HighPeak Energy Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 5, 2024

There are 6 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the High Peak Energy 20 24 Third Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Tholen, Chief Financial Officer.

Operator

Please go ahead.

Speaker 1

Good morning, everyone, and welcome to Hiteq Energy's Q3 2024 earnings call. Representing Hypeak today are Chairman and CEO, Jack Hightower President, Michael Hollis and I'm Stephen Tholent, the Chief Financial Officer. During today's call, we will make reference to our November investor presentation and our Q3 earnings release, which can be found on High Peak's website. Today's call participants may make certain forward looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions and future performance. So please refer to the cautionary information regarding forward looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control.

Speaker 1

We will also refer to certain non GAAP financial measures on today's call. So please see the reconciliations in the earnings release and in our November investor presentation. I will now turn the call over to our Chairman and CEO, Jack Hightower.

Speaker 2

Thank you, Steve. Good morning, ladies and gentlemen, and thank you for joining us today. My prepared remarks will begin on Slide 4 of our November investor presentation. And after looking at our press release and seeing our results, I'm extremely excited to report yet again that High Peak has achieved another solid quarter of execution across the board. Heading into the 2024 calendar year, we laid out a set of core values including maintaining disciplined operations, strengthening our balance sheet and focus on maximizing shareholder value.

Speaker 2

Our unwavering commitment to these values has driven our continued success. Operationally, our drilling program has continued to deliver strong well results and production levels have continued to outperform initial expectations. This has resulted in another beat in rates of our production guidance this quarter and our operations team has remained aggressively focused on production optimization and reducing our cost structure across the board. Financially, last quarter marks the 5th consecutive quarter that High Peak has generated positive free cash flow. And true to our core values, we have utilized a substantial portion of our free cash flow to pay down absolute debt while simultaneously executing our opportunistic share buyback program.

Speaker 2

As we set out at the beginning of the year, we continue to implement our primary objective of increasing absolute shareholder value through improved operational results, our return of capital strategy and ultimately through our strategic alternatives process. So now, if you'll turn to Page 5 of the presentation. The 3rd quarter was a huge another operational huge success for High Peak as our production volumes average over 51,000 barrels of oil per day. This level was higher than our first and second quarter averages this year, even taking into account the continuation of our moderated 2 rig development program. Operations during the quarter were affected by a major storm akin to a 100 year flood that hit in early September.

Speaker 2

This storm caused some of our production volumes to be offline and translated into our lease operating expenses running a little hot during the quarter due to remedial work associated with the storm damage. It's a true testament to our operations team and our robust infrastructure system. That a storm of this magnitude only caused minimal shut in volumes and operational issues. As you can see, our Q4 is off to another strong start as production volumes have continued to average over 50,000 barrels of oil per day thus far. We're continuing to see impressive results from our most recent wells, including our extension wells in the Northern and Northeastern Flat Top.

Speaker 2

We remain extremely excited about these areas of the field as well as our potential of upside zones. Mike will provide additional details regarding our continued strong production levels and our recent well results later in the presentation. I'd just like to reemphasize the major positives of these results. In addition, we continue to efficiently convert our products into value for the company as evidenced by our sustained peer leading EBITDAX per BOE. Our 3rd quarter results translated into high peak converting 80% of our realized price per BOE into cash.

Speaker 2

We generated another strong quarter of free cash flow and we remain in a very healthy financial position. Now turning to Slide 6, And as you look at this slide, you can realize the raise and the reaffirmation. As I mentioned earlier, as a result of continued strong production volumes, we're going to yet again increase our full year 2024 production guidance. Our new range is 48000 to 51000 BOEs per day. This range translates to over a 5% increase compared to our prior increase back in August and a 10% increase compared to our initial 24 guide.

Speaker 2

This is due to our strong well performance and continued production optimization efforts. We're also reaffirming our 24 lease operating expense and CapEx guidance, which we updated back in August. Our team continues to execute on optimizing our fill wide operations and we remain optimistic there are still some incremental savings we can achieve going forward. We expect our capital expenditures will fall within our narrow range of $540,000,000 to 580,000,000 dollars We've now completed the bulk of our 2024 infrastructure projects, so the vast majority of our capital expenses during the Q4 will be associated with drilling and completing wells. On that note, our drilling and completions team is doing a tremendous job in achieving additional cost savings, even compared to the lower cost levels that we realized earlier this year.

