HighPeak Energy Beats Q1 Targets, But Hedging Losses Cloud Outlook

FORT WORTH, TX – May 06, 2026 – HighPeak Energy, Inc. (NASDAQ: HPK) today announced first-quarter results that paint a picture of a company excelling operationally while navigating the fierce crosswinds of a volatile global energy market. The Midland Basin operator surpassed production guidance and slashed costs, yet reported a substantial net loss driven by its hedging program in an environment of soaring oil prices.

While the company posted a GAAP net loss of $127.4 million, or $1.02 per share, the figure was skewed by a staggering $157 million loss on derivative instruments. When adjusted for these non-cash items, the company’s adjusted net loss was a much narrower $2.7 million, or $0.02 per share. The results highlight the dual reality for many producers: strong underlying performance tempered by financial strategies designed to protect against price collapses, which can become costly liabilities when prices surge unexpectedly.

Operational Prowess Drives Performance

On the ground in West Texas, HighPeak's team delivered a standout quarter. Production averaged approximately 46,000 barrels of oil equivalent per day (BOE/d), beating the midpoint of company guidance by 7.5%. Critically, daily oil production saw a robust 10% increase compared to the previous quarter, a metric closely watched by investors. This outperformance was attributed to a combination of strong initial output from new wells and ongoing optimization of its existing production base.

Perhaps more impressively, the company demonstrated significant progress on cost control, a key focus in its 2026 strategy. Lease operating expenses (LOE) came in 17% below the company’s guided range and were 22% lower than fourth-quarter 2025 levels. HighPeak’s cash costs for the quarter were $15.81 per Boe, with the core lease operating cost at a competitive $6.53 per Boe. This disciplined cost management contributed to an unhedged margin of $36.76 per Boe, showcasing the fundamental profitability of its assets before financial instruments are factored in.

“We are starting the year strong, with first quarter operating results outperforming guidance across the board, and I am proud of how our team executed in every area of the business,” said Michael Hollis, President and CEO of HighPeak, in a statement. He emphasized that the company’s core objectives for 2026 remain achieving financial resilience, maintaining its capital program, and prioritizing corporate efficiency.

The Double-Edged Sword of Hedging

The significant gap between HighPeak’s GAAP net loss and its adjusted results is rooted in its commodity hedging strategy. The reported $157 million derivative loss was composed of $17.4 million in realized cash settlement losses and a much larger $140 million in unrealized, mark-to-market losses. These non-cash losses reflect the increased value of the company’s hedging contracts in a market where crude prices have climbed dramatically.

Geopolitical turmoil, particularly the “2026 Iran crisis” and related disruptions to the critical Strait of Hormuz shipping lane, pushed benchmark crude prices above $100 per barrel during the quarter. While HighPeak’s hedging program—which includes swaps and costless collars—provides a floor to protect revenues from a price collapse, it also caps the upside. With approximately 40% of its production hedged, the company benefited from elevated spot prices on its unhedged volumes but was contractually obligated to settle its hedged barrels at previously agreed-upon lower prices, leading to the reported losses.

This strategy is a common, if sometimes painful, form of risk management in the notoriously cyclical energy sector. While the paper losses weighed on the headline earnings, the hedges offer a degree of certainty that allows the company to execute its capital plans with more confidence. The challenge for investors is weighing this stability against the opportunity cost in a bull market for oil.

A Disciplined Strategy for Uncertain Times

In response to market volatility, HighPeak is firmly in what it calls a “maintenance mode development strategy” for 2026. The primary goals are generating free cash flow and reducing debt rather than pursuing aggressive production growth. This disciplined approach is reflected in its capital program. The company spent $78.4 million on capital expenditures in the first quarter, in line with its plan to keep spending below 30% of its full-year budget, which is guided between $255 million and $285 million—nearly a 50% reduction from the previous year.

To support this financial strategy, HighPeak suspended its dividend, a move expected to improve annual liquidity by $20 million to $25 million and accelerate debt repayment. The company ran one drilling rig and one frac crew during the quarter and plans to maintain that modest pace for most of the year. After drilling nine new wells and bringing twelve online, HighPeak exited the quarter with 18 wells in various stages of progress, positioning it to maintain a relatively flat production profile for the remainder of 2026.

“While the current situation has created what could become one of the most significant crude oil supply shocks the world has ever seen, HighPeak intends to use every dollar of incremental free cash flow the right way by strengthening our financial foundation,” Hollis stated, reinforcing the company's conservative stance. “These stronger prices are helpful, but disciplined execution is what will create lasting value for our stakeholders.”

Despite the strong operational beat, the market reaction was subdued. HighPeak's stock fell approximately 10% following the announcement, suggesting investors were more focused on the headline net loss, the impact of the hedging program, and a year-over-year decline in total revenue. The mixed sentiment underscores the complex environment HighPeak must navigate as it balances operational excellence with financial prudence in a world of geopolitical uncertainty and fluctuating commodity prices.