Welcome to High Peak Energy's 2026 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Solon, Chief Financial Officer. Please go ahead. Thank you. Good morning, everyone, and welcome

to High Peak Energy's first quarter 2026 earnings call. Representing High Peak today, our President and CEO Michael Hollis, Executive Vice President Ryan Hightower, Executive Vice President Daniel Silver, Senior Vice President Chris Monday, and I'm Stephen Boland, the Chief Financial Officer. During today's call we may refer to our May investor presentation and press release which can be found on Hypeake's website. Today's call participants may make certain forward looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. So please refer to the cautionary information regarding forward looking statements and related risks in the company's SEC filings including the fact that actual results may differ materially from our expectations due to a variety of reasons many of which are beyond our control we will also refer to certain non-GAAP financial managers on today's call so please see the reconciliations in the earnings release and in our May investor presentation I will now turn the call over to our president and CEO Mike Hollis thank you Steve good morning

everyone and thank you for joining us we appreciate you taking the time to be with us today. I'm going to spend a few minutes walking through our first quarter results, how we're positioned today, and how we're thinking about the rest of 2026. And I'll tell you right up front, the business is doing exactly what we said it would do. We are executing, we're staying disciplined, and we're building a stronger company quarter by quarter. Let's start with the first quarter. We're off to a very strong start this year and I'm proud of the way our team has performed across the board. We outperformed expectations on every major operational measure. Production averaged approximately 46,000 BOEs per day which came in about seven and a half percent above the midpoint of our guidance range which includes the effects of winter storm fern and with a quarter to date production coming in as strong as or stronger than q1 production now oil production specifically was a 10% quarter over quarter which is a meaningful step up and speaks to the quality of both our new wells and our base production. And that's important because it wasn't driven by just one thing. It was a balanced success. We saw strong performance from the new wells we brought on during the quarter and at the same time we continue to optimize and improve our base production. That combination is what drives consistency in the business. It's a direct result of operational work our team has been focused on over the last several quarters, dialing in execution, tightening processes, and getting better in every aspect of the business. Now let's talk about cost because this is where we really separated ourselves this quarter. Our operations team delivered exceptional cost performance. Lease operating expense per BOE came in more than 17 percent below our guided range and roughly 22 percent below the fourth quarter levels. That's a material improvement in a very short period of time. And just as important, it wasn't just a per unit story. On an absolute dollar raises our operating costs declined by approximately 7.4 million dollars quarter of a quarter. So we spend meaningfully less money while producing more barrels. That's exactly what operational efficiency should look like. Now what drove that? Three primary areas. First, continued optimization of our chemical program, making sure we're using the right treatments in the right places at the right cost. Second, more efficient use of film gas. Given the current dislocation between Waha pricing and Henry Hub, we're not making money on our gas at the moment, so we're putting it to work in our own operations wherever we can. That's a practical economic decision and is paying off. And third, continued electrification across our field operations. That's improving reliability, lowering costs, and positioning us well for the long term. Now put it all together, this is a structurally more efficient business than it was just a few quarters ago. Turning to our development program, we are exactly where we need to be. First quarter drilling and turning line activity represents roughly one-third of our planned 2026 program. Capital spending came in right in line with expectations at about 29% of our full year budget. We exited the quarter with 18 wells in progress, and that puts us in a strong position to execute the remainder of the year. Now, as a reminder, we guided to deploying roughly 60% of our capital in the first half of the year, and we remain firmly on track with that plan. Execution is steady, predictable, and controlled. Now, let's step back and talk about the bigger picture. capital discipline and efficiency because that's really the core of our strategy as you know we made a deliberate shift heading into 2026. we reduced our capital program by roughly 50 percent compared to last year and we moved into what we are calling maintenance mode development strategy And the goal is simple, hold production roughly flat while maximizing free cash flow. And the early results are very encouraging. One key metric we track is net oil produced per dollar of capital invested. Quarter over quarter, that metric improved by more than 60%, moving from about 21 and a half thousand barrels per million dollars of capital spent to approximately 35.4 thousand barrels per million. That's a significant step change in efficiency and again it's coming from both sides of the business. Strong well performance on new capital and meaningful gains on the base asset now let me spend a minute on that base optimization work because it's an important part of the story during the quarter we executed 16 targeted workover projects these projects increase production from roughly 1,600 barrels of oil per day to about 2,600 barrels of oil per day. That's an add of about a thousand barrels of oil per day and but importantly an increase of 63 percent per well on average for those 16 wells with relatively low capital intensity. That's exactly the type of work we want to be doing especially in this current commodity price environment where every incremental barrel we produce receives elevated spot prices. These projects leverage infrastructure we already own, target opportunities we understand well, and they generate extremely high margin barrels. This is what disciplined capital allocation looks like in practice. Now let's talk about the broader environment and how we're thinking about it here at Hy-Vee. There's obviously a lot going on in the world right now. We've seen significant volatility in commodity prices driven largely by geopolitical developments in the Middle East. Near-term oil prices have moved meaningfully higher but when we look at the market and more importantly when we make decisions we focus on the back end of the curve and what we've seen there is a much more modest move roughly a 10 to 12 dollar increase from around $60 a barrel at the beginning of the year to the low 70s per barrel currently now that's constructive but it's not something that fundamentally changes our strategy we are not going to chase short-term price signals. We're not going to accelerate activity just because spot pricing has moved. We are going to stay disciplined and develop this asset at the right pace and that's one that reflects sustainable pricing, capital efficiency, and long-term value creation. Now with that said, this geopolitical situation, if it persists, we do believe there will be increasing pressure on the back end of the curve over time. And if that happens, it creates a meaningful long-term opportunity for Hype. More sustained pricing strength means higher incremental free cash flow for years to come. And that's where real value gets created. And importantly we are positioned to benefit from that environment. We currently have approximately 40% average exposure to spot oil prices based on the midpoint of our production guided range and our current hedge book. Please know that current production is well above this level and given even more exposure. That gives us meaningful upside to stronger pricing and at the same time we've protected the downside. We've established a hedge four in the mid $60 per barrel range that provides a reliable base level of cash flow to fund our development program and service are dead so we've got both upside torque and downside protection and you saw that show up in the first quarter excluding changes in working capital we generated over 21 million dollars of free cash flow that's up from a negative 42 million dollars last quarter and that only reflects less than one month of elevated oil prices. If prices remain higher for longer, that free cash flow number moves up materially as we move through the year and accelerates the time frame needed to strengthen our balance sheet. Again, our priority for that free cash flow is very clear. We are going to strengthen the balance sheet. One additional item to touch on as we talk about strengthening the balance sheet, we recently put on an at-the-market or ATM program in place. This gives us the ability to issue up to $150 million of common stock. Now, just to be clear, there is no requirement for us to issue a single share under this program. This is about flexibility. It's a tool that allows us to be opportunistic if we see dislocations in the market. If we do choose to access the ATM, the use of proceeds is very straightforward. It's about reducing debt, increasing liquidity, and continuing to strengthen the balance sheet. Now, let me close with our focus for the year. Look, nothing's changed, and that's by design. our priorities are clear. First, strengthen the balance sheet through sustained free cash flow generation, debt reduction, and or increasing liquidity. Second, preserve high quality inventory by developing our inventory at a disciplined pace and continuing to optimize both new wells in our base production. Third, improve corporate efficiency, focusing on returns, not volumes, and ultimately create long-term equity value and maximize net asset value. We are allocating capital where it drives the highest returns, and we are building a more durable, more resilient business that is built to thrive across commodity cycles. Now, stronger commodity prices are helpful, no question, but disciplined execution is what creates long-term value, and that's exactly what Hypeak is delivering. With my comments now complete, Operator, please open the call up for questions.

