Pure Acquisition DEFM14AProxy related to merger

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

Payment of Filing Fee (Check the appropriate box):

PURE ACQUISITION CORP.
421 W. 3rd Street, Suite 1000
Fort Worth, Texas 76102

Dear Stockholders of Pure Acquisition Corp.:

You are cordially invited to attend the special meeting of the stockholders (the “special meeting”) of Pure Acquisition Corp. (“Pure”), which will be held on Tuesday, August 18, 2020, at 10:00 a.m., Eastern Time, at 421 W. 3rd Street, Suite 1000, Fort Worth, Texas 76102. At the special meeting, Pure’s stockholders will be asked to consider and vote upon the following proposals:

The Pure Board, upon the unanimous recommendation (with one abstention) of the members of the special committee of the Pure Board (the “Pure Special Committee”), which consists of three independent members of the Pure Board, recommends that Pure stockholders vote “FOR” each of the Proposals. When you consider the recommendation of the Pure Board in favor of each of the Proposals, you should keep in mind that certain of Pure’s directors and officers have interests in the business combination that may conflict with your interests as a Pure stockholder. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”

Each of the Proposals is more fully described in the accompanying proxy statement/prospectus, which each Pure stockholder is encouraged to review carefully.

Pure’s Class A Common Stock and its warrants, which are exercisable for shares of Class A Common Stock under certain circumstances, are currently listed for trading on the Nasdaq Capital Market under the symbols “PACQ” and “PACQW,” respectively. In addition, certain of Pure’s shares of Class A Common Stock and warrants currently trade as units consisting of one share of Class A Common Stock and one-half of one warrant, and are listed for trading on the Nasdaq Capital Market under the symbol “PACQU.” Holders of units currently have the option to continue to hold units or separate their units into the component securities. Prior to the business combination, holders will need to have their brokers contact Continental Stock Transfer & Trust Company (Pure’s “Transfer Agent”) in order to separate the units into shares of Class A Common Stock and warrants. As a result of the business combination and pursuant to the warrant agreement, Pure’s warrants will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein. In connection with the business combination, Pure’s units will automatically separate into the component securities and will no longer trade as a separate security following the business combination. Upon the Closing, HighPeak Energy intends to list its common stock for trading on either the Nasdaq Global Market, the Nasdaq Capital Market or the New York Stock Exchange  American (“NYSE American”) under the symbol “HPK.” HighPeak Energy also intends to list its warrants and CVRs for trading on the Nasdaq Global Market, the Nasdaq Capital Market or the NYSE American under the symbols “HPK WS” and “HPKR” or “HPK RT” (depending on the exchange listed), respectively. There is no assurance, however, that these securities will be listed on either the Nasdaq Global Market, the Nasdaq Capital Market or the NYSE American. Additionally, in connection with the business combination, Pure’s Common Stock, units and warrants will be delisted from the Nasdaq Capital Market, deregistered under the Exchange Act and cease to be publicly traded.

Pursuant to Pure’s Charter, Pure is providing the holders of shares of Class A Common Stock originally sold as part of the units issued in its initial public offering, which closed on April 17, 2018 (the “IPO” and such holders, the “public stockholders”), with the opportunity to elect to require that Pure redeem all or a portion of their shares of Class A Common Stock upon the Closing at a price per share, payable in cash, equal to the aggregate amount per share of Class A Common Stock then on deposit in the trust account (the “Trust Account”), divided by the number of then-outstanding shares of Class A Common Stock that were sold to the public stockholders in the IPO. The Trust Account holds or is anticipated to hold, as applicable, (i) the proceeds from the IPO and a concurrent private placement of warrants to Sponsor, (ii) the proceeds of certain loans from HighPeak Energy Holdings, LLC, a current subsidiary of HPK LP (“HighPeak Holdings”), pursuant to an agreement by Pure’s Sponsor to loan or cause an affiliate to loan to Pure or one of Pure’s subsidiaries (a) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the stockholder votes to approve the First Extension and Second Extension (each as defined in the accompanying proxy statement/prospectus), for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from October 17, 2019 until May 21, 2020, and (b) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus). As of July 23, 2020, an aggregate of $9,116,396 had been deposited into the Trust Account, pursuant to the Sponsor Loans (as defined in the accompanying proxy statement/prospectus), representing a $0.351 payment for each share of Class A Common Stock outstanding. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of June 30, 2020 of approximately $53.1 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.60. Public stockholders may elect to require that Pure redeem their shares even if they vote for the Business Combination Proposal.

Pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HighPeak Energy Partners II, LP, a Delaware limited partnership (“HPEP II”), conducted four (4) warrant tender offers to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II, as a result of which an aggregate 20,371,112 public warrants were tendered and purchased by HPEP II. Each warrant tender offer was not conditioned upon any minimum number of public warrants being tendered. Pure’s Sponsor, HPEP II and the Company entered into a sponsor support agreement whereby Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration, which eliminates the substantial majority of all of Pure’s outstanding warrants. As a result of the business combination and pursuant to the warrant agreement, any of Pure’s remaining public warrants, held by persons other than HPEP II, will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein.

HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into an amendment to the Business Combination Agreement, on June 12, 2020, that provides for additional cash consideration, without interest, to be paid as merger consideration to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share. HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into a second amendment to the Business Combination Agreement on July 1, 2020 that provides for the CVRs to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock, as well as to the Forward Purchase Investors, among other amendments.  For additional detail regarding the Contingent Value Rights, see the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus and the form of CVR Agreement attached to the accompanying proxy statement/prospectus as Annex H.

HighPeak Energy, Pure and the other parties to the Business Combination Agreement further amended the Business Combination Agreement on July 24, 2020 to provide for the issuance of one warrant to purchase HighPeak Energy common stock for each one whole share of HighPeak Energy common stock to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock and updates to the conditions to Closing the business combination related to HighPeak Energy’s liquidity and capitalization following the business combination as further described in the accompanying proxy statement/prospectus.

Currently, Pure’s Sponsor and independent directors own all of Pure’s outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined and have agreed to vote in favor of the business combination. Accordingly, the vote to approve the business combination is assured.

Pure is providing this proxy statement/prospectus and accompanying proxy card to its stockholders in connection with the solicitation of proxies to be voted at the special meeting. Your vote is very important. Whether or not you plan to attend the special meeting in person, and whether or not you tender your shares for redemption, please submit your proxy card without delay.

You are encouraged to read this proxy statement/prospectus carefully. In particular, you should review the matters discussed under the caption “Risk Factors” beginning on page 26 of this proxy statement/prospectus.

The approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, but the Adjournment Proposal requires only the affirmative vote of a majority of the holders of the outstanding shares of Class A Common Stock and Class B Common Stock represented in person or by proxy and entitled to vote thereon, voting as a single class, and actually cast at the special meeting. As a result of the collective ownership by Pure’s Sponsor and independent directors of approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined and their agreement to vote in favor of the business combination, the approval of both proposals is assured.

If you sign, date and return your proxy card without indicating how you wish to vote, your shares will be voted “FOR” each of the Proposals presented at the special meeting. If you fail to return your proxy card or fail to submit your proxy by telephone or over the Internet, or fail to instruct your bank, broker or other nominee how to vote, and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the effect of a vote “AGAINST” the Business Combination Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal. If you are a stockholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE PURE REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO PURE’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE VOTE AT THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT/WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANKS OR BROKERS TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

Thank you for your consideration of these matters.

Sincerely,

/s/ Jack Hightower                                        

Jack Hightower

Chairman and Chief Executive Officer

Pure Acquisition Corp.

