HighPeak Energy: the stock has run 45% to $11.39, but my Base value is $7.93

HighPeak Energy earned $0.59 a share in the second quarter and has no dividend, but the stock has risen from $7.88 to $11.39 since my September 24 analysis, a gain of 44.5%. On October 6 the company announced a $450 million convertible preferred stock investment and an $800 million bank facility to replace its $1.17 billion term loan. That is real relief on interest and amortization, but it is a deal that has not closed, and it puts a new claim ahead of common holders. I model it as conditional.

At $11.39, the last trade at 5:42 pm New York time on October 19, 2026 (after hours; an XTB screen on the morning of October 20 shows the same price), the shares trade 43.7% above my triangulated Base value of $7.93. The Bear value is $0.00, 100% below the price, and the Bull value of $16.54 is 45.2% above it. Confidence is grade D (10/25), the required margin of safety (MOS) is 50%, and the maximum buy price is $3.96. The price is not far-fetched: a generous set of inputs reaches $11.72. But it needs most things to go right at once.

Valuation route: a Permian-style shale oil producer, a depleting business. Primary method: a risked proved reserve value (the independent engineer's PV-10 repriced for today's oil price and costs). Secondary method: normalized 2027 EBITDAX at 3, 4 and 5 times. Classification: standard company, not a compounder. This replaces my September 24 analysis, which is archived.

What HighPeak is

HighPeak Energy drills for oil in the Midland Basin of West Texas, mainly in its Flat Top and Signal Peak areas. In the second quarter it produced 45.3 thousand barrels of oil equivalent a day (MBoe/d), 64% of it crude oil and 83% liquids, and it spent $107.5 million on capital. Its operating costs are low: lease operating expense was $6.43 per barrel of oil equivalent (boe), and total cash costs including taxes and cash overhead were $17.02.

Its weakness is what it takes to stand still. Oil production fell about 15% from a year earlier, to 28,952 barrels a day, and total production fell about 7%. At the end of 2025 proved reserves were 173.9 million boe, 55% of them developed, down 12.6% from a year earlier, and the engineer's PV-10 value fell 39.3% to $2,057 million. Proved reserves equal roughly 10.5 years of first-half production, and developed reserves only about 5.8 years. The company has to keep drilling to hold output.

The latest results

The first-half net loss was $45.2 million, or -$0.36 a share. The profit in the second quarter owes a lot to oil near $99 and to the noncash gain on hedges, not to a change in what the business earns in a normal year. The quarterly dividend was suspended in the first quarter of 2026 and none was paid in the first half. The yield of 0.35% still shown on trading screens is stale and I give it no weight. The next report, for the third quarter, is not in this analysis.

Which cash to value

Company EBITDAX leaves out drilling, interest, taxes and compensation. For a business that must keep drilling, I value cash left for common holders after all of those, and I count capital spending in full. The first half of 2026 looks like this:

Operating cash flow did not cover the drilling program in the first half. The company's own free cash flow of $23.5 million excludes stock pay and other property spending and leaves out the working capital swing. Second quarter free cash flow of $37.6 million included a $34.5 million source from delaying payments to drillers, which can reverse. History tells the same story:

Over the three years hard cash totaled about -$307 million, and 2025 would have been negative without a working capital benefit (about -$38.5 million before it). A good oil price quarter does not yet show a durable owner cash stream.

Shares, preferred stock and the new financing

The options share in common dividends before they are exercised, so cash per share has to be divided by 139.16 million, not 126.45 million. They are barely in the money at $11.39 and have about 3.7 years left, so I assume they lapse in mid-2030 in the long-run path. If the preferred stock converted, it would add 37.5% to the share count.

The $800 million bank facility is a commitment, not $800 million of cash. I assume a draw of $643.7 million at 6.5%, which leaves about $156 million undrawn. Net bank debt after closing is $593.7 million plus the $450 million of preferred stock, so the combined claim is larger than today's net loan by exactly the $20 million of fees. There is no free equity from relabeling debt.

From the company's October 6 filing: the preferred stock costs 6% in cash for the first two years (or 7.5% paid in more stock), then 7.5% in cash (or 9% in stock) until year five, then 10%. On $450 million that is $27 million a year, then $33.75 million, then $45 million, paid before any common dividend. It converts into common at $9.50 at the holder's option, and the company can force conversion after three years only if the stock closes above $14.25 for 30 of 40 trading days. After three years the company can also redeem it for cash at a price that gives the investors a 10% annual return. Two years of paying in stock would lift the claim to about $522 million and the conversion shares to about 55 million. The investors will each appoint a director.

The company expects the deal to close in the fourth quarter of 2026. Its news page lists nothing after the October 6 announcement, so I treat the deal as open. If it fails, the new lower interest cost disappears and the $1.17 billion term loan, with $30 million quarterly principal payments, stays. In the valuation I take the lower of two values for common holders: one that keeps the preferred stock as a claim, and one that converts it into shares.

