Pure Acquisition Corp. (“Pure”) (NASDAQ: PACQ, PACQU, PACQW), an
oil and gas exploration and production focused special purpose
acquisition entity, today announced that it has amended its
business combination agreement (the “HPK Business Combination
Agreement”) with, among others, HighPeak Energy, Inc. (“HighPeak
Energy” or the “Company”) and certain affiliates of HighPeak Energy
Partners, LP (the “HighPeak Funds”) to enhance the return for those
Pure stockholders who participate in the business combination.
As merger consideration, each Pure stockholder who
participates in the business combination will receive:
- One share of HighPeak Energy common stock
- A cash payment equal to the amount, if any, by which the
per-share redemption value of Pure’s Class A common stock exceeds
$10.00 per share at the closing of the business combination and
which is estimated to be approximately $0.60 per share
- One public contingent value right (“Public CVR”) at the closing
of the business combination in exchange for each share of Pure
Class A common stock which provides holders with a 10% per annum
preferred simple return including downside protection to $4.00 per
share (See below for more information).
The Public CVRs are contractual rights to receive a
contingent payment in the form of additional shares of HighPeak
Energy common stock. The Public CVRs provide significant valuation
protection if the trading price of HighPeak Energy’s common stock
is below the price that would provide the Public CVR holder with a
10% preferred simple annual return based on $10.00 per share at the
closing of the business combination, subject to a floor downside
per-share price of $4.00 at the CVR maturity date of two years
which can be extended an additional six months by the HighPeak
Funds. HighPeak Energy intends to list the Public CVRs on either
the NYSE or the Nasdaq. The HighPeak Funds will deposit 2.125
shares of HighPeak Energy common stock in escrow to secure the
downside protection and preferred return for Pure stockholders who
participate in the HighPeak Energy business combination. If
any additional shares of HighPeak Energy common stock are issued to
Public CVR holders following the CVR maturity date, the HighPeak
Funds will forfeit an equivalent number of escrowed shares to
HighPeak Energy for cancellation. HighPeak Energy will also issue
contingent value rights to forward purchase investors and PIPE
investors (“Private CVRs”) which will have generally the same
characteristics as the Public CVRs except the Private CVRs will not
be listed or traded on any national exchange. For additional
information regarding the specific terms of the CVR, see the
Company’s website at www.highpeakenergy.com, the Company’s
Amendment No. 3 to Form S-4 filed with the SEC on July 2, 2020 at
https://www.sec.gov/Archives/edgar/data/1792849/000143774920014428/hpe20200601_s4a.htm
and Pure’s Form 8-K on July 2, 2020 filed with the Securities and
Exchange Commission (the “SEC”) at
https://www.sec.gov/Archives/edgar/data/1726293/000143774920014436/pacq20200701_8k.htm.
Jack Hightower, HighPeak Energy’s Chairman and CEO
commented, “Due to the current volatile energy and equity markets,
we created the contingent value right to reduce Pure stockholders’
risk and incentivize them to participate in the business
combination. Management of the HighPeak Funds believes so strongly
in the upside potential of the asset base that it is contributing
its entire oil and gas asset base in exchange for HighPeak Energy
shares with no cash consideration plus it is willing to put 2.125
of the shares received at the closing into escrow for every CVR
issued to secure the preferred return and downside protection for
every Pure stockholder or private investor who participates in the
business combination.”
Mr. Hightower continued, “HighPeak Energy has the
potential to generate substantial cash flow growth from its 51,000
net acre position in the oil-rich Howard County area of the Midland
Basin. We believe our assets provide for one of the best domestic
onshore U.S. opportunities due to the high oil production content
and industry leading full-cycle margins of our wells.”
Below are illustrative examples of the aggregate
number of additional shares of HighPeak Energy common stock that
would be issuable to the CVR holder under several HighPeak Energy
share price scenarios at the CVR maturity date of either two or two
and one-half years following the closing of the business
combination. The share reference price is based on the “Reference
Price” as defined in the contingent value rights agreements, other
than the reference prices that are below $4.00, which are shown for
illustrative purposes only. The description of the Public CVR
and Private CVR is qualified entirely by reference to materials
filed by Pure and HighPeak Energy with the SEC at www.sec.gov which
describe the Public CVRs and Private CVRs in more detail.
