HighPeak Energy (HPK) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Changes in the global trade environment, including the imposition of tariffs, could adversely affect our business
2. 02Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of reserves
3. 03Restrictions in the Term Loan Credit Agreement, the Senior Credit Facility Agreement and any future debt agreements could limit HighPeak Energy’s growth and ability to engage in certain activities
4. 04Our results of operations and cash flows vary significantly from year to year due to the cyclical nature of the crude oil and natural gas industry
5. 05Certain factors could require HighPeak Energy to write-down the carrying values of its crude oil and natural gas properties, including commodity prices decreasing to a level such that future undiscounted cash flows from its properties are less than their carrying value
6. 06Hedging transactions expose HighPeak Energy to counterparty credit risk and may become more costly or unavailable
7. 07The standardized measure of estimated reserves may not be an accurate estimate of the current fair value of estimated crude oil and natural gas reserves
8. 08Adverse weather conditions may negatively affect HighPeak Energy’s operating results and ability to conduct drilling activities
9. 09HighPeak Energy may be unable to make additional attractive acquisitions or successfully integrate acquired businesses with its current assets, and any inability to do so may disrupt its business and hinder its ability to grow
10. 10The operations of HighPeak Energy are subject to a variety of risks arising from climate change
11. 13Crude oil, NGL and natural gas prices are volatile. Sustained volatility, or declines in, crude oil, NGL and natural gas prices could adversely affect HighPeak Energy’s business, financial condition and results of operations and its ability to meet its capital expenditure obligations and other financial commitments
12. 14Cash flows from operations are subject to significant uncertainty. As a result, the amount of liquidity that HighPeak Energy will have in the future is uncertain
13. 15HighPeak Energy’s ability to access the public or private capital markets
14. 16limit management’s discretion in operating HighPeak Energy’s business
15. 17Our ability to repurchase shares under our recently announced share repurchase program is subject to certain considerations, and any share repurchases thereunder could increase the volatility of our stock prices and could diminish our cash reserves
16. 18Our existing and future indebtedness may adversely affect our cash flows and ability to operate our business, remain in compliance and repay our debt
17. 19seeking to raise additional capital
18. 20In addition, if we fail to comply with the covenants or other terms of our Credit Agreements, our lenders will have the right to accelerate the maturity of that debt and foreclose upon the collateral, if any, securing that debt. Realization of any of these factors could adversely affect our financial condition
19. 21The marketability of HighPeak Energy’s production is dependent upon transportation, storage and other facilities, certain of which it does not control. If these facilities are unavailable, in whole or in part, HighPeak Energy’s operations could be interrupted, and its revenues reduced
20. 22Likewise, NGL, which are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which has different uses and pricing characteristics, have also fluctuated widely during this period
21. 23Part of HighPeak Energy’s business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application
22. 24being able to run tools and other equipment consistently through the horizontal wellbore
23. 25the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage
24. 26Drilling for and producing crude oil and natural gas are high risk activities with many uncertainties that could adversely affect HighPeak Energy’s business, financial condition or results of operations
25. 27We have entered into certain long-term contracts that require us to pay fees to our service providers based on minimum volumes regardless of actual volume throughput and that may limit our ability to use other service providers
26. 28The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our businesses
27. 29Properties that HighPeak Energy acquires may not produce as projected, and HighPeak Energy may be unable to determine reserve potential, identify liabilities associated with such properties or obtain protection from sellers against such liabilities
28. 30the rate of production of reserves, if any
29. 31HighPeak Energy’s operations are substantially dependent on the availability of frac sand and water. Restrictions on its ability to obtain frac sand and water may have an adverse effect on its financial condition, results of operations and cash flows
30. 32HighPeak Energy may incur losses as a result of title defects in the properties in which it invests
31. 33The development of estimated PUDs may take longer and may require higher levels of capital expenditures than anticipated. Therefore, estimated PUDs may not be ultimately developed or produced
32. 34HighPeak Energy’s operations may be exposed to significant delays, costs and liabilities as a result of environmental and occupational health and safety requirements applicable to its business activities
33. 35OSHA, under which federal Occupational Safety and Health Administration and similar state agencies have promulgated regulations limiting exposures to hazardous substances in the workplace and imposing various worker safety requirements
