Earnings call transcript: EON Resources Q2 2025 sees flat revenues, stock dips

EON Resources Inc. (EONR) reported its Q2 2025 financial results, revealing steady revenues due to effective hedging strategies despite a decline in average oil prices. The company’s stock fell 7.77% to $0.345 following the earnings announcement, continuing a challenging period that has seen the share price decline 83% over the past year according to InvestingPro data. In premarket trading, the stock recovered slightly, gaining 4.06% to $0.359. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels. The company continues to focus on operational efficiencies and strategic expansions, with significant plans for horizontal drilling in the San Andres zone.

Key Takeaways

• EON Resources maintained stable revenues in Q2 2025, aided by hedging.
• The average oil price decreased from $70 to $61 per barrel.
• Stock price dropped 7.77% post-earnings, with a slight recovery in premarket trading.
• Plans for horizontal drilling could significantly increase production rates.
• The company aims to be cash flow positive by Q4 2024.

Company Performance

EON Resources’ performance in Q2 2025 was marked by stable revenues, largely attributed to successful hedging mechanisms. The company collected $290,000 in cash from hedging transactions and noted a non-cash hedging benefit of $600,000. InvestingPro data reveals concerning fundamentals, including a high debt-to-equity ratio of 2.51 and negative free cash flow yield. These metrics are among 12+ exclusive ProTips available to subscribers, offering deeper insights into the company’s financial health. Operationally, EON Resources increased production from 800 to 920 barrels per day, with enhancements such as acid stimulations and reactivating inactive wells contributing to this growth. The acquisition of the South Justice Field further bolstered production levels.

Financial Highlights

• Revenue: Stable due to hedging strategies.
• Average oil price: $61 per barrel, down from $70.
• Cash collected from hedging: $290,000.
• Non-cash hedging benefit: $600,000.
• G&A costs reduced by $300,000 per quarter.
• Senior debt reduced from $28 million to $21 million.

Market Reaction

Following the earnings release, EON Resources’ stock fell by 7.77% to $0.345, reflecting investor concerns over the drop in oil prices. However, in premarket trading, the stock rebounded by 4.06%, reaching $0.359. This movement suggests a cautious optimism among investors, possibly driven by the company’s strategic plans and operational improvements.

Outlook & Guidance

EON Resources is focused on future growth through horizontal drilling, which is expected to significantly boost production rates. The company plans to initiate this drilling program in late Q1 2026. By the end of 2025, EON Resources aims to increase production to 1,400-1,500 barrels per day and anticipates being cash flow positive by Q4 2024. The company is targeting funding between $40 million to $50 million to support these initiatives.

Executive Commentary

CEO Dante expressed optimism about the company’s transformation, stating, "We’re really at the precipice of going from a very mediocre to poor company to something good." Jesse Allen, VP of Operations, highlighted the potential of horizontal drilling, likening it to "putting 30 vertical wells at a fraction of the cost." These statements underscore EON Resources’ strategic focus on enhancing production efficiency and financial stability.

Risks and Challenges

• Oil price volatility: Continued fluctuations could impact revenue.
• Execution risk: Implementing horizontal drilling requires precise execution.
• Market conditions: Potential dampening due to geopolitical factors like Ukraine peace negotiations.
• Debt management: Successfully retiring senior debt and seller obligations is crucial for financial health.

Q&A

During the earnings call, analysts inquired about potential oil price scenarios and confirmed Chevron’s interest in purchasing increased production. Executives detailed the advantages of horizontal drilling technology and outlined plans for rig utilization and field development, providing clarity on the company’s growth strategy.

Full transcript - EON Resources Inc (EONR) Q2 2025:

Conference Moderator: Good day, everyone, and welcome to the E. ON Resources Inc. Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. And we’ll open the floor for your questions and comments after the presentation.

