WEB NEWS Comments & Business Outlook
FORT WORTH, Texas, Jan. 22, 2020 (GLOBE NEWSWIRE ) -- Pure Acquisition Corp. (“Pure”) (NASDAQ: PACQ, PACQU, PACQW), a special purpose acquisition company focused on oil and gas exploration and production, and its wholly owned subsidiary, HighPeak Energy, Inc. (“HighPeak”), previously announced a business combination whereby, among other things, Pure will merge with HighPeak, with HighPeak surviving as a publicly traded company, and HighPeak will concurrently acquire the oil and gas assets and cash from certain affiliates (“HighPeak Affiliates”) in exchange for HighPeak common stock, and the oil and gas assets of Grenadier Energy Partners II, LLC (“Grenadier”) will be contributed in exchange for HighPeak common stock and cash. Upon completion of the business combination and the acquisition of such assets from the HighPeak Affiliates and Grenadier (such assets collectively, the “Combined HighPeak Assets”), HighPeak will conduct its business as an independent oil and gas company engaged in the acquisition, development and production of oil, natural gas and NGL reserves with assets primarily located in Howard County, Texas in the Midland Basin.
Today, Pure announced that the 2019 year-end exit rate net production for the Combined HighPeak Assets successfully achieved management’s forecasted projection of approximately 12,000 barrels of oil equivalent per day (“Boe/d”)1. Such year-end production was approximately 79% oil, 13% NGLs and 8% natural gas.
Pure’s Chairman and CEO, Jack Hightower, said, “The Combined HighPeak Assets have achieved multiple milestones during the last half of 2019 which include reaching our projected year-end 2019 production forecast while dramatically lowering our drilling and completion costs. Production from the Combined HighPeak Assets has more than doubled from the second quarter of 2019 to an exit rate of approximately 12,000 Boe/d, demonstrating strong results in multiple zones across the acreage position. On average, our wells have performed in-line with our type curves for the Wolfcamp A and the Lower Spraberry and continue to support our forecasted production and reserve growth projections. With our ongoing operations and drilling program, we expect the Combined HighPeak Assets to continue to build production throughout the first quarter of 2020.”
During the fourth quarter of 2019, the HighPeak Affiliates and Grenadier drilled and completed seven 7,500-foot laterals, five 10,000-foot laterals and two 12,500-foot laterals on the Combined HighPeak Asset base. The cost of drilling, completion, equipping and facilities continues to improve for both wells drilled by the HighPeak Affiliates and by Grenadier. The costs for wells operated by the HighPeak Affiliates during the last quarter of 2019 have trended down to approximately $6.5 million for 10,000-foot lateral wells, which is about $1.0 million below previous company estimates. These capital cost reductions are driven by our intense focus on operational efficiencies which include drilling multiple well pads, zipper completions, faster drilling times and our extensive vendor network stemming from our long-term relationships in the Permian Basin.
Pure’s President Mike Hollis commented, “We are extremely pleased with our drilling and completion performance; and with our ongoing focus on capital efficiency, we intend to continue to identify opportunities to reduce costs and improve results throughout the year.”
The HighPeak Affiliates and Grenadier are currently running three operated rigs and three frac crews on the Combined HighPeak Assets and collectively have 36 operated horizontal wells on production, including seven wells that were recently brought online, plus working interests in an additional 70 horizontal producing wells. During the first quarter of 2020, we expect that the HighPeak Affiliates and Grenadier will undertake completion operations on 12 operated, drilled uncompleted wells (“DUCs”), including two 12,500-foot laterals and ten 10,000-foot laterals. Eight of the DUCs were drilled in the Wolfcamp A formation and four were drilled in the Lower Spraberry formation. In January, the HighPeak Affiliates finished drilling the adjacent Oldham 38-27 B Unit and O’Daniel Ranch 28-37 A Unit pads with four wells targeting the Wolfcamp A formation and two wells targeting the Lower Spraberry formation. These six 10,000-foot lateral wells are presently being completed utilizing two frac crews. There are currently six wells in the process of being drilled on three surface pads, including four 12,500-foot laterals and two 10,000-foot laterals.
Howard County continues to be one of the most active counties in the Midland Basin with 27 rigs currently running by many public and private operators. Many of these operators are similarly achieving great results in the Wolfcamp A and Lower Spraberry formations while also further delineating additional zones, including the Wolfcamp B, Middle Spraberry, Jo Mill, Wolfcamp C and Wolfcamp D formations, with very encouraging results. Recently, offset operators have drilled successful wells in the Wolfcamp B and Wolfcamp D formations adjacent to the asset base of the Combined HighPeak Assets.
