HighPeak Energy Inc. (NASDAQ: HPK) share prices suffered in the first half of 2023, but the tough times should end soon. The company's stock price was hindered by underperformance and a need to raise capital, including dilution, but there is an upside.
The company restructured its debt and shored up its balance sheet, and operational improvements are underway. Those include a reduction in capex to focus on the efficient completion of existing drilling projects with the expectation that curtailed projects would ramp back to expected levels in 2024.
In this light, it's understandable that shares moved to a long-term low, prompting insiders to buy the stock in bulk.
The company has only seen insiders buy for nearly two years, and the buying is broad-based and heavy. Insidertrades.com tracks multiple purchases from seven insiders, including a director, the CEO, the president, VP, CFO, the COO and a major shareholder, John Paul Dejoria.
He's bought multiple times over the past two years, including a large transaction in early July. As the largest shareholder, he owns over 12% of the stock.
Institutions are also buying the stock. The institutions don't own much of the company, only about 11%, which is almost all available after you count in the insiders, major shareholders and venture capital firms. The telling indicators in the institutional data are that they are buying on balance and at a high pace. Buying outpaced selling by 4:1 over the past 12 months and may continue to do so, given the outlook for production and operational improvement.
The analysts will be a headwind for the stock in the near term. There is only one analyst with a current rating, and it is not bullish. The sentiment is "sell" with a price target about 40% below the recent action. If there is no change in this market segment, the price action may be firm, but it is not likely to move appreciably higher.
Capital Raises and Dilution Weighs on the Market
The primary cause for the stock's recent implosion is the need to raise capital. The story first broke when the company announced a debt offering worth $575 million, compounded by a share offering intended to raise $135.5 million.
The takeaway from the news is that $475 million of the debt raise will be used (or was used) to reposition existing debt, with the rest intended for corporate use. The share offering will bolster the cash position and aid operations through the end of the year. That includes mothballing two drilling projects to focus on the two closest to completion to improve production and cash flow by the end of the fiscal year. At that point, management expects cash flow to be sufficient to maintain operations and restart the other two drilling teams.
HighPeak Energy Pays a Dividend
HighPeak Energy isn't a cash-flow powerhouse, but it is positive and makes enough profit to pay dividends. The payout is worth about 0.75% to investors with shares near $14.25 and may grow. The payout is only 3.9% of the earnings outlook, with production and revenue expected to grow significantly in the 2024 fiscal period.
The chart is favorable in that it shows a potential bottom. The market hit a new low in late June but is rebounding from that level. The market had become oversold and is now on the cusp of a strong buy signal. MACD already shows a bullish crossover. If that is confirmed by the stochastic and then a moving average crossover, this market could return to the $20 to $28 range by the end of the year.