The primary valuation: proved reserves

The independent engineer's PV-10 already deducts field operating costs, production taxes, future drilling and abandonment. At the engineer's $65.34 oil price it was $2,057 million. I reprice each category (producing, developed non-producing and undeveloped) for $79.74 oil, add 5% to future costs, and then risk each category: 100% for producing reserves, 90% for developed non-producing and 80% for undeveloped. This is a proxy, not a new reserve report.

The lower of the two, $6.63 a share, is my primary Base. The Bear and Bull values are $0.00 and $14.03. No premium is given for undrilled acreage or for a takeover. Two inputs deserve respect: a $100 million error in the cash produced since December moves the value by about $0.79 a share, and a $50 million shortfall in the financing bridge by about $0.40 on the reserve value and $0.24 on the blend.

Oil price and the discount rate move the blend (60% reserve method, 40% EBITDAX method) like this:

At $90 oil only the 8% column reaches today's price ($11.44). At $100 oil the 8% and 10% columns do ($13.42 and $12.21), while 12% gives $11.10.

The secondary valuation: EBITDAX

For 2027 I assume 45,000 boe a day with a 64% oil share, the U.S. government's October forecast of $79.74 for the 2027 average oil price, $20 for natural gas liquids and $0 for gas delivered (second quarter gas sold for -$1.50 per thousand cubic feet). That makes sales of $911.2 million. Cash costs of $13.80 per boe and production taxes of 4.9% leave $639.8 million before hedges. The company's disclosed hedges cost me about $62.7 million at the forecast's quarterly oil path, so EBITDAX is $577.1 million. Then the owner cash for common holders in 2027 is:

That is a cash yield of 10.9% on $11.39, but the figure is a cash capacity, not a payout the company has announced. If the preferred stock converted instead, the coupon disappears but there are 186.5 million claims, and cash per share falls to $1.071. The $320 million of capital is my estimate. Management's 2026 budget is $255 million to $285 million and production guidance was 41,000 to 44,000 boe a day, so $320 million for 45,000 is not generous.

Four times is my estimate for a small producer that has to keep drilling and is changing its funding. As a check, Permian Resources (PR) trades at 4.40 times second-quarter EBITDAX, annualized, at a $24.80 share price. It is far larger, with a stronger balance sheet and reserves, and HighPeak gets no premium for looking cheaper. I did not put numbers on Matador and Diamondback, because the parent and consolidated figures and minority interests do not line up cleanly.

Both asset methods start from the same $79.74 oil price and the same funding, so agreement between them would not be independent proof. In any case they do not agree.

Triangulating the two values

The reserve method gets more weight because depletion and the cost of drilling matter most for this kind of company. The Base values differ by 39.2% of their average, above the 30% line at which my framework treats the methods as disagreeing. The reserve method gives no credit for new wells that are not yet proved, while the EBITDAX method assumes the company keeps replacing production at acceptable returns. Confidence is cut one grade, from C to D, for this once.

What the price already assumes

A long-run oil price near $95 is possible during a long supply disruption, but the government's forecast has oil falling in 2027, and I do not extrapolate a $100 world forever. The 12% entry price of $11.17 comes from a different path that assumes the company keeps drilling and sells at 4 times EBITDAX in October 2031 (cash paid out each October 2027 to 2031, with the first cut 10% for transition friction). Its return at $11.39 is 11.5% a year, a little under 12%. That is a return from a franchise that keeps going, not from the reserves on the books, so I do not average it with fair value.

Bear, Base and Bull

In the Bear, both methods leave nothing for common holders after the bank and preferred claims. A $0.00 value is a limited-liability floor, not a prediction of bankruptcy: the company would cut drilling, and the bank borrowing base would matter, before that point. The Bull needs $100 oil, more production and cheaper funding together. It is not a price target.

Generous test: keep $79.74 oil, remove reserve cost inflation, risk every category at 100%, use an 8% discount rate, a 5 times multiple, $270 million of capital and a 5.5% bank rate. The blend rises to $11.72, only 2.9% above the price. That weakens any claim that $11.39 is plainly wrong, but it still does not give a 50% margin of safety.

How the buy price is set

Confidence grade D calls for a margin of safety of at least 50%. I use 50%, the lowest in the band, because the financial statements are detailed and the financing has committed counterparties. The risks that are already in the numbers (oil, capital, reserve risk, financing, dilution) are not charged a second time. The maximum buy price is $7.93 x (1 - 50%) = $3.96. Even at that price the Bear value is zero.

Three numbers answer different questions: what the shares are worth ($7.93), what price would give a 12% return on cash and exit ($11.17) and what price leaves a 50% margin of safety ($3.96). The return-based entry does not override the more cautious reserve view.

The dividend

There is none. The board suspended the common dividend in the first quarter of 2026, and the company said that would add $20 million to $25 million of yearly liquidity. Preferred holders will rank ahead, with $27 million a year in cash, rising to $33.75 million and $45 million, and paying in stock only increases their claim. I do not forecast a restart. A trading screen yield of 0.35% is not income.

