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Item 1A. Risk Factors

2025-03-10 compared with 2024-03-06 · 141 added, 114 removed, 790 unchanged (24% of the section changed)

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Sustained volatility, or declines in, crude oil, NGL and natural gas prices could adversely affect HighPeak Energy’s business, financial condition and results of operations and its ability to meet its capital expenditure obligations and other financial commitments.

Changes in the global trade environment, including the imposition of tariffs, could adversely affect our business.

Reserve estimates depend on many assumptions that may turn out to be inaccurate.

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Restrictions in the Term Loan Credit Agreement, the Senior Credit Facility Agreement and any future debt agreements could limit HighPeak Energy’s growth and ability to engage in certain activities.

Our ability to repurchase shares under our recently announced share repurchase program is subject to certain considerations, and any share repurchases thereunder could increase the volatility of our stock prices and could diminish our cash reserves.

Our ability to repurchase shares under our share repurchase program is subject to certain considerations, and any share repurchases thereunder could increase the volatility of our stock prices and could diminish our cash reserves.

Our existing and future indebtedness may adversely affect our cash flows and ability to operate our business, remain in compliance and repay our debt.

Our results of operations and cash flows vary significantly from year to year due to the cyclical nature of the crude oil and natural gas industry.

HighPeak Energy has experienced periods of higher costs as commodity prices have risen and inflation may adversely affect our operating results, which negatively impacts our profitability, cash flow and ability to complete development activities as planned.

Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn could cause our capital expenditures and operating costs to rise.

Volatility in the political, legal and regulatory environment ahead of the upcoming U.S.

presidential election and political instability or armed conflict in crude oil or natural gas producing regions, such as the ongoing war between Russia and Ukraine, the Israel-Hamas conflict and OPEC+ policy decisions could have a material adverse impact on our business, financial condition or future results.

HighPeak Energy experiences periods of higher costs as commodity prices have risen and inflation may adversely affect our operating results, which negatively impacts our profitability, cash flow and ability to complete development activities as planned.

Continuing or worsening inflationary issues and associated changes in monetary policy, including tariffs, have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn could cause our capital expenditures and operating costs to rise.

Volatility in the political, legal and regulatory environment as a result of the change in U.S.

presidential administration and political instability or armed conflict in crude oil or natural gas producing regions, such as the ongoing war between Russia and Ukraine, the Israel-Hamas conflict and OPEC+ policy decisions could have a material adverse impact on our business, financial condition or future results.

The marketability of HighPeak Energy’s production is dependent upon transportation, storage and other facilities, certain of which it does not control.

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Hedging transactions expose HighPeak Energy to counterparty credit risk and may become more costly or unavailable.

The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business.

The standardized measure of estimated reserves may not be an accurate estimate of the current fair value of estimated crude oil and natural gas reserves.

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Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays in the completion of crude oil and natural gas wells and adversely affect HighPeak Energy’s production.

Continued increases in interest rates could adversely affect HighPeak Energy’s business.

HighPeak Energy’s business could be adversely affected by security threats, including cyber-security threats, and related disruptions.

Increases in interest rates could adversely affect HighPeak Energy’s business.

HighPeak Energy’s business could be adversely affected by security threats, including cybersecurity threats, and related disruptions.

Risks Related to Ownership of our Securities

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For example, during the period from January 1, 2021 through December 31, 2024, the calendar month average NYMEX WTI crude oil price per Bbl ranged from a low of $52.10 to a high of $114.34, and the last trading day NYMEX natural gas price per MMBtu ranged from a low of $1.58 to a high of $9.35.

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.

One of the factors which caused the fall in prices was OPEC+ being unable to reach an agreement on production levels for crude oil, which resulted in Saudi Arabia and Russia initiating efforts to increase production.

The convergence of these events, along with the significantly reduced demand because of the COVID-19 pandemic, created an unprecedented global crude oil and natural gas supply and demand imbalance, reduced global crude oil and natural gas storage capacity, caused crude oil and natural gas prices to decline significantly and resulted in continued volatility in crude oil, NGL and natural gas prices into the second quarter of 2020.

Prices have recovered to pre-pandemic levels, with the calendar month average NYMEX WTI crude oil price of $71.69 per Bbl and the last trading day NYMEX natural gas price of $3.43 per MMBtu for the month of December 2024.

However, there can be no certainty that commodity prices will sustain at these levels or continue to increase.

In addition, the incoming U.S.

presidential administration has signaled it will encourage increased domestic production of crude oil, which could lead to falling crude oil, NGL and natural gas prices.

Likewise, NGL, which are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which has different uses and pricing characteristics, have also fluctuated widely during this period.

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the price and quantity of foreign imports of crude oil, NGL and natural gas;

domestic and global political and economic conditions, such as the upcoming U.S.

presidential election, the ongoing conflict in Ukraine, the Israel-Hamas conflict, socio-political unrest and instability, terrorism or hostilities in or affecting other producing regions or countries, including the Middle East, Africa, South America and Russia;

the occurrence or threat of epidemic or pandemic diseases, such as the recent outbreak of COVID-19, or any government response to such occurrence or threat;

domestic and global political and economic conditions, such as the change in U.S.

presidential administration, the ongoing conflict in Ukraine, the Israel-Hamas conflict, socio-political unrest and instability, terrorism or hostilities in or affecting other producing regions or countries, including the Middle East, Africa, South America and Russia;

the occurrence or threat of epidemic or pandemic diseases, such as COVID-19, or any government response to such occurrence or threat;

actions of OPEC, its members and other state-controlled crude oil companies relating to crude oil price and production controls;

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As a result, a substantial or extended decline in commodity prices may materially and adversely affect HighPeak Energy’s future business, financial condition, results of operations, liquidity and ability to finance planned capital expenditures.

