QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: The Company’s major market risk exposure is the pricing it receives for its sales of crude oil, NGL and natural gas.
+Added: The Company’s major market risk exposure is the pricing it receives for its sales of crude oil, NGL and natural gas.
Pricing for crude oil, NGL and natural gas has been volatile and unpredictable for several years, and HighPeak Energy expects this volatility to continue in the future.
1 unchanged sentence
For the month of April 2020, the calendar month average NYMEX WTI crude oil price was $16.70 per Bbl and the last trading day NYMEX natural gas price was $1.63 per MMBtu.
−Removed: A $1.00 per barrel increase (decrease) in the weighted average crude oil price for the year ended December 31, 2022 would have increased (decreased) the Company’s revenues by approximately $7.9 million, excluding the effects of derivatives, and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2022 would have increased (decreased) the Company’s revenues by approximately $332,000, excluding the effects of derivatives.
−Removed: Due to this volatility, the Company uses commodity derivative instruments, such as collars, puts and swaps, to hedge price risk associated with a portion of anticipated production.
−Removed: These hedging instruments allow the Company to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in crude oil and natural gas prices, provide increased certainty of cash flows for its drilling program and protect the Credit Agreement borrowing base.
−Removed: These instruments provide only partial price protection against declines in crude oil and natural gas prices and may partially limit the Company’s potential gains from future increases in prices.
−Removed: The Company enters into hedging arrangements to protect its capital expenditure budget and to protect its Credit Agreement borrowing base.
−Removed: The Company’s Credit Agreement and the indentures governing the Company’s 10.000% Senior Notes and 10.625% Senior Notes require the Company to hedge certain quantities of its projected crude oil production, in the case of the Credit Agreement, if its ratio of debt to EBITDAX is greater than a certain ratio.
+Added: A $1.00 per barrel increase (decrease) in the weighted average crude oil price for the year ended December 31, 2023 would have increased (decreased) the Company’s crude oil and NGL revenues by approximately $14.3 million, excluding the effects of derivatives, and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2023 would have increased (decreased) the Company’s natural gas revenues by approximately $722,000, excluding the effects of derivatives.
+Added: Due to this volatility, the Company uses commodity derivative instruments, such as collars, puts, swaps and basis swaps, to hedge price risk associated with a portion of anticipated production.
+Added: These hedging instruments allow the Company to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in crude oil and natural gas prices and provide increased certainty of cash flows for its drilling program.
+Added: These instruments provide only partial price protection against declines in crude oil and natural gas prices and may partially limit the Company’s potential gains from future increases in prices.
+Added: The Company enters into hedging arrangements to protect its capital expenditure budget.
+Added: The Company’s Term Loan Credit Agreement and Senior Credit Facility Agreement require the Company to hedge certain quantities of its projected crude oil production.
The Company does not enter into any commodity derivative instruments, including derivatives, for speculative or trading purposes.
Counterparty and Customer Credit Risk.
−Removed: The Company’s derivative contracts, if any, expose it to credit risk in the event of nonperformance by counterparties.
−Removed: It is anticipated that if the Company enters into any commodity contracts, the collateral for the outstanding borrowings under the Credit Agreement may be used as collateral for the Company’s commodity derivatives.
+Added: The Company’s derivative contracts, if any, expose it to credit risk in the event of nonperformance by counterparties.
+Added: It is anticipated that if the Company enters into any commodity contracts, the collateral for the outstanding borrowings under the Credit Agreements may be used as collateral for the Company’s commodity derivatives.
The Company evaluates the credit standing of its counterparties as it deems appropriate.
−Removed: It is anticipated that any counterparties to HighPeak Energy’s derivative contracts would have investment grade ratings.
−Removed: The Company’s principal exposures to credit risk are through receivables from the sale of crude oil and natural gas production due to the concentration of its crude oil and natural gas receivables with a few significant customers.
−Removed: The inability or failure of the Company’s significant customers to meet their obligations to the Company or their insolvency or liquidation may adversely affect the Company’s financial results.
+Added: It is anticipated that any counterparties to HighPeak Energy’s derivative contracts would have investment grade ratings.
+Added: The Company’s principal exposures to credit risk are through receivables from the sale of crude oil and natural gas production due to the concentration of its crude oil and natural gas receivables with a few significant customers.
+Added: The inability or failure of the Company’s significant customers to meet their obligations to the Company or their insolvency or liquidation may adversely affect the Company’s financial results.
The average forward prices based on December 31, 2023 market quotes were as follows:
4 unchanged sentences
Average forward NYMEX natural gas price per MMBtu
−Removed: The Company's primary concentration of credit risk is associated with (i) the collection of receivables resulting from the sale of crude oil and natural gas production and (ii) the risk of a counterparty's failure to meet its obligations under derivative contracts with the Company.
+Added: The Company's primary concentration of credit risk is associated with (i) the collection of receivables resulting from the sale of crude oil and natural gas production and (ii) the risk of a counterparty's failure to meet its obligations under derivative contracts with the Company.
The Company monitors exposure to counterparties primarily by reviewing credit ratings, financial criteria and payment history.
3 unchanged sentences
The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments.
−Removed: Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company’s credit risk policies and procedures.
−Removed: The Company entered into International Swap Dealers Association Master Agreements (“ISDA Agreements”) with its derivative counterparties.
+Added: Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company’s credit risk policies and procedures.
+Added: The Company entered into International Swap Dealers Association Master Agreements (“ISDA Agreements”) with its derivative counterparties.
The terms of the ISDA Agreements provide the Company and the counterparties with right of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative contract, whereby the party not in default may set off all derivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party.
Interest Rate Risk.
−Removed:  At December 31, 2022, we had $270 million outstanding under the Credit Agreement and $252.6 million of available borrowing capacity.
−Removed: The Company is subject to interest rate risk on its variable rate debt from our Credit Agreement.
−Removed: The Company also has fixed rate debt but does not currently utilize derivative instruments to manage the economic effect of changes in interest rates.
+Added: At December 31, 2023, we had $1.2 billion outstanding under the Term Loan Credit Agreement and had $68.9 million of available borrowing capacity under the Senior Credit Facility Agreement.
+Added: The Company is subject to interest rate risk on its variable rate debt from our Term Loan Credit Agreement and Senior Credit Facility Agreement.
+Added: The Company also periodically has fixed rate debt but does not currently utilize derivative instruments to manage the economic effect of changes in interest rates.
The impact of a 1% increase in interest rates on our outstanding debt as of December 31, 2023 would have resulted in an annual increase in interest expense of approximately $12.0 million.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.