Operator? I am so sorry for the technical – I'm sorry we had some technical difficulties there for a moment. We will conduct the question and answer session now. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question today comes from Jeff Rowe with Water Tower Research. Your line is open.

Mike, given where you are with production and 60% of estimated 26 capital being spent in the first half of the year, can you share some color on production levels, progression in the back half of the year, and with the inventory of ducks that you might exit 26, any early color or preliminary color on 2027?

No, Jeff. Great question. And, you know, as we laid out in our guidance last quarter, you know, we were planning to spend roughly 60% of that budget in the first half of the year. And, you know, as we've kind of shown here in Q1, we were right along that. We did about 33% of the activity for the year and came in a little under 30% of the capital spent for the year. So, as you look through 2026, the activity in Q2 will be very similar to what we had in Q1. From a production standpoint, yes, we're running hot to our guide today, and up through quarter to date even, and as you look through the latter half of the year, the additional work that we do in the first half, that is the wells that are going to be producing in the second half of the year so I think what you'll see throughout 2026 is more of a flat production profile that looks very similar to what we've done to date this year you know and again yes it's a little hot to our guided range on the top you know above the top end of the guided range and we hope between base optimization projects that we're working on and the great performance we've had from our new wells and we're drilling very similar wells throughout the entire year and that's what's going to be coming online then we will be in the upper portion of that production range that we guided to originally but for the capex spin the guided range is still very applicable and i think

