View:
United States securities and exchange commission logo
August 19, 2022
Steven Tholen
Chief Financial Officer
HighPeak Energy, Inc.
421 W. 3rd St., Suite 1000
Fort Worth, TX 76102
Re: HighPeak Energy,
Inc.
Form 10-K for the
Fiscal Year ended December 31, 2021
Filed March 7, 2022
File No. 001-39464
Dear Mr. Tholen:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year ended December 31, 2021
Business and Properties
Development of Proved Undeveloped Reserves, page 11
1. Please expand your
discussion of investments and progress made during the year to
include quantification
of the capital expenditures incurred to convert proved undeveloped
reserves to proved
developed reserves to comply with Item 1203(c) of Regulation S-K.
Production, Revenue and Price History, page 13
2. Please disclose the
annual production volumes, by final product sold, on a consolidated
basis and for each
field that contains 15% or more of your total proved reserves, to
comply with Item
1204(a) of Regulation S-K and Rule 4-10(a)(15) of Regulation S-X.
Steven Tholen
FirstName LastNameSteven Tholen
HighPeak Energy, Inc.
Comapany
August 19, NameHighPeak
2022 Energy, Inc.
August
Page 2 19, 2022 Page 2
FirstName LastName
Drilling Activities, page 15
3. We note your disclosure indicating that you participated in drilling a
material number of
productive exploratory wells during each of the last three fiscal
years.
Please modify your disclosure to clarify the extent to which these
wells were extension
wells or exploratory wells, based on the definitions in Item
1205(b)(2) of Regulation S-K,
and Rules 4-10(a)(13) and (a)(14) of Regulation S-X.
Management's Discussion and Analysis
Financial and Operating Performance, page 58
4. We note that you attribute an increase in net income for 2021
partially to an increase in
crude oil and natural gas revenues, which you associate with a 383%
increase in daily
sales volumes, and an 86% increase in average realized commodity
prices. You further
explain along with this disclosure, and along with your tabulations of
Crude oil, NGL and
natural gas sales volumes on page 62, that the increase in sales
volumes is attributable to
your successful horizontal drilling program.
However, disclosures in Note 3 to the financial statements on page 85,
and in the second
quarter earnings release filed with a Form 8-K on August 9, 2021,
indicate that some
portion of the increase in production would be attributable to
producing properties that
you acquired during 2021. You estimated in the earlier report that
associated production
would average "greater than 1,400 Boe/d" subsequent to your
acquisition.
In describing quarterly changes in net income on pages 32 and 23 of
the subsequent first
and second quarter interim reports, you similarly attribute increases
in sales volumes to
your successful horizontal drilling program, and while acquisitions
are mentioned in
addition to corresponding explanations on pages 35 and 26 of these
reports, there is no
quantification of production volumes arising from recently acquired
properties.
Please expand the disclosures in your periodic filings to clarify the
extent to which
increases in production volumes are attributable to acquisitions
within the period,
including properties that were producing or subsequently became
producing, as opposed
to the results of drilling programs applied to interests owned at the
beginning of the
periods, to comply with Item 303(b)(2) of Regulation S-K.
Financial Statements
Note 3 - Acquisitions and Divestitures, page 85
5. We note your disclosure explaining that you completed multiple
property and lease
acquisitions during 2021, although you have aggregated the purchase
consideration in
your disclosure without providing any specific details of the
underlying transactions.
Steven Tholen
FirstName LastNameSteven Tholen
HighPeak Energy, Inc.
Comapany
August 19, NameHighPeak
2022 Energy, Inc.
August
Page 3 19, 2022 Page 3
FirstName LastName
Please expand your disclosure to include details of the particular
acquisitions that you
completed during the periods covered by your financial statements,
such as the dates of
completion, amounts and forms of consideration, nature and status of
the property
interests acquired, and production levels of producing interests.
Please similarly revise the corresponding disclosures in your
subsequent interim reports to
provide details of the various transactions in which you acquired
interests in oil and gas
properties during the first half of your fiscal year, including
details pertaining to the
contingent acquisition mentioned on page 17 of your first quarter
report.
6. We note that you filed a Form 8-K on June 30, 2022 with historical and
pro forma
financial statements related to interests in oil and gas properties
that you acquired on June
27, 2022. However, you report having also acquired interests in oil
and gas properties
pursuant to an agreement mentioned in a Form 8-K that you filed on
February 22, 2022,
although you did not file any similar financial information for these
transactions.