Whether or not you plan to attend the special meeting and whether or not you tender your shares for redemption, please submit your proxy by completing, signing, dating and mailing the enclosed proxy card in the pre-addressed postage paid envelope or by using the telephone or Internet procedures provided to you by your broker or bank. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote in person, you must obtain a proxy from your broker or bank.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated August 7, 2020, and is first being mailed to Pure stockholders on or about such date.

PURE ACQUISITION CORP.
421 W. 3^rd Street, Suite 1000
Fort Worth, Texas 76102

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF PURE ACQUISITION CORP.

To Be Held On August 18, 2020

To the Stockholders of Pure Acquisition Corp.:

NOTICE IS HEREBY GIVEN that the special meeting of the stockholders (the “special meeting”) of Pure Acquisition Corp. (“Pure”) will be held on Tuesday, August 18, 2020, at 10:00 a.m., Eastern Time, at 421 W. 3rd Street, Suite 1000, Fort Worth, Texas 76102. At the special meeting, Pure’s stockholders will be asked to consider and vote upon the following proposals:

Only holders of record of Pure’s Class A Common Stock and Class B Common Stock at the close of business on August 4, 2020, are entitled to notice of the special meeting and to vote at the special meeting and any adjournments or postponements thereof. A complete list of Pure’s stockholders of record entitled to vote at the special meeting will be available for ten (10) days before the special meeting at Pure’s principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. As a result of the collective ownership by Pure’s Sponsor and independent directors of approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined and their agreement to vote in favor of the business combination, the approval of both proposals is assured.

Pursuant to Pure’s Charter, Pure is providing the holders of shares of Class A Common Stock originally sold as part of the units issued in its initial public offering, which closed on April 17, 2018 (the “IPO” and such holders, the “public stockholders”), with the opportunity to elect to require that Pure redeem all or a portion of their shares of Class A Common Stock upon the Closing at a price per share, payable in cash, equal to the aggregate amount per share of Class A Common Stock then on deposit in the trust account (the “Trust Account”), divided by the number of then-outstanding shares of Class A Common Stock that were sold to the public stockholders in the IPO. The Trust Account holds or is anticipated to hold, as applicable, (i) the proceeds from the IPO and a concurrent private placement of warrants to Sponsor, (ii) the proceeds of certain loans from HighPeak Energy Holdings, LLC, a current subsidiary of HPK LP (“HighPeak Holdings”), pursuant to an agreement by Pure’s Sponsor to loan or cause an affiliate to loan to Pure or one of Pure’s subsidiaries (a) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the stockholder votes to approve the First Extension and Second Extension (each as defined in the accompanying proxy statement/prospectus), for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from October 17, 2019 until May 21, 2020, and (b) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) that is needed by Pure to complete an Initial Business Combination from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (as defined in the accompanying proxy statement/prospectus). As of July 23, 2020, an aggregate of $9,116,396 had been deposited into the Trust Account, pursuant to the Sponsor Loans (as defined in the accompanying proxy statement/prospectus), representing a $0.351 payment for each share of Class A Common Stock outstanding. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of June 30, 2020 of approximately $53.1 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.60. Public stockholders may elect to require that Pure redeem their shares even if they vote for the Business Combination Proposal.

HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into an amendment to the Business Combination Agreement, on June 12, 2020, that provides for additional cash consideration, without interest, to be paid as merger consideration to holders of shares of Pure’s Class A Common Stock in an amount per share equal to the amount, if any, by which the per-share redemption value of Pure’s Class A Common Stock at the Closing exceeds $10.00 per share. HighPeak Energy, Pure and the other parties to the Business Combination Agreement entered into a second amendment to the Business Combination Agreement on July 1, 2020 that provides for the CVRs to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock, as well as to the Forward Purchase Investors, among other amendments.  For additional detail regarding the Contingent Value Rights, see the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” in the accompanying proxy statement/prospectus and the form of CVR Agreement attached to the accompanying proxy statement/prospectus as Annex H.

HighPeak Energy, Pure and the other parties to the Business Combination Agreement further amended the Business Combination Agreement on July 24, 2020 to provide for the issuance of one warrant to purchase HighPeak Energy common stock for each one whole share of HighPeak Energy common stock to be issued as merger consideration to holders of shares of Pure’s Class A Common Stock and updates to the conditions to Closing the business combination related to HighPeak Energy’s liquidity and capitalization following the business combination as further described in the accompanying proxy statement/prospectus.

Pursuant to Pure’s Sponsor’s obligation under a certain letter agreement entered into in connection with the IPO, HighPeak Energy Partners II, LP, a Delaware limited partnership (“HPEP II”), conducted four (4) warrant tender offers to purchase, at $1.00 in cash per public warrant, Pure’s outstanding public warrants held by persons other than HPEP II, as a result of which an aggregate 20,371,112 public warrants were tendered and purchased by HPEP II. Each warrant tender offer was not conditioned upon any minimum number of public warrants being tendered. Pure’s Sponsor, HPEP II and the Company entered into a sponsor support agreement whereby Sponsor and HPEP II will forfeit all of their private placement warrants and public warrants for no consideration, which eliminates the substantial majority of all of Pure’s outstanding warrants. As a result of the business combination and pursuant to the warrant agreement, any of Pure’s remaining public warrants, held by persons other than HPEP II, will become warrants of HighPeak Energy exercisable for shares of HighPeak Energy common stock on the terms set forth therein.

Currently, Pure’s Sponsor and independent directors own all of Pure’s outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined and have agreed to vote in favor of the business combination. Accordingly, the vote to approve the business combination is assured.

Pure will not consummate the business combination unless the Business Combination Proposal is approved at the special meeting. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

If you have any questions or need assistance voting your shares, please call Pure’s proxy solicitor, Morrow Sodali LLC, toll free at (800) 662-5200. Banks and brokerage firms, please call collect at (203) 658-9400.

August 7, 2020

By Order of the Board of Directors

/s/ Jack Hightower                                           

Jack Hightower

Chairman and Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to be held on August 18, 2020: This notice of meeting and the related proxy statement/prospectus will be available at https://www.cstproxy.com/pureacquisitioncorp/2020. 

TABLE OF CONTENTS

CERTAIN DEFINED TERMS

Unless the context otherwise requires, references in this proxy statement/prospectus to:

For additional defined terms commonly used in the oil and natural gas industry and used in this proxy statement/prospectus, please see “Glossary of Oil and Natural Gas Terms” set forth in Annex K.

We show the voting and economic interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus upon the Closing based on the assumptions set forth below and otherwise assuming the following redemption scenario: 

Maximum Redemption Based on Existing Equity Commitments: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes up to 823,629 shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 4,189,000 shares outstanding at Closing. In addition, it includes the 5,811,000 shares of HighPeak Energy common stock, 5,811,000 CVRs and 5,811,000 forward purchase warrants that the Forward Purchase Investors have committed to purchase pursuant to the Forward Purchase Agreement Amendment. Based on the approximately 10,000,000 shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the commitments under the Forward Purchases in this Maximum Redemption Scenario, we would satisfy the Minimum Equity Capitalization (as such term is defined in the Business Combination Agreement) closing condition. This Maximum Redemption Scenario does not require or assume any Debt Facility, however, to enhance HighPeak Energy’s liquidity at Closing, the Company intends to pursue a Debt Facility with a borrowing base of approximately $40 million which HighPeak Energy intends to have committed and executed in connection with the Closing, although it is not certain that the Debt Facility will be entered into by the Closing or upon the terms currently expected. For anticipated terms of the Proposed Revolving Credit Agreement (as defined herein) that HighPeak Energy expects to govern the Debt Facility, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of the Predecessors—Liquidity and Capital Resources—Debt Facility; Proposed Revolving Credit Agreement.”