Speaker 2

I believe this is one of the critical areas of our business that not only differentiates from our peer group, but that is also being missed by the public investor universe. Our current cost structure is significantly lower

Speaker 3

than our Midland Basin peers and alongside our strong well results absolutely translates into our per well economics competing with anyone in the Midland Basin. Mike will provide additional detail on this topic, but I

Speaker 2

want to take this opportunity to emphasize this point and to also call out great work that our drilling and completions team is achieving. The key takeaway is that we've delivered extremely impressive results to the 1st 3 quarters of the year and I feel confident that this trend will continue. Now I'll turn the call over to our President, Mike Collins.

Speaker 4

Thanks, Jag. Now turning to Slide 7. Hypeak's EBITDAX per BOE continues a commanding lead amongst our peer group. Said differently, no other public company can generate close to the same EBITDAX that Hypeak does on 50,000 BOEs a day, thanks to our very oily mix in low OpEx. The cartoon on Slide 7 shows how efficiently Highpeak converts our oily BOEs into cash.

Speaker 4

Starting from left to right on the slide, Highpeak's BOE is 75% oil and 88% liquids versus our peer average of 45% oil. Plus, Highpeak's efficiency of converting that higher realized price per BOE to EBITDAX is higher than our peers. Highpeak converts 80% of our realized price to EBITDAX. That compares to our peers converting only 70%. Beginning with a significantly higher BOE value than our peers and converting at a greater percentage of that price into EBITDAX results in a substantially higher EBITDAX per BOE.

Speaker 4

And in our Q3, our unhedged EBITDAX per BOE remained strong and differential at $45.68 per BOE. Highpeak's EBITDAX per BOE continues to be over 65% higher than our peer group average. The operations team has done a fantastic job building 1 of the most efficient machines in the business. These efficiencies are extremely sticky. By that, I mean they're here to stay.

Speaker 4

This is very important when a company has multiple decades of sub $50 breakeven inventory to exploit and equates to significant value creation. Jack mentioned a 100 year flood that caused High Peak roughly 800 high oil cut BOEs during the Q3 per day. We also had an additional expense in Q3 for repairing that flood damage with fewer BOEs to allocate for the quarter. Had this not happened, we would be on pace to exit the quarter at or below the midpoint of the LOE guide. This gives us confidence to reaffirm the LOE guide.

Speaker 4

There is always wood to chop on the LOE front. The team continues to find innovative ways to reduce costs, which will further widen the gap between Hypeek and our peers. Now turning to Slide 8. Let's talk about some recent well results. We are continuing to see very positive performance from wells in our northern and northeastern extension areas in Flat Top as well as some of our upside target zones.

Speaker 4

First, let's discuss our Callas well. This well is High Peak's first operated Middle Spraberry well. Our Callas well achieved a max oil IP of roughly 1500 barrels of oil per day plus associated gas out of a 2 mile lateral, far exceeding our initial Middle Spraberry expectations. And as you can see on the production chart on Slide 8, the Callas well is also outperforming our bread

Speaker 3

and

Speaker 4

butter Wolfcamp A type curve. I would like to point out that the landing point in the Middle Spraberry formation is approximately 800 feet above where we land in the Lower Spraberry formation, which we believe will allow us to efficiently and effectively develop areas of the field where we already have drilled Lower Spraberry wells without seeing any parent child influence. We have identified approximately 300 Middle Spraberry locations across our acreage. Note, we have obviously drilled through the Middle Spraberry formation on every well that we have drilled to date. Since all were drilled to deeper zones.

Speaker 4

We have collected extensive data on this zone and that makes this test a technical no brainer. Utilizing our current well cost and the initial performance of the Callas well equates to a lot of additional high peak inventory that will breakeven at well below $50 a barrel. This Middle Spraberry inventory resides in our 2,600 total well inventory that High Peak carries, but these continued results like this and much of that inventory will surely migrate over and add to our current $11.50 sub-fifty dollars breakeven locations. And I know that High Peak and I believe that our investors and the industry as a whole would all agree that we would all take a 1500 barrel oil well per day at a cost well below $6,000,000 and we would take those all day long. We've also highlighted our Judith well on Slide 8.

Speaker 4

This well is High Peak's furthest East operated producing Wolfcamp A well, which has demonstrated very strong performance to date. This well reached an oil IP of 1700 barrels of oil per day plus associated gas. Over the first roughly 5 months of production, since the well initially cut oil, it has produced over 135,000 barrels of oil, outperforming the conservative type curve we have for this area. This data point is further proof that our primary zones are good across our entire acreage position. In addition, as we mentioned last quarter's update, the results of our first handful of wells in our northernmost extension of Flat Top, both in the Wolfcamp A and Lower Spraberry formations are continuing to exhibit very strong early performance.

