HighPeak Energy Could Become An Acquisition Target - Analyst Determines The Premium

Truist Securities analyst Neal Dingmann upgraded HighPeak Energy, Inc HPK to Hold from Sell, raising the price forecast to $13 from $10.

Per Dingmann, HighPeak has found a bit of its stride after struggling last year with various operational and financial issues. The company has currently improved operations, resulting in lower spending and lower costs.

The analyst forecasts production remaining relatively flat this year before moderating declining next year, though if prices remain firm and costs/spend contained, then FCF should remain decent enough to generate a high single-digit yield.

While data suggests that well productivity, on average, has moderately decreased since 2022, the analyst emphasized more efficient operations should offset much of this decline. 

Dingmann highlights that HighPeak could become an acquisition target with a potential price per share roughly around the new $13 price target.

Going ahead, the company will likely need to take a moderate shareholder return approach after the 60% distribution increase and share repurchase announced last quarter, given the need to continually de-lever the balance sheet. 

As a result, the company said it would continue to run a less active/stable operation, running a two-drilling rig/one frac crew program that should provide stable FCF in the near term. 

For FY24, the company raised EBIDTAX to $965 million from $957 million.

For FY25, the company raised EBIDTAX to $917 million from $911 million.

Price Action: HPK shares are trading higher by 0.44% to $14.85 at last check Thursday. 

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