Share Reference Price |
Preferred Return Shares
andCorrespondingCVRs |
TotalCorrespondingEscrowed
Shares |
TotalCorresponding
Escrowed Shares Available
for Forfeiture to HighPeak
Energy |
Shares
ofHighPeak EnergyCommon Stock
tobe Issued
toApplicableQualifying
CVR Holder |
Total Value
toApplicable Qualifying
CVR Holder |
$ |
12.50 |
1 |
2.125 |
2.000 |
0.000 |
$ |
12.50 |
$ |
12.00 |
1 |
2.125 |
2.000 |
0.000 |
$ |
12.00 |
$ |
11.00 |
1 |
2.125 |
2.000 |
0.091 |
$ |
12.00 |
$ |
10.00 |
1 |
2.125 |
2.000 |
0.200 |
$ |
12.00 |
$ |
9.00 |
1 |
2.125 |
2.000 |
0.333 |
$ |
12.00 |
$ |
8.00 |
1 |
2.125 |
2.000 |
0.500 |
$ |
12.00 |
$ |
7.00 |
1 |
2.125 |
2.000 |
0.714 |
$ |
12.00 |
$ |
6.00 |
1 |
2.125 |
2.000 |
1.000 |
$ |
12.00 |
$ |
5.00 |
1 |
2.125 |
2.000 |
1.400 |
$ |
12.00 |
$ |
4.00 |
1 |
2.125 |
2.000 |
2.000 |
$ |
12.00 |
$ |
3.33 |
1 |
2.125 |
2.000 |
2.000 |
$ |
10.00 |
$ |
3.00 |
1 |
2.125 |
2.000 |
2.000 |
$ |
9.00 |
Below is an illustrative example of the
aggregate number of additional shares of HighPeak Energy common
stock that would be issuable to the CVR holder under several
HighPeak Energy share price scenarios at a CVR maturity date of two
and one-half years following the closing of the business
combination. The description of the Public CVR and the Private CVR
is qualified entirely by reference to materials filed by Pure and
HighPeak Energy with the SEC at www.sec.gov which describe the
Public CVRs and Private CVRs in more detail.
Share Reference Price |
Preferred Return Shares
andCorrespondingCVRs |
TotalCorrespondingEscrowed
Shares |
TotalCorrespondingEscrowed
Shares Available for Forfeiture
to HighPeak Energy |
Shares ofHighPeak
EnergyCommon Stock tobe Issued
toApplicableQualifying
CVRHolders |
Total Value
to ApplicableQualifying
CVR Holders |
$ |
12.50 |
1 |
2.125 |
2.125 |
0.000 |
$ |
12.50 |
$ |
12.00 |
1 |
2.125 |
2.125 |
0.042 |
$ |
12.50 |
$ |
11.00 |
1 |
2.125 |
2.125 |
0.136 |
$ |
12.50 |
$ |
10.00 |
1 |
2.125 |
2.125 |
0.250 |
$ |
12.50 |
$ |
9.00 |
1 |
2.125 |
2.125 |
0.389 |
$ |
12.50 |
$ |
8.00 |
1 |
2.125 |
2.125 |
0.563 |
$ |
12.50 |
$ |
7.00 |
1 |
2.125 |
2.125 |
0.786 |
$ |
12.50 |
$ |
6.00 |
1 |
2.125 |
2.125 |
1.083 |
$ |
12.50 |
$ |
5.00 |
1 |
2.125 |
2.125 |
1.500 |
$ |
12.50 |
$ |
4.00 |
1 |
2.125 |
2.125 |
2.125 |
$ |
12.50 |
$ |
3.20 |
1 |
2.125 |
2.125 |
2.125 |
$ |
10.00 |
$ |
3.00 |
1 |
2.125 |
2.125 |
2.125 |
$ |
9.38 |
HighPeak Energy Operating Highlights
(Pro Forma for Proposed Business Combination)
- HighPeak Energy’s Chairman and CEO,
Jack Hightower, provides 49 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
- Highly contiguous position of
approximately 51,000 net acres located primarily in Howard County,
with greater than 90% operated, provides the scale and depth of
inventory to maximize capital and operating efficiencies
- Anticipated net production of
approximately 12,000 barrels of oil equivalent per day upon
completion of HighPeak Energy’s inventory of drilled but
uncompleted wells1
- High oil mix of more than 80%
supports a strong operating margin
- Approximately 400 net drilling
locations identified in either the Wolfcamp A and/or Lower
Spraberry formations that are planned to be developed with mostly
two-mile laterals
- Successful recent offset and
non-operated activity near our acreage provides significant upside
with an aggregate of approximately 760 net potential operated
drilling locations in the Wolfcamp B, Wolfcamp C, Wolfcamp D,
Middle Spraberry and Jo Mill zones
- Planned pad development assuming
three operated rigs beginning after the close of the business
combination reduces the impact of parent/child degradation
Michael L. Hollis, HighPeak Energy’s President,
said “Capital and operating efficiencies have never been more
important in the energy business. Our decisions will be driven by
returns. The quality of our asset base positions HighPeak Energy to
be among the lowest capital and operating cost, highest return oil