Tell us how you considered Rule 3-05(a)(3), (b)(2), and (b)(3) of
Regulation S-X, along
with Rule 11-01(b)(3)(ii), and the guidance on significance in Rule
1-02(w), in
determining there was no need to file historical and pro forma
financial statements for
these earlier transactions, if this is your view.
Please also clarify how you considered the contingent acquisition
mentioned on page 17
of your Q1 report and its resolution in your analysis.
Notes to Consolidated Financial Statements
Note 18-Supplemental Crude Oil and Natural Gas Disclosures (Unaudited)
Crude Oil, NGL and Natural Gas Reserves, page 102
7. Please expand the table of proved developed and undeveloped reserves
on page 103 to
include the net quantities by individual product type as of December
31, 2019, to comply
with FASB ASC 932-235-50-4. Please also modify the reconciliation on
page 102 to
clarify whether the beginning estimates correspond to December 31,
2019.
8. We note your discussion of negative revisions does not clearly
distinguish between
changes attributable to well performance and changes associated with
certain
adjustments to your proved undeveloped reserve estimates.
Please modify your discussion as necessary to clearly identify the
source of each change
and to include an explanation relating to each of the items you
identify. If two or more
unrelated factors, including offsetting factors, contribute to the
overall change, please
separately identify and quantify the change attributable to each
factor.
For example, the disclosure pertaining to revisions in previous
estimates should identify
the changes associated with individual factors, such as changes in
commodity prices,
costs, property interests, well performance, unsuccessful and/or
uneconomic proved
undeveloped locations, and previously adopted development plans.
Steven Tholen
FirstName LastNameSteven Tholen
HighPeak Energy, Inc.
Comapany
August 19, NameHighPeak
2022 Energy, Inc.
August
Page 4 19, 2022 Page 4
FirstName LastName
Please ensure that the change in net reserve quantities between
periods is fully reconciled
and explained to comply with FASB ASC 932-235-50-5.
Standardized Measure of Discounted Future Net Cash Flows, page 104
9. Please expand your disclosure on page 104 to clarify the extent to
which your
standardized measures reflect all estimated future costs that will be
incurred to settle your
asset retirement obligations, including costs for dismantlement,
restoration, and
abandonment of the existing wells (including both active and inactive
wells on leases
and future proved undeveloped locations), to comply with FASB ASC
932-235-50-36.
The standardized measures may reflect these costs as a separate line
item or within the
category for future development and production costs. Therefore, if
your standardized
measures exclude any portion of such costs, please quantify the
excluded amounts,
explain to us your rationale, and submit any proposed revisions.
10. We note that the amounts reported as undiscounted future development
costs on page 104
do not agree with the corresponding figures in the reserve reports at
Exhibits 99.1 and
99.2, having the December 31, 2020 and 2021 reserve estimates and
related information.
We also note that disclosures within the Miscellaneous sections of the
third party reserve
reports indicate that their measures of discounted future net cash
flows reflect the net cost
of plugging and salvage values only for commercial wells.
As the standardized measures of discounted future net cash flows
should reflect all future
costs to settle asset retirement obligations that either currently
exist or that will arise in the
course of developing and producing your proved reserves, it appears
that you will need to
obtain and file revised reserve reports from the engineering firm
having computations of
discounted future net cash flows that conform with the applicable
guidance.
Please also submit any revisions to the annual report that may be
necessary to resolve
the inconsistencies outlined above, if the corresponding measures
reported by the
company are also incomplete, in this or any similar respect.
Steven Tholen
HighPeak Energy, Inc.
August 19, 2022
Page 5
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Mark Wojciechowski, Staff Accountant, at (202) 551-3759
if you have
questions regarding comments on your financial statements and related matters.
You may
contact John Hodgin, Petroleum Engineer, at (202) 551-3699 with questions
regarding comments
on engineering matters. Please contact Karl Hiller, Branch Chief, at (202)
551-3686 with any
other questions.
FirstName LastNameSteven Tholen Sincerely,
Comapany NameHighPeak Energy, Inc.
Division of
Corporation Finance
August 19, 2022 Page 5 Office of Energy &
Transportation
FirstName LastName