If you’re listening on webcast, you can submit a question by clicking on the Ask Question button on the left of your screen. Type your question into the box and hit send to submit your question. It is now my pleasure to turn the floor over to your host, Michael Porter. Sir, the floor is yours.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Thank you, Matt. Good afternoon, ladies and gentlemen. Before I read the whole harmless and forward looking statement clause, let me advise you that this morning we put two slide presentations on our website. One is our normal corporate presentation that we update quarterly, and the second one is the slide presentation for this call. This conference call includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involves risks and uncertainties that could cause actual results to differ materially from what is expected.

Words such as expect, believe, anticipate, estimate, seek, possibly, should, variation, and similar words and expressions are intended to identify such forward looking statements. But in the absence of these words, it does not mean the statement is not forward looking. The company also files and expect or disclose in our company documents filed from time to time on EDGAR and under the Securities and Exchange Commission, sec.gov. Without further ado, I’d like to turn the meeting over to our president and CEO. Dante, you may go ahead.

Dante, President and CEO, E. ON Resources Inc.: Thank you, Mike. Thank you everybody who’s dialed in. We really appreciate our shareholders. I wanna start with just thanking all of you for buying our stock and especially for holding our stock. And to that point, I wanna highlight that insiders, which is our management team here, own approximately 3,000,000 shares, and we’re looking to add to that position.

And we’re doing so now because we’ve today is one of those days where we’re allowed to buy the stock, and that means we have revealed to the shareholding public really everything material. So I’ll also say that most of my comments are forward looking. In the rearview mirror is a is a struggling oil company that bought smartly. We own a very nice property in the Permian in New Mexico with a billion barrels, and we have studied this thing and done, you know, just about everything to maintain production, getting ready to spend CapEx to double and triple the existing production from the existing wells. On top of that, we’ve also worked hard to identify a zone, and we published a couple press releases on it.

The San Andreas that looks like it could deliver another 40,000,000 barrels in an IP production rate far in excess of any number any of us have set. The the the tape will be told once drilling commences, we’re still targeting for ’26. So our real story isn’t the earnings for the last quarter. You can all see it. It’s a little bit better than the previous quarter.

The real story with us is what’s gonna happen in the next thirty days. So we have, talked about a a funding level of between 40 and 50,000,000, and I’m I’m I’m happy to report we’re on track. So those funding efforts involve first, I’ll say the the courtship, then the due diligence, which is a lot of engineering, then the preparation of definitive docs, then the funding. We are currently in the in the definitive doc stage, so we have passed the the tests of due diligence and engineering, which is where normally these things would fail if they’re gonna fail. I can’t tell you that we’re 90%.

We’re 99%. We’re 80%, but I can’t tell you we feel good. And almost without exception, the insiders are serving notice they’re gonna buy stock. So, of course, we encourage that all the time. So in addition to the funder, we’ve got we’ve got signed LOIs that we’re not publishing because we decided the market does doesn’t react to LOIs.

We’ll wait until we have the definitive doc sign, which means this thing is a certainty, but we do have signed LOIs from a driller, from a funder, and we have backups that are working through the system in case the funder falls through. We’re very pleased with both the funder and the driller. So now I’ll go through the slide that you have in front of you. The first slide is we have an upward trend in production. Now the upward trend is really an upward trend from a down number.

We got as low as 800 barrels a day. We’re we’re touching the high nine hundreds, and we’re hoping to cross into a thousand steadily. Now we’re doing that by running rigs. We have three rigs running at the at the our our main field, Jackson Greyberg, and we have one rig running at South Justice. So South Justice is producing what it was when we bought it, and we’re trying to increase it from nominally a 120 barrels a day to 350 barrels a day.

We’re trying to increase now, Graybird Jackson from roughly nine fifty to hopefully 1,400, 1,500 by the end of the year. We have lower costs and solid income from operations, but the real cash flow is gonna come as a result of this funding exercise because it’s our intent and hope to retire the senior debt, to retire the seller obligations, the seller note, and really take, roughly 40,000,000 in debt off our balance sheet. And with that, to take out $700,000 in monthly payments. So with that, you get a sonic boom of cash flow. We anticipate being cash flow positive in q four, and we anticipate, you know, with after amortization and all that accounting rigmarole, it will be a little better than breakeven by the 2025.

