HighPeak Energy NASDAQ: HPK executives said the company started 2026 ahead of operational expectations and is staying committed to a “maintenance mode” development plan intended to keep production roughly flat while maximizing free cash flow and strengthening the balance sheet.
On the company’s first-quarter earnings call, President and CEO Michael Hollis said HighPeak “outperformed expectations on every major operational measure,” citing both stronger production and lower costs. CFO Steven Tholen and other executives joined Hollis on the call.
Production outperforms guidance midpoint as costs fall
Hollis said first-quarter production averaged about 46,000 barrels of oil equivalent per day, approximately 7.5% above the midpoint of the company’s guidance range, which he noted included the effects of Winter Storm Uri. He added that quarter-to-date production was “as strong as or stronger than Q1 production.”
Oil production increased 10% quarter-over-quarter, which Hollis attributed to a combination of strong new-well performance and ongoing base production optimization.
On costs, Hollis said lease operating expense (LOE) per BOE came in more than 17% below the company’s guided range and roughly 22% below fourth-quarter levels. He also said operating costs declined by about $7.4 million quarter-over-quarter on an absolute basis while production increased.
Hollis attributed the LOE improvement to several operational actions:
- Optimization of the company’s chemical program
- Increased use of field gas in operations amid a “dislocation between Waha pricing and Henry Hub”
- Continued electrification across field operations to improve reliability and lower costs
Development pacing aligned with a reduced 2026 capital plan
Hollis said the company reduced its 2026 capital program by roughly 50% compared to the prior year as it moved into “maintenance mode.” He said first-quarter drilling and turn-in-line activity represented roughly one-third of the planned 2026 program, while capital spending was about 29% of the full-year budget.
HighPeak exited the quarter with 18 wells in progress, which Hollis said positions the company to execute the remainder of the year. He reiterated the company’s plan to deploy roughly 60% of capital in the first half of 2026.
Asked about production progression in the back half of the year, Hollis told Water Tower Research analyst Jeff Robertson that second-quarter activity should look “very similar” to the first quarter, and that additional work completed in the first half would support production in the second half. He said investors should expect “more of a flat, production profile” through 2026 and that the company hopes to land in the “upper portion” of its guided production range.
Hollis also provided an update on drilled-but-uncompleted wells, saying HighPeak expects to exit 2026 with roughly nine to 10 DUCs going into 2027.
Workovers and base optimization highlighted as a key lever
Hollis said HighPeak executed 16 targeted workover projects during the quarter that increased production across those wells from roughly 1,600 barrels of oil per day to about 2,600 barrels of oil per day. He characterized that as an increase of roughly 1,000 barrels of oil per day total, or an average 63% per-well increase for the group.
In response to questions from Robertson and Roth Capital analyst Nicholas Pope, Hollis said the company is still early in evaluating the longer-term decline behavior following the interventions and does not want to do too many at once. He said the work performed has generally been on wells the company “were going to go touch and do work on for some reason or another,” and described the interventions as “mini stimulation” treatments such as surfactants and acid intended to clean the wellbore and reduce formation damage over time.
On how workovers flow through costs, Hollis said LOE includes both “day-to-day” operating expenses and workover expense to repair wells and return them to their prior state. He said workover expense rose during the back half of 2025 as the company spent to get base production “tip-top shape,” and he cautioned investors not to assume workover expense would go to zero. Hollis said a conservative run-rate assumption for workover expense is about $0.75 to $1.00 per BOE, noting first-quarter levels were below that.
Hollis also said some interventions are treated as capital workovers if they add reserves and change well value, and he indicated the company has been “shaving costs” in its drilling and completion budget to incorporate some capital workovers within the existing budget.
Inventory and infrastructure: water system underutilized; area with water issues removed from plans
Pope asked about a previously discussed area with water encroachment. Hollis said HighPeak encountered “extraneous water production” in that area and that the company will not drill additional wells there. He said the issue resulted in roughly 18 wells being removed from inventory and that the only zone the company carried inventory in within that area was the Wolfcamp A. Hollis said HighPeak has three wells currently producing in that area and has performed interventions to reduce water inflow; he called them “very economic” but lower-rate wells due to a shorter effective producing interval.
On water handling and disposal, Hollis emphasized HighPeak’s infrastructure buildout over the last five-plus years. He said the company has a little over 400,000 barrels per day of saltwater disposal capacity and can move around 400,000 barrels per day through its pipeline system. Hollis said the company is currently producing about 210,000 to 220,000 barrels of water per day, placing utilization at roughly 45% to 50%. He also said HighPeak recycles nearly 95% of the water it uses for stimulation and takes “very little” third-party water into its system, though capacity is available.
Free cash flow improves; hedging and ATM program discussed
Hollis said HighPeak generated more than $21 million of free cash flow in the first quarter excluding working capital changes, compared with negative $42 million in the prior quarter. He said this improvement reflected less than one month of elevated oil prices and reiterated that the company’s free cash flow priority is to strengthen the balance sheet.
Robertson asked about working capital swings. Hollis said HighPeak had a negative working capital swing of about $35 million in the first quarter, which he tied to higher activity in the fourth quarter, including running two rigs and completing “a couple of really large simul-frac jobs.” He said those impacts are “behind us now” and he would not expect similarly large swings for the remainder of 2026.
On hedging, Tholen addressed reported derivative impacts, saying total derivatives loss in the first quarter was about $155 million, of which $17.4 million was cash and roughly $140 million was mark-to-market as of March 31. Tholen said if commodity prices pull back, the mark-to-market loss and potential cash hedge losses would shrink as the year progresses.
Hollis also discussed the company’s hedge positioning, stating HighPeak has approximately 40% average exposure to spot oil prices based on the midpoint of guidance and its current hedge book, while maintaining a hedge floor “in the mid $60 per barrel range” to support cash flow for development and debt service.
Finally, Hollis said HighPeak recently put an at-the-market equity program in place allowing issuance of up to $150 million of common stock, emphasizing there is “no requirement” to issue shares. He said the program is intended to provide flexibility, and any proceeds would be directed toward reducing debt, increasing liquidity, and strengthening the balance sheet.
About HighPeak Energy NASDAQ: HPK
HighPeak Energy, Inc NASDAQ: HPK is a Delaware‐incorporated independent oil and natural gas exploration and production company. The firm focuses on the acquisition, development and exploitation of onshore petroleum assets in the continental United States. Its operations encompass the full upstream value chain, including exploration, drilling, completion and production activities aimed at maximizing hydrocarbon recovery and operational efficiency.
The company’s primary business activities include identifying and acquiring conventional and unconventional oil and gas properties, applying advanced drilling and completion technologies, and managing midstream logistics to optimize product flow.
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