Speaker 4

We anticipate providing additional production details next quarter. But as a preview, our Lower Spraberry and Wolfcamp A results in this extension area are performing as good as or better than the core development in Flat Top, nearly 10 miles south, again underscoring our already sizable and differentiated inventory of sub $50 breakeven runway. This area, undeniably, has legs. Now turning to slide 9. As Jack mentioned earlier, our drilling and completions group has done a tremendous job of reducing our cost structure to drill, complete and equip our wells.

Speaker 4

All in DCE and F that has facilities as well, costs are currently running 9% below the cost we achieved in Q1 of this year. We have seen the usual suspects contribute to those cost reductions: rig rates, stimulation costs per pumping hour, OTCG pricing, fuel cost and incremental performance improvements. But let's talk a little about what folks are missing about Hightpeak's cost structure. Let's start from some a truth that everybody has bought into over time. That truth is that the Delaware Basin is more expensive than the Midland Basin proper to drill and complete wells to the tune of almost $3,000,000 per well.

Speaker 4

Now the returns compete in both basins because the production and value are almost proportional to the differences in cost. Midland Basin costs are less due to the structural nature of the wells. What does that mean? The Midland Basin is shallower, has lower pressure, requires less horsepower to complete the wells. The industry and investors have accepted this fact.

Speaker 4

Public sources also do a decent job accounting for average regional descriptions of these costs. However, utilizing a regional cost structure for High Peak would lead the public to miss the extraordinary efficiency, value and runway that High Peak offers. So how does the Delaware Basin to Midland Basin comparison relate to High Peak's acreage, which resides on the eastern side of the Midland Basin? We enjoy similar structural differences to the center part of the basin as the Midland Basin does to the Delaware Basin. Our zones are shallower than our peers out to the west in the Midland Basin.

Speaker 4

Obviously, that means less total footage to drill, less pipe, less cement, less time and variable cost. All in, this equates to less DCENF cost. Our frac pressures are significantly lower than our other public peers in the Midland Basin, requiring far less horsepower, fewer pump trucks and therefore significantly less fuel. Having access to all of the recycled stimulation fluid that we need and ultra local wet sand enhance our environmental stewardship and greatly reduce our capital requirements. Those lower stimulation pressures, roughly 30% lower, allow High Peak to further optimize the tubular goods used, which reduce and significantly reduce the additional savings or increase the additional savings for our wells at High Peak.

Speaker 4

So why is this important and what are folks missing? It's no secret that High Peak's BOEs generate significantly higher EBITDAX per BOE compared to our peers, mainly driven by our high oil cut. But what's the read through? We made similar oil recoveries, but make less natural gas. However, gas and NGLs are only about 1% of High Peak's total revenue.

Speaker 4

They are closer to 10%, give or take, of our peers' revenue in the center part of the Midland Basin. So distilling all of this down, being able to generate slightly less revenue per well, I. E. The gas, but doing it at less than 75% of the comparable cost wins the race for generating shareholder value every time. And having multiple decades of this inventory that will allow Hy P to continue this performance for the foreseeable future is the value that the market has yet to grasp.

Speaker 4

Now turning to Slide 10. ESG is ingrained in every aspect of Highteen's operational and strategic planning. We continue to build large central tank batteries that meet all regulatory requirements, Use 100% of ultra local wet sand, reducing cost and associated emissions. We continue to use recycled stimulation fluid and have the capacity to supply multiple frac crews. We continue to build out oil infrastructure to our newer acreage blocks.

Speaker 4

Oil on pipe garners a better realized price per barrel and reduces emissions. We have electrified field wide and continue to run our 2 rigs off of High Line Power. Our solar farm supplants 10,000 metric tons of CO2 per year and the electricity from the solar farm is cheaper than grid power. So it also reduces High Peak's CapEx and OpEx. We have continued to expand our low pressure gas gathering to High Peak's new acreage, eliminating the need for flaring.

Speaker 4

With our gas gatherers addition of compression and processing throughput, High Peak has enjoyed lower field wide pressures equating to slightly higher natural gas production. Highpeak prioritizes ESG initiatives throughout all operational and governance decisions. Doing the right thing is not only the right thing to do, but more often than not, it is also the right financial decision for our shareholders. With my comments now complete, I'll turn the call back over to Jack to wrap things up.