I talked about the financing, the horizontal drilling. We’re working now with the driller to prioritize leases, well locations, and how we go along with this. I talked about the four wells are running. They’re doing well. And I just couldn’t be happier for how we’re positioned right now for the future.

So our slide says well positioned for ’26, but we are well positioned to really make money in ’25 in q four. So with that, I’m gonna turn it over to Mitch.

Mitch Trotter, CFO, E. ON Resources Inc.: Thank you, Dante. Hello. I’m Mitch Trotter, the CFO, and thanks all for attending. So a little bit of the look back. I’ll give you insight into the second quarter results.

And the main takeaways from Q2 are efforts to improve the balance sheet continues. Revenues remain level as hedging mitigate the temporary dip in production that Dante mentioned, and cost reductions in LOE and G and A and interest continue even further than where we dropped off in Q1, which is good. On the cost reduction side, G and A cost reductions will be discussed in a later slide. The LOE, as I mentioned, it dropped to 665 per month in q two. This is down from last year’s 718,000 per month average across 2024.

Interest expense dropped another 65 k for the quarter due to the no conversions in our efforts to clean up the balance sheet. This is 230,000 per quarter drop from where we were 2024. So with that, I wanna go to the revenue slide, please. The production, as I noted, was temporary dip, and Jesse will discuss all those items. I do wanna note that the average price of oil dropped from 70 to 61 per barrel.

Well, hedging mitigated this drop, and we have collected or collected during the quarter 290,000 in cash. The noncash hedging pickup was 600,000, which was due to the drop in oil price, but that kept the overall revenues flat. With that, let’s go to the G and A slide. Now on the G and A, our plan has been to reduce cost across the year and future in the next year as well. The larger tickets in Q2 are salaries, fees, and related costs decreased in Q1 and in Q2 by 300,000 a quarter compared to what we were running the 2024.

And q one and q two also had lower professional fees for legal, audit, consulting services, and they’re 300,000 per quarter lower than q four of last year. So the costs are and these costs are primarily for the public reporting requirements, financing efforts, you know, costs stemming from various trailing legal matters, but we expect these costs to continue to drop as the year progresses. So let’s move on to the balance sheet, please. Not gonna spend a lot of time here, but I do wanna mention that the company has made and is continuing to make improvements to the balance sheet. We’ll discuss those type items primarily in the debt and equity components on the next slide.

So let’s just go ahead and go to the debt slide. Do note that our senior debt continues to be paid down. It was originally at 28,000,000. Now it’s around 21,000,000. Big thing, we have completed our efforts to exchange all the former pre acquisition short term private loans and warrants to now the long term convertible notes.

Warrants liability is gone from the balance sheet. The overall combined liability of those started at 9,800,000.0, and it has now been reduced by over $4,000,000, and it’s about 5,600,000.0. Now let’s go to the equity slide. There’s nothing really new here from what I’ve shown before. The preferred stock will clean up when we close, but the warrants have dropped by 4,000,000, and that came from what we discussed on the debt slide.

I will say in the equity section, I’ve had several questions about the s one, and most of these are long term possible versus issued shares. Let me just talk about a little bit about what’s issued. It’s South Justice acquisition back in June. There were 2,000,000 shares, and all those were based on market or up to $1 per share. So it was a good deal, and the overall price of South Justice, as we’ve talked in the past, was a very good deal.

The only other issued shares were contract fees, and that was only 100,000, and that was between, again, a market based issuance and a dollar. So good pricing. All the rest of it, you can call it shelf type shares. Now forgive my slang. These are not issued.

They come in two groups. The convertible notes. These are the same as we’ve been discussing on the debt slide. There’s nothing new here. Whatever we put in the s one is really a reserve to have if needed.