Changes in the global trade environment, including the imposition of tariffs, could adversely affect our business.

Escalating trade tensions, particularly between the U.S.

and Canada, Mexico, China and other countries, may lead to the imposition of tariffs and trade restrictions.

We may be materially adversely impacted by tariffs if we are not able to adapt our supply chain strategy.

We may also face unanticipated costs in developing our domestic supply chain and increased competition for materials and components in the United States, which also would impact our business and results of operations.

The imposition of tariffs may also create uncertainty in our industry.

Increases in costs to drill and develop reserves as a result of tariffs coupled with lower commodity prices from increased domestic production could make producing such reserves no longer economically viable or technically feasible.

Additionally, existing or future tariffs may negatively affect our customers, suppliers, and manufacturing partners.

Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility and price fluctuations.

Tariffs, the adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our supply chain and access to equipment, and our costs and ability to economically serve certain markets.

Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer.

There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S.

trade policies will change in the future, including as a result of changes by the incoming U.S.

presidential administration.

Reserve estimates depend on many assumptions that may turn out to be inaccurate.

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Our estimates of our SEC reserves are based upon average commodity prices over the prior 12 months, which may not reflect actual prices received for our production.

For example, our reserve volumes and PV-10 as disclosed in this Annual Report are based on assumed commodity prices of $78.22 per Bbl of crude oil and NGL and $2.637 per MMBtu of natural gas as of December 31, 2023, which are somewhat higher than the December 31, 2023 front-month forward pricing of $71.65 per Bbl of crude oil and $2.514 per Mcf of natural gas.

For example, our reserve volumes and PV-10 as disclosed in this Annual Report are based on assumed commodity prices of $75.48 per Bbl of crude oil and NGL and $2.130 per MMBtu of natural gas as of December 31, 2024, which are somewhat higher for crude oil and lower for natural gas than the December 31, 2024 front-month forward pricing of $71.72 per Bbl of crude oil and $3.633 per Mcf of natural gas.

Accordingly, you are cautioned not to place undue weight on our reserve volumes or PV-10 based on such pricing when evaluating our financial condition or an investment in our securities.

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HighPeak Energy has evaluated multiple development scenarios under multiple potential commodity price assumptions.

Under its current 2024 development program, HighPeak Energy would expect to incur approximately $450 to $525 million of capital expenditures for drilling, completion, facilities and equipping costs and $50 - $60 million for field infrastructure, land and other costs.

Under its current 2025 development program, HighPeak Energy would expect to incur approximately $375 to $405 million of capital expenditures for drilling, completion, facilities and equipping costs, $40 - $50 million for field infrastructure, land and other costs and $33 - $35 million on one-time infrastructure expenditures.

The ability to make these capital expenditures will be highly dependent on the price of crude oil and available funding of HighPeak Energy.

Commodity prices have recovered from their April 2020 lows, with the calendar month average NYMEX WTI price of $72.12 per Bbl and last trading day NYMEX natural gas price of $2.71 per MMBtu for the month of December 2023.

HighPeak Energy began the year with six rigs, then ran a five-rig program from February to mid-April of 2023 and subsequently decreased to a three-rig program beginning in May 2023 and a two-rig program from June 2023 to the end of October 2023 when it increased to a three-rig program through yearend.

Commodity prices have recovered, with the calendar month average NYMEX WTI price of $71.69 per Bbl and last trading day NYMEX natural gas price of $3.43 per MMBtu for the month of December 2024.

HighPeak Energy ran a two-rig program for the majority of 2024.

HighPeak Energy expects to average two (2) drilling rigs and one (1) frac crew during 2025.

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The availability and cost of these capital sources is cyclical, and these capital sources may not remain available, or we may not be able to obtain financing at a reasonable cost in the future.

For example, due to the high levels of inflation in the U.S., the Federal Reserve and other central banks increased interest rates multiple times in 2022 and 2023, and although the Federal Reserve has indicated that such increases have ceased going into 2024, uncertainty remains as to when or if such elevated rates may be decreased.

For example, due to the high levels of inflation in the U.S., the Federal Reserve and other central banks increased interest rates multiple times in 2022 and 2023, and began decreasing rates with three rate cuts toward the end of 2024 and although the Federal Reserve has indicated that such decreases should continue in 2025, uncertainty remains as to when or if such elevated rates may be decreased further.

Such increased interest rates have increased the cost of capital and may prevent us from being able to obtain debt financing at favorable rates, or at all, which would materially impact our operations.

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cash settlements from HighPeak Energy’s derivative activities;

production interruptions or curtailments from time-to-time related to third-party infrastructure downtime or delays in third-party installation of infrastructure, including electrical power supply, that affects our ability to produce our crude oil and natural gas;

restrictions on capital expenditures in certain circumstances under the Term Loan Credit Agreement or the Senior Credit Facility Agreement;

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Moreover, any subsequent replacement of HighPeak Energy’s financing arrangements may require it to comply with more restrictive covenants which could further restrict business operations.

The Company had an aggregate maximum commitment amount of $100.0 million and commitment amount of $75.0 million with respect to the Senior Credit Facility Agreement as of December 31, 2023.

The Company had an aggregate maximum commitment amount and actual commitment amount of $100.0 million with respect to the Senior Credit Facility Agreement as of December 31, 2024.

The Term Loan Credit Agreement also limits the amounts HighPeak Energy can borrow under the Senior Credit Facility Agreement to $100.0 million.

We recently adopted a share repurchase program that authorizes us to repurchase up to an aggregate $75.0 million of shares of our common stock.

Our repurchase program expires December 31, 2024 and does not obligate HighPeak to repurchase any specific dollar amount or to acquire any specific number of shares and will depend upon, among other things, our earnings, liquidity, capital requirements, financial condition and other factors deemed relevant by our board of directors.