Speaker 2

Thanks, Mike, and congratulations on another very successful quarter. Now if everybody would turn to slide 11. Ladies and gentlemen, the important points, the key takeaways I want to leave you with today are: 1st, we continue to execute on all cylinders. Our asset base continues to deliver strong production results full of oily high margin barrels. We expect to maintain this trend going forward, which is why we're raising our production guidance again.

Speaker 2

Throughout the past year, we have been intensely focused on optimizing our build wide operations and expanding our world class infrastructure system to reach all areas of the field. These initiatives has led to sustained operating cost reductions as evidenced by our results over the past 4 quarters. 2nd, we have positioned the company for optimal value creation. We've amassed a sizable, highly contiguous acreage position, which is prime for large scale development. We've continued to add organic high value inventory both through expanding our flattop acreage position and also through the delineation of some of our upside target zones, which we will continue.

Speaker 2

This is truly one of the few remaining opportunities of significant scale in the most sought after basin in the country. We've rapidly grown our high margin oil weighted production and reserves to a significant level. We've delineated a long runway of high value sub-fifty dollars breakeven inventory that spans our entire leasehold position. Again, the scarcity of sub-fifty dollars per barrel breakeven inventory amidst the current market trend of extreme consolidation puts High Peak in a very unique and advantageous position. We've expanded our world class infrastructure system to our extension areas and we've worked with primary midstream partners to provide for the expansion of our infill crude oil and natural gas gathering and takeaway capability, which will support life of field development and maintain our peer leading profit margins for decades to come.

Speaker 2

I can't give specific details at this time, but I do want to say that we are continuing to make significant progress in our strategic alternatives process and we remain very excited about the possibilities for High Peak and our shareholders. Now we'll open up the presentation to any questions that anybody might have.

Operator

Thank you. At this time, we will conduct a question and answer session. Our first question comes from the line of John White of ROTH MKM Capital. Your line is now open.

Speaker 5

Good morning, gentlemen, and congratulations on a very strong quarter.

Speaker 2

Thank you.

Speaker 5

Focusing on Slide 8 and your Callus 34-39, very well. Do you plan to offset that? And if so, to what direction and what would be the timing on offsetting this Middle Spraberry well?

Speaker 4

John, this is Mike. And hey, thank you for the question. Obviously, we're extremely excited about the Middle Spraberry results. There's some offset data out a little bit farther west. You can see it on the map that we've inset on this slide.

Speaker 4

Our Kalish well at 10,000 feet and 1500 barrels of oil a day is something that obviously we would like to have more of. So I think it would be reasonable to expect in the future that we would look for the right place to delineate. And typically, again, to just offset would be great and we think we would get a very similar result. At this stage, when it's early, you would probably see us walk away from this well a couple miles either north, south or east to again draw a little bit more credence to a larger swath of our acreage that would be perspective. So to do a direct off offset might not carry the same amount of weight.

Speaker 4

But the good news is we've got the data on all of those wells that we've drilled through the Middle Spraberry and it looks perspective across the vast majority of our acreage. So I think it would be reasonable that we would move either north, south or east from where we are here and do a test sometime in the next quarter or 2.

Speaker 5

Okay. Next quarter or 2. I appreciate that.

Speaker 4

Yes.

Speaker 5

And on the Judith sixty seven-five, you've extended your Wolfcamp A further to the east. So for the Wolfcamp A and the Middle Spraberry, as you work your way north and east in the Flat Top Block, you continue to get strong well results. So you must feel pretty good about this expansion.

Speaker 4

Absolutely, John. I've mentioned in the prepared remarks a handful of wells in the far northern extension of Flat Top. Those wells, again, next quarter, we'll be able to have enough production data to kind of see where they do peak as some of these wells are still inclining in production today. So once they start to roll over, we'll be able to kind of put an EUR curve on those and that would be something when we feel comfortable letting everybody know. But early time results look very similar to the kind of production chart that you're seeing here on Slide 8 for our wells up north.

