Note 11 - Related Party Transactions

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 11. Related Party Transactions

Underwritten Equity Offering. In connection with the Company’s underwritten equity offering in July 2023, certain of the Company’s stockholders, John Paul DeJoria Family Trust and Jack Hightower, the Company’s Chairman and Chief Executive Officer, and entities and individuals associated with them, purchased an aggregate of approximately 10 million shares of common stock in the offering at the public offering price per share. In connection therewith, the Underwriter received a reduced underwriting discount on such shares purchased by these persons or entities compared with other shares sold to the public in the offering.

Water Treatment. In September 2021, the Company entered into a contract with Pilot Exploration, Inc., (“Pilot”), whose President and CEO was an outside director of the Company, to deploy Pilot’s proprietary water treatment technology in the Company’s Flat Top area to treat up to 25,000 barrels of produced water per day that can be reused in the Company’s completion operations or sold to third parties for their completion operations. This contract was set to expire on March 1, 2022; however, it was extended to October 1, 2022 based on the early results of the project. During the year ended December 31, 2022, the Company paid $2.0 million to Pilot for such services.

In May 2022, the Company entered into an agreement with Pilot 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 one-year term of the agreement, beginning on October 1, 2022, the Company 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. During the years ended December 31, 2024, 2023 and 2022, the Company paid zero, $1.5 million and $1.6 million, respectively, to Pilot for such services. In April 2023, the Company terminated the contract with Pilot in exchange for $6.5 million that was charged to other expense in the accompanying consolidated statements of operations during the year ended December 31, 2023.

Private Investment in Public Equity. On August 22 and 23, 2022, HighPeak Energy entered into multiple Subscription Agreements (the “Subscription Agreements”) with certain accredited investors (collectively, the “Investors”) pursuant to which, among other things, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Investors, an aggregate 2,855,162 newly issued shares of the Company’s common stock at a price per share of $21.61 (as determined by the 5-day volume weighted average trading price per share for the five trading days immediately prior to (and excluding) August 22, 2022), for aggregate gross proceeds of approximately $61.7 million. The Company used the proceeds of the Private Placement for general corporate purposes. The transactions contemplated by the Subscription Agreements closed in multiple closings on or about September 2, 2022, subject to customary closing conditions.

As part of the private placement, certain related persons of the Company participated as investors, and such participation was approved by the Board pursuant to and in accordance with the terms of the Related Party Transactions Policy adopted by the Board on August 21, 2020. Specifically, Messrs. Jack Hightower (the Company’s Chief Executive Officer), Michael Hollis (the Company’s President), Steven Tholen (the Company’s Chief Financial Officer), Rodney Woodard (the Company’s Chief Operating Officer) and John Paul DeJoria as trustee for the John Paul DeJoria Family Trust (a greater than ten percent (10%) holder of the Company’s outstanding common stock) entered into Subscription Agreements to purchase 462,749, 46,276, 9,255, 23,138 and 2,313,744 shares of common stock, respectively, in each case on substantially the same terms as other investors in the private placement. In addition, each Subscription Agreement with an investor other than Messrs. Hightower and DeJoria (each of which has existing registration rights with respect to the Company’s securities) provides for customary registration rights with respect to the shares issued thereunder, including the right to have such shares registered for resale on a “shelf” registration statement.