we demonstrated that in the first quarter if you think about 2027 mike would you plan from from an activity standpoint another year where it's weighted toward the first half of the year to as you said support product to get the full benefit of production in the in the year the wells are being drilled or as much of it as possible i don't know that we uh we're detailed

enough to mic a brick as I like to call it from West Texas slang but I think if you look into 2027 I would assume a very very similar program to what we had in 2026 and there was one question I did not answer which was how many ducks we would exit the year at we will exit with roughly 9 to 10 ducks in 2026 going into 27. So, we would be set up very similarly to do the exact program that we have in 26 and 27. So, again, if you're looking at kind of a CapEx spend in 27, I think what we have this year at midpoint of about 270 million is where you need to be, you know, kind of coalescing for modeling purposes.

On your workover efforts, are you doing anything differently to try to identify wells that need some attention and therefore justify the expense of going in and spending capital that turns into LOE expense but results in the increased production that you highlighted on slide seven?

No, that's a great question. And, you know, Jeff, we've got, you know, upwards to getting now close to 400 horizontal wells that are producing. So as we've gone through all of our inventory of producing wells, we do have a list of wells that we think would benefit from this type of intervention more than others. However, if a well is producing fine and everything's good, you probably wouldn't go take that well off production and go do this type of intervention. typically what we are looking for, and again, we don't want to do too many at one time. We're pretty early in this process. So what we've done to date are wells that we were going to go touch and do work on for some reason or another, and they met the requirements and look like a good candidate. Those are the ones that we went and did, and I think that's how you can kind of assume we will do for this year, maybe even next year. We need more time to watch the production increase that we have from these interventions and how that plays out over kind of a year, two-year time frame to really understand that before we would want to go and attack a well that's currently producing. and you know these are well interventions that we were going to have to do something thinking on the I like to call it a mini stimulation on the well things surfactants acid more or less cleaning the well more out and reducing you know damage to the formation that happens over time and we're seeing really good results I think you know as you look forward in the two three years from now, basin-wide, this is going to become one of the new knobs that we can turn in our industry to hopefully be able to extract a higher ultimate recovery from all of the wells in the basin. You're hearing this kind of thematically across a lot of the other companies' releases that they are kind of experimenting with some of these things too. So I think this is something that's here to stay and will increase the total recovery of this area.

Ryan or Mike, you had big working capital swings in the first quarter, which impacted pre-cash flow, as you noted in your remarks. Can you talk about how much of that activity was isolated to one-quarter events and how we should think about that as you move forward through 2026?

Yeah, great question, Jeff. If you recall, for the bulk of the fourth quarter, we ran two rigs, and we also had a couple of really large simul-frack jobs. So we did have a negative working capital swing of about $35 million in Q1. A lot of that is just that capital from the additional rig and a couple of those simul-frack jobs kind of working its way through the system. All that's behind us now. So on a go-forward basis, it's more steady state. So I wouldn't expect those large capital, working capital swings on a go-forward basis throughout the rest of the year.

And just lastly, Brian or Steve, Hypeake had a big unrealized mark-to-market hedge gain in the first quarter, which obviously impacted reported earnings. Can you talk about how that gain would be treated as you move forward in 2026 in a potentially lower oil price environment than what ended the first quarter? Yeah, absolutely, Jeff.

And I think you're referring to a large hedge loss in the first quarter. So the way to think about it, total derivatives loss in the first quarter on paper was about $150, $55 million. Only $17.4 million was actual cash loss. The rest of it, roughly $140 million, was a mark-to-market loss that was done as of March 31. So the way to think about that, if prices kind of pull back to lower levels throughout the rest of the year, that market-to-market loss is going to shrink, and any potential cash hedge loss would shrink as well as we kind of progress throughout the year.

Thank you.

Thank you very much. Our next question is from Nicholas Pope with Ross Capital. Your line is open.

hey good morning guys good morning nick good morning um curious a little to dig a little bit more on um the workovers and i know you have this slide um kind of talking about the benefits of that it looks like the workover expense for the quarter was was actually pretty low relative to kind of what the run rate was in in 2025 and so i'm just trying to understand my i guess what the activity expectation is going forward i mean a lot of wells obviously that you're looking at to potentially you know augment with with you know improve productivity with with these workovers but we kind of look at this expense line items it didn't seem like you had as much work and it was certainly helpful for the loe line item for the quarter just maybe i'm trying to understand how that splits out you know i guess how much is going into capital expenses how much is in this work over expense and what that should be going forward.