Unless otherwise specified, the statements regarding (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in this proxy statement/prospectus do not take into account (i) the public warrants or forward purchase warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreement (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following:

If the actual facts are different than HighPeak Energy’s assumptions or the scenario presented above, the (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in this proxy statement/prospectus will differ from those set forth in this proxy statement/prospectus and such differences may be material. For example, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors. However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

See “Risk Factors—Risks Related to HighPeak Energy and the Business Combination—Due to a variety of factors, some of which are beyond its control, HighPeak Energy may have lower liquidity at Closing than currently expected. This may cause HighPeak Energy to increase its borrowings at Closing to fund costs, fees and expenses associated with the business combination and increase its borrowings after Closing to fund capital expenditures or decrease its future capital expenditures, all of which could impact HighPeak Energy’s balance sheet and ability to develop its oil and gas assets.”

SUMMARY TERM SHEET

This Summary Term Sheet, together with the sections entitled “Questions and Answers About the Proposals for Pure Stockholders” and “Summary of the Proxy Statement/Prospectus,” summarizes certain information contained in this proxy statement/prospectus but does not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus, including the attached annexes, for a more complete understanding of the matters to be considered at the special meeting.

Maximum Redemption Based on Existing Equity Commitments: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes up to 823,629 shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 4,189,000 shares outstanding at Closing. In addition, it includes the 5,811,000 shares of HighPeak Energy common stock, 5,811,000 CVRs and 5,811,000 forward purchase warrants that the Forward Purchase Investors have committed to purchase pursuant to the Forward Purchase Agreement Amendment. Based on the approximately 10,000,000 shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the commitments under the Forward Purchases in this Maximum Redemption Scenario, we would satisfy the Minimum Equity Capitalization (as such term is defined in the Business Combination Agreement) closing condition. This Maximum Redemption Scenario does not require or assume any Debt Facility, however, to enhance HighPeak Energy’s liquidity at Closing, the Company intends to pursue a Debt Facility with a borrowing base of approximately $40 million which HighPeak Energy intends to have committed and executed in connection with the Closing, although it is not certain that the Debt Facility will be entered into by the Closing or upon the terms currently expected. For anticipated terms of the Proposed Revolving Credit Agreement (as defined herein) that HighPeak Energy expects to govern the Debt Facility, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of the Predecessors—Liquidity and Capital Resources—Debt Facility; Proposed Revolving Credit Agreement.”

(1) The numbers set forth in the table above do not take into account (i) the public warrants and forward purchase warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreement (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following: (i) the Closing occurs on August 19, 2020; (ii) at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming: (a) overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on August 19, 2020 will collectively total an aggregate of approximately $2.3 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing; (b) the cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on August 19, 2020; (c) transaction expenses will be approximately $15 million and (d) there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement; (iii) approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing, which assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (iv) no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (v) no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement Amendment other than HighPeak III’s commitment to purchase 500,000 forward purchase units under the Forward Purchase Agreement Amendment; (vi) there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the $58.1 million of Forward Purchases committed under the Forward Purchase Agreement; (vii) no available debt capacity; and (viii) no Pure public warrants are tendered for purchase in the warrant tender offer.

(2) Shares owned upon conversion of founder shares at consummation of the business combination and the forfeiture by Sponsor of 5,350,000 founder shares pursuant to the Sponsor Support Agreement.

If the actual facts are different than HighPeak Energy’s assumptions or the scenario presented above, the interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus set forth above will differ and such differences may be material.

Further, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors. However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

The scenario above does not give effect to the potential exercise of any warrants. However, if HighPeak Energy assumes that no warrants of Pure are tendered for purchase in the warrant tender offer by HPEP II, and the maximum number of warrants currently expected to be outstanding at the Closing, including (i) the 328,888 outstanding public warrants, (ii) the 5,811,000 warrants issued at the Closing pursuant to the Forward Purchase Agreement Amendment and (iii) the up to 4,189,000 warrants issued to holders of Pure’s Class A Common Stock in the merger, to purchase an aggregate of 10,328,888 shares of HighPeak Energy common stock were exercisable and exercised following completion of the business combination, with proceeds to HighPeak Energy of approximately $118.8 million, then the ownership of HighPeak Energy would be as follows:

The scenario above assumes that the warrant holders exercise their warrants using cash consideration to pay the exercise price.  The warrant holders may also exercise their warrants on a cashless basis, in which case, the shares and percentages above would change.

In addition, the scenario above does not give effect to the potential issuance of shares of HighPeak Energy common stock pursuant to the CVRs that could occur at the CVR Maturity Date. If HighPeak I, HighPeak II and Sponsor are required to forfeit shares of HighPeak Energy common stock in connection with the issuance of shares of HighPeak Energy common stock pursuant to the Contingent Value Rights Agreement, the ownership percentage of the HighPeak Group would be materially reduced.

Please see the section entitled “Summary of the Proxy Statement/Prospectus—Impact of the Business Combination on Public Float” and “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” for further information.

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR PURE STOCKHOLDERS

The following questions and answers briefly address some commonly asked questions about the Proposals to be presented at the special meeting of stockholders of Pure, including the proposed business combination. The following questions and answers do not include all of the information that is important to Pure stockholders. Pure urges its stockholders to read carefully this entire proxy statement/prospectus, including the annexes and other documents referred to herein.

If the transactions contemplated by the Business Combination Agreement are completed, HighPeak Energy will own and operate the assets and businesses currently conducted by Pure and HPK LP and you will receive the right to receive one share of HighPeak Energy common stock (and cash in lieu of fractional shares, if any) for each share of Class A Common Stock or Class B Common Stock that you held immediately prior to the Closing, and in the case of holders of Class A Common Stock, one CVR and one warrant to purchase HighPeak Energy common stock for each one whole share of HighPeak Energy common stock (excluding fractional shares) issued to holders of Class A Common Stock, and, pursuant to the warrant agreement, each outstanding public warrant and private placement warrant of Pure held immediately prior to the Closing will entitle the holder thereof to purchase one share of HighPeak Energy common stock following the Closing on the terms set forth therein; provided, however, that all public warrants and private placement warrants held by Pure’s Sponsor or HPEP II immediately prior to the merger effective time will be forfeited for no consideration and cancelled immediately prior to the merger effective time. After the Closing, the HighPeak Energy common stock, the CVRs and warrants to purchase HighPeak Energy common stock are expected to be listed for trading on the Nasdaq Global Market, the Nasdaq Capital Market or the NYSE American.

Currently, Pure’s Sponsor and independent directors own all of Pure’s outstanding shares of Class B Common Stock and collectively own approximately 67.4% of Pure’s aggregate outstanding shares of Class A Common Stock and Class B Common Stock combined and have agreed to vote in favor of the business combination. Accordingly, the vote to approve the business combination is assured.

Copies of the Business Combination Agreement (as well as the Business Combination Agreement Amendments) are attached to this proxy statement/prospectus as Annex A, Annex A-I, Annex A-II and Annex A-III, respectively, and incorporated by reference herein. This proxy statement/prospectus and its annexes contain important information about the proposed business combination and the other matters to be acted upon at the special meeting. Holders of Class A Common Stock and Class B Common Stock are entitled to vote on all proposals in this proxy statement/prospectus. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.