Mr. Hightower continued, “We are excited about our pending business combination and believe our continued production and cash flow growth will create significant near-term and long-term value for our stockholders.”
Acquisition Activity
FORT WORTH, Texas, Nov. 27, 2019 (GLOBE NEWSWIRE
Pursuant to the Business Combination Agreements, a wholly owned subsidiary of HighPeak Energy will merge with and into Pure, with Pure surviving as a wholly owned subsidiary of HighPeak Energy and Pure’s existing stockholders receiving one share of common stock of HighPeak Energy for each share of Pure’s common stock owned thereby. HighPeak Energy will then acquire certain assets from the HighPeak Funds in exchange for shares of its common stock and certain assets from Grenadier in exchange for shares of its common stock, warrants to purchase shares of its common stock and cash (such transactions referred to collectively as, the “business combination”). After giving effect to the business combination, HighPeak Energy will conduct its business as an independent oil and natural gas company engaged in the acquisition, development and production of oil, natural gas and NGL reserves with assets located in the northeastern part of the oil-rich Midland Basin. Upon completion of the business combination, HighPeak Energy intends to list its common stock and warrants for trading on the New York Stock Exchange (the “NSYE”) or the Nasdaq Capital Market (the “Nasdaq”) under the symbols “HPK” and “HPKWS.” Pure’s securities are expected to be delisted from the Nasdaq at closing of the business combination concurrently with the NYSE or Nasdaq listing for trading of HighPeak Energy’s securities.
The transaction was unanimously approved and recommended to Pure’s board of directors (the “Board”) by a special committee consisting of independent directors of Pure’s Board, and is expected to close in the first quarter of 2020, subject to certain closing conditions, including receipt of the requisite shareholder approval.
Jack Hightower, HighPeak Energy’s Chairman, President and CEO, commented, “We’re extremely excited about this transaction as this area provides for one of the best on-shore domestic U.S. opportunities in regards to accelerated near-term cash flow growth, single well economics due to the high oil production content, industry leading full-cycle operating margins and the economies of scale we expect to achieve in cost savings attributable to drilling & completion operations, production facilities and infrastructure due to the contiguous nature of the asset base. The HighPeak management team is confident in our ability to successfully implement the proposed development drilling program and achieve the anticipated growth profile of the company.”
Patrick Noyes, Grenadier’s Chairman, President and CEO, said, “We are excited to reach this agreement with HighPeak Energy in the current market and help form a new strategic pure play company focused on a key area of the Midland basin that has been significantly de-risked over the past year. Our Grenadier team has performed exceptionally well in both executing on our active drilling and completion program along with supporting this key transaction with HighPeak. As a significant shareholder going forward, we are excited about the continued growth and upside potential of this combined asset.”
HighPeak Energy Operating Highlights (Pro Forma for Proposed Business Combination)
HighPeak Energy’s Chairman, President & CEO, Jack Hightower, provides 48 years of exploration and production (“E&P”) experience including years of executive leadership. In addition to Mr. Hightower, the senior management team provides extensive experience in various roles within the E&P industry that will provide HighPeak Energy with the synergy and capability needed in its business and operations
Business Combination
Pursuant to the HPK Business Combination Agreement, HighPeak Energy will acquire, in exchange for 71,150,000, as adjusted in accordance with the HPK Business Combination Agreement, shares of HighPeak Energy common stock, all of the outstanding interests in HPK Energy, LP (“HPK”), which holds certain rights, title and interests in oil and natural gas assets and cash, as well as the right, pursuant to a Contribution Agreement between Grenadier and a subsidiary of HPK, to acquire substantially all of the assets of Grenadier for aggregate consideration of 15,760,000 shares of HighPeak Energy common stock, 2,500,000 warrants to purchase HighPeak Energy common stock and approximately $465 million in cash, subject to purchase price adjustments.
The closing of the business combination is subject to the requisite approval of Pure’s stockholders and the satisfaction of customary conditions. The business combination is expected to close in the first quarter of 2020. The description of the business combination contained herein is only a summary and is qualified in its entirety by reference to the Business Combination Agreements relating thereto.