Speaker 4

And again, as this is our farthest east operated Wolfcamp A well, if you look at the hashed box that kind of sits to the southeast of our flattop area, I can't read the number here, but there's almost 30 wells that are in the A and Lower Spraberry and even some other zones that are producing farther east than high peak and you have very similar results even east of our acreage block that look just like our wells kind of in the center part of Flat Top. So absolutely, we feel very strongly that our inventory is good throughout all of our acreage here and that it supports the 11.50 wells that we currently have today that are sub $50 breakeven. But to that point, I want to stress again that not in that number are very many Middle Spraberry wells. I think we have an offset or 2 to this Callas well that sits in it. But outside of that, the vast majority of the 300 Middle Spraberry that we have identified are not in our $11.50 sub $50 breakeven.

Speaker 4

So as we go forward and drill some of those additional tests that you were asking about and assuming that we get similar results to what we've seen on the callers and all of our rock and petrophysical and geological data suggests that it will be, then you'll start to see us move more of those wells into the sub-fifty dollars breakeven category. And that's important to know that we're only drilling with 2 rigs. That's about 48 to 50 wells a year that High Peak Drills completes. And if you're adding a couple of 100 into your sub-fifty dollars breakeven category, I would suspect in the next year or so, we will have even more inventory that Tier 1 in anybody's portfolio than what we have today with the results we're seeing. Well,

Speaker 5

good luck with that. Nice slide, nice explanations. I appreciate it. You bet.

Speaker 4

Thank you, John.

Operator

One moment for our next question. Our next question comes from the line of Jeff Robertson of Water Tower Research. Your line is now open.

Speaker 3

Thanks, Mike. To further the conversation with respect to Slide 8, on both the Callas well and the Judith well, what can you take from the log penetrations and the data you got while the well was drilling and now the performance and use that to help de risk the locations that you have?

Speaker 4

You bet, Jeff. The great news is obviously while we were drilling the wells, they acted very similar and you wouldn't know that you were drilling 5 miles east or 6 miles east of our 1st Wolfcamp A Lower Spraberry well that we drilled 5 or 6 years ago. So again, it's very consistent from an operational standpoint on the drilling and completion side. Obviously, we gather our log data as well as cutting samples through every one of these wells and we can look at the maturation of the oil. So again, we feel very confident that all the way out to the east as well as all the way up to the north.

Speaker 4

And look, at the end of the day, I'm a very pragmatic guy. I like to see oil in the stock tank. We can do all the science we want, which de risks the initial dollars that we invest to test. But the real setup is what's the commerciality of the well and how much oil shows up for sale in that stock tank. We have proved that all the way out to the east and to the north that substantiates our large inventory that High Peak has.

Speaker 3

Mike, does the performance of the Judith well so far versus your type curve reflect any kind of a change in the way the well was drilled and the way that actually the well was stimulated or is that geology and petrophysics?

Speaker 4

So a couple of things there, Jeff. It is a parent well by itself. That's one. If we had drilled 12 wells around it all at the same time, would I suspect there would be a 5% difference in performance give or take? Probably.

Speaker 4

So that plays a small piece. What I will say is every day we are tweaking our completion, landing, perforation scheme, everything we're trying to optimize with every new data point that we get. Do we suspect that the rock is any different here than what we have back to the West? Not enough to make a large enough difference. Had we done all of the things we're doing today on the Judith well, on our very first well, I think we would have got a better result even on the very first well, which was the Jasmine well that we had drilled.

Speaker 4

So I think it's just an evolution over time. But when we have a very consistent sandbox and you're starting to see little bit better performance on these wells as well as our base production,

Speaker 1

I mean, we don't want

Speaker 4

to forget our production guys. They're doing a fantastic job on keeping well uptime as well as cost being able to keep these wells producing and reducing our LOE. So

Speaker 3

all

Speaker 4

of those things kind of come together to build the efficiency of the machine that we have here at High Peak. It I think is very differential. But I think what you're going to see is over time these wells will continue to get incrementally better from all of the day to day changes that we're looking at.

Speaker 2

Yes. So also just to add on to that, if you just study looking backwards in the Permian Basin, whether it's Midland Basin, Delaware Basin or Mach 54 years of drilling wells out here, you realize that you improve your performance with time. You have technological changes and our operations team and our drilling guys and our completion guys are up to speed. And if you look at the industry's performance and then look at our performance, your expectation can be that you're going to see significant improvements in the future as we go forward in increasing performance and increasing recovery. So we're really excited about the basic rock and what we can recover from that rock.

Speaker 2

And Jeff, this might

Speaker 4

be another time or another opportunity to jump in and kind of run back over this. Because again, it's something we see as we talk to investors that is sometimes hard to understand and believe. And again, when you look at public data, public data does a really good job when everything looks the same, I. E. The Delaware proper in the Midland Basin proper.