Based on the assumptions set forth under “—Certain Defined Terms,” we currently expect HighPeak Energy to issue approximately 76,250,000 shares of HighPeak Energy common stock to the HPK Contributors at Closing, which reflects the 75,000,000 shares of HighPeak Energy common stock and estimated additional shares of HighPeak Energy common stock to be issued as adjustments pursuant to the Business Combination Agreement.

For more information about the Business Combination Agreement, the consideration to be received by the HPK Contributors, and the business combination generally, see the section entitled “Proposal No. 1—The Business Combination Proposal.”

On April 12, 2018, Pure entered into the Forward Purchase Agreement with HPEP I. On July 24, 2020, HighPeak Energy, each party designated as a purchaser therein (which may include purchasers that subsequently join as parties thereto), HPEP I and, solely for the limited purposes specified therein, Pure, entered into the Forward Purchase Agreement Amendment, pursuant to which, among other things, (i) the Forward Purchase Agreement entered into by and between HPEP I and Pure has been amended and restated in its entirety to provide for, among other things, (A) the inclusion of CVRs in the forward purchase units issued thereunder and (B) registration rights with respect to the securities issuable pursuant to the forward purchase units, and (ii) the purchasers thereunder will collectively purchase, in connection with the Closing, the number of forward purchase units as indicated therein, up to a maximum amount of 15,000,000 forward purchase units (and of which 5,811,000 are currently committed), with each forward purchase unit consisting of one share of HighPeak Energy common stock, one CVR and one warrant (which one whole warrant is exercisable for HighPeak Energy common stock), for $10.00 per forward purchase unit, or an aggregate maximum amount of up to $150,000,000. The aggregate 5,811,000 shares (and corresponding number of warrants and CVRs) includes 5,000,000 shares (and corresponding number of warrants and CVRs) irrevocably committed to be purchased under the Forward Purchase Agreement Amendment signed July 24, 2020, and 811,000 shares (and corresponding number of warrants and CVRs) irrevocably committed to be purchased by additional private purchasers under the Forward Purchase Agreement Amendment pursuant to Assignment and Joinder agreements entered into between such private purchasers and HPEP I subsequent to July 24, 2020. Additionally, HPEP I may further elect to commit to purchase uncommitted forward purchase units or assign all or part of its right to purchase uncommitted forward purchase units to one or more third parties under the Forward Purchase Agreement Amendment pursuant to Assignment and Joinder Agreements prior to the Closing.

HighPeak Energy is pursuing additional equity investments with certain accredited investors and institutional buyers through a transfer of obligations under the Forward Purchase Agreement Amendment (in addition to those already committed), which, if successful, would close in connection with the business combination. For more information, see “Questions and Answers About the Proposals for Pure Stockholders—Will HighPeak Energy obtain new financing in connection with the business combination? If so, what are the anticipated material terms of such financing?”

Prior to the Initial Business Combination, HighPeak Energy intends to adopt the HighPeak Energy, Inc. Long Term Incentive Plan (the “LTIP”), and it is anticipated that Pure, as HighPeak Energy’s sole shareholder, will approve the LTIP. Following the Closing, HighPeak Energy will continue to sponsor the LTIP. As described further under “Proposal No. 1—The Business Combination Proposal—Related Arrangements—HighPeak Energy, Inc. Long Term Incentive Plan,” the LTIP provides for potential grants of options, dividend equivalents, cash awards and substitute awards to employees, directors and service providers of HighPeak Energy, as well as stock awards to directors of HighPeak Energy. The LTIP will be administered by the HighPeak Energy Board or a committee thereof.

Subject to adjustment in accordance with the terms of the LTIP, a number of shares of HighPeak Energy common stock equal to 13% of the outstanding shares of HighPeak Energy common stock on the effective date of the LTIP (the “Share Pool”) are reserved and available for delivery with respect to Awards, and 1,300 shares of HighPeak Energy common stock will be available for the issuance of shares upon the exercise of ISOs (as defined in the LTIP). On January 1, 2021 and January 1 of each calendar year occurring thereafter and prior to the expiration of the LTIP, the Share Pool will automatically be increased by (i) the number of shares of HighPeak Energy common stock issued pursuant to the LTIP during the immediately preceding calendar year and (ii) 13% of the number of shares of HighPeak Energy common stock that are newly issued by HighPeak Energy (other than those issued pursuant to the LTIP) during the immediately preceding calendar year.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, which have caused a significant decrease in activity in the global economy and the demand for oil and natural gas. Also in March 2020, the Organization of Petroleum Exporting Countries and other oil producing nations (“OPEC+”) were unable to reach an agreement on production levels for crude oil, at which point Saudi Arabia and Russia initiated efforts to aggressively increase production. The convergence of these events created the unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply. While OPEC+ agreed in April to cut production, these cuts and other reduced capital expenditures by non-OPEC+ members have not offset the significant decrease in demand related to the COVID-19 pandemic. As a result, the price of oil has remained extremely depressed and available storage and transportation capacity for production is increasingly limited and may be completely unavailable in the near future. The imbalance between the supply of and demand for oil, lack of available storage, as well as the uncertainty around the extent and timing of an economic recovery, have caused extreme market volatility and a substantial adverse effect on commodity prices and available financing for oil and gas companies. In light of this substantial change in market conditions, on April 24, 2020, Pure, and the several other parties thereto, terminated the Original HPK Business Combination Agreement and the Grenadier Contribution Agreement.

Thereafter, certain representatives of the HighPeak Group engaged in conversations with the Pure Special Committee and discussed, among other things, a proposal to combine the Target Assets alone in a business combination with Pure, where the HPK Contributors would receive equity interests and no cash in exchange for the Target Assets. The new proposed value of the HighPeak Funds’ contributed properties was reduced from the value in the Original HPK Business Combination Agreement of $892 million (taking into account expected adjustments for capital expenditures and other items under the Original HPK Business Combination Agreement) to $750 million despite significant capital expenditures that increased HighPeak Group’s operated horizontal well count from two (2) wells to twenty-three (23) wells. This increase drove significant increases in reserves and production capability. The reasoning of the HighPeak Group behind the lower value of the offer for the HighPeak Funds’ contributed assets is due to deteriorated market conditions driven by the effects of the COVID-19 pandemic and the OPEC+ oil price war and the HighPeak Funds’ related expectations regarding the pace of their drilling program. The valuation analyses performed by the Deal Team (as defined below) and discussed with the Pure Special Committee was a holistic analysis based on a broad variety of quantitative and qualitative factors, including, but not limited to, comparable company analysis, the estimated transaction metrics for recent comparable transactions in HighPeak Energy’s areas of operation, expectations regarding future pricing and demand for oil and natural gas, expectations regarding future well results and other factors. As such, the Pure Special Committee believes that the Transaction (as defined below) is fair from a financial point of view to, and in the best interests of, Pure’s stockholders based on its analysis of quantitative and qualitative factors discussed with the Deal Team, including, but not limited to, the comparable company analysis and the estimated transaction metrics for recent comparable transactions in HighPeak Energy’s areas of operation. See “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination” for additional details regarding the valuation analysis completed in connections with entry into the Business Combination Agreement and “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination—The Pure Board’s Reasons for the Approval of the Business Combination” for additional detail regarding the quantitative and qualitative factors discussed with the Deal Team.

The Deal Team, HighPeak Energy and the HighPeak Funds also determined to provide third party participants in the business combination with a significant valuation protection through the issuance of Contingent Value Rights and to make the consideration received by public shareholders equivalent to that received by Forward Purchase Investors under the Forward Purchase Agreement Amendment.  See the section entitled “Proposal No. 1—The Business Combination Proposal—Description of Contingent Value Rights” for more information regarding the Contingent Value Rights.

