Pure Acquisition Corporation *

Pure Acquisition Corporation *

Oct 19, 2020 by viktoria.v

PROPOSED BUSINESS COMBINATION: HighPeak Energy Inc.


ESTIMATED CURRENT FUNDS in TRUST: $53.2 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.62*
ENTERPRISE VALUE: $845 million

*SPACInsider estimate a/o 8-16-20

SUBSEQUENT EVENTS JULY 27, 2020

On July 27th, PACQ announced that it has further amended its business combination agreement with HighPeak Energy, Inc.

Each Pure stockholder who participates in the HighPeak Energy business combination will receive the following consideration:

  • One share of HighPeak Energy common stock; plus
  • 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 $0.63 per share; plus
  • One contingent value right (“CVR”) at the closing of the business combination in exchange for each share of Pure Class A common stock; plus
  • One full warrant to purchase HighPeak Energy common stock for $11.50 per share.

Pure also announced that it has received written commitments and subscriptions for 5,000,000 shares of HighPeak Energy common stock in exchange for $50 million through its forward purchase agreement. For each $10 invested, the forward purchaser will receive:

  • One share of HighPeak Energy common stock; plus
  • One CVR; plus
  • One full warrant to purchase HighPeak Energy common stock for $11.50 per share.

Pure expects to finalize additional forward purchase commitments and subscriptions prior to the closing of the business combination.

SUBSEQUENT EVENTS JULY 7, 2020

On July 7th, PACQ announced that it has further amended its business combination agreement with HighPeak Energy, Inc. 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

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. 

To review illustrative examples of the aggregate number of shares that would be issuable to the CVR holder, click HERE


SUBSEQUENT EVENTS – JULY 2, 2020

  • The Second BCA Amendment provides for one (1) contingent value right, which shall be registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and listed for trading on the Nasdaq Global Market (the “Nasdaq”) (the “Public CVRs”), to be issued as merger consideration for each share of HighPeak Energy common stock (excluding any fractional shares) that is issued as merger consideration to holders of shares of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”). The Second BCA Amendment also contemplates that one (1) contingent value right, which shall not be listed for trading on any national securities exchange, will be issued in a private placement (the “Private CVRs”) to investors participating in the PIPE Investment (as defined in the Second BCA Amendment) pursuant to applicable subscription agreements and to investors participating in Forward Purchases (as defined in the Second BCA Amendment) for each share of HighPeak Energy common stock purchased thereby.

SUBSEQUENT EVENTS – MAY 12, 2020

  • Subsequent to the closing of the Business Combination (assuming the Extension Amendment Proposal is approved), management anticipates recommending that the board of HighPeak Energy declare a one-time cash dividend (the “Non-Redemption Dividend”) to holders of the Company’s Class A Common Stock that do not redeem their shares prior to the Business Combination (“Non-Redeeming Holders”) in an amount per share equal to the amount by which the per-share redemption value of the Company’s Class A Common Stock at the closing of the Business Combination exceeds $10.00 per share as promptly as practicable following the closing of the Business Combination

SUBSEQUENT EVENTS: MAY 4, 2020

Pure Acquisition Corp. terminated its original transaction with HighPeak Energy on April 24, 2020.  On May 4, 2020, Pure announced a new combination agreement with HighPeak. (The original transaction is still listed below in black, the new combination is in blue).

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.

HIGHLIGHTS:

  • 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

TRANSACTION SUMMARY

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


 

SPONSOR SHARES AND PRIVATE PLACEMENT WARRANTS

  • 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.

NOTABLE CONDITIONS TO CLOSING

  • “Minimum Aggregate Funding Availability” being not less than $100,000,000
  • Minimum Equity Capitalization being not less than $50,000,000.

NOTABLE CONDITIONS TO TERMINATION

  • If the transactions have not been consummated on or before 5:00 p.m., Houston time on August 21, 2020;

Pure Transaction summary 5-4-20


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.
  • 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.

ORIGINAL TRANSACTION – Announced November 27, 2019

Pure Acquisition Corp. proposes to combine with HighPeak Energy, Inc., 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.  Pure will also enter into a Contribution Agreement with Grenadier Contribution Agreement with Grenadier Energy Partners II, LLC (“Grenadier”).

Upon completion of the business combination, HighPeak Energy intends to list its common stock and warrants for trading on the New York Stock Exchange (the “NSYE”) or the Nasdaq Capital Market (the “Nasdaq”) under the symbols “HPK” and “HPKWS.”

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

1 Management estimates based on currently available information. Projections are inherently uncertain and subject to change.


