Pure Acquisition Corp. Announces Combination

Pure Acquisition Corp. (PACQ), announced this morning that it has entered into a Business Combination Agreement with HighPeak Energy, Inc., and a Contribution Agreement with Grenadier Energy Partners II, LLC (“Grenadier”). Post-combination close, HighPeak Energy will conduct its business as an independent oil and natural gas company engaged in the acquisition, development and production of oil, natural gas and NGL reserves with assets located in the northeastern part of the oil-rich Midland Basin.

Upon completion of the business combination, which is expected to close in the first quarter of 2020, HighPeak Energy intends to list its common stock and warrants for trading on the New York Stock Exchange or the Nasdaq Capital Market under the symbols “HPK” and “HPKWS.”

Transaction Summary

Certain entities controlled by the Sponsor, Pure and HighPeak entered into a definitive agreement to acquire Grenadier Energy Partners II (“Grenadier”) a pure play, northern Midland Basin E&P company for cash, equity and warrants.

Pursuant to the HPK Business Combination Agreement, HighPeak Energy will acquire all of the outstanding interests in HPK Energy, LP (“HPK”), in exchange for 71,150,000 shares of HighPeak Energy common stock, as adjusted in accordance with the HPK Business Combination Agreement.

HPK holds the right, pursuant to a Contribution Agreement between Grenadier and a subsidiary of HPK, to acquire substantially all of the assets of Grenadier for aggregate consideration of:

• 15,760,000 shares of HighPeak Energy common stock
• 2,500,000 warrants to purchase HighPeak Energy common stock
• And approximately $465 million in cash, subject to purchase price adjustments.

HighPeak Energy Operating Highlights (Pro Forma for Proposed Business Combination)

• HighPeak Energy’s Chairman, President & CEO, Jack Hightower, provides 48 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
• Contiguous position of greater than 71,000 net acres located primarily in Howard County, with greater than 90% operated, provides the sale and depth of inventory to efficiently develop
• Anticipated net production of approximately 12,000 barrels of oil equivalent per day, projected as of the year ended 2019¹
• High oil mix of more than 80% supports a strong operating margin
• Approximately 875 (725 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
• Planned pad development in 2020 with four operated rigs reduces the impact of parent/child degradation
• Significant recent offset and non-operated activity is quickly de-risking the acreage position

Quick takes: Included in the filed presentation today is the suggestion that Pure will be seeking a $200 million PIPE in order to help finance this transaction. However, we still don’t know the price at which this PIPE will be done, but that’s a big PIPE.  The concern is, energy companies have had a difficult time of it lately rounding up any kind of institutional investment so it remains to be seen if Pure can secure PIPE participants.  Additionally, at what price? In an out of favor sector, there is always the possibility that a PIPE will need to be done at a hefty discount.  Having said that, the transaction, as currently structured, means HighPeak will be debt-free, which makes it the ONLY unlevered pure play Permian mid-cap company – a big advantage.  However, let’s wait to see the details of that $200 million PIPE.  In the meantime, Pure still has 20,452,000 public warrants outstanding (only 248,000 tendered at their extension vote) so warrant holders will have another opportunity to tender at the combination vote for $1.00.

ADVISORS

With respect to the HPK Business Combination Agreement:

• Jefferies LLC acted as financial advisor
• Hunton Andrews Kurth LLP acted as legal counsel to the special committee of the board of directors of Pure
• Vinson & Elkins L.L.P. acted as legal counsel to the HighPeak Funds
• Latham & Watkins LLP acted as legal counsel to Jefferies LLC

With respect to the Grenadier Contribution Agreement:

• Jefferies LLC acted as financial advisor
• Thompson & Knight LLP acted as legal counsel to the HighPeak Funds
• Vinson & Elkins L.L.P. acted as legal counsel to Grenadier