After the consummation of the business combination, HighPeak Energy could face substantial hardship in the event effects of COVID-19 and recent commodity price declines persist.  

For example, prices decreased to a level in April 2020 that caused the HPK Contributors to halt their drilling program and to curtail a substantial portion of their existing production, as well. It is uncertain when prices will return to levels at which the HPK Contributors or HighPeak Energy would be willing to execute their drilling program. However, prices have since increased and HighPeak Energy management began returning wells to production in mid-July and we will continue to monitor the extent by which prices continue to increase and/or stabilize prior to any capital expenditure program. In addition, HighPeak Energy may be unable to fund its expected capital expenditure program. HighPeak Energy has evaluated multiple development scenarios under multiple potential commodity price assumptions. Under its three (3) rig development scenario, HighPeak Energy would expect to make approximately $350 to $400 million of capital expenditures in the twelve (12) months following the expected August 19, 2020 Closing. The ability to make these capital expenditures will be highly dependent on the price of oil and available funding as HighPeak Energy is only expected to have available liquidity of approximately $95 million in the Maximum Redemption Scenario assuming $40 million is undrawn availability on the Debt Facility at Closing. Liquidity at Closing may be up to $35 million less based on execution of the permitted interim capital budget and timing of the related payments. See discussion of the “Maximum Redemption Scenario” in the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy”. Commodity prices have already partially recovered from their April lows, with an average WTI spot price of $38.30 per Bbl and $1.63 per MMBtu for the month of June 2020, and $40.47 per Bbl and $1.75 per MMBtu for the first two (2) weeks of July 2020.  If commodity prices remain at these levels for a sustained period, HighPeak Energy intends to resume drilling a three (3) rig program after the Closing, but also recognizes that commodity prices remain highly volatile and that its liquidity will likely be limited, and as a result, there is no certainty that HighPeak Energy will operate three (3) rigs post-Closing.  For detail regarding sensitivity cases for a zero (0), one (1) and two (2) rig program over the same periods, see “Proposal No. 1—The Business Combination Proposal—Unaudited Prospective Financial, Operating and Reserve Information Provided to the Pure Board in Connection with Signing the Business Combination Agreement.”

For additional information, see “Risk Factors—Risks Related to the Target Assets—Oil, natural gas and NGL prices are volatile. Sustained periods of low, or further declines in, oil, natural gas and NGL prices could adversely affect HighPeak Energy’s business, financial condition and results of operations and its ability to meet its capital expenditure obligations and other financial commitments” and “—Recent COVID-19 and other pandemic outbreaks could negatively impact HighPeak Energy’s business and results of operations.”

The board of directors of HighPeak Energy (the “HighPeak Energy Board”) will consist of a sole director, Jack Hightower, prior to the Closing. Under the Business Combination Agreement, the HPK Contributors have the right until five (5) business days prior to the effectiveness of this proxy statement/prospectus to designate to HighPeak Energy a list of individuals that HPK LP wants to be appointed to the HighPeak Energy Board, effective as of the Closing. To the extent that the HPK Contributors timely deliver such a designation, HighPeak Energy and the HighPeak Energy Board will be obligated under the Stockholders’ Agreement to take all necessary action to effect such appointments, and the designated directors and officers will be listed in a subsequent amendment to this proxy statement/prospectus. Under the Stockholders’ Agreement, the Principal Stockholder Group will be entitled to appoint four (4) directors to the HighPeak Energy Board for so long as it holds greater than 35% of the shares of HighPeak Energy’s voting stock outstanding. For more information, see the sections entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements—Stockholders’ Agreement” and “Management After the Business Combination.”

In connection with Forward Purchases and in order to secure their participation in the business combination, HighPeak Energy will issue Forward Purchase Investors purchasing forward purchase units pursuant to the Forward Purchase Agreement Amendment one (1) CVR for each share of HighPeak Energy common stock purchased thereunder. CVRs will also be issued as part of the merger consideration to holders of shares of Pure’s Class A Common Stock participating in the business combination. The CVR Holders are being provided with a significant valuation protection through the opportunity to obtain additional contingent consideration in the form of additional shares of HighPeak Energy common stock if the trading price of HighPeak Energy’s common stock is below the price that would provide the CVR Holders with a 10% preferred simple annual return (based on a $10.00 per share price at Closing), subject to a floor downside per-share price of $4.00 (such return, the “Preferred Return”), at the CVR Maturity Date. Further, CVR Holders are being afforded additional liquidity as HighPeak Energy intends to list the CVRs for trading on the Nasdaq Global Market, the Nasdaq Capital Market or the NYSE American and they may be traded following the Closing. This contingent consideration, if applicable, will only be issued to Qualifying CVR Holders. To be a Qualifying CVR Holder, a CVR Holder must provide certain information required under the Contingent Value Rights Agreement. Under the Maximum Redemption Scenario, up to 21,250,000 shares of HighPeak Energy common stock, respectively, may be issued by HighPeak Energy to satisfy the Preferred Returns with respect to the CVRs issued pursuant to the Business Combination Agreement Third Amendment and the Forward Purchase Agreement Amendment. If any additional shares of HighPeak Energy common stock are issued to Qualifying CVR Holders pursuant to the CVR Agreement, HighPeak I, HighPeak II and Sponsor will collectively forfeit an equivalent number of Escrowed Shares to HighPeak Energy for cancellation. The Preferred Returns could entitle a Qualifying CVR Holder to receive up to 2.125 shares of HighPeak Energy common stock per CVR. By way of example, if the CVR Maturity Date were set at the second anniversary of the Closing, the price of HighPeak Energy’s common stock were $12.00 or higher on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 CVRs at such CVR Maturity Date, HighPeak Energy would not issue any additional shares of HighPeak Energy common stock to such Qualifying CVR Holders. However, if the CVR Maturity Date were set at the date that is thirty (30) months following the Closing, the price of HighPeak Energy’s common stock were $4.00 or lower on such CVR Maturity Date and the Qualifying CVR Holders collectively held 15,000,000 CVRs at such CVR Maturity Date, HighPeak Energy would issue an additional 31,875,000 shares of HighPeak Energy common stock (or 2.125 shares of HighPeak Energy common stock per CVR, representing an aggregate value at the downside price of $4.00 per share of up to $127.5 million (i.e., in an amount sufficient to provide a 10% preferred simple annual return with respect to 15,000,000 CVRs)), collectively, to such Qualifying CVR Holders and HighPeak I, HighPeak II and Sponsor would collectively forfeit an equivalent number of shares to HighPeak Energy for cancellation. Within three (3) business days following the Closing, HighPeak I, HighPeak II and Sponsor will collectively place a number of shares of HighPeak Energy common stock in escrow equal to the maximum number of additional shares of HighPeak Energy common stock issuable pursuant to the Contingent Value Rights Agreement, which Escrowed Shares will be released either to HighPeak Energy for cancellation in connection with the satisfaction of any Preferred Returns or back to HighPeak I, HighPeak II and Sponsor, collectively, as applicable, following the CVR Maturity Date. Please see below an illustration of the aggregate number of additional shares of HighPeak Energy common stock that would be issuable to a Qualifying CVR Holder under a number of price scenarios assuming that such Qualifying CVR Holder held one (1) CVR at the CVR Maturity Date (and shown for scenarios in which the CVR Maturity Date is on either the second anniversary of Closing or the date that is thirty (30) months following Closing):

CVR Maturity Date set at the second anniversary of the Closing Date

(The share reference price is based on the “Reference Price” as defined in the Contingent Value Rights Agreement, other than the reference prices that are below $4.00, which are shown for illustrative purposes only)

CVR Maturity Date set at the date that is thirty (30) months following the Closing Date

(1) Calculated based on a 2.5 year period rather than a specific number of days occurring during such thirty (30) month period. This amount may vary slightly depending upon the actual date of the Closing and the applicable months that are covered in the thirty (30) month period.