Comments & Business Outlook
Prime Acquisition Corp. Consolidated statements of income/(loss) and comprehensive income/(loss)
Notes
2014
2013*
2012
Continuing operations
Rental income
$
4,086,075
$
1,007,015
$
–
Other revenues
126,165
77,436
–
Total Revenues
4,212,240
1,084,451
–
Depreciation and bad debt provision
6
(107,400
)
(59,295
)
–
Impairment of goodwill
–
(6,914,458
)
–
Other expenses
7
(2,769,238
)
(4,367,539
)
(1,120,793
)
Total operating expenses
(2,876,638
)
(11,341,292
)
(1,120,793
)
Operating profit/(loss)
1,335,602
(10,256,841
)
(1,120,793
)
Finance income
8
75,880
–
–
Finance costs
8
(1,891,493
)
(712,545
)
–
Contingent consideration in connection with business combination
9
5,157,951
(5,157,951
)
–
Interest earned from investment held in trust
–
3,868
31,919
Net fair value gain on revaluation of investment properties
332,425
–
–
Profit/(loss) before tax
5,010,365
(16,123,469
)
(1,088,874
)
Tax expense, current
11
(208,603
)
–
–
Deferred tax expense
11,12
(654,579
)
7,184
–
Profit/(loss) for the year from continuing operations
4,147,183
(16,116,285
)
(1,088,874
)
Profit/(loss) from discontinued operations
Net profit/(loss) from discontinued operations
13
(727,864
)
230,807
–
Profit/(loss) for the year
$
3,419,319
$
(15,885,478
)
$
(1,088,874
)
Other comprehensive income, net of income tax
Foreign currency translation reserve
(999,519
)
131,878
–
Total comprehensive income/(loss) for the year
$
2,419,800
$
(15,753,600
)
$
(1,088,874
)
Earnings/(loss) per share
From continuing and discontinued operations
Weighted average number of ordinary shares outstanding - basic
3,098,017
3,037,806
4,894,983
Basic earnings/(loss) per share
$
1.10
$
(5.23
)
$
(0.22
)
Weighted average number of ordinary shares outstanding - diluted
3,452,271
3,037,806
4,894,983
Diluted earnings/(loss) per share
$
1.04
$
(5.23
)
$
(0.22
)
From continuing operations
Weighted average number of ordinary shares outstanding - basic
3,098,017
3,037,806
4,894,983
Basic earnings/(loss) per share
$
1.34
$
(5.31
)
$
(0.22
)
Weighted average number of ordinary shares outstanding - diluted
3,452,271
3,037,806
4,894,983
Diluted earnings/(loss) per share
$
1.26
$
(5.31
)
$
(0.22
)
Comments & Business Outlook
Prime Acquisition Corp.
Consolidated statements of loss and comprehensive loss
For the years ended December 31,
Notes
2013
2012
Rental income
$
1,374,728
$
–
Other revenues
148,258
–
Total Revenues
1,522,986
–
Depreciation, amortization and bad debt provision
7
(176,986
)
–
Impairment of goodwill
8
(1,791,548
)
–
Other expenses
9
(4,689,037
)
(1,120,793
)
Total operating expenses
(6,657,571
)
(1,120,793
)
Operating loss
(5,134,585
)
(1,120,793
)
Finance income
10
53,648
–
Finance costs
10
(601,039
)
–
Contingent consideration in connection with business combination
4
(5,157,951
)
–
Interest earned from investment held in trust
3,868
31,919
Loss before tax
(10,836,059
)
(1,088,874
)
Deferred tax expense
19
(44,200
)
–
Loss for the year
$
(10,880,259
)
$
(1,088,874
)
Loss for the year
$
(10,880,259
)
$
(1,088,874
)
Foreign currency translation reserve
131,878
–
Total comprehensive loss for the year
$
(10,748,381
)
$
(1,088,874
)
Weighted average number of ordinary shares outstanding - basic and diluted
3,037,806
4,894,983
Basic and diluted net loss per ordinary share
$
(3.58
)
$
(0.22
)
Management Discussion and Analysis
Revenues: We did not engage in any substantive commercial business until the acquisition of the Subsidiaries on September 30, 2013, and as such there were no revenues prior to that date. The revenues for 2013 were for the period from the date of the acquisition to December 31, 2013, and are therefore not meaningful to compare to the 2012 results.
Contingent consideration in connection with business combination of $5,157,951 arising from certain transaction value agreements (see detail in Item 10C) Prime has entered into with the sellers of Subsidiaries in connection with the Business Combination is recorded as an expense in the consolidated statements of loss and comprehensive loss and a current liability in the consolidated statements of financial position in 2013. This contingent consideration will be re-measured at each reporting period until settled.