34. 36HighPeak Energy may incur increasing attention to ESG matters that may impact its business
35. 37HighPeak Energy will not be insured against all risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect its business, financial condition or results of operations
36. 38terrorist attacks targeting crude oil and natural gas related facilities and infrastructure
37. 39repair and remediation costs
38. 40Properties that HighPeak Energy decides to drill may not yield crude oil or natural gas in commercially viable quantities
39. 41increases in the cost of, and shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services
40. 42Certain of HighPeak Energy’s properties are subject to land use restrictions, which could limit the manner in which HighPeak Energy conducts business
41. 43HighPeak Energy could experience periods of higher costs if commodity prices rise and inflation may adversely affect our operating results. These increases in cost could reduce profitability, cash flow and ability to complete development activities as planned
42. 44The IRA 2022 could accelerate the transition to a low carbon economy and could impose new costs on our operations
43. 45HighPeak Energy may be involved in legal proceedings that could result in substantial liabilities
44. 46Should our operators fail to comply with all applicable regulatory agency administered statutes, rules, regulations and orders, our operators could be subject to substantial penalties and fines
45. 47Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays in the completion of crude oil and natural gas wells and adversely affect HighPeak Energy’s production
46. 48Legislation or regulatory initiatives intended to address seismic activity could restrict HighPeak Energy’s drilling and production activities, as well as HighPeak Energy’s ability to dispose of produced water gathered from such activities, which could have a material adverse effect on its future business
47. 49Competition in the crude oil and natural gas industry is intense, which will make it more difficult for HighPeak Energy to acquire properties, market crude oil or natural gas and secure trained personnel
48. 50The loss of senior management or technical personnel could adversely affect operations
49. 51Increases in interest rates could adversely affect HighPeak Energy’s business
50. 52HighPeak Energy’s use of seismic data is subject to interpretation and may not accurately identify the presence of crude oil and natural gas, which could adversely affect the results of its drilling operations
51. 53Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect HighPeak Energy’s ability to conduct drilling activities in areas where it operates
52. 54HighPeak Energy may not be able to keep pace with technological developments in its industry
53. 55There are inherent limitations in all control systems, and misstatements due to error or fraud that could seriously harm HighPeak Energy’s business may occur and not be detected
54. 56HighPeak Energy’s business could be adversely affected by security threats, including cybersecurity threats, and related disruptions

Risks Related to Ownership of our Securities

1. 11HighPeak Energy is a “controlled company” within the meaning of Nasdaq rules and qualifies for exemptions from certain corporate governance requirements. As a result, you do not have the same protections afforded to stockholders of companies that are not exempt from such corporate governance requirements
2. 12Unanticipated changes in effective tax rates or laws or adverse outcomes resulting from examination of HighPeak Energy’s income or other tax returns could adversely affect HighPeak Energy’s financial condition, results of operations and cash flow
3. 57HighPeak Energy may not be able to pay dividends on our common stock
4. 58The Principal Stockholder Group has significant influence over HighPeak Energy
5. 59If HighPeak Energy’s operational and financial performance does not meet the expectations of investors or securities analysts, the market price of our securities may decline. The market values of our securities may vary significantly from time to time
6. 60general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations, OPEC+’s ability to continue to agree to limit production among its members and acts of war or terrorism
7. 61HighPeak Energy may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on HighPeak Energy’s financial condition, results of operations and stock price, which could cause you to lose some or all of your investment
8. 62There is no guarantee that our warrants will be in the money at the time you choose to exercise them, and they may expire worthless
9. 63The terms of our warrants may be amended in a manner that may be adverse to holders of our warrants with the approval by the holders of at least 50% of our then-outstanding warrants
10. 64Warrants are exercisable for HighPeak Energy common stock and HighPeak Energy’s LTIP provides for a significant number of stock options, each of which could increase the number of shares eligible for future resale in the public market and result in dilution to stockholders
11. 65Changes in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect HighPeak Energy’s business, investments and results of operations
12. 66There can be no assurance that HighPeak Energy common stock issued, including issuable upon exercise of our warrants, will remain listed on the Nasdaq, or that HighPeak Energy will be able to comply with the continued listing standards of the Nasdaq
13. 67a decreased ability to issue additional securities or obtain additional financing in the future
14. 68changes in tax laws, regulations or interpretations thereof