As described above, the financing proceeds may also include additional commitments to purchase forward purchase units under the Forward Purchase Agreement Amendment.

HighPeak Energy also intends to either assume a Debt Facility that the HPK Contributors may enter into prior to the business combination, or to enter into a Debt Facility in connection with the consummation of the business combination. The HPK Contributors may draw on the Debt Facility prior to Closing, in which HighPeak Energy would assume such outstanding loans, and HighPeak Energy expects to draw on the Debt Facility from time to time as circumstances warrant (including, if necessary or appropriate, to fund costs, fees and expenses (including the fees and expenses payable pursuant to the Business Combination Marketing Agreement (as defined below)) associated with the business combination (including such transaction expenses of the HPK Contributors and their affiliates pursuant to the Business Combination Agreement (as defined below)) and for working capital and general corporate purposes) and may potentially utilize other sources of debt financing. For anticipated terms of the Proposed Revolving Credit Agreement (as defined herein) that HighPeak Energy expects to govern the Debt Facility, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of the Predecessors—Liquidity and Capital Resources—Debt Facility; Proposed Revolving Credit Agreement.” Note, however, that the Proposed Revolving Credit Agreement is currently uncommitted and in syndication. The terms of the Proposed Revolving Credit Agreement described herein reflect those in the term sheet attached to the Engagement Letter (as defined herein) relating to the Proposed Revolving Credit Agreement and remain subject to completion of syndication and definitive documentation for the Proposed Revolving Credit Agreement.

The proceeds of cash in the Trust Account and received pursuant to the Forward Purchase Agreement Amendment, if any, and, if appropriate, from borrowing under the Debt Facility will be used to fund the Cash Consideration, the costs, fees and expenses (including the fees and expenses payable pursuant to the Business Combination Marketing Agreement, dated as of April 12, 2018, by and among Pure, Oppenheimer & Co. Inc. and EarlyBirdCapital, Inc. (as further amended, the “Business Combination Marketing Agreement”)) associated with the business combination (including such transaction expenses of the HPK Contributors and their affiliates pursuant to the Business Combination Agreement) and for working capital and general corporate purposes. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Arrangements.”

As a result, the business combination could still close if there were, among other things, fewer equity sales, higher redemptions by public stockholders or greater aggregate Cash Consideration than currently anticipated, each of which could have a significant impact on the sources and uses set forth above and the actual liquidity of HighPeak Energy at the Closing. See “Risk Factors—Risks Related to HighPeak Energy and the Business Combination—Due to a variety of factors, some of which are beyond its control, HighPeak Energy may have lower liquidity at Closing than currently expected. This may cause HighPeak Energy to increase its borrowings at Closing to fund costs, fees and expenses associated with the business combination and increase its borrowings after Closing to fund capital expenditures or decrease its future capital expenditures, all of which could impact HighPeak Energy’s balance sheet and ability to develop its oil and gas assets.”

HighPeak Energy expects to fund its forecasted capital expenditures following Closing with (i) the amount of funds contained in the Trust Account (net of any stockholder redemptions and Cash Consideration), plus (ii) any cash on-hand of the HighPeak Contributed Entities as of the Closing (without duplication as described below), plus (iii) the amount of cash proceeds attributable to the forward purchase units and any other issuance of Class A Common Stock or HighPeak Energy common stock prior to or at the Closing, plus (iv) a Debt Facility (if any), plus (v) cash generated by operations. HighPeak Energy has evaluated multiple development scenarios under multiple potential commodity price assumptions. Under its three (3) rig development scenario, HighPeak Energy would expect to make approximately $350 to $400 million of capital expenditures in the twelve (12) months following the expected August 19, 2020 Closing. The ability to make these capital expenditures will be highly dependent on the price of oil and available funding as HighPeak Energy is only expected to have available liquidity of approximately $95 million in the Maximum Redemption Scenario assuming $40 million is undrawn availability on the Debt Facility at Closing. Liquidity at Closing may be up to $35 million less based on execution of the permitted interim capital budget and timing of the related payments. See discussion of the “Maximum Redemption Scenario” in the section entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy.”  Commodity prices have already partially recovered from their April lows, with an average WTI spot price of $38.30 per Bbl and $1.63 per MMBtu for the month of June 2020, and $40.47 per Bbl and $1.75 per MMBtu for the first two (2) weeks of July 2020.  If commodity prices remain at these levels for a sustained period, HighPeak Energy intends to resume drilling a three (3) rig program after the Closing, but also recognizes that commodity prices remain highly volatile and that its liquidity will likely be limited, and as a result, there is no certainty that HighPeak Energy will operate three (3) rigs post-Closing.  For detail regarding sensitivity cases for a zero (0), one (1) and two (2) rig program over the same periods, see “Proposal No. 1—The Business Combination Proposal—Unaudited Prospective Financial, Operating and Reserve Information Provided to the Pure Board in Connection with Signing the Business Combination Agreement.”

HighPeak Energy periodically reviews the applicable capital expenditures and adjusts its budget and its allocation based on liquidity, drilling results, leasehold acquisition opportunities and commodity prices. Because HighPeak Energy operates a high percentage of its acreage, capital expenditure amounts and timing are largely discretionary and within its control. HighPeak Energy determines its capital expenditures depending on a variety of factors, including, but not limited to, the success of its drilling activities, prevailing and anticipated prices for oil and natural gas, lease expirations, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, drilling and acquisition costs and the level of participation by other working interest owners. A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows. Additionally, if HighPeak Energy curtails or reallocates priorities in its drilling program, it may lose a portion of its acreage through lease expirations. However, in the event of any such curtailment or reallocation of priorities, HighPeak Energy would expect to prioritize lease retention to minimize any expirations. Furthermore, HighPeak Energy may be required to remove some portion of its reserves currently booked as PUDs if such changes in planned capital expenditures means HighPeak Energy will be unable to develop such reserves within five (5) years of their initial booking.

Maximum Redemption Based on Existing Equity Commitments: This scenario, which we refer to as the “Maximum Redemption Scenario,” assumes up to 823,629 shares of Class A Common Stock are redeemed from the public stockholders, other than the 36,387,371 shares of Class A Common Stock redeemed in connection with the Extensions resulting in 4,189,000 shares outstanding at Closing. In addition, it includes the 5,811,000 shares of HighPeak Energy common stock, 5,811,000 CVRs and 5,811,000 forward purchase warrants that the Forward Purchase Investors have committed to purchase pursuant to the Forward Purchase Agreement Amendment. Based on the approximately 10,000,000 shares of HighPeak Energy common stock that would be outstanding following the business combination and the fulfillment of the commitments under the Forward Purchases in this Maximum Redemption Scenario, we would satisfy the Minimum Equity Capitalization (as such term is defined in the Business Combination Agreement) closing condition. This Maximum Redemption Scenario does not require or assume any Debt Facility, however, to enhance HighPeak Energy’s liquidity at Closing, the Company intends to pursue a Debt Facility with a borrowing base of approximately $40 million which HighPeak Energy intends to have committed and executed in connection with the Closing, although it is not certain that the Debt Facility will be entered into by the Closing or upon the terms currently expected. For anticipated terms of the Proposed Revolving Credit Agreement (as defined herein) that HighPeak Energy expects to govern the Debt Facility, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of the Predecessors—Liquidity and Capital Resources—Debt Facility; Proposed Revolving Credit Agreement.”