Transaction Overview

Pursuant to the HPK Business Combination Agreement:

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

Notable Conditions to Termination

  • If the transaction is not completed by February 21, 2020

Notable Conditions to Closing

  • There being at least $275 million of Available Liquidity, which is:
    • (a) the amount of funds contained in the Trust Account (net of the Parent Stockholder Redemption Amount), plus
    • (b) any cash on-hand of the Transferred Entities as of the Closing (but excluding such cash to the extent it is included in the calculation of clause (a) or clause (c) of this definition), plus
    • (c) the amount of Available Financing Proceeds, minus
    • (d) the amount of the Grenadier Closing Cash Payment, minus
    • (e) Contributor’s Transaction Expenses (to the extent not paid by or on behalf of Contributor prior to the Closing), minus
    • (f) Parent’s Transaction Expenses, plus
    • (g) the amount of any and all capital expenditures and other amounts paid by or on behalf of the HighPeak Entities, with respect to their respective assets, and Grenadier, with respect to the Grenadier Assets, in each case, from and after January 1, 2020 through the Closing.

PIPE

  • Seeking to raise $200 million.  No further details as of yet.

Founder Shares and Private Placement Warrants

  • Surrendering and forfeiting for no consideration, 760,000 shares (of the 10,350,000 issued)
  • Private Placement Warrants – none to be surrendered (10,280,000 purchased at IPO)

Amended Forward Purchase Agreement

  • the “Original Forward Purchase Agreement”) with HPEP I, an affiliate of Sponsor:
    • HPEP I agreed to purchase up to 15,000,000 shares of Class A Common Stock of the Company and 7,500,000 warrants for $10.00 per unit, for an aggregate purchase price of $150,000,000 in a private placement which would close immediately prior to the HPK Closing.
  • Amended and Restated Forward Purchase Agreement (the “A&R Forward Purchase Agreement”), pursuant to which, among other things, HPEP I will assign its rights and obligations under the Original Forward Purchase Agreement to HPEP II and HPEP III, the Company will assign its rights and obligations under the Original Forward Purchase Agreement to HighPeak Energy and the maximum number of warrants to be purchased thereunder will be reduced to 5,000,000.

Pure Acquisition transaction Summary 2-25-20


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

 

PURE ACQUISITION CORP. MANAGEMENT & BOARD


Executive Officers

Jack D. Hightower, 69
Chairman, CEO and President

Mr. Hightower has over 47 years of experience in the oil and gas industry managing multiple exploration & production (“E&P”) platforms. Mr. Hightower currently serves as the Chairman of the Board and Chief Executive Officer of the general partner of HighPeak LP. Mr. Hightower served as Chairman, President and CEO of Bluestem Energy Partners, LP (“Bluestem”) from 2011 to 2013. Prior to forming Bluestem, Mr. Hightower served as Chairman, President, and CEO of Celero II from 2006 to 2009 and as Chairman, President and CEO of Celero from 2004 to 2005. Prior to forming Celero, Mr. Hightower served as Chairman, President and CEO of Pure (NYSE: PRS), which became the 11th largest publicly traded independent E&P company in North America. In October 2002, Unocal tendered for the Pure shares it did not already own. In March 1995, Mr. Hightower founded Titan (Nasdaq: TEXP), the predecessor to Pure, and served as Chairman, President and CEO. Prior to founding Titan, Mr. Hightower served as Chairman, President and CEO of Enertex Inc. (“Enertex”), the general partner and operator of record for several oil and gas partnerships from 1991 to 1994. Mr. Hightower graduated from Texas Tech University in 1970 with Bachelor of Business Administration degrees in Administrative Finance and Money, Banking & Investments.


Rodney L. Woodard, 62
COO and Director

Mr. Woodard has over 39 years of experience in the oil and gas industry as a CEO, COO, and leader of Engineering and Operations of numerous E&P companies. Most recently Mr. Woodard served as the President and COO of Atlantic Resources from 2015 to 2016. Prior to Atlantic, Mr. Woodard served as CEO and COO of Celero II, a Natural Gas Partners portfolio company, with operations principally in the Permian Basin from 2006 to 2015. Prior to Celero II, Mr. Woodard served as Executive Vice President and COO of Celero, a Quantum Energy Partners portfolio company from 2004 to 2006. From 2002 to 2004, Mr. Woodard was Vice President of Reserves and Evaluations with Pure Resources (NYSE: PRS) and was a co-founder of its predecessor, Titan Exploration (Nasdaq: TEXP). From 1986 to 1995, Mr. Woodard held various positions of increasing responsibility at Selma International Investments Ltd. (“Selma”). Mr. Woodard graduated from The Pennsylvania State University in 1977 with a Bachelor of Science degree in Mechanical Engineering.