No, great, great question, Nick. So let me step back to last year and to kind of answer the question as to why overall LOE is down. You know, an LOE is kind of two buckets, right? It's your chemical and day-to-day, everyday LOE, and then it's your work over expense. and think work over expenses, repairing something on a well and just getting it back to the same kind of state that it was. That's the work over expense. If you look back into last year, kind of the latter half to three quarters of 2025, our work over expense started marching up throughout that year because we went and did a lot of those, getting the base production and the wells tip-top shake, and we spend, you know, call it a dollar-ish or a little bit more per BOE doing that in 2025. We only have so many wells, and there's always going to be some work over expense. You know, make sure you don't read through that it's going to zero. But I think a reasonable run rate for work over expense probably somewhere in the 75 cent to a dollar range is extremely conservative you know obviously we're much lower than that in q1 now to answer your other question about the type of interventions you know again we touch a lot of wells all the time some are designated as expense work basically getting the well back to its original state some are considered capital workovers where you're adding reserves and actually changing the value of the well after the fact. So to that, I would say with all the work we did throughout the quarter, some of these were capital workovers in our inner capital spend for the quarter. And I think that screened very well for the amount of work we did on our DNC budget the read-through there is we're shaving costs where we can on our traditional DNC budget enough that we're going to be able to slice some of these capital workovers in within the budget we currently have and on the expense side again we wanted to be very conservative with our early guide range. That's why you saw a fairly sizable workover program because we wanted to say, hey, if we had to continue what we did in 25, this gives us plenty of money in the budget to do it. But I think you're looking at it exactly right. It's not like we just moved a lot of cost from the expense bucket to the capital bucket, or you would have seen it show up there overall total cost is coming down that makes sense um one one other piece of this and

i don't know if it's connected or not i mean it sounds like it it might have been you know the i guess second half of last year um you know as you stepped out into i think it was to the further to the east you had some of the issues with kind of finding the i guess where you had water encroachment and in some of the the newer extensional wells um i guess where does that stand are those wells i mean are we just has that area just been kind of written off at this point and are those wells just not really part of the existing production or any plan going forward

great question nick uh you know a quarter or so ago we had a slide that showed a red box right exactly where you're talking about and yes we encountered some extraneous water production in that area. You know we kind of talked about the impact it had on our inventory so the only zone we carried inventory in that little red box was Wolf Camp A and the quick answer is no. Hypec is not going to drill another well in that little red box and that equated to about 18 wells coming out of our inventory. Now the existing wells that we do have there, we've got three of those wells producing today. We've done some interventions on those wells to reduce the amount of water coming in so they are very economic. They're just lower production because you're only producing from, call it, 4,000 feet of actual producing rock out of those wells. So from an economic standpoint for a new well no we would not drill another one but we will optimize the wells that we do have in that area but absolutely that had an effect with production kind of in the second half of 2025 and again all of that kind of rolls through on a BOE basis for your LOE per BOE cost in the second half of the year as well.

Got it. And I think I've talked to you about this before, but just total, I guess, high-peak water handling and disposal capacity relative to kind of where, what y'all are seeing in terms of water volumes currently?

Yeah, no, great question. And, again, we constantly highlight the infrastructure that Hypeak has put in place over the last five-plus years. And to your question there on the water system, if you look back a couple years, we were running six rigs, three frack crews, and looking to build to 75,000 to 100,000 barrels of oil a day. Now, with that you need to be able to handle 400,000 barrels of water per day. So we put in very large pipes, very large pumps, several SWDs, so our SWD capacity is a little over 400,000 barrels of capacity today. Big pipelines that are 24 inches in diameter, we can move around 400,000 barrels a day. And of course, we recycle almost 95% of what we use on the stimulation side. But to give you an idea of where we sit today, where we're producing roughly, you know, on gross spaces of oil that we produce, it's pretty close to 45,000 to 47,000 barrels of gross of oil. So with that kind of four to one, we're a little over 200, call it 210, 220,000 barrels of water a day being produced across high peak. Some of that a little bit more than four times is because you have some flow back from the new fracked wells but we're about 45 to 50 percent utilized of capacity that high peak has we take very little third party water into our system it's available so for folks near and around us we do have plenty of capacity for disposal but the infrastructure was built for life of field and that stretches across our oil, gas, electrical, recycle capability. All of that's built in place and I think you're seeing that on our LOE cost numbers and then same thing on our CAPEX numbers as we have built our all of our large central tank batteries you're starting to see the cost per well go way down because today when we drill a new well all we have to do is add some metering equipment to tie it into an existing battery that's already there so both sides of the equation is what we've attacked and we've been able to bring

calls down across the board got it that is all very helpful Mike I appreciate the time guys appreciate the time hey thanks Nick thank you very much this

does conclude our question and answer session we thank you very much for your participation in today's conference. You may now disconnect.