Top-level insiders such as CEOs and Presidents tend to have the best understanding of their companies’ operating activities. If they’re buying company stock, it’s often worth taking a closer look.
In this report, we are going to highlight some interesting insider buying at HighPeak Energy (HPK:US). HighPeak is a Texas-based oil and natural gas company engaged in the acquisition, development, and production of oil, natural gas, and NGL reserves. It is listed on the Nasdaq and currently has a market cap of approximately $2.28 billion.
Insider Buying at HighPeak Energy
Our data shows that between November 17 and December 7, HighPeak President Michael Hollis purchased 87,681 HPK shares at prices of between $21.73 and $22.48 per share. In total, the insider invested around $1.94 million in stock.
Oil and Gas Experience
Mr. Hollis has considerable experience in the oil and gas industry. Prior to joining HighPeak, he served as President and COO of Diamondback Energy, a Permian focused oil and gas producer. Before this, he was a Drilling Manager at Chesapeake Energy Corporation and also held roles of increasing responsibility in production, completions and drilling engineering at ConocoPhillips and Burlington Resources. Given his background, he is likely to have an excellent understanding of his company’s prospects.
What stands out here is that Mr. Hollis has increased the size of his holding by about 40% with his recent trades. This suggests that he is very confident the stock is set to move higher.
Share Price Dislocation
HighPeak recently posted a solid set of Q3 results.
For the quarter, net sales volumes averaged 26,247 barrels of oil equivalent per day (“Boe/d”), an increase of 19% compared with second quarter 2022. EBITDAX was $169.7 million, an increase of 25% compared with Q2.
At the end of the quarter, the company had over 105,000 net acres, an increase of approximately 68% compared with year-end 2021.
In the Q3 results, CEO Jack Hightower made a comment that caught our eye:
“Our extraordinary cash margin, driven by our high oil-cut and low cost structure, is thirty-six percent higher than our peer average and generates EBITDA growth that our peers have not been able to replicate. We believe it’s only a matter of time before the broader market begins to see the dislocation between where our share price is currently trading and the intrinsic value we have created for our shareholders. This is one reason the management team and our largest legacy investors purchased over 90% of our recent $85 million equity private placement.”
Clearly, Mr. Hightower believes the stock is trading below its intrinsic value right now. And that’s not surprising, as the stock’s forward-looking P/E ratio is currently about three.
In light of this comment from the CEO, we see the insider buying here as a bullish indicator.