Steven W. Tholen, 67
CFO

Mr. Tholen is a Corporate Finance Executive with over 30 years of experience in building, leading and advising corporations through complex restructurings, purchase and sales transactions, and capital market transactions. Most recently, Mr. Tholen served as Executive Vice President – Finance of Fieldco Construction Services, Inc., a startup company which provides oilfield construction services to clients throughout East Texas & Western Louisiana, from 2011 to 2013. From 2009 to 2013, Mr. Tholen served as President of SDL&T Energy Partners, a source of equity & debt financing to fund energy companies and energy projects worldwide. From 2001 to 2008, Mr. Tholen was Senior Vice President & CFO of Harvest Natural Resources, Inc., an exploration and production company with properties in the United States, Venezuela, Indonesia, Gabon, and Russia. From 1995 to 2000, Mr. Tholen served as Vice President and CFO of Penn Virginia Corporation, an independent natural gas and oil company. From 1990 to 1995, Mr. Tholen was Treasurer/Manager of Business Administration of Cabot Oil & Gas Corporation, a North American independent natural gas producer. Mr. Tholen graduated from St. John’s University with a Bachelor of Science degree in Physics and earned his MBA-Finance from The University of Denver, Daniels School of Business.


Board of Directors

Sylvia K. Barnes, 61
Independent Director Nominee

Ms. Barnes is a Principal and owner of Tanda Resources LLC, a privately-held oil & gas investment and consulting company. From 2011 to March 2015, Ms. Barnes served as Managing Director and Group Head for KeyBanc Capital Markets Oil & Gas Investment and Corporate Banking Group and was a member of the firm’s Executive Committee. Prior to joining KeyBanc, Ms. Barnes was Head of Energy Investment Banking at Madison Williams, and Managing Director at Merrill Lynch’s energy investment banking practice. She joined Merrill Lynch as part of the firm’s acquisition of Petrie Parkman & Co. From 1994 to 2000, Ms. Barnes worked as Managing Director and SVP for Nesbitt Burns, including serving as head of the firm’s U.S. energy investment banking group. Prior to that she worked in various capacities at Nesbitt Burns and its parent company, Bank of Montreal. As a banker Ms. Barnes devoted her career to serving companies in the upstream oil and gas sector and she successfully executed a variety of mergers, acquisitions and divestiture transactions, and advised on public and private equity offerings and private debt and equity placements. Ms. Barnes is a member of the Board of Directors of SandRidge Energy, Inc. (NYSE:SD) and serves on its Audit and Compensation Committees. Ms. Barnes previously served on the Board of Directors of Halcón Resources Corporation (NYSE:HK) and as a member of its Audit and Reserves Committees. Ms. Barnes began her career as a reservoir engineer for Esso Resources. Ms. Barnes graduated from the University of Manitoba with a Bachelor of Science in Engineering (Dean’s List), was a licensed professional engineer in Alberta and earned a Masters of Business Administration in Finance from York University.


M. Gregory Colvin, 58
Independent Director Nominee

Mr. Colvin currently serves on the Board of Directors of Sanchez Energy Corporation, a position he has held since 2012. While at Sanchez, Mr. Colvin chaired the compensation committee, served on the pricing committee for all securities offerings, and was a member of the audit, nominating, and governance committees. From December 2011 to 2014, Mr. Colvin was the Managing Partner and Chief Operating Officer of Sankofa Capital, an investment management firm which he co-founded. Mr. Colvin currently holds a series 24, 7, and 63 securities license. From 2007 to 2012, Mr. Colvin was a licensed broker affiliated with Bluffview Capital, LP, where his focus was on private equity and hedge fund clients. From 1997 to 2006, Mr. Colvin was a Managing Director of the Private Funds Group at Donaldson, Lufkin & Jenrette Securities Corp and Credit Suisse LLC. In 1986 Mr. Colvin started his professional career with Stephens Inc. specializing in placing primary and secondary fixed income products to institutional investors. Mr. Colvin received his Bachelor of Science degree in Business Administration from the University of Arkansas. Mr. Colvin currently serves on the advisory board of the Sam M. Walton College of Business at the University of Arkansas.


Jared S. Sturdivant, 39
Independent Director Nominee

Mr. Sturdivant has served as the Managing Partner of Platform Group, LP, a partnership focused on private equity investments since July 2015 and Source Energy Partners, LLC, a partnership focused on acquiring oil and gas mineral interests since April 2017. Mr. Sturdivant also invests in oil and gas minerals serving as Managing Partner of Alta Mesa Mineral Acquisitions, LLC since December 2013. Previously, Mr. Sturdivant spent over a decade in the hedge fund industry with multi-billion dollar institutions focused on distressed debt investments, deep value equity, debt origination and private equity investments. Prior to that, Mr. Sturdivant served as a restructuring advisor to companies going through chapter 11 reorganizations. Mr. Sturdivant has previously served as a strategic advisor to Mr. Harold C. Simmons. Mr. Sturdivant graduated magna cum laude with a BBA in Finance from the McCombs School of Business at The University of Texas.