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    HPK
    Earnings call· Jun 2026(Q2 FY26)

    HighPeak Energy Q2 FY26 earnings call HPK

    Aug 11, 2026 Source

    Executive summary

    HighPeak Energy Q2 FY26 — Production Exceeds Guidance, Capital Front-Loaded for H2 Free Cash Flow

    HighPeak Energy delivered strong Q2 FY26 results, with H1 production exceeding guidance and unit LOE significantly below expectations. The company strategically front-loaded capital spending into the first half, accelerating completion activity to capture efficiencies and favorable pricing, which positions it for materially lower capital requirements and stronger free cash flow generation in the second half of the year. Despite absorbing hedge losses and facing negative gas differentials, management remains focused on disciplined capital allocation and operational efficiency to drive long-term shareholder value.

    Highlights

    4

    • Production averaged 45,500 BOE per day during H1 2026, exceeding the high end of guidance.

    • Lease operating expense (LOE) averaged $7.56 per BOE in H1 2026, approximately 13% below guidance.

    • Accelerated completion activity into Q2 2026 to lock in attractive frac pricing and efficiency gains.

    • Positioned to generate stronger free cash flow in H2 2026 as capital spending declines meaningfully.

    Concerns

    3

    • Absorbed approximately $55 million of net cash hedge losses during Q2 2026.

    • Oil cut decreased to 64% in Q2 2026, below the full-year expectation of 67% to 68%.

    • Experienced very high negative Waha differentials for gas in Q2 2026, impacting realizations.

    Guidance & targets

    7
    CategoryTargetConfidence
    Capital spending
    decline meaningfully
    high materiality
    High
    Free cash flow
    stronger free cash flow
    high materiality
    High
    Oil cut
    closer to the 67% of the range
    medium materiality
    Medium
    DUC inventory
    10-plus DUCs
    medium materiality
    High
    DUC inventory
    2 additional DUCs
    medium materiality
    High
    2027 Capital requirements and production volumes
    look a lot like 2026
    high materiality
    Medium
    Waha differential
    closer to the minus $1
    medium materiality
    High

    Operational metrics

    10
    Production volume
    45,500exceeded high end of guidance range
    H1 FY26

    Average production for the first six months of the year.

    Net cash hedge losses
    $55M
    Q2 FY26

    Impact on financial results during the quarter.

    Lease operating expense per BOE
    $7.5613% below midpoint of full-year guidance
    H1 FY26

    Strong cost performance driven by operational efficiencies.

    Wells drilled
    17out of planned 29 for the year
    H1 FY26

    Progress against the 2026 development plan.

    Wells completed
    24out of planned 33 for the year
    H1 FY26

    Accelerated completion activity into Q2.

    Wells turned to sales (TILs)
    20towards full-year target of 37
    H1 FY26

    Putting the company in a strong position for the full-year target.

    Capital spending
    $185.9Mmid to upper 60% range of annual budget
    H1 FY26

    Front-loaded spending due to accelerated completion activity.

    Adjusted EBITDAX
    $281M
    H1 FY26

    Generated through strong production, lower operating costs, and disciplined capital execution.

    Oil cut
    64%down from guided 67-68%
    Q2 FY26

    Impacted by frac-impacted oil volumes and workovers on higher gas cut wells.

    Cash balance
    $146M
    End of Q2 FY26

    Cash on hand at the end of the quarter.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity17wells drilled
    Realized price differentialnegative $1.50per MCF
    Basin level production volume45,500BOE/d
    Cost of supply unit cash cost$7.56per BOE
    FCF shareholder distributionssignificant free cash flow

    Capital programs

    1
    2026 Development Planunderway
    Period spend: $185.9M
    Spent to date: mid to upper 60% of annual budget
    Start: FY26

    Benefit: 37 turn-in-lines (target)

    The company front-loaded capital spending into H1 2026 to accelerate completion activity and capture efficiencies, with 24 wells completed and 20 turned to sales in H1.