On March 6, 2025, the Board extended the expiration date of the prior repurchase program of up to $75 million of the Company’s common stock that was originally authorized by the Board in February 2024 (the “2024 Repurchase Program”).

The extension did not alter the terms of the 2024 Repurchase Program, did not increase the total amount under the program and does not obligate HighPeak to repurchase any specific dollar amount or to acquire any specific number of shares and will depend upon, among other things, our earnings, liquidity, capital requirements, financial condition and other factors deemed relevant by our board of directors.

Additionally, our Term Loan Credit Agreement limits our ability to repurchase shares of our common stock.

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Our existing and future indebtedness may adversely affect our cash flows and ability to operate our business, remain in compliance and repay our debt.

In September 2023, in connection with the entry into the Term Loan Credit Agreement, the Prior Credit Agreement was terminated.

As of December 31, 2024, we had $1.1 billion of total indebtedness, including $1.1 billion outstanding of our Term Loan Credit Agreement and no indebtedness outstanding under our Senior Credit Facility Agreement, and available capacity under our Senior Credit Facility Agreement of approximately $93.1 million.

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A high rate of inflation may have an adverse effect on HighPeak Energy’s operating results and this impact may be magnified to the extent that HighPeak Energy’s ability to participate in the commodity price increases is limited by its derivative activities, if any.

Elevated inflation rates throughout 2023 and inflationary pressures have resulted in and may result in additional increases to the costs of our oilfield goods, services and personnel, which would in turn cause our capital expenditures and operating costs to rise.

Due to the high levels of inflation in the U.S., the Federal Reserve and other central banks increased interest rates multiple times in 2022 and 2023, and although the Federal Reserve has indicated that such increases have ceased going into 2024, uncertainty remains as to when or if such elevated rates may be decreased.

Elevated inflation rates throughout 2023 and 2024 and inflationary pressures have resulted in and may result in additional increases to the costs of our oilfield goods, services and personnel, which would in turn cause our capital expenditures and operating costs to rise.

Due to the high levels of inflation in the U.S., the Federal Reserve and other central banks increased interest rates multiple times in 2022 and 2023, and began decreasing rates with three rate cuts toward the end of 2024 and although the Federal Reserve has indicated that such decreases could continue into 2025, uncertainty remains as to when or if such elevated rates may be decreased further.

To the extent rates remain high, this could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.

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We cannot predict any future trends in the rate of inflation, and a significant increase in inflation, to the extent we are unable to recover higher costs through higher crude oil and natural gas prices and revenues, would negatively impact our business, financial condition and results of operations.

Volatility in the political, legal and regulatory environments ahead of the upcoming U.S.

Our business, financial condition and future results are subject to political and economic risks and uncertainties, including volatility in the political, legal and regulatory environments ahead of the upcoming U.S.

presidential election and instability resulting from civil unrest, political demonstrations, mass strikes or armed conflict or other crises in crude oil or natural gas producing areas such as the ongoing war between Russia and Ukraine and the Israel-Hamas conflict.

Volatility in the political, legal and regulatory environments as a result of the change in U.S.

presidential administration and instability resulting from civil unrest, political demonstrations, mass strikes or armed conflict or other crises in crude oil or natural gas producing areas such as the ongoing war between Russia and Ukraine and the Israel-Hamas conflict.

The United States and other countries and certain international organizations have imposed broad-ranging and severe economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response, and additional sanctions may be imposed in the future.

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It is believed that many OPEC+ countries will be unable to increase their production levels or even produce at expected levels due to their lack of capital investments in developing incremental crude oil supplies over the past few years.

In November 2023, OPEC+ determined to reduce production beginning in early 2024 by 2.2 million Bopd, due to the uncertainty surrounding the global economic and crude oil market outlooks.

In December 2024, OPEC+ postponed planned reductions of 2.2 million Bopd of oil production until April 2025, due to a slowdown in global demand and rising output surrounding the global economic and crude oil market outlooks.

Furthermore, sanctions and import bans on Russian crude oil have been implemented by various countries in response to the war in Ukraine, further impacting global crude oil supply.

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Cost increases necessary to bring wells back online may be significant enough that such wells would become uneconomic at low commodity price levels, which may lead to decreases in HighPeak Energy’s proved reserve estimates and potential impairments and associated charges to its earnings.

HighPeak Energy curtailed the majority of its production in April 2020.

However, prices increased, and HighPeak Energy management began returning its wells to production in mid-July 2020.

As of December 31, 2023, HighPeak Energy was running a three-rig program and expects to average two (2) drilling rigs and one (1) frac crew during 2024 under our current development plan.

As of December 31, 2024, HighPeak Energy was running a two-rig program and expects to average two (2) drilling rigs and approximately one (1) frac crew during 2025 under our current development plan.

HighPeak Energy will continue to monitor the extent by which prices continue to increase and/or stabilize as we execute our capital expenditure program.

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Generally, the leases for net acreage not held by production will expire at the end of their primary term unless production is established in paying quantities under the units containing these leases or the leases are extended or renewed.

From 2024 through 2026, approximately 21%, 14% and 1%, respectively, of the net acreage associated with the leases are set to expire.

From 2025 through 2027, approximately 54%, 31% and 11%, respectively, of the net undeveloped acreage associated with the leases are set to expire.

If the leases expire and HighPeak Energy is unable to renew the leases, HighPeak Energy will lose its right to develop the related properties.

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Certain of these agreements require HighPeak Energy to meet minimum volume commitments, often regardless of actual throughput.

In May 2021, the Company entered into a crude oil marketing contract with Delek as the purchaser and DKL Permian Gathering, LLC (“DKL”) as the gatherer and transporter.

The contract includes the Company’s current and future crude oil production from the majority of its horizontal wells in Flat Top where DKL is constructing a crude oil gathering system and custody transfer meters to most of the Company’s central tank batteries.

