In a bold move that's turning heads on Wall Street, HighPeak Energy (HPK) CEO Jack Hightower recently scooped up over $2 million worth of company stock. This significant insider buying comes at a time when the small-cap energy company is showing impressive operational performance and financial growth, including an increase in sales volumes and a reduction in operating expenses.
With a relatively modest market capitalization of approximately $1.85 billion, HighPeak Energy has been making waves in the Permian Basin, showcasing impressive production growth and cost optimization strategies. The recent insider buying activity on HPK, coupled with its robust second-quarter results for 2024, paints a compelling picture of a company on the rise.
With a “moderate buy” consensus rating from analysts and a projected 45% upside potential to the average price target, HighPeak Energy offers an enticing investment opportunity in the energy space. Should you make like a CEO and buy shares of this dividend stock, too?
About HighPeak Energy Stock
An independent energy company engaged in the acquisition, development, and production of oil (CLV24), natural gas (NGV24), and natural gas liquid (NGL) reserves, HighPeak Energy (HPK) is keenly focused on the Permian Basin in West Texas. This strategic approach leverages its unparalleled expertise and cutting-edge technology to truly set it apart.
Over the last 52 weeks, HPK stock has shed 6.9%, and the shares are down 1.2% on a year-to-date basis. While that underperforms the broader equities market, it's in line with the volatile price action in oil over the last year.
CEO Jack Hightower thinks HPK is a bargain around current prices, scooping up two tranches of shares in transactions dated Aug. 29 and Sept. 3. Between the two purchases, the executive picked up 186,392 shares for a total investment of over $2.8 million, with the purchase price around $15.45-$15.47 per share.
Previously, the CEO plowed millions of dollars into HPK around $14 last December.
HighPeak's Financial Scorecard
The company's recent financial performance tells a story that matches the CEO's confidence, highlighted by his latest round of hefty insider buying. HighPeak delivered solid results in the second quarter of 2024, boosting production by 15% year-over-year to 48,531 barrels of oil equivalent per day. They pulled in adjusted net income of $39.4 million, or $0.28 per share, and maintained positive free cash flow for the fourth straight quarter, highlighting their operational savvy and financial discipline.
HighPeak also bumped up their quarterly dividend by 60%, and is now offering $0.04 per share, which brings the annual dividend to $0.16 for a forward yield of 1.10%. While that yield might not seem huge, it's a solid step forward for an energy stock with a two-year dividend history under its belt - and plenty of room to grow, too.
Plus, they've got a $75 million share buyback plan in the works, showing they're confident about their financial future. By upping their dividends and buying back shares, HighPeak is likely to draw more investors and keep its stock price strong.
Looking at valuations, HighPeak's 3.15x enterprise value (EV)-to-EBITDA valuation suggests the stock is a bargain compared to the broader energy sector, which carries an average multiple of 5.78x. All of these elements, along with the CEO's repeat insider buying, paint a rosy picture of the company's financial health and growth potential.
Unpacking HighPeak's Growth Potential
HighPeak Energy's growth potential is underpinned by several key drivers that align with the CEO's bullish stance, starting with its recent commissioning of the WildHorse Solar Farm. This new facility, developed by Priority Power, is a testament to HighPeak's commitment to sustainable energy. The solar farm is expected to produce enough electricity to power nearly 3,700 homes annually, significantly reducing carbon emissions. This initiative not only enhances HighPeak's green credentials but also positions it favorably in an industry increasingly focused on sustainability.
For the remainder of 2024, the company has upped its production forecast by over 4%, aiming to churn out between 45,000 and 49,000 barrels of oil equivalent daily. This boost shows they're confident in their ability to grow and perform. On top of that, they've cut their lease operating expense estimates to between $6.50 and $7.50 per barrel, a 12.5% drop at the midpoint. This suggests they're getting more efficient and managing costs better, which could mean bigger profits down the line.
Wall Street analysts are on board with HPK, too. Out of three analysts in coverage, two have given it a "Strong Buy," while one says it's a "Hold." The average price target is $23.50, suggesting a hefty 67% upside potential.
Conclusion
In conclusion, HighPeak Energy is making all the right moves to position itself for a bright future. With the CEO's significant insider buying, a focus on sustainable energy, and a commitment to rewarding shareholders, it's no wonder analysts are bullish on this small-cap energy player.
As the company continues to execute its growth strategy and deliver strong operational performance, HighPeak Energy looks poised to become a bigger player in the energy sector. For investors seeking a promising passive income pick that also offers strong growth opportunities, HighPeak Energy might just be that hidden gem.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