Some will be used, but the number over the next few months is still unknown and the amount is unknown. The other shelf type shares of ELAC, and this is again nothing new. It’s been in place since October 2022, and we’ve discussed this on every call. Currently, not using it. Over the past year plus, we’ve only used a small percentage of daily volume.

We mention that on every call. So if we use it going forward, it’s the same thing. It’ll only be a small percent. We’re not envisioning using a whole lot, but, again, this is essentially self shares, and they’re for a need, and it just goes with the contract. So let’s go on to the next slide, which is a future looking slide, which plays basically what Dante’s already covered.

In our press releases, it kept you informed, so I’ll just do a quick wrap up. Dante’s already noted we’re it’s all contingent on wrapping up the definitive docs. We expect to fund between 40 and 50,000,000 via one or more biometric funding instruments. They’re not neither they’re not designed by debt or equity. So the funds first go to settle the seller agreement, as Dante noted, where we pay 20,500,000.0 in return to get the 10% ORE back, the 15,000,000 note plus accrued interest in the 5,000,000 range, and the preferred shares to clean up the equity section.

All the funds from there will go towards paying off our senior debt with FIBT. All in all, as Dante mentioned, the monthly debt amortization of 700,000 is replaced with a much smaller ORE type payment, volumetric payment. This is a big boost to our cash flow. So with that, I want to move on to Jesse to review operations. So please advance to Jesse’s slide.

Jesse Allen, VP of Operations, E. ON Resources Inc.: Thank you Mitch. Good afternoon. I’m Jesse Allen, VP of Operations and I’m gonna talk a little bit about our Grayburg Jackson Field, the operations there And then also about our new acquisition, the South Justice Field, is about a 100 miles south and east of our Grayburg Jackson Field. So very convenient to our operations. It’s also of course in the Permian Basin.

So let me start off with the Grayburg Jackson, some operations there. And I always like to start off with the safety. And over the past quarter and actually since we’ve had taken over operations there at Grayburg Jackson, we’ve had no reportable incidents. So our field operating people are doing a good job as far as safety is concerned. And as Dante and Mitch have mentioned, we did have a temporary drop in production during that second quarter where we dropped near the 800 barrel of oil per day mark and we’re heading upwards.

Currently, we’re averaging about nine twenty barrels of oil a day. And so you might be asking yourself, well, was the drop? Well, of course, we are in an asset that’s ever declining but we’d like to do operations to keep that steady or even increase. And so what were some of the issues? Well, we have an ongoing issue with a main trunk line on our water injection, one of our water injection facilities which is key in maintaining production.

We’re working on those and that’s nearing completion. So hope to have that resolved here pretty quickly. And then during the second quarter, we initiated 13 acid stimulations. These are a little bit bigger jobs than what we did last year. And the downtime associated with doing those wells had affected production.

In that we shut the wells in for basically seventy two hours to let that acid and chemical soak then we bring them back on then we’ve got to recover that fluid. So there’s always a drop in production as a result as we’re doing those. But as we bring them back on and we recover all the load and acid water they start to produce oil. So those 13 wells we’ve seen a steady increase of about 52 barrels of oil a day. In addition to help with that production decline, that drop off, we contracted a second well service rig there in the Graber Jackson to return idle and inactive wells.

We’ve been able to make a significant dent in the inactive well count. And since early June, first week in June, we’ve returned 27 inactive wells to production which has given us a steady increase of about 60 barrels of oil a day. And if you do the simple math there, that gets you about from our 800 number up to our nine twenty current rate. In addition, we contracted a third service well rig there in the Greybird Jackson to return idle injection wells or wells that have failed their mechanical integrity test. So we’re repairing those.

And so that will have an impact on production not typically right in the immediate future but generally a month or two or three down the line as we get those wells back on injection. And then the most exciting news will be the kickoff of our San Andres horizontal drilling well program. And as Dante has mentioned, we have an investor and a driller that we’ve been talking to. And so we anticipate first quarter, late first quarter to kick off that program. So very positive news there at the Grayburg Jackson.