The contract contains a minimum volume commitment commencing October 2021 based on the gross barrels delivered at the Company’s central tank battery facilities and is 5,000 Bopd for the first year, 7,500 Bopd for the second year and 10,000 Bopd for the remaining eight years of the contract.

However, the Company has the ability under the contract to cumulatively bank excess volumes delivered to offset future minimum volume commitments.

For the period from October 1, 2021 to December 31, 2023, the Company has delivered approximately 29,600 Bopd under the contract.

In September 2024, the Company entered into an amended and restated crude oil marketing contract with Delek as the purchaser and DKL Permian Gathering, LLC (“DKL”) as the gatherer and transporter.

The contract includes the Company’s current and future crude oil production from the majority of its horizontal wells in Flat Top and Signal Peak where DKL is continually constructing a crude oil gathering system and custody transfer meters to most of the Company’s central tank batteries.

The contract contains a minimum volume commitment commencing May 2024 that totals $138.7 million based on the gross piped barrels delivered of 23,500 Bopd for the first ten years of the contract at a certain amount per barrel escalating throughout the term of the contract.

However, the Company generally has the ability under the contract to cumulatively bank dollars based on excess volumes delivered to offset the minimum volume commitment.

For the period from May 1, 2024 to December 31, 2024, the Company has delivered approximately 31,196 Bopd under the contract.

The remaining monetary commitment as of December 31, 2024, if the Company never delivers any additional volumes under the agreement, is approximately $130.3 million.

The Company is party to an amended agreement whereby it has agreed to purchase at least 1.6 million tons of frac sand over a two-year period beginning July 1, 2022.

The Company is party to an amended agreement whereby it has agreed to purchase at least 750,000 tons of frac sand over a fifteen-month period beginning April 1, 2024.

The Company has taken deliveries of approximately 547,000 tons of sand through December 31, 2024, leaving a commitment of approximately 203,000 tons remaining.

There are stipulations in the agreement that reduce this commitment should we experience a downturn in crude oil prices.

As of December 31, 2023, the Company has purchased approximately 1.2 million tons of frac sand under the contract.

However, generally if the Company never takes delivery of any additional frac sand under the agreement, the monetary commitment that remains as of December 31, 2023 is approximately $9.5 million.

Generally, if the Company never takes delivery of any additional frac sand under the agreement, the monetary commitment that remains as of December 31, 2024 is approximately $5.2 million.

If HighPeak Energy has insufficient production to meet the minimum volume commitments under any of these agreements or if HighPeak Energy fails to take delivery of supplies which it committed to, HighPeak Energy’s cash flow from operations will be reduced, which may require HighPeak Energy to reduce or delay its planned investments and capital expenditures, or seek alternative means of financing, all of which may have a material adverse effect on HighPeak Energy’s results of operation.

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If natural gas, NGL or crude oil prices upon settlement of derivative swap contracts exceed the price at which commodities have been hedged, HighPeak Energy will be obligated to make cash payments to counterparties, which could, in certain circumstances, be significant.

In addition, U.S.

regulators adopted a final rule in November 2019 implementing a new approach for calculating the exposure amount of derivative contracts under the applicable agencies’ regulatory capital rules, referred to as the standardized approach for counterparty credit risk (“SA-CCR”).

As adopted, certain financial institutions are required to comply with the new SA-CCR rules beginning on January 1, 2022.

The new rules could significantly increase the capital requirements for certain participants in the over-the-counter derivatives market in which HighPeak Energy participates.

These increased capital requirements could result in significant additional costs being passed through to end-users or reduce the number of participants or products available in the over-the-counter derivatives market.

The effects of these regulations could reduce HighPeak Energy’s hedging opportunities, or substantially increase the cost of hedging, which could adversely affect HighPeak Energy’s business, financial condition and results of operations.

On July 21, 2010, new comprehensive financial reform legislation, known as the Dodd‑Frank Wall Street Reform and Consumer Protection Act (the “Act”), was enacted that establishes federal oversight and regulation of the over‑the‑counter derivatives market and entities, such as us, that participate in that market.

The Act requires the CFTC, the SEC and other regulators to promulgate rules and regulations implementing the new legislation.

The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing and exchange trading.

To the extent we engage in such transactions or transactions that become subject to such rules in the future, we will be required to comply or take steps to qualify for an exemption to such requirements.

Although we expect to qualify for the end‑user exception to the mandatory clearing requirements for swaps entered to hedge our commercial risks, the application of the mandatory clearing and trade execution requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that we use for hedging.

If our swaps do not qualify for the commercial end‑user exception, or the cost of entering into uncleared swaps becomes prohibitive, we may be required to clear such transactions.

The ultimate effect of the rules and any additional regulations on our businesses is uncertain at this time.

In addition, the Act requires that regulators establish margin rules for uncleared swaps.

Banking regulators and the CFTC have adopted final rules establishing minimum margin requirements for uncleared swaps.

Although we expect to qualify for the end‑user exception from such margin requirements for swaps entered into to hedge our commercial risks, the application of such requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that we use for hedging.

If any of our swaps do not qualify for the commercial end‑user exception, posting of initial or variation margin could impact our liquidity and reduce cash available for capital expenditures, therefore reducing our ability to execute hedges to reduce risk and protect cash flows.

The CFTC has finalized rules that place limits on positions in certain core futures and equivalent swaps contracts for, or linked to, certain physical commodities, subject to exceptions for certain bona fide hedging transactions.

We currently do not expect such rules will have a material impact on us.

The CFTC has also adopted a final rule regarding aggregation of positions, under which a party that controls the trading of, or owns 10% or more of the equity interests in, another party will have to aggregate the positions of the controlled or owned party with its own positions for purposes of determining compliance with position limits unless an exemption applies.

