HighPeak Energy (NASDAQ:HPK) used its fourth-quarter 2025 earnings call to focus less on retrospective results and more on how the company plans to run the business in 2026, emphasizing balance sheet improvement, disciplined capital spending, and production optimization over headline growth.
2026 strategy shifts toward cash flow and debt reduction
President and CEO Michael Hollis said the company is approaching 2026 with a clear focus: “Protect profitability, maximize cash flow, and strengthen the foundation of our business, not pursue growth for its own sake.” Hollis said incremental cash flow in a stronger commodity environment will be directed first to debt reduction and liquidity improvement.
Hollis also announced HighPeak suspended its dividend, which he said is expected to increase annual liquidity by roughly $20 million to $25 million. He said management concluded the market was not crediting the dividend in the valuation and that capital could be better deployed toward strengthening the balance sheet.
Conservative development plan: one rig, about 30 wells drilled
For 2026, Hollis described a conservative plan anchored around one drilling rig and roughly one completion crew. The company expects this activity level to support drilling about 30 wells and bringing 36 to 38 wells online during the year. Hollis said the plan was designed to:
- Operate within cash flow across financial obligations even in a softer price environment
- Maximize free cash flow when prices are stronger to accelerate debt reduction
- Maintain strict cost discipline
Hollis said the company’s capital budget for 2026 is nearly 50% lower than the prior year, while unit lease operating expenses per BOE are expected to be “modestly higher” due to targeted spending aimed at improving base production.
He added that the company expects a significant improvement in capital efficiency, citing an estimated 65% increase in production per dollar invested.
Early production trends and “sustainable baseline” commentary
Hollis said quarter-to-date production was averaging more than 46,000 BOE per day, which he characterized as about 10% above the midpoint of the company’s 2026 guidance range, even after accounting for Winter Storm Uri impacts. Based on the current market environment, he said the company views production in the low- to mid-40,000 BOE per day range as a sustainable baseline under its 2026 budget and debt reduction plans.
He also discussed the industry backdrop, arguing that mid-cap E&Ps are currently rewarded for durable free cash flow, balance sheet strength, and inventory depth rather than production growth. Hollis stressed that “return on capital employed matters more than production growth,” and said HighPeak aims to preserve tier-one inventory for periods when financial capacity and commodity prices align.
Operational execution: optimization, remediation, and delineation
In the Q&A session, Hollis provided additional detail on cost reductions and production optimization efforts, describing ongoing improvements on both capital and operating cost fronts. On the drilling and completions side, he cited faster cycle times, changes in the completion chemical program, perforation scheme updates, and increased use of simul-frac compared with earlier approaches. On the operating side, he pointed to production optimization steps including lowering pumps, modifying artificial lift, and using downhole treatments intended to increase production and address “skin damage.”
Hollis also described the planned allocation of 2026 development activity. He said roughly 70% of capital will be spent in Flat Top (the northern block) and about 30% in Signal Peak, reflecting the acreage split. He added that more than 90% of capital would be directed toward Wolfcamp A and Lower Spraberry co-development, with about 5% to 8% of capital aimed at Middle Spraberry activity, including some co-development.
Within Flat Top, Hollis said the company expects an approximately 50/50 split between North Borden and the core Flat Top area. He also reiterated that the company plans no new drilling in the Northeast Flat Top area in 2026 (the “small red box” referenced in the investor presentation) where several wells experienced anomalous water inflows. Hollis said the company has performed remedial work on several of those wells and is seeing encouraging early results, but the 2026 plan is focused on remediation and optimization rather than new drilling in that area. He added that the potential long-term inventory impact is limited, affecting 18 Wolfcamp A locations carried in inventory for that area.
On delineation, Hollis said progress in the Middle Spraberry is “encouraging” across HighPeak and offset operators, with nine successful producers and roughly six additional delineation wells planned between the company and offset operators in the first half of 2026. He stated a long-term goal of converting more than 200 Middle Spraberry locations at Flat Top into fully delineated sub-$50 breakeven inventory.
At Signal Peak, Hollis said development will continue in the Wolfcamp A and Lower Spraberry, while the company continues to evaluate Wolfcamp D economics. He noted HighPeak has not drilled a Wolfcamp D well in about three years but said industry improvements in deeper well performance could affect future decisions.
Decline rates, DUCs, and term loan paydown flexibility
Hollis said HighPeak’s corporate decline rate has moderated as activity levels have slowed. He stated that the corporate decline rate was in the mid-40% range exiting 2024 and declined to about 38% by the end of 2025. Entering 2026, the company was at about 38% and expects to exit 2026 around 36%, implying an approximate 2% reduction over the year. Hollis said lower declines reduce the maintenance capital required to keep production flat.
He also discussed the company’s drilled-but-uncompleted well inventory, noting HighPeak expects to complete roughly seven more wells than it drills in 2026. Hollis said the company entered 2026 with “20+” operational DUCs and expects to carry roughly 14 to 15 DUCs into 2027, which he said would support continuing a similar plan in 2027 alongside further absolute debt reduction.
Responding to questions about term loan amortization, Hollis said the term loan amortization is $30 million per quarter and emphasized that HighPeak can pay down the term loan at par. He said additional free cash flow in a stronger oil price environment could allow the company to accelerate debt reduction and noted that lowering the company’s cost of capital could become possible over time if financial conditions improve.
In a follow-up question, EVP Ryan Hightower addressed share distribution timing related to partnership investors, stating that when oil prices were in the mid- to upper-$50s entering 2026, the company worked with the majority investors and extended for an additional year. Hightower said the company has flexibility to distribute throughout 2026 or potentially begin distributions in early 2027.
About HighPeak Energy (NASDAQ:HPK)
HighPeak Energy, Inc (NASDAQ: HPK) is a Delaware‐incorporated independent oil and natural gas exploration and production company. The firm focuses on the acquisition, development and exploitation of onshore petroleum assets in the continental United States. Its operations encompass the full upstream value chain, including exploration, drilling, completion and production activities aimed at maximizing hydrocarbon recovery and operational efficiency.
The company’s primary business activities include identifying and acquiring conventional and unconventional oil and gas properties, applying advanced drilling and completion technologies, and managing midstream logistics to optimize product flow.