Reasons to own

• Low field costs. $6.43 of lease operating expense per boe and existing infrastructure can produce plenty of cash at $80 to $100 oil.
• Financing relief if it closes. Replacing a $1.17 billion term loan and its amortization could free cash for sensible drilling.
• Oil leverage. The Bull case reaches $16.54 at $100 oil with better operations, and the proved reserves are real, independently estimated assets.
• Optionality. A sale or a new reserve report could recognize inventory that my proved-only Base does not count, with no takeover premium assumed.

Main risks

• Oil price and depletion. At $55 oil with sticky capital, the common equity is worth nothing in my model. Output has to be replaced every year.
• Financing. The deal can fail, the bank's final terms are not published, the borrowing base can be cut, and the preferred coupon steps up. A second claim on cash comes before common holders.
• Dilution. The preferred stock can convert into 37.5% more shares and the legacy options share in dividends. Counting the cash without the claims overstates the value.
• Customers and measurement. About 88% of first-half sales went to one buyer, Delek, which is not proof of a risk to the revenue but is a credit and logistics point. The reserve proxy has no new well-level decline curves.

Stock Analyza scorecard

The valuation score is 23/100 (highly overvalued under the Base), from 8/40 for the discount to value, 2/20 for protection against the Bear, 5/15 for agreement between methods, 3/10 for history, 4/10 for what the price implies and 1/5 for data quality. Management scores 10 of 20: operating execution and cost control are good, but there is a record of heavy spending, a leveraged balance sheet and financing that costs common holders something.

Confidence score

Before the divergence cut the total was 14 (grade C). The score is a judgment with visible parts, not a probability.

What I would watch from here

The most important thesis breakers

• No financing. HighPeak cannot refinance, or does so on worse terms than announced. I would then rebuild the valuation from a restructuring view rather than widen a range.
• Maintenance capital. Holding 45,000 boe a day takes $400 million a year or more, which would shrink common cash sharply.
• Oil falls. WTI near $55 while production falls and capital cannot fall as fast; senior claims then absorb the common value.

How I checked the model

I rebuilt the model and checked the facts against filings and company releases. I reproduced: the 2027 sales, costs and owner cash; the oil hedge cost (about $64.7 million, using the contracts and the October government price path); the financing bridge; the preferred stock and option waterfall for both branches; the primary value from the risked field value through to the share value; the three secondary values; the 60/40 blend, divergence, upside and buy price; the reverse solve for the multiple (6.77 times); the return of 11.5% and the $11.17 entry; the cash per claim series and the growth rates. The $95.46 oil price is consistent with the table above, which brackets $11.39 between $90 and $100. I also reproduced the tax adjustment and the way risk factors reduce the repriced reserve values.

From the company's own documents I confirmed: second quarter production, prices, earnings, EBITDAX, costs and capital; cash and the August 6 share count; first-half operating cash flow, capital spending, stock pay and the lack of dividends; 2025 reserves and PV-10; 2026 guidance and the dividend suspension; the 2027 hedge book; and the preferred stock and bank commitment terms. The company's news page showed no closing announcement after October 6. The government's October oil forecast, the reserve category tables, the option count and strike, the term loan balance and maturity, the customer share and the peer numbers come from the supplied analysis and I could not independently re-read them. The 5% cost inflation effect on reserves (about $88 million in the Base) cannot be recomputed without the engineer's cost tables.

Main data limits: October cash is an estimate, the bank's final pricing is unpublished, there is no updated reserve report or maintenance-only production study, and the share count is from August. These are why Confidence is D.

Final verdict: reduce at $11.39

HighPeak has low costs, a possible way out of expensive debt and real oil leverage. But at $11.39 you pay 43.7% more than my Base value, for a stock whose common cash sits behind a $450 million preferred claim, whose reserves have been shrinking and whose financing has not closed. The price needs oil near $95 for the long run.

Verdict: REDUCE at $11.39, watchlist for new money. Triangulated Base value $7.93, downside 30.4%, Confidence D (10/25), required margin of safety 50%, maximum buy price $3.96.

For holders this means reducing, not panicking: the Bull case at $16.54 is real and I show what it needs. For new money it means waiting for a far lower price or a closed financing with a new reserve report and cash that covers the drilling.

Analysis history

What changed: the stock rose 44.5%, and the Base value fell from $9.61 to $7.93 because this analysis adds the proposed $450 million preferred stock and the dividend-sharing options, and risks the reserve categories. The two valuations are built differently, so the values are not directly comparable.

Sources

Primary sources include HighPeak Energy's second quarter 2026 quarterly report on Form 10-Q, the second quarter results release of August 10, 2026, the refinancing announcement of October 6, 2026 and its Form 8-K, and the fourth quarter and 2025 results release with 2026 guidance. The reserve report data are from the company's 2025 annual filing, and the oil price path is from the U.S. Energy Information Administration's Short-Term Energy Outlook for October 2026. Peer figures come from the second quarter earnings releases of Permian Resources, Matador and Diamondback.

The reference market price is $11.39, the last trade at 5:42 pm New York time on October 19, 2026 (after hours), confirmed by an XTB screen on October 20. Values per share use 126.45 million common shares for the asset methods and 139.16 million dividend-sharing shares for cash per share. October cash, the bank draw, sustaining capital, multiples and the 2027 to 2031 paths are analytical estimates, not company guidance.