The CFTC’s aggregation rules are now in effect, though CFTC staff have granted relief—until August 12, 2025 or the effective date of any codifying rulemaking—from various conditions and requirements in the final aggregation rules.

With the implementation of the final aggregation rules and upon the effectiveness of the final CFTC position limits rule, our ability to execute our hedging strategies described above could be limited.

The full impact of the Act and related regulatory requirements upon our businesses will not be known until all of the related regulations are implemented.

The Act and any new regulations could significantly increase the cost of derivative contracts (including from swap recordkeeping and reporting requirements and through requirements to post collateral which could adversely affect our available liquidity), materially alter the terms of derivative contracts, reduce the availability of some derivatives to protect against risks we encounter and reduce our ability to monetize or restructure our existing derivative contracts.

If we reduce our use of derivatives as a result of the Act and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures.

Any of these consequences could have material adverse effect on our financial condition, results of operations and cash available for distribution.

In addition, the European Union and other non‑U.S.

jurisdictions are implementing regulations with respect to the derivatives market.

To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations.

The standardized measure of estimated reserves may not be an accurate estimate of the current fair value of estimated crude oil and natural gas reserves.

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Standardized measure requires historical twelve-month pricing as required by the SEC as well as operating and development costs prevailing as of the date of computation.

For example, our reserve volumes and PV-10 as disclosed in this Annual Report are based on assumed commodity prices of $78.22 per Bbl of crude oil and NGL and $2.637 per MMBtu of natural gas as of December 31, 2023, which are substantially higher than December 31, 2023 front-month forward pricing of $71.65 per Bbl of crude oil and $2.514 per Mcf of natural gas.

For example, our reserve volumes and PV-10 as disclosed in this Annual Report are based on assumed commodity prices of $75.48 per Bbl of crude oil and NGL and $2.130 per MMBtu of natural gas as of December 31, 2024, which are higher for crude oil and lower for natural gas than December 31, 2024 front-month forward pricing of $71.72 per Bbl of crude oil and $3.633 per Mcf of natural gas.

Consequently, it may not reflect the prices ordinarily received or that will be received for crude oil and natural gas production because of varying market conditions, nor may it reflect the actual costs that will be required to produce or develop the crude oil and natural gas properties.

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HighPeak Energy expects to sell its production to a relatively small number of customers, as is customary in the crude oil and natural gas business.

For the year ended December 31, 2023, there were two purchasers that accounted for approximately 96% of our revenue (one at approximately 82% and one at approximately 14%) and for the years ended December 31, 2022 and 2021, there was one purchaser that accounted for approximately 88% and 94% of our revenue, respectively.

For the years ended December 31, 2024 and 2023, there were two purchasers that accounted for approximately 94% and 96% of our revenue, respectively (one at approximately 76% and 82%, respectively, and one at approximately 18% and 14%, respectively), and for the year ended December 31, 2022, there was one purchaser that accounted for approximately 88% of our revenue.

No other purchaser accounted for 10% or more of such revenues during such period.

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In addition, HighPeak Energy may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt its operations and limit growth and revenue.

Certain environmental laws impose strict liability (i.e., no showing of “fault” is required) as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.

Certain environmental laws impose strict liability ( i.e.

, no showing of “fault” is required) as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.

HighPeak Energy may be required to remediate contaminated properties owned or operated by it or facilities of third parties that received waste generated by operations regardless of whether such contamination resulted from the conduct of others or from consequences of its own actions that were in compliance with all applicable laws at the time those actions were taken.

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It is not uncommon for neighboring landowners, employees and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, wastes or other materials into the environment.

The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment and more stringent laws and regulations may be adopted in the future.

While from time to time there have been periods of deregulation under certain U.S.

presidential administrations, the trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment and more stringent laws and regulations may be adopted in the future.

To the extent HighPeak Energy’s operations are affected by national, regional, local and other laws, and to the extent such laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, HighPeak Energy’s business, prospects, financial condition or results of operations could be materially adversely affected.

HighPeak Energy may incur increasing attention to ESG matters that may impact its business.

Businesses across all industries are facing increasing scrutiny from stakeholders related to their ESG practices.

Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition and/or stock price of such business entity could be materially and adversely affected.

Increasing attention to climate change, increasing societal expectations on businesses to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for HighPeak Energy’s hydrocarbon products, reduced profits, increased investigations and litigation and negative impacts on its stock price and access to capital markets.

Businesses across all industries are facing increasing scrutiny from investors, customers, employees, regulatory bodies and other stakeholders related to their ESG practices.

Businesses that do not adapt to or comply with such stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG related issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition and/or stock price of such business entity could be adversely affected.

Increasing attention to climate change, increasing societal expectations on businesses to address climate change, changes in regulation relating to climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for HighPeak Energy’s hydrocarbon products, reduced profits, increased investigations and litigation and negative impacts on its stock price and access to capital markets.

Increasing attention to climate change, for example, may result in demand shifts for HighPeak Energy’s hydrocarbon products and additional governmental investigations and private litigation.

Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, certain statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.

Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, certain statements in those voluntary disclosures may be based on expectations and assumptions or hypothetical scenarios that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established approach to identifying, measuring and reporting on many ESG matters.

We may also announce participation in, or certification under, various third-party ESG frameworks in an attempt to improve our ESG profile, but such participation or certification may be costly and may not achieve the desired results.

Additionally, while we may announce various voluntary ESG targets, such targets are aspirational.

Additionally, while we may announce various voluntary ESG targets, such targets are often aspirational.

We may not be able to meet such targets in the manner or on such a timeline as initially contemplated, including but not limited to as a result of unforeseen costs or technical difficulties associated with achieving such results.