So let me speak a little bit to South about the South Justice Field, which we acquired with an effective date, June 1. It’s, like I said, it’s about a 100 miles south and east of our Grayburg Jackson Field. It’s located just outside of Jaw, New Mexico, not too far from the Texas state border. And so with that property, it was producing about 88 barrels of oil a day when we acquired. There were three wells that were down.

We contracted a well service rig, got those three back on production. In addition, there’s some idle inactive wells there. We put three additional inactive idle wells, total six wells with this well service rig, and so current production is about 117 barrels all today. We will continue reactivating idle wells during the South Justice field. We have, like I said, we have a rig running and so that’s our intention by the end of the year to continue to activate wells that have been down or idle.

And in doing so, obviously the lessons that we’ve learned at the Graybird Jackson field we are employing here. And so that gives us a little bit of a production boost just knowing what we’re doing in a field that is very similar. And in addition, one of the reasons we targeted this field was that there’s significant horizontal drilling potential here in the South Justice field. And that same driller has an interest in possibly doing a project very similar here. So with that, I’m going to turn it back over to Dante for final wrap up.

I thank you all for listening. Dante, are you there?

Dante, President and CEO, E. ON Resources Inc.: Yes. I’m here. I was on mute. Thank you for that. So, guys, yeah, let me summarize where I think we’re at.

We’re we’re at the we’re we’re really at the the precipice of going from, I’ll say, a very mediocre to poor company to something good. And and I would I would expand that if we were talking the middle of next year, I’d say we’ve we’ve we’ve gone from good to great. So that’s in the cards. And how are we gonna get there? You know, it’s this team.

Jesse’s technical team found the horizontal drilling opportunities, quantified it, and we use that, put it on our website to go out and recruit using brokers to find the best driller we could, and I believe we’ve done that. That driller also helped us with the funding. So, you know, somebody wants to invest in a field that’s got a lot of potential, and we certainly have that. So where we’re at, I wanna I wanna finish up with a thank you to Jesse and his technical team, to Mitch and his accounting team. And then right now, the bulk of our activity is with David Smith, our general counsel, and his legal team.

Because when you get into Definitive Docs, it’s almost all legal. So we we have to work with the bank. We have to work with the seller. We have to work with the funder. We have to work with everybody to make this thing come off smoothly.

And so far so good. We’ve got regular weekly coordination meetings, and, you know, I’m getting asked almost at least every other day when is it gonna close? When is it gonna close? Early September. We were trying like hell to get it to happen by August 27, but believe it or not college football is impacting us.

So we think it’s gonna be September and that’s where we’re at. So with that, I’ll turn it back over to Mike.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Matt, could you start the question and answer period, please? Certainly.

Conference Moderator: Everyone at this time will be conducting a question and answer session. We do ask that while posing your question, please pick up your handset if you’re listening on speakerphone to provide optimum sound quality. We do ask that participants please ask one question and one follow-up then reenter the queue. Your first question is coming from Brian Orbit from Advanced Logistics USA. Your line is live.

Brian Orbit, Analyst, Advanced Logistics USA: Yes. Team Dante and the whole team, thank you for, you know, being so forthcoming with the shareholders. It’s actually enjoyable to get on these conference calls, which doesn’t always happen in the markets. I did have a question going forward on oil prices as we go into the winter season. Where do you see this leading?

Are we gonna get back up into the seventies, eighties? Are we gonna hang in the sixties? Thank you.

Dante, President and CEO, E. ON Resources Inc.: Yeah. I mean, every it’s it’s everybody’s guess, and thank you for the question. But peace in Ukraine seems to be dampening oil prices. So a lot of the, I’ll say, analysts are saying lower oil prices ahead. But being one of those people that worked in Saudi, I I personally believe the Saudis aren’t gonna stand for an oil price below much below 60.

So I I think where oil is is where it’s gonna be, and it’s fine with us. You know, the concern that’s gonna come up for us is, you know, what are the economics telling us with regard to drilling? And right now, we think we need high fifties, low sixties for an economic limit, but I don’t see it affecting our funding because these are long term outlooks. It may delay the drilling. It may slow down the drilling, but it isn’t gonna stop the deal.

