STOP THE WAR! Let’s support Ukraine Together

Pure Acquisition Corp. Announces a “Do-Over” with HighPeak Energy


Pure Acquisition Corp. Announces a “Do-Over” with HighPeak Energy

The Covid-19 lock down makes every day feeling like Groundhog Day, and today is no exception.  That’s because Pure Acquisition Corp. (PACQ), which announced a combination with HighPeak Energy Inc., back on November 27, 2019, and then subsequently terminated that transaction on April 24, 2020, announced this morning that it will once again try to combine with HighPeak Energy. With a few changes, naturally.

After giving effect to the business combination, HighPeak Energy will continue to 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, HighPeak Energy intends to list its common stock on the Nasdaq, under the symbol “HPK”, with the transaction expected to be completed in the third quarter of 2020.

Some highlights from today’s press release include:

  • 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
  • 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 495 (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 920 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


As for the details of this combination, HighPeak Energy will acquire, in exchange for 75,000,000 shares, as adjusted in accordance with the HPK Business Combination Agreement (mostly having to do with transactions expenses, loans, etc.), 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.

Additionally, certain affiliates of the HighPeak Funds will surrender 5,350,000 shares of Class B common stock (Founder Shares) and all the private placement and public warrants which they hold, a minimum of 30,721,112 of warrants in the aggregate, immediately prior to the closing of the business combination. (Pure holds 10,350,000 Founders Shares, so they will be cancelling roughly a little more than half.)

There is also a condition to closing of a “Minimum Aggregate Funding Availability” being not less than $100,000,000 and the Minimum Equity Capitalization being not less than $50,000,000.

Furthermore, there is a “large investor incentive” built into this transaction with both SPAC shareholders and new investors eligible to participate if they hold or purchase 100,000 shares or greater.  However, you must hold the stock for a period of two years in order to qualify.  Essentially, the Sponsor will place into escrow “collateral shares” that will provide a preferred return down to a $4.00 share price.  As you can see below, if the share trades under $3.20, your return goes negative.


pure grid

Quick takes: Mike McAllister, who has written previously on energy SPACs, and in particular, on whether an E&P team can take the SPAC route to go public, will be taking a look and providing some input on this combination.  He is far more qualified to weigh-in on this deal having formerly been a energy research analyst.  However, while the “large investor incentive” is certainly interesting, two years seems like an awfully long time for a sector under significant pressure.  $4.00 might wind up being a high bar.  However, let’s see what Mike has to say after he’s had a chance to go through all of the materials.


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.
  • Latham & Watkins LLP acted as legal counsel to Jefferies LLC.
  • Vinson & Elkins L.L.P. acted as legal counsel to the HighPeak Funds.
  • EarlyBirdCapital, Inc. acted as advisor for Pure.