producers in the domestic United States. For example, we reduced
our capital costs prior to the pandemic including drilling,
completion, equipping and facilities down to a best-in-class
average of $525 per foot for 10,000 foot or longer laterals.”
Business Combination
Pursuant to the HPK Business Combination Agreement,
HighPeak Energy will acquire, in exchange for 75,000,000 shares, as
adjusted in accordance with the HPK Business Combination Agreement,
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.
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 third 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 HPK Business
Combination Agreement relating thereto. Upon completion of the
business combination, HighPeak Energy intends to list its common
stock for trading on either the New York Stock Exchange (“NYSE”) or
the Nasdaq Global Market (the “Nasdaq”) under the symbol “HPK”.”
Pure’s securities are expected to be delisted from the Nasdaq
Capital Market at closing of the business combination concurrently
with the listing for trading of HighPeak Energy’s securities on
either the NYSE or the Nasdaq.
About Pure Acquisition Corp.
Pure is a blank check company formed in Delaware on
November 13, 2017 for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses. Pure’s
units were listed for trading on the Nasdaq under the symbol
“PACQU” on April 13, 2018. On May 29, 2018, Pure’s Class A common
stock and warrants began trading on the Nasdaq under the symbols
“PACQ” and “PACQW,” respectively.
About HighPeak Energy
HighPeak Energy is an independent oil and natural
gas company engaged in the acquisition, development and production
of oil, natural gas and NGL reserves. HighPeak Energy’s assets,
after giving effect to the potential business combination, will be
primarily located in Howard County, Texas, which lies within
the northeastern part of the oil-rich Midland Basin. HighPeak
Energy is led by its Chairman and CEO, Jack Hightower, an industry
veteran with over 49 years of experience in the oil and natural gas
industry, primarily in the Permian Basin managing multiple
E&P platforms and generating strong returns despite
industry cycles by consistently applying a disciplined,
risk-adjusted approach designed to balance capital preservation
with value creation. HighPeak Energy’s objective is to maximize
returns by generating rapid production growth initially followed by
steady production growth with strong margins and cash flow.
HighPeak Energy also intends to generate attractive full cycle
returns on capital employed.
About HighPeak Funds
The HighPeak Funds are entities affiliated with
HighPeak Energy Partners, LP, with operations in Howard County,
Texas, lying in the northeastern part of the oil-rich Midland
Basin.
Forward-Looking Statements
The information included herein and in any oral
statements made in connection herewith include “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of present or
historical fact included herein, regarding the proposed merger of
Pure Acquisition Merger Sub, Inc. (“MergerSub”) into Pure and the
proposed contribution of the partnership interests in HPK to
HighPeak Energy, HighPeak Energy’s and Pure’s ability to consummate
the transaction, including raising an adequate amount of equity and
debt financing, the benefits of the transaction and HighPeak
Energy’s future financial performance following the transaction, as
well as HighPeak Energy’s and Pure’s strategy, future operations,
financial position, estimated revenues, and losses, projected
costs, prospects, plans and objectives of management are forward
looking statements. When used herein, including any oral statements
made in connection herewith, the words “could,” “should,” “will,”
“may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,”
“project,” the negative of such terms and other similar expressions
are intended to identify forward-looking statements, although not
all forward-looking statements contain such identifying words.
