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Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<div><ul><li>Management laid out the math on debt reduction in frank terms – every $125 million term loan paydown translates to ~$1 per share in equity value based on HighPeak’s current share count. </li><li>Mandatory quarterly term loan amortization payments of $30 million are scheduled to begin on September 30, 2026.</li><li>The FY26 operating plan was constructed to generate free cash flow in a sub-$60/bbl oil price environment.</li></ul></div>

Management laid out the math on debt reduction in frank terms – every $125 million term loan paydown translates to ~$1 per share in equity value based on HighPeak’s current share count. Mandatory quarterly term loan amortization payments of $30 million are scheduled to begin on September 30, 2026.The FY26 operating plan was constructed to generate free cash flow in a sub-$60/bbl oil price environment.

HPK: Prioritizing Debt Reduction to Position Company for Long Term

<div><ul><li>HighPeak has committed itself to deleveraging the balance sheet to position the company to convert its large undeveloped drilling inventory into asset value. </li><li>To achieve the objective, HighPeak has set a FY26 capex program of $255-285 million, nearly 50% lower than FY25 capex.</li><li>Free cash flow will be used to reduce term loan borrowings. As of December 31, 2025, the term loan balance was $1.2 billion. </li></ul></div>

HighPeak has committed itself to deleveraging the balance sheet to position the company to convert its large undeveloped drilling inventory into asset value. To achieve the objective, HighPeak has set a FY26 capex program of $255-285 million, nearly 50% lower than FY25 capex.Free cash flow will be used to reduce term loan borrowings. As of December 31, 2025, the term loan balance was $1.2 billion. 

HPK: Cash Flow Outlook Supports Objectives to Reduce Term Loan Borrowings

Thematic (Sector/Industry)

<ul><li>Residential electricity price spike shines a light on data center power usage. </li><li>Residential electricity prices rose sharply across much of the US between 2021 and 2025, with a meaningful number of utilities recording compound annual growth rates well above general inflation.</li><li>The Electric Power Monthly report published by the Energy Information Administration shows that US average residential electricity rates increased 6.1% per year during 2021-2025 and has jumped another ~9% so far this year (Figure 1). </li></ul>

Residential electricity price spike shines a light on data center power usage. Residential electricity prices rose sharply across much of the US between 2021 and 2025, with a meaningful number of utilities recording compound annual growth rates well above general inflation.The Electric Power Monthly report published by the Energy Information Administration shows that US average residential electricity rates increased 6.1% per year during 2021-2025 and has jumped another ~9% so far this year (Figure 1). 

States Push Back on Data Center Projects; US Military De-Escalation Calms Oil Markets

<div><ul><li>HighPeak’s long-term focus is on responsibly managing capital outlays in tandem with a goal of reducing absolute debt levels over time. </li><li>On its earnings call on November 5, 2025, Hollis, who was elevated to the CEO role upon the retirement of Jack Hightower, laid out management’s operating guideposts in a variety of oil price environments.</li><li>In a base-case scenario with oil prices ranging from $60-70/bbl, management expects to maintain production levels and generate free cash flow that would be used to reduce debt. </li></ul></div>

HighPeak’s long-term focus is on responsibly managing capital outlays in tandem with a goal of reducing absolute debt levels over time. On its earnings call on November 5, 2025, Hollis, who was elevated to the CEO role upon the retirement of Jack Hightower, laid out management’s operating guideposts in a variety of oil price environments.In a base-case scenario with oil prices ranging from $60-70/bbl, management expects to maintain production levels and generate free cash flow that would be used to reduce debt. 

HPK: Adapting Operating Philosophy to Concentrate on Debt Reduction

<div><ul><li style="list-style-type: square;">We expect HighPeak will continue to balance the company’s development program with its long-term goal of reducing leverage. </li><li style="list-style-type: square;">The FY25 estimated capital program is $448-490 million, including ~$35 million of one-time infrastructure projects that were completed in 1H25. </li><li style="list-style-type: square;">Estimated drilling-related capital is $375-405 million. </li></ul></div>

We expect HighPeak will continue to balance the company’s development program with its long-term goal of reducing leverage. The FY25 estimated capital program is $448-490 million, including ~$35 million of one-time infrastructure projects that were completed in 1H25. Estimated drilling-related capital is $375-405 million. 

Highpeak Energy Inc.: Seeking Balance Between Development and Deleveraging - 28 October 2025

United States

HighPeak Energy, Inc. operates as an exploration company. The Company offers petroleum engineering, geology, geophysics, drilling, and land financing services. HighPeak Energy serves customers in the United States.

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HighPeak Energy Inc (HPK US)

HPK: Prioritizing Debt Reduction to Position Company for Long Term

Management laid out the math on debt reduction in frank terms – every $125 million term loan paydown translates to ~$1 per share in equity value...

Water Tower Research

HPK: Cash Flow Outlook Supports Objectives to Reduce Term Loan Borrowings

HighPeak has committed itself to deleveraging the balance sheet to position the company to convert its large undeveloped drilling inventory into...

Water Tower Research

States Push Back on Data Center Projects; US Military De-Escalation Calms Oil Markets

Residential electricity prices rose sharply across much of the US between 2021 and 2025, with a meaningful number of utilities recording compound...

Water Tower Research

HPK: Adapting Operating Philosophy to Concentrate on Debt Reduction

HighPeak’s long-term focus is on responsibly managing capital outlays in tandem with a goal of reducing absolute debt levels over time.

Water Tower Research

Highpeak Energy Inc.: Seeking Balance Between Development and Deleveraging - 28 October 2025

We expect HighPeak will continue to balance the company’s development program with its long-term goal of reducing leverage. The FY25 estimated...

Water Tower Research

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