(1) The numbers set forth in the table above do not take into account (i) the public warrants and forward purchase warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to the Contingent Value Rights Agreement (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following: (i) the Closing occurs on August 19, 2020; (ii) at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming: (a) overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on August 19, 2020 will collectively total an aggregate of approximately $2.3 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing; (b) the cancelled loans will consist of approximately $10.5 million of Sponsor Loans through Closing on August 19, 2020; (c) transaction expenses will be approximately $15 million and (d) there are no other material adjustments to the consideration payable to the HPK Contributors under the Business Combination Agreement; (iii) approximately $30 million of payments with respect to accounts payable of the HighPeak Entities as of April 1, 2020 will be made prior to or at Closing, which assumes no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (iv) no new net capital expenditures made by the HighPeak Entities prior to Closing, however, as described in further detail below, the Business Combination Agreement would permit up to $35 million of additional new capital expenditures; (v) no member of the HighPeak Group purchases shares of Class A Common Stock or HighPeak Energy common stock in the open market or pursuant to the Forward Purchase Agreement Amendment other than HighPeak III’s commitment to purchase 500,000 forward purchase units under the Forward Purchase Agreement Amendment; (vi) there are no other issuances of equity interests of Pure or HighPeak Energy prior to or in connection with the Closing other than the $58.1 million of Forward Purchases committed under the Forward Purchase Agreement; (vii) no available debt capacity; and (viii) no Pure public warrants are tendered for purchase in the warrant tender offer.

(2) Shares owned upon conversion of founder shares at consummation of the business combination and the forfeiture by Sponsor of 5,350,000 founder shares pursuant to the Sponsor Support Agreement.

If the actual facts are different than HighPeak Energy’s assumptions or the scenario presented above, the interests of HighPeak Energy stockholders and other estimates set forth in this proxy statement/prospectus set forth above will differ and such differences may be material. For example, we have assumed that no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing. While HPK LP ceased its drilling program on April 1, 2020 due to the severe downturn in commodity prices, it is possible that commodity prices improve to a point where HPK LP would resume drilling and/or completion activities prior to Closing. Specifically, HPK LP is currently evaluating when to resume operations on the 12 completed/DUC wells referenced above and it is possible that operations will not resume until after Closing, which would increase available liquidity and lower projected production at Closing. However, liquidity at Closing already assumes that such completion costs would be made post-Closing, and thus would have no impact on available liquidity as presented in this proxy statement/prospectus. Note that the Business Combination Agreement permits HPK LP to spend up to $35 million on capital expenditures prior to Closing. If HPK LP funds such pre-Closing capital expenditures with a Debt Facility prior to Closing as expected, which would be assumed by HighPeak Energy under the Business Combination Agreement, it will not impact the equity ultimately issued to the HPK Contributors.  However, if the HPK Contributors funded such expenses, the amount of equity ultimately issued to the HPK Contributors would increase by one (1) share for every $10 spent pursuant to certain adjustment provisions in the Business Combination Agreement.

The scenario above does not give effect to the potential exercise of any warrants. However, if HighPeak Energy assumes that no warrants of Pure are tendered for purchase in the warrant tender offer by HPEP II, and the maximum number of warrants currently expected to be outstanding at the Closing, including (i) the 328,888 outstanding public warrants, (ii) the 5,811,000 warrants issued at the Closing pursuant to the Forward Purchase Agreement Amendment and (iii) the up to 4,189,000 warrants issued to holders of Pure’s Class A Common Stock in the merger, to purchase an aggregate of 10,328,888 shares of HighPeak Energy common stock were exercisable and exercised following completion of the business combination, with proceeds to HighPeak Energy of approximately $118.8 million, then the ownership of HighPeak Energy would be as follows:

The scenario above assumes that the warrant holders exercise their warrants using cash consideration to pay the exercise price.  The warrant holders may also exercise their warrants on a cashless basis, in which case, the shares and percentages above would change.

In addition, the scenario above does not give effect to the potential issuance of shares of HighPeak Energy common stock pursuant to the CVRs that could occur at the CVR Maturity Date. If HighPeak I, HighPeak II and Sponsor are required to forfeit shares of HighPeak Energy common stock in connection with the issuance of shares of HighPeak Energy common stock pursuant to the Contingent Value Rights Agreement, the ownership percentage of the HighPeak Group would be materially reduced.

The public warrants and forward purchase warrants will become exercisable thirty (30) days after the completion of an Initial Business Combination and will expire five (5) years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation.

Please see the sections entitled “Summary of the Proxy Statement/Prospectus—Impact of the Business Combination on Public Float” and “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of HighPeak Energy” for further information.

In addition to being the sole member of Sponsor, HPEP I is party to the current Forward Purchase Agreement pursuant to which it has agreed to purchase up to 15,000,000 units, consisting of 15,000,000 shares of Class A Common Stock and 7,500,000 forward purchase warrants, for aggregate consideration of up to $150 million. On July 24, 2020, HighPeak Energy, each party designated as a purchaser therein (which may include purchasers that subsequently join as parties thereto), HPEP I and, solely for the limited purposes specified therein, Pure, entered into the Forward Purchase Agreement Amendment, pursuant to which, among other things, (i) the Forward Purchase Agreement entered into by and between HPEP I and Pure has been amended and restated in its entirety to provide for, among other things, (A) the inclusion of CVRs in the forward purchase units issued thereunder and (B) registration rights with respect to the securities issuable pursuant to the forward purchase units, and (ii) the purchasers thereunder will collectively purchase, in connection with the Closing, the number of forward purchase units as indicated therein, up to a maximum amount of 15,000,000 forward purchase units (and of which 5,811,000 are currently committed), with each forward purchase unit consisting of one share of HighPeak Energy common stock, one CVR and one warrant (which one whole warrant is exercisable for HighPeak Energy common stock), for $10.00 per forward purchase unit, or an aggregate maximum amount of up to $150,000,000. The aggregate 5,811,000 shares (and corresponding number of warrants and CVRs) includes 5,000,000 shares (and corresponding number of warrants and CVRs) irrevocably committed to be purchased under the Forward Purchase Agreement Amendment signed July 24, 2020, and 811,000 shares (and corresponding number of warrants and CVRs) irrevocably committed to be purchased by additional private purchasers under the Forward Purchase Agreement Amendment pursuant to Assignment and Joinder agreements entered into between such private purchasers and HPEP I subsequent to July 24, 2020. Additionally, HPEP I may further elect to commit to purchase uncommitted forward purchase units or assign all or part of its right to purchase uncommitted forward purchase units to one or more third parties under the Forward Purchase Agreement Amendment pursuant to Assignment and Joinder agreements prior to the Closing. 

HPEP II owns 20,371,112 public warrants (all of which will be forfeited immediately prior to the Merger Effective Time), which were acquired pursuant to the completed warrant tender offers, to purchase 20,371,112 shares of Class A Common Stock for $11.50 per share. Pursuant to the Sponsor Support Agreement, HPEP II has agreed to surrender and forfeit for no consideration all of the public warrants that it owns. The general partner of HPEP II is HighPeak Energy Partners GP II, LP, whose general partner is HighPeak GP II, LLC (“HP GP II”). Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP II and is one of three managers of HP GP II. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP II at any given time, which acts by majority vote. In addition to approval by HP GP II, certain items require approval of the limited partner advisory committee.

