitment of 29.2 million barrels of produced water while maintaining the ability to bank excess produced water processed each month toward the minimum volume commitment.  The monetary commitment, if the Company never delivers any produced water to be treated under the agreement, is approximately $6.0 million.

 

Stock-based compensation.  On May 4, 2022, an additional 824,500 stock option awards were granted to employees of which 729,833 vest immediately and the remainder vest over the next two years. As such, stock-based compensation expense of $10.9 million will be recognized in future periods, $9.7 million and $10.2 million of which will be recognized during the second quarter of 2022 and the nine months ended December 31, 2022, respectively.