These forward-looking statements are based on management’s current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. Except as otherwise required by applicable law,
HighPeak Energy and Pure disclaim any duty to update any
forward-looking statements, all of which are expressly qualified by
the statements in this section, to reflect events or circumstances
after the date hereof. HighPeak Energy and Pure caution you that
these forward-looking statements are subject to all of the risks
and uncertainties, most of which are difficult to predict and many
of which are beyond the control of HighPeak Energy and Pure,
incident to the development, production, gathering and sale of oil,
natural gas and natural gas liquids. These risks include, but are
not limited to, commodity price volatility, low prices for oil
and/or natural gas, developments in the global economy as well as
the public health crisis related to the coronavirus (COVID-19)
pandemic and resulting significant negative effects to the global
economy, disrupted global supply chains and significant volatility
and disruption of financial and commodity markets, inflation,
increased operating costs, lack of availability of drilling and
production equipment, supplies, services and qualified personnel,
certificates related to new technologies, geographical
concentration of operations, environmental risks, weather risks,
security risks, drilling and other operating risks, regulatory
changes, the uncertainty inherent in estimating oil and natural gas
reserves and in projecting future rates of production, reductions
in cash flow, lack of access to capital, HighPeak Energy’s ability
to satisfy future cash obligations, restrictions in existing or
future debt agreements, the timing of development expenditures,
managing growth and integration of acquisitions, failure to realize
expected value creation from property acquisitions, title defects
and limited control over non-operated properties. Should one or
more of the risks or uncertainties described herein and in any oral
statements made in connection therewith occur, or should underlying
assumptions prove incorrect, actual results and plans could differ
materially from those expressed in any forward-looking statements.
Additional information concerning these and other factors that may
impact HighPeak Energy’s and Pure’s expectations and projections
can be found in Pure’s periodic filings with the U.S. Securities
and Exchange Commission (the “SEC”), including Pure’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2019. Pure’s
SEC filings are available publicly on the SEC’s website at
www.sec.gov.
No Offer or Solicitation
This communication is for informational purposes
only and shall not constitute an offer to sell or the solicitation
of an offer to buy any securities pursuant to the proposed
transaction or otherwise, nor shall there be any sale of securities
in any jurisdiction in which the offer, solicitation or sale would
be unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act.
Additional Information about the
Transaction and Where to Find It
HighPeak Energy filed an amended registration
statement on Form S-4, including a prospectus of HighPeak Energy
and a proxy statement of the Company with the SEC. Additionally,
HighPeak Energy and Pure will file other relevant materials with
the SEC in connection with the proposed merger of MergerSub into
Pure and the proposed contribution of the partnership interests in
HPK to HighPeak Energy. The materials to be filed by HighPeak
Energy and Pure with the SEC may be obtained free of charge at the
SEC’s website at www.sec.gov. Investors and security holders of
Pure are urged to read the proxy statement/prospectus and the other
relevant materials when they become available before making any
voting or investment decision with respect to the proposed business
combination because they will contain important information about
the business combination and the parties to the business
combination.
Participants in Solicitation
HighPeak Energy and Pure and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies of Pure’s stockholders in connection
with the proposed business combination. Investors and security
holders may obtain more detailed information regarding the names,
affiliations and interests of certain of Pure’s executive officers
and directors in the solicitation by reading Pure’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2019, and the
proxy statement/prospectus and other relevant materials filed with
the SEC in connection with the business combination. Information
concerning the interests of HighPeak Energy’s and Pure’s
participants in the solicitation, which may, in some cases, be
different than those of their stockholders generally, will be set
forth in the proxy statement/prospectus relating to the business
combination when it becomes available.
Contact:
info@highpeakenergy.com
(817) 850-9200
_________________________________________
1 Management estimates based on currently available
information. Projections are inherently uncertain and subject
to change. See “Forward-Looking Statements.”
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