To the extent we meet such targets, it may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our ESG impact instead of actual changes in our ESG performance.

Also, despite these aspirational goals and any other actions taken, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.

In addition, organizations that provided information to investors on corporate governance and related matters have developed rating processes for evaluating business entities on their approach to ESG matters.

Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders.

Some of these arrangements may receive scrutiny from certain constituencies.

Also, despite these aspirational goals and any other actions taken, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to pursue or implement such goals because of potential costs or technical or operational obstacles.

Certain statements or initiatives with respect to ESG matters that we may pursue or assert are increasingly subject to heightened scrutiny from the public and governmental authorities, as well as other parties.

For example, the SEC has recently taken enforcement action against companies for ESG-related misconduct, including alleged “greenwashing,” ( i.e.

, the process of conveying misleading information or making false claims that overstate potential ESG benefits).

Certain regulators, such as the SEC and various state agencies, as well as non-governmental organizations and other private actors have filed lawsuits under various securities and consumer protection laws alleging that certain ESG statements, goals or standards were misleading, false or otherwise deceptive.

Certain social and inclusion initiatives are the subject of scrutiny by both those calling for the continued advancement of such policies, as well as those who believe they should be curbed, including government actors, and the complex regulatory and legal frameworks applicable to such initiatives continue to evolve.

More recent political developments could mean that the Company faces increasing criticism or litigation risks from certain “anti-ESG” parties, including various government agencies.

Such sentiment may focus on the Company’s environmental or social commitments (such as reducing GHG emissions) or its pursuit of certain employment practices or social initiatives that are alleged to be political or polarizing in nature or are alleged to violate laws based, in part, on changing priorities of, or interpretations by, federal agencies or state governments.

Consideration of ESG-related factors in the Company’s decision-making could be subject to increasing scrutiny and objection from such anti-ESG parties.

As a result, the Company may be subject to pressure in the media or through other means, such as governmental investigations, enforcement actions, or other proceedings, all of which could adversely affect our reputation, business, financial performance, market access and growth.

Accordingly, there may be increased costs related to reviewing, implementing and managing such policies, as well as compliance and litigation risks based both on positions we do or do not take, or work we do or do not perform.

In addition, organizations that provided information to investors on ESG and related matters have developed rating processes for evaluating business entities on their approach to ESG matters.

Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations has become more broadly accepted by investors and shareholders.

Such ratings are used by some investors to inform their investment and voting decisions.

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ESG matters may also impact our suppliers and customers, which may ultimately have adverse impacts on our operations.

In addition, ESG efforts related to employment practices and social initiatives are the subject of scrutiny by stakeholders, regulators and other third-parties.

The complex regulatory and legal frameworks applicable to such initiatives continue to evolve.

We cannot be certain of the impact of such regulatory, legal and other developments on our business.

To the extent any enforcement actions or other litigation is brought against us as a result of emerging viewpoints and legal interpretations, our business, financial condition and access to financing may be materially and adversely affected.

HighPeak Energy may incur substantial losses and be subject to substantial liability claims as a result of operations.

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The demand for drilling rigs, pipe and other equipment and supplies, as well as for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the crude oil and natural gas industry, can fluctuate significantly, often in correlation with crude oil, NGL and natural gas prices, causing periodic shortages of equipment, supplies and needed personnel.

The incoming U.S.

presidential administration has signaled it will encourage increased domestic exploration and production activity, which could lead to a reduction in crude oil, NGL and natural gas prices.

Additionally, supply constraints due to the conflict in Ukraine, the Israel-Hamas conflict, elevated interest rates and associated policies of the Federal Reserve has increased the cost of oilfield services.

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For the month of April 2020, the calendar month average NYMEX WTI crude oil price was $16.70 and last trading day NYMEX natural gas price was $1.63 per MMBtu.

However, prices have since increased.

To the extent commodity prices improve in the future, the demand for and prices of these goods and services are likely to increase and HighPeak Energy could encounter delays in or an inability to secure the personnel, equipment, power, services, resources and facilities access necessary for it to resume or increase HighPeak Energy’s development activities, which could result in production volumes being below its forecasted volumes.

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The IRA 2022 amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories.

The methane emissions charge would start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year after.

The methane emissions charge began in calendar year 2024 at $900 per ton of methane, increases to $1,200 in 2025, and will be set at $1,500 for 2026 and each year after.

Calculation of the fee is based on certain thresholds established in the IRA 2022.

In addition, the multiple incentives offered for various clean energy industries referenced above could further accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives.

This could decrease demand for crude oil and natural gas, increase our compliance and operating costs and consequently adversely affect our business.

We cannot predict whether, how, or when the incoming Trump Administration might take action to revise or repeal the methane emissions charge.

Additionally, Congress may take actions to repeal or revise the IRA, including with respect to the methane emissions charge, which timing or outcome similarly cannot be predicted.

To the extent the methane emissions charge is implemented as originally promulgated, it could decrease demand for crude oil and natural gas, increase our compliance and operating costs and consequently adversely affect our business.

In addition, fuel conservation measures, alternative fuel requirements and increasing consumer demand for alternatives to crude oil, NGL and natural gas could reduce demand for crude oil, NGL and natural gas.

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As a result, crude oil and natural gas exploration and production operations are subject to a series of regulatory, political, litigation and financial risks associated with the production and processing of fossil fuels and emission of GHGs.

In the United States, no comprehensive climate change legislation has been implemented at the federal level, though federal law such as the IRA 2022 advances numerous climate-related objectives.

However, with the U.S.

Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States.

The regulation of methane from crude oil and natural gas facilities has been subject to uncertainty in recent years.

Although, in September 2020, the Trump Administration revised prior promulgated regulations to rescind certain methane standards and remove the transmission and storage segments from the source category for certain regulations, the U.S.