So that that’s the best I can offer. I don’t know if Mitch, do you wanna give a different view or Jesse?

Mitch Trotter, CFO, E. ON Resources Inc.: No. I think you’re dead on. I mean, it’s it’s everybody’s guess. I wish we knew all the answers.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Yeah.

Dante, President and CEO, E. ON Resources Inc.: Okay. Back to you, Ben.

Brian Orbit, Analyst, Advanced Logistics USA: Appreciate that. Yeah. I appreciate that information. And and just one quick follow-up. Of the oil that you’re gonna produce from these new wells, hopefully, in q one twenty late q one twenty twenty six, Chevron gonna be buying all that oil as well?

Dante, President and CEO, E. ON Resources Inc.: You know, they they told us they would. They told us they would, but it’s a very interesting market for oil buyers. The big guys, and I won’t mention them, they all wanna buy crude, and they all wanna buy from a field that’s increasing in production. But so far so good with Chevron. We did go to them early on once we bought the field, and we said, we plan to double, triple, quadruple production.

You have any problem with that? They said you can increase it by tenfold. We’ll take the crew. So they want it, but they’re not the only ones that want it.

Brian Orbit, Analyst, Advanced Logistics USA: Perfect. Thank you, Dante. Thank you, team, and look forward to the future.

Dante, President and CEO, E. ON Resources Inc.: Thank you. Good questions.

Conference Moderator: Thank you. Thank you. That concludes our verbal Q and A. For those listening on webcast, you can submit question at this time by clicking on the Ask Question button on the left of your screen. Type your question into the box and hit the send button to submit your question.

I will now turn the call over to Michael Porter for remaining questions.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Thank you, Matt. Dante, I just received a question from a shareholder who would like you to explain the ORE deals and what it means to the company.

Dante, President and CEO, E. ON Resources Inc.: Yeah. And and ORE stands for overriding royalty interest. It’s like a royalty. And sometimes it can be a term, Orey, meaning we get it back, or it could be a perpetual roy Orey, meaning they keep it forever. And an Orey is going to be our secret weapon.

So we only wanna talk to those on this call about it, but it’s really in a a buyer of an ORE or a buyer of a royalty will pay $2.03 $4.05 times the the revenue. A bank, however, if we were to go to a bank for a loan, they might give us two times EBITDA. So for a little Ori give up, we get a lot more cash, and we don’t take oil risk or production risk on the loan. So an ORE is impossible to default on. So we don’t have bank covenants.

We don’t have any of the things that frankly are kind of scary about a bank loan, and the money, if you know where to look, is a little more plentiful. So we’ve taken this route to finance what we need to do to retire all debt. We we also will continue in this vein to raise CapEx and to raise money for acquisitions. If we use stock as in an ELOC, we’re you know, I I started this call by saying the insiders own a lot of stock. We don’t wanna water down our stock by pumping a bunch of shares out there for 30¢.

We’d much rather sell an Ori, pick up 40,000,000 or 10,000,000 or 20,000,000, invest it in the field, delight our shareholders, attract institutional shareholders, and then when the stock is $10, $20, yeah, we’ll tap the gas a little bit and sell some stock with an ELOC. I hope that answered your question.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Thank you. The next question is, since you started this whole discussion about horizontal drilling, does the management team have expertise in this area? And what does the horizontal drilling mean as far as increased production?

Dante, President and CEO, E. ON Resources Inc.: Yeah. Jesse, can you field it?

Jesse Allen, VP of Operations, E. ON Resources Inc.: Yes, indeed. Yes. So the management team at Eon Resources has extensive horizontal drilling experience. I myself worked almost ten years at Chesapeake who was one of the premier horizontal drillers in many of the different basins and so I bring that experience to the table. And then secondarily, the investordrilling group that we want to employ are also very experienced drillers and completion experts as far as horizontal drilling.

