In a multi-combination transaction announced Wednesday, Permian Basin independent HighPeak Energy Inc. is being transformed into a bigger oil and natural gas player in West Texas.
In an all-stock exchange, Pure Acquisition Corp., formed as a special purpose acquisition entity in 2017, is combining with HighPeak and affiliates. Pure would survive as a subsidiary of HighPeak, with existing shareholders trading share for share.
HighPeak affiliates in turn would trade stock to acquire assets from Grenadier Energy Partners LLC, backed by EnCap Investments LP and Kayne Anderson Capital Advisors LP. Grenadier, headquartered north of Houston in The Woodlands, entered the Permian Midland in November 2016. Its original 7,000 net acre position as of July had grown to more than 20,000 acres and 19 producing horizontal wells
“We’re extremely excited about this transaction as this area provides for one of the best onshore domestic U.S. opportunities,” said HighPeak CEO Jack Hightower, who also is company chief of Pure Acquisition. The combination, he said, would accelerate near-term cash flow growth and single well economics. In addition, operating margins should improve with cost savings in drilling/completion activities and via infrastructure, as the asset base is mostly contiguous.
“We are excited to reach this agreement with HighPeak Energy in the current market and help form a new strategic pure-play company focused on a key area of the Midland basin that has been significantly derisked over the past year,” Grenadier CEO Patrick Noyes said. “As a significant shareholder going forward, we are excited about the continued growth and upside potential of this combined asset.”
Once the transactions are completed, HighPeak plans to focus on the northeastern part of the Midland, where it would have around 71,000 net acres primarily in Howard County, more than 90% operated. Net production pro forma for 2019 is forecast to be 12,000 boe/d net.
About 725 net drilling locations combined have been identified in the Wolfcamp A and Lower Spraberry formations, which would be developed “with mostly two-mile laterals,” management said. Planned pad development in 2020 is for four operated rigs to reduce the impact of parent/child well interference.
HighPeak plans to list for trading on the New York Stock Exchange under the symbol “HPK” or on the Nasdaq under “HPKWS.” Pure’s securities are expected to be delisted from Nasdaq once the combination is completed.