Pure Acquisition to Merge With HighPeak Energy

Pure Acquisition Corp. plans to take another run at combining with HighPeak Energy, according documents filed with the SEC on May 4. The companies first revealed a merger plan in November 2019 but the deal was terminated in late April 2020.

Under the updated terms, HighPeak Energy will acquire, in exchange for 75,000,000 shares of HighPeak Energy common stock, all of the outstanding interests in HPK Energy LP. Affiliates of the HighPeak Funds will also give up 5,350,000 shares of Class B common stock and all the private placement and public warrants they currently hold prior to closing.

HighPeak will operate as an independent oil and gas company with a focus on acquiring, developing and producing oil, gas and NGL reserves with assets in the northeastern area of the Midland Basin. At closing, which is expected in 3Q 2020, HighPeak will also list its common stock on the Nasdaq exchange under the symbol “HPK”.

“We are extremely excited about this transaction as this area provides for one of the best onshore domestic U.S. opportunities in regards to accelerated near-term cash flow growth, single well economics due to the high oil production content, industry leading full-cycle operating margins and the economies of scale we expect to achieve in cost savings attributable to drilling and completion operations, production facilities and infrastructure due to the contiguous nature of the asset base,” Jack Hightower, HighPeak Energy’s Chairman and CEO said in a written statement.

“…With the decline of energy prices over the last few months, several energy companies are struggling. However due to our low drilling and completion costs and our low operating costs, our breakeven prices are much lower than our competitors which enables us to operate at lower price levels.”

Michael L. Hollis, HighPeak’s President, said, “…I am extremely excited about the successful development potential of these assets. Over the last several months, we have reduced our drilling, completion, production, facilities, and operating costs to be best in class. Our development costs prior to the pandemic including drilling, completion, equipping and facilities has averaged less than $525 per foot for 10,000 foot or longer laterals. In addition, the combination of our high oil cut and low operating costs enable us to earn among the highest margins in the Permian Basin.”

Some operating highlights from the announcement include:

• Contiguous position of 51,000 net acres primarily in Howard County, with greater than 90% operated, provides the scale and depth of inventory
• Anticipated net production of 12,000 barrels of oil equivalent per day upon completion of HighPeak Energy’s inventory of drilled but uncompleted wells
• High oil mix of more than 80% supports a strong operating margin
• Approximately 495 (400 net) drilling locations identified in either the Wolfcamp A and/or Lower Spraberry formations that will be developed with mostly two-mile laterals

To contact the author, email bertie.taylor@rigzone.com.