I myself have fracked many, many, many horizontal wells personally on location and remotely via the computer. So to answer that question, yes. We wouldn’t be a player in the horizontal drilling realm if we weren’t very well versed in that technology. And then second, and then also just to add, horizontal drilling if you’d like to think of it like this, when we drill a horizontal well horizontally of course for 5,000 plus feet or one mile horizontal and you pump 30 fracs on it, it’s like putting 30 vertical wells. So at a fraction of the cost of 40 wells you get it in one single horizontal.

So the production impact instead of maybe a 40 barrel a day well, get a 400 to 600 barrel a day well, somewhere in that range. So that’s the impact. So the rate of return is much higher and you get a bigger bang for your buck by drilling a horizontal well versus an equal number of vertical wells. So I hope that answers the question.

Dante, President and CEO, E. ON Resources Inc.: I might add I was gonna add one thing to that and it’s buried in all our releases. But the the forecast for a horizontal well is in the 400 to 500 barrel a day average zone for an average well. Some wells could do a thousand, some wells might do 300. But if you take those numbers and you multiply it times 90 now I don’t know that the 90 number will hold up in the end maybe it’s 70 maybe it’s 60 but you get a very big number coming out of this oil field if you multiply it out. Now none of us wanna do the math for that because we wanted we don’t wanna jinx it, but we we do think that Jesse has selected a a premier drilling group that comes with a full team experienced in our field.

So I’ll leave it at that. Back to you, Mike.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Okay. Thank you. The next question is for Mitch. Have you started to work on a hedging program for 2026?

Mitch Trotter, CFO, E. ON Resources Inc.: Yes. We have. We’re actually we’re in discussions and looking at the various pricing options that are presented, and we will be hedging into 2026, and some of it will come after we finish the close in any position we need, and our hedging currently is on the Gray Brook Jackson. Obviously, we’re also gonna look at the South Justice, and we will put appropriate level, and just like last year, we’ll stage it now. We had a huge benefit in 2024 with a big spike on February in oil prices, so we locked in much longer.

But typically, you’ll put it in by a quarter, by a half year, and whatever. So, yeah, we’re definitely looking at that. That’s an important thing to have. And that’ll yes, we’re doing that. So go back to you, Mike.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Thank you. Dante, the question is how important is the four rigs on both properties, and what does it mean for the next two quarters?

Dante, President and CEO, E. ON Resources Inc.: Well, these rigs cost us about $5 a day each, and it’s absolutely critical to kick the production up. We just wanted to be sure where the best place was to spend our money. And at the moment, when we turn a well on at South Justice, we’re we’re getting five, six barrels a day with some flush production up front. So running a rig over there for the next three or four months makes a lot of sense. Over at Graeburg Jackson, we we just we want every well producing.

We want every injection well injecting water, and it’s it’s a question of dollars and cents, but our our steady state view would be probably one run one rig continuously at Graber Jackson and do all the right things. So we’ll stay on once we put them on. That means having the right pump, having the right tubing, having the right stimulation. We did a lot of experimentation. Some of it failed.

Some of it worked to figure out how to frack without getting the Sahara Desert coming on you. What acid job works to give you a good payout? So we now feel like we have our feet beneath us. And I think the next two, three months and possibly through the end of the year, we’ll be running four rigs.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Okay. Thank you. The next question is, have you looked at doing a competitive bidding, an RFP for legal consulting expenses? Is there any chance you can reduce your costs here?

Mitch Trotter, CFO, E. ON Resources Inc.: I’ll take that. I don’t know if we’ll do a formal RFP for everything, but we are looking at everything and we’re discussing all options with everybody. And yes, we’re definitely see that, and we’ve driven costs down as we’ve gone, and we will continue to do that.

Dante, President and CEO, E. ON Resources Inc.: But, yeah, I’m gonna I’m gonna just add legal Sure. Accounting. Legal accounting and insurance are three top G and A expenses. So all three of those, you know, we we’re we’re trying to work with our current providers to grind them down, and some of them tell us we’re the problem. So we’re looking at ourselves to improve what we asked for and they all fit in the category of writing blank checks.