Congress approved, and President Biden signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions, effectively reinstating the prior standards.

Additionally, in December 2023, the EPA finalized a rule that established OOOOb as new source and OOOOc as first-time existing source standards of performance for methane and VOC emissions for the crude oil and natural gas source category.

Under the final rule, owners or operators of affected emission units or processes will have two years to prepare and submit their plans to impose methane emission controls on existing sources.

The presumptive standards under the final rule are generally the same for both new and existing sources, including enhanced leak detection using optical gas imaging and subsequent repair requirements, reduction of regulated emissions through capture and control systems, zero-emission requirements for certain equipment or processes, operations and maintenance requirements and requirements for “green well” completions.

The rule also establishes a “super-emitter” response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, triggering certain investigation and repair requirements.

Separately, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, the United Nations-sponsored “Paris Agreement” requires member states to submit non-binding, individually-determined reduction goals every five years after 2020.

President Biden has recommitted the United States to the Paris Agreement and in April 2021, announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.

In November 2021, the international community gathered again in Glasgow at COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO2 GHGs.

Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector.

These goals were reaffirmed at COP27, and countries were called upon to accelerate their efforts, though no firm commitments were made.

At COP28, the parties entered into an agreement to transition away from fossil fuels in energy systems and increase renewable energy capacity, though no timeline for doing so was set.

The impacts of these actions cannot be predicted at this time.

In the United States, no comprehensive climate change legislation has been implemented.

However, the EPA has adopted rules that, among other things, established construction and operating permit reviews for GHG emissions from certain large stationary sources, required the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, and together with the DOT, implemented GHG emissions limits on vehicles manufactured for operation in the United States.

However, from time to time, certain administrations have taken actions to repeal or revise such climate-related actions.

For example, the regulation of methane from crude oil and natural gas facilities has been subject to uncertainty in recent years.

For more information, see the section entitled “Items 1 and 2.

Business and Properties—Regulation of Environmental and Occupational Safety and Health Matters— Regulation of Greenhouse Gas Emissions.”

Business and Properties—Regulation of Environmental and Occupational Safety and Health Matters— Regulation of Greenhouse Gas Emissions.” Separately, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, in 2021, President Biden recommitted the United States to the Paris Agreement, which requires member states to submit non-binding, individually determined reduction goals every five years.

In December 2024, President Biden unveiled a new emissions target, seeking to cut emissions by 61-66% from 2005 levels by 2035.

Subsequent United Nations climate conferences have called for additional action to transition away from fossil fuels and control or otherwise reduce GHG emissions, though none have been legally binding.

However, the Trump Administration has formally begun the process of re-withdrawing from the Paris Agreement, and the United States’ participation in future United Nations climate-related conferences is unclear.

Therefore, the full impact of these actions cannot be predicted at this time.

Governmental, scientific and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change related pledges made by certain candidates in public office.

On January 27, 2021, President Biden signed an executive order calling for substantial action on climate change, including, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry and increased emphasis on climate-related risks across agencies and economic sectors.

Additional actions that could be pursued by the Biden Administration may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of LNG export facilities.

For example, on January 26, 2024, President Biden announced a temporary pause on pending decisions on new exports of LNG to countries that the U.S.

does not have free trade agreements with, pending Department of Energy review.

Litigation risks are also increasing, as a number of entities have sought to bring suit against crude oil and natural gas companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that such companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.

There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all their investments into other sectors.

Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.

For example, at COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.

The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing and/or underwriting activities to net zero by 2050.

There have also recently been increasing financial risks for fossil fuel producers as certain shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all their investments into other sectors.

There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.

In late 2020, the Federal Reserve announced it has joined the NGFS and, in November 2021, issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities.

In September 2022, the Federal Reserve announced that six of the U.S.’ largest banks will participate in a pilot climate scenario analysis exercise, which took place throughout 2023, to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.

Limitation of investments in and financing for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities.

In addition, the SEC proposed a rule requiring registrants to make certain climate-related disclosures, including emissions data.

The final rule remains pending, and we cannot predict its final form or substance.

To the extent the rules impose additional reporting obligations, we could face increased costs.

Some states have also enacted or are considering climate-related disclosure requirements.

Additionally, we cannot predict how financial institutions and investors might consider any information disclosed under a final rule when making investment decisions, and as a result it is possible that we could face increases with respect to the costs of, or restrictions imposed on, our access to capital.

For more information, see the section entitled “Items 1 and 2.

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One or more of these developments could have a material adverse effect on HighPeak Energy’s business, financial condition and results of operations.

Finally, many scientists have concluded that increasing concentrations of GHG in the atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climate events that could have an adverse effect on HighPeak Energy’s operations.

Finally, increasing concentrations of GHG in the atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climate events that could have an adverse effect on HighPeak Energy’s operations.

If such effects were to occur, our development and production operations have the potential to be adversely affected.

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Hydraulic fracturing is typically regulated by state crude oil and natural gas commissions, but certain federal agencies have asserted regulatory authority over certain aspects of the process.

For example, the EPA finalized rules in June 2016 that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants.

Congress has, from time to time, considered legislation to provide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process.

It is unclear how any additional federal regulation of hydraulic fracturing activities may affect HighPeak Energy’s operations, but such additional federal regulation could have an adverse effect on its business, financial condition and results of operations.

In December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources.

The EPA report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water under certain limited circumstances.

Moreover, some states and local governments have adopted, and other governmental entities are considering adopting, regulations that could impose more stringent permitting, disclosure and well-construction requirements on hydraulic fracturing operations, including states in which our properties are located.

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In some instances, regulators may also order that disposal wells be shut-in.

In September 2021, the TRRC issued a notice to operators in the city of Midland area to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18-month period.

The notice also required disposal well operators to provide injection data to TRRC staff to further analyze seismicity in the area.