Speaker 4

So your public sources do a pretty good job of saying how much people are spending because that data is made public. Again, with High Peak, part of this is we had to put some money in for infrastructure over the last 4 years, a sizable amount that's paying dividends today. But on that capital front and going forward, that infrastructure is in place. We just now have to tie into it whenever we drill a new well. But I talked a little bit about those structural differences and why they are so important to economics.

Speaker 4

And for High Peak, again, we've got very similar structural differences to the center part of the Midland Basin as that center part of the Midland Basin has to the Delaware Basin. And those structural train changes as I went through kind of pressures and what it takes to frac these wells and the tubular goods you have to have, how much horsepower and fuel. When you take all of those into consideration, when you look at some of these wells that again can produce 1500 barrels of oil a day and cost well under $6,000,000 of well to complete, Those economics will compete with anything in either one of those two basins. So I think that is a piece that folks are having a hard time believing that something in the Midland Basin can produce that well and be that cost to complete.

Speaker 3

And Mike, your cost differences versus the central part of the Midland Basin is you're further up on the shelf a little bit, right? So it's not quite as deep?

Speaker 4

That's correct. As we're coming to the eastern side of the basin, it's roughly 100 foot per mile of depth that you move up. So as you go farther into the basin, you could be a a 1,000, 1500 or more feet deeper. And different streams of those casings have to be set at different spots. And some of that has to do with some of the legacy drilling that was done in these areas.

Speaker 4

For instance, if you take some of the operators in the middle part of the basin, they're having to drill the vertical part of their horizontal well through a what we used to call the Spraberry or the Wolfberry play that has been around for 50 years. So a lot of depletion has happened in these vertical parts of the center part of the basin, which require different practices and cost to drill through it. Where high peak acreage sits, any development that was done in this area was much deeper than the zones we're drilling to. So none of that depletion has taken place. All that equates to less pipe that we need, less time to drill these wells.

Speaker 4

That's again why our 2 rigs can drill an average of 24 to 25 wells per year per rig at an average lateral length of about 13,000 feet. So again, it all comes out in our numbers and all of the math works out. But again, it's just we noticed that people are having a hard time believing that the differential is as big as it is, but we've got the data and the well performance to show that.

Speaker 3

And then lastly on that, Mike, your acreage block on Page 8 is a little bit is filled in a little bit more than it was in one of your previous presentations. Are you still I guess that one, it reflects your confidence in the northern part of this acreage position, excuse me. But are you still seeing opportunities to pick up offset acreage at reasonable prices?

Speaker 4

Jeff, our land department does a yeoman's job every day. Obviously, with the well results we have, I mean, look, our industry does a whole lot of close to ology, right? You get a good well, you're trying to pick acreage up around it. We have enough data in the area to know where we want to have that acreage, and these guys are doing a great job picking it up. So I think it's reasonable to expect over time you'll see a little bit more on this chart our map is showing gray, a little bit more gray on there over time as we're picking up and filling in, as well as even where there's some gray, we're just picking up additional ownership in some of those blocks.

Speaker 4

So we really like our position in kind of Eastern Howard and in Borden County and these well results are fantastic.

Speaker 3

Thank you.

Speaker 4

You bet. Thank you, Jeff.

Operator

This concludes the question and answer session. I would now like to turn it back to Jack Hightower, Chief Executive Officer for closing remarks.

Speaker 2

Thank you. Ladies and gentlemen, I'd like to reemphasize the key takeaways from today's call. First, operationally, we're executing on all cylinders. We will continue to strive for incremental improvements going forward. 2nd, our strong well performance is continuing to outperform initial expectations.

Speaker 2

3rd, we've expanded our truly world class infrastructure system to our extension areas, which will help maintain our lower cost structure and our peer leading profit margins for the entire life of our field. 4th, with the success of our new Middle Spraberry well and our Northern Extension area wells in Flat Top combined with our lower capital cost structure, we're adding significant highly economic inventory to our already deep portfolio. As we continue to delineate our other upside zones, and we've mentioned those things in the past, we're convinced that our field has upwards of 1,000,000,000 barrels of oil equivalent of net recoverable resource in place. All these things translate to High Peak being positioned to create optimal value for our shareholders. Our inventory competes with any of our peers in the Permian Basin or would also fit nicely within any potential suitors portfolio.

Speaker 2

So again, thanks for joining us today.

Operator

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

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