You know, you have to be very careful what you ask for because they’ll all do it and then you get the bill. So if we can get this under a lump sum or lower bill rates, yes. So that’s a that’s a very sensitive topic, and, yes, we’re working it.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Okay. The next question is, what is the largest increase in equity related costs in the third quarter?

Mitch Trotter, CFO, E. ON Resources Inc.: In the third quarter or the fourth quarter? I see a note in there. It says fourth quarter of last year.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Oh, I’m sorry. Fourth quarter.

Mitch Trotter, CFO, E. ON Resources Inc.: That’s okay. Because that would have been the only big quarter we’ve actually had. So anyway, it really comes in two pieces. There was about a million dollars that hit the the g and a for equity based cost. About a third of that 350,000 range was in the category of clearing a lot of payables.

And and so we went through that at year end, but we cleared a significant number of payables at a dollar of stock, which was higher than the price was going or at the price or below. So it was a very good deal. And then $675,006.50 range, two thirds of it, was really fees relating to settlements, and the biggest was clearly the clearing out the FDA, getting rid of the FDA where we had to issue a bunch of stock to do that. So that’s the bulk of that, and then there were a couple other small settlements. Yeah, that was a one time hit to everything, the biggest, and that million plus, million 1 was a 138,000 or something like that in in q two, and that’s just basically some contract fees.

So, yeah, so it’s dramatically off. And I think I answered that, so I’m gonna pass it on back to you, Mike.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Thank you. There was a comment in the 10 Q that the South Justice currently has 50 acre spacing. And can you please tell us whether you expect to bring that down to what you’re doing in the grayberg of, I guess, it’s 20 acre spacing?

Dante, President and CEO, E. ON Resources Inc.: Yeah. Yeah. I’m just gonna say we don’t know the answer to that question, but we’ve recently commissioned a study by a third party engineer. I guess I can give the the commercial form. They’re the same outfit that does all our work, Hoskobb out of Dallas.

So they’re just at the beginning of studying this, but we bought the property based on some some rough indications from them. Namely, if you infill drill in the Permian, the new wells do half as good as the original wells just as a general rule of thumb. In this field with these wells was doing 6,000 barrels a day in the sixties and early seventies. So if we were to infill drill, maybe we’d see 3,000 barrels a day. Again, we have no basis, no engineering to support that, but we’re we’re trying to study that now, and it’s we’re probably six months away from answering that question, but the possibility exists.

Jesse Allen, VP of Operations, E. ON Resources Inc.: Let me let me add, Dante. This is Jesse Allen. That Yeah. It would probably be a combination of some infill drilling, vertical wells and horizontal wells in order to maximize the ultimate recovery and or the ultimate daily oil rate. So in my mind it’s gonna be a combination.

We’ll probably do some vertical wells and then in addition horizontal wells to fully exploit the reserve potential and obviously the daily oil production of both fields, both the Grayberg Jackson and the South Justice. Mike, back over to you, sir.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Okay, Dante, that was the last question out of the website. Would you like to make any closing remarks?

Dante, President and CEO, E. ON Resources Inc.: Yeah. Those are all good questions. I wanna repeat thank you to all our shareholders, and thank you to to the millions of share buyers this week that that should be buying our stock. And thank you to all our employees that work so hard in the field, the technical team, the the financial team, the legal team, and and all of our contractors and vendors that support us. I mean, it really feels like we’re on the brink of going from mediocre to good, and I’m I look forward to talking to all of you again next quarter, the quarter after that when I can say finally, we’ve gone from good to great.

But right now getting the cash flow positive, having capital to invest in these two fields, and, you know, being able to look forward is is really a good feeling. So thank you all. Back to you.

Michael Porter, Host/Moderator, E. ON Resources Inc.: Matt, do you wanna close?

Conference Moderator: Certainly. And thank you, everyone. This concludes today’s event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

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