    Risks & headwinds

    3
    Net cash hedge lossesQ2 FY26

    $55M

    Mitigation: Maintaining a solid hedge position for downside protection while allowing exposure to spot prices; adding NYMEX WTI roll swaps and Waha basis swaps.

    Commodity price volatilityNear term

    Unquantified

    Mitigation: Maintaining a solid hedge position with majority of oil hedges in mid-$60/barrel range; larger percentage of expected production exposed to spot pricing for upside.

    Negative Waha differentials for natural gasQ2 FY26

    Negative $1.50 per MCF in Q2 FY26

    Mitigation: Waha differential now closer to minus $1 per MCF due to Gulf Coast Express expansion; taken steps to hedge some volatility.

    What to watch in Q3 FY26

    5

    Capital spending

    H2 FY26
    Current$185.9M in H1 FY26 (mid to upper 60% of annual budget)
    TargetMeaningful decline in H2 FY26

    Why it matters

    A significant reduction in capital spending is key to generating stronger free cash flow and validating the front-loaded capital strategy.

    As a result, we expect capital spending to decline meaningfully during the second half of 2026, which is consistent with our original plan and reflects the amount of development work completed during the first 6 months of the year.

    Q&A highlights

    4

    How did accelerating completions impact Q2 production, and what is the anticipated cadence for H2 2026 and the setup for 2027 production and capital?

    Accelerated completions led to more frac-impacted oil volumes in Q2, but H2 will see less water out. The drilling rig is more efficient, potentially adding 2 DUCs for 2027. 2027 capital requirements and production volumes are expected to be similar to 2026, with a planned 10+ DUCs carried over.

    “So to your point, we watered out or frac-impacted even more oil than we had initially anticipated. When you look at our kind of maintenance mode program, you will have some lumpiness as we move that frac crew around and have breaks in the schedule.”

    asked by Jeffrey Robertson · answered by Michael Hollis

    2 min read5 chapters

    Detailed Narrative

    01

    Operational Execution and Capital Discipline

    HighPeak Energy demonstrated strong operational execution in the first half of 2026, with production averaging 45,500 BOE/d, exceeding the high end of guidance. The company strategically pulled forward📎 completion activity into Q2, spending $185.9 million (mid to upper 60% of the annual budget) to capitalize on attractive frac pricing and efficient simul-frac crews. This front-loaded capital deployment is expected to lead to a meaningful decline in capital spending during H2 2026, positioning the company for stronger free cash flow.

    02

    Successful Workover Program

    A successful workover program complemented the development plan, investing modest capital into low-cost, high-return opportunities. These workovers brought meaningful production back online and enhanced well productivity, generating attractive economics and quick paybacks. While not a replacement for new drilling, this program maximizes the value of existing assets and contributed to maintaining strong production levels despite frac-impacted oil volumes.

    03

    Cost Management and Efficiency Gains

    The company achieved strong cost performance, with unit lease operating expense (LOE) averaging $7.56 per BOE in H1 2026, approximately 13% below guidance. These savings are attributed to years of focus on efficient operations, including infrastructure improvements, electrification, fluid level optimization, and a culture of continuous improvement. Management emphasized that these cost savings are proving to be durable and sustainable.

    04

    Hedge Strategy and Commodity Exposure

    HighPeak maintains a disciplined approach to risk management, utilizing hedges to provide downside protection while allowing exposure to stronger commodity prices. Despite absorbing $55 million in net cash hedge losses in Q2 2026, a larger percentage of expected production remains exposed to spot pricing. The company also added NYMEX WTI roll swaps and Waha basis swaps to manage calendar spread and West Texas natural gas pricing volatility, respectively.

    05

    Balance Sheet and Liquidity Management

    The company ended Q2 2026 with $146 million in cash. Scheduled amortization of the term loan at $30 million per quarter begins in Q3 2026. Management indicated a cautious approach to prepaying beyond the scheduled amortization, prioritizing maintaining sufficient cash on hand to weather potential variability in commodity prices, while acknowledging that current strip prices suggest significant free cash flow generation.

    AI-generated summary of the company’s earnings call. Not investment advice.