Subsequently, the TRRC ordered the indefinite suspension of all deep crude oil and natural gas produced water injection wells in the area, effective December 31, 2021.

The response area was expanded to cover an additional 17 wells following another earthquake in December 2022.

Additional response areas have been established, most recently the Northern Culberson-Reeves Seismic Response Area, where 23 deep disposal well permits were suspended in December 2023.

For example, in December 2023, the TRRC issued a notice to suspend the permits of all deep disposal wells within the Northern Culberson-Reeves Seismic Response Area.

HighPeak Energy will likely dispose of large volumes of produced water gathered from its drilling and production operations by injecting it into wells pursuant to permits issued by governmental authorities overseeing such disposal activities.

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The designation of previously unprotected species in areas where HighPeak Energy operates as threatened or endangered could cause it to incur increased costs arising from species protection measures or could result in limitations on its activities that could have a material and adverse impact on its ability to develop and produce reserves.

For example, a review is currently pending to determine whether the dunes sagebrush lizard should be listed and, in November 2022, the FWS listed two distinct population segments of the lesser prairie-chicken under the ESA.

For example, in May 2024, the dunes sagebrush lizard was listed and, in November 2022, the FWS listed two distinct population segments of the lesser prairie-chicken under the ESA, although this decision has been challenged.

If these species or others are listed, the FWS and similar state agencies may designate critical or suitable habitat areas that they believe are necessary for the survival of threatened or endangered species.

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Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

HighPeak Energy ’ s business could be adversely affected by security threats, including cyber-security threats, and related disruptions.

HighPeak Energy ’ s business could be adversely affected by security threats, including cybersecurity threats, and related disruptions.

HighPeak Energy relies heavily on its information systems, and the availability and integrity of these systems is essential to conducting HighPeak Energy’s business and operations.

As a producer of crude oil and natural gas, HighPeak Energy faces various security threats, including cyber-security threats, to gain unauthorized access to its sensitive information or to render its information or systems unusable, and threats to the security of its facilities and infrastructure or third-party facilities and infrastructure, such as gathering and processing and other facilities, refineries and pipelines.

As a producer of crude oil and natural gas, HighPeak Energy faces various security threats, including cybersecurity threats, such as attempts to gain unauthorized access to its sensitive information or to render its information or systems unusable, and threats to the security of its facilities and infrastructure or third-party facilities and infrastructure, such as gathering and processing and other facilities, refineries and pipelines.

This risk may be heightened as a result of an increased remote working environment, similar to the one created by the COVID-19 outbreak in 2020.

The potential for such security threats subjects its operations to increased risks that could have a material adverse effect on its business, financial condition, results of operations and cash flows.

Cyber-security attacks in particular are becoming more sophisticated and include, but are not limited to, installation of malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.

Cybersecurity attacks in particular are becoming more sophisticated and include, but are not limited to, installation of malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.

For example, in May 2021, Colonial Pipeline’s digital systems were infected by a ransomware attack that caused the shutdown of the pipeline for several days and the payment of an approximate $4.4 million ransom.

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We continue to monitor and assess the impact of these laws, which in addition to penalties and legal liability, could impose significant costs for investigations and compliance, require us to change our business practices and carry significant potential liability for our business should we fail to comply with any such applicable laws.

HighPeak Energy’s implementation of various procedures and controls to monitor and mitigate such security threats and to increase security for its information, systems, facilities and infrastructure may result in increased costs.

HighPeak Energy’s implementation of various procedures and controls to identify, monitor and mitigate such security threats and to increase security for its information, systems, facilities and infrastructure may result in increased costs.

Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring.

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If securities or industry analysts do not publish or cease publishing research or reports about HighPeak Energy, HighPeak Energy ’ s business or HighPeak Energy ’ s market, or if they change their recommendations regarding HighPeak Energy common stock adversely, the price and trading volume of HighPeak Energy common stock could decline.

Furthermore, negative publicity or sentiments shared on social media platforms can also influence the perception of HighPeak Energy and its stock price, potentially leading to volatility.

The trading market for HighPeak Energy common stock will be influenced by the research and reports that industry or securities analysts may publish about HighPeak Energy, HighPeak Energy’s business, HighPeak Energy’s market, or HighPeak Energy’s competitors.

Additionally, the sentiments and discussions on social media platforms can significantly impact investor perceptions and trading behaviors.

If any of the analysts who may cover HighPeak Energy change their recommendation regarding HighPeak Energy common stock adversely, or provide more favorable relative recommendations about its competitors, the price of HighPeak Energy common stock would likely decline.

Similarly, unfavorable social media trends or negative comments about HighPeak Energy could drive down the stock price.

If any analyst who may cover HighPeak Energy were to cease their coverage or fail to regularly publish reports on HighPeak Energy, HighPeak Energy could lose visibility in the financial markets, which could cause HighPeak Energy’s stock price or trading volume to decline.

Social media also plays a role in maintaining visibility;

a lack of positive social media engagement could further decrease investor interest and trading volume.

The Second Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders ’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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As a result, HighPeak Energy’s stockholders may not have access to certain information they may deem important.

HighPeak Energy could be an emerging growth company for up to five years (i.e., until December 31, 2025), although circumstances could cause HighPeak Energy to lose that status earlier, including if the market value of HighPeak Energy’s equity held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case HighPeak Energy would no longer be an emerging growth company as of the following December 31.

HighPeak Energy’s exemption status as an emerging growth company will end on December 31, 2025, unless we issue more than $1 billion in non-convertible debt during any three-year period before that time, in which case we would cease to be an emerging growth company immediately.

HighPeak Energy cannot predict whether investors will find its securities less attractive because HighPeak Energy will rely on these exemptions.

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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.

What changed 10-K

Item 1A. Risk Factors