Similarly, the general partner of HPEP III is HighPeak Energy Partners GP III, LP, whose general partner is HighPeak GP III, LLC (“HP GP III”). Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP III and is one of three managers of HP GP III. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP III at any given time, which acts by majority vote. In addition to approval by HP GP III, certain items require approval of the limited partner advisory committee.

Additionally, the HPK Contributors and HPK Representative, are parties to the Business Combination Agreement along with Pure and the several other parties thereto are affiliates of Sponsor.

In addition, Pure’s Sponsor has agreed to loan, or cause an affiliate to loan, Pure or one of Pure’s subsidiaries, (i) an amount equal to $0.033 for each share of Class A Common Stock issued in the IPO that was not redeemed in connection with the First Extension and Second Extension for each month (commencing on October 17, 2019 and on the 17th day of each subsequent calendar month) from October 17, 2019 until May 21, 2020, (ii) $200,000 for each month (commencing on May 21, 2020 and on the 21st day of each subsequent calendar month) from May 21, 2020 until August 21, 2020 in connection with the stockholder vote to approve the Third Extension (such loans described in clauses (i) and (ii), the Sponsor Extension Loans) and (iii) such other amounts as Pure and HighPeak Energy may agree upon with any HPK Contributor, any HighPeak Contributed Entity or another affiliate of Pure’s Sponsor (provided that in the case of obtaining approval of Pure of any such other amounts in excess of $5,000,000 in the aggregate, the Pure Special Committee shall approve in writing such amounts). For example, if Pure completes a business combination on August 19, 2020, Pure’s Sponsor would make aggregate Sponsor Extension Loans of approximately $9.1 million. Accordingly, if Pure completes a business combination on August 19, 2020, then the redemption amount per public share as of August 19, 2020 (net of permitted liabilities) would be approximately $10.63 per public share, in comparison to the redemption amount as of June 30, 2020 (net of permitted liabilities) of approximately $10.60 per public share.

Pure expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had elected to have their shares redeemed in connection with the business combination, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and requirements of other applicable law. The initial stockholders and Pure’s officers and directors have entered into a letter agreement, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if Pure fails to complete the business combination.

In the event of liquidation, there will be no distribution with respect to Pure’s outstanding warrants. However, the escrow agent will purchase all of the public warrants held by parties other than HPEP II for $1.00 per public warrant.

Pure’s Sponsor, directors and officers have agreed to waive their redemption rights with respect to any shares of Pure’s capital stock they may hold in connection with the consummation of the business combination, and the founder shares will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of June 30, 2020 of approximately $53.1 million (net of permitted liabilities), the estimated per share redemption price would have been approximately $10.60. Additionally, shares properly tendered for redemption will only be redeemed if the business combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including the Sponsor Extension Loans and interest earned on the funds held in the Trust Account and not previously released to Pure to fund its working capital requirements) in connection with the liquidation of the Trust Account or if Pure subsequently completes a different business combination on or prior to August 21, 2020.

Continental Stock Transfer & Trust Company

1 State Street—30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, telephone number and address to the Transfer Agent to validly redeem its shares.

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is Pure’s understanding that stockholders should generally allot at least two (2) weeks to obtain physical certificates from the Transfer Agent. However, Pure does not have any control over this process and it may take longer than two (2) weeks. Stockholders who hold their shares in street name will have to coordinate with their respective banks, brokers or other nominees to have the shares certificated or delivered electronically.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to the Transfer Agent prior to the date set forth in this proxy statement/prospectus, or to deliver their shares to the Transfer Agent electronically using the Depository Trust Company’s (the “DTC”) Deposit/Withdrawal At Custodian (DWAC) system. The requirement for physical or electronic delivery prior to the special meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the business combination is approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee, and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether stockholders seeking to exercise redemption rights are required to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated. Shares tendered for redemption must be delivered not less than two (2) business days prior to the special meeting.

Pure expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had elected to have their shares redeemed in connection with the business combination, subject in each case to Pure’s obligations under Delaware law to provide for claims of creditors and requirements of other applicable law. The initial stockholders and Pure’s officers and directors have entered into a letter agreement, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if Pure fails to complete the business combination.

In the event of liquidation, there will be no distribution with respect to Pure’s outstanding warrants. Accordingly, the warrants will expire worthless.

Pure Acquisition Corp.

421 W. 3rd Street, Suite 1000

Fort Worth, Texas 76102

Tel: 817-850-9200

You may also contact the proxy solicitor at:

Morrow Sodali LLC

470 West Avenue, 3rd Floor

Stamford, Connecticut 06902

Individuals call: 800-662-5200

Banks and brokers call: 203-658-9400

Email: PACQ.info@morrowsodali.com

Hosting page for the Proxy Card and Statement:  https://www.cstproxy.com/pureacquisitioncorp/2020

Proxy Statement link for brokers:  https://www.cstproxy.com/pureacquisitioncorp/2020/proxy

To obtain timely delivery, Pure’s stockholders must request the materials no later than two (2) business days prior to the special meeting.

You may also obtain additional information about Pure from documents filed with the United States Securities and Exchange Commission (the “SEC”) by following the instructions in the section entitled “Where You Can Find Additional Information.”

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Pure’s Transfer Agent prior to the special meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

1 State Street—30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

 

Organizational Structure

 

Prior to the Business Combination

 

The following diagram illustrates the ownership structure of Pure prior to the business combination.

 

 

 

 

 

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(1)

The sole member of Sponsor is HPEP I. The general partner of HPEP I is HighPeak Energy Partners GP, LP, whose general partner is HP GP I. Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP I and is one of three managers of HP GP I. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP I at any given time, which acts by majority vote. As a result, Mr. Hightower may be deemed to have or share beneficial ownership of the securities held directly by Sponsor.

(2)

The independent directors of the Pure Board each own 48,000 shares of Class B Common Stock.

 

Following the Business Combination

 

The diagram below illustrates the ownership structure of HighPeak Energy immediately following the business combination based on the Maximum Redemption Scenario, which assumes 823,629 public shareholders elect to have their shares redeemed and 5,811,000 shares of HighPeak Energy common stock are issued pursuant to the Forward Purchases. The statements regarding (a) available liquidity, (b) the voting and economic interests of HighPeak Energy stockholders and (c) other estimates set forth in the diagram do not take into account (i) the public warrants that will remain outstanding following the business combination and may be exercised at a later date or (ii) any shares that may be issued by HighPeak Energy pursuant to Contingent Value Rights Agreement (or the equivalent number of shares of HighPeak Energy common stock that would be collectively forfeited by HighPeak I, HighPeak II and Sponsor to HighPeak Energy in connection with such issuance), and also assume the following:

 

●

the Closing occurs on August 19, 2020;

 

●

at the Closing, adjustments to the consideration payable to the HPK Contributors with respect to the HighPeak Contributed Entities under the Business Combination Agreement were calculated assuming:

 

●

overhead expenses spent by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date of April 1, 2020 through a Closing on August 19, 2020 will collectively total an aggregate of approximately $2.3 million and no funds will be spent on new net working capital by the HPK Contributors with respect to the HighPeak Contributed Entities from the effective date through Closing;

 

 

 

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(1)

The sole member of Sponsor is HPEP I. The general partner of HPEP I is HighPeak Energy Partners GP, LP, whose general partner is HP GP I. Mr. Hightower has the right to appoint all of the managers to the board of managers of HP GP I and HPK GP and is one of three managers of HP GP I and HPK GP. Mr. Hightower has the number of votes necessary to constitute a majority of the total number of votes held by all of the managers of HP GP I and HPK GP at any given time, which acts by majority vote. As a result, Mr. Hightower may be deemed to have or share beneficial ownership of the securities held directly by Sponsor or HPK LP.