HighPeak Energy Faces Challenges Amid $60 WTI Oil Price

HighPeak Energy, a US-based oil and gas company, announced the retirement of its founder and CEO Jack Hightower. Hightower was also the Board Chairman and majority owner of the company through the HighPeak Funds. He is being replaced by a new CEO, who will oversee the company's operations and strategy. The retirement comes at a challenging time for the company, with oil prices at $60 per barrel. The new CEO will need to navigate the company's challenges and make strategic decisions to ensure its long-term success.

HighPeak Energy (NASDAQ:HPK), a US-based oil and gas company, has announced the retirement of its founder and CEO, Jack Hightower. Hightower, who was also the Board Chairman and majority owner of the company through the HighPeak Funds, is being replaced by Michael Hollis, who has served as the company's President for five years. Hollis will oversee the company's operations and strategy as the interim CEO while the company searches for a permanent replacement.

The retirement comes at a challenging time for the company, with oil prices currently hovering around $60 per barrel. HighPeak's liquidity may start to decline late in 2026 when it is required to resume its $30 million quarterly term loan repayments. At this price level, HighPeak is projected to be at breakeven free cash flow after paying its dividend, assuming it maintains its oil production levels. If oil prices remain below $70 per barrel into 2027, the company may face significant liquidity pressures.

Hollis, who has extensive experience in the energy sector, including serving as President and COO of Diamondback Energy, will lead the company through this period of uncertainty. He will be supported by a committee, including Daniel Silver (HighPeak's VP of Finance) and Ryan Hightower (Jack's son and HighPeak's VP of Business Development), which will manage the HighPeak Funds. Jack Hightower will receive a cash separation payment of $2.4 million and 1,385,500 unvested shares, forfeiting the right to exercise various outstanding stock options.

HighPeak's projected 2026 production is expected to be around 32,000 barrels of oil per day, with total production averaging 48,000 BOEPD. At $60 WTI oil, the company is projected to generate $739 million in revenues after hedges. However, with $375 million in capital expenditures and $708 million in total expenditures, HighPeak is projected to generate $31 million in free cash flow in 2026, which would be around $11 million after paying its current $0.04 per share quarterly dividend.

The company's debt situation is a significant concern. HighPeak's liquidity may start to decline in late 2026, leaving it with approximately $170 million in liquidity after factoring in $60 million in term loan repayments. In a continued $60 WTI oil environment, the company may need to take steps to improve its liquidity, such as cutting capex, cutting its dividend, and/or doing an equity offering.

In conclusion, HighPeak Energy faces significant challenges in the current oil price environment. The company's new leadership will need to navigate these challenges and make strategic decisions to ensure its long-term success. Despite some upside in the base case scenario, investors should remain cautious due to the risks around the company's debt.