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EON Resources Inc. (market cap: $8.52 million) reported its fourth-quarter 2024 financial results, revealing a significant earnings surprise. The company posted earnings per share (EPS) of $0.29, surpassing the forecasted loss of $0.19 per share. Revenue fell short of expectations at $6 million, compared to the forecast of $6.64 million, continuing a challenging trend with revenue declining 24.4% over the last twelve months. Despite the mixed results, the stock rose 1.92% in pre-market trading, closing at $0.477, up from the previous price of $0.468. According to InvestingPro analysis, the company’s overall financial health is currently rated as WEAK, with 8 additional key insights available to subscribers.
Key Takeaways
- EON Resources achieved a notable earnings beat with an actual EPS of $0.29 against a forecasted loss.
- Revenue fell short of expectations, coming in at $6 million versus the anticipated $6.64 million.
- The company reduced its senior debt from $28 million to $23 million, showcasing financial discipline.
- Production remained stable at 950 barrels per day with plans to increase by 50% by year-end.
- The stock showed a positive pre-market reaction, rising by 1.92%.
Company Performance
EON Resources demonstrated mixed financial management in Q4 2024 by beating EPS expectations significantly, despite revenue falling short. The company maintained stable production levels and reduced its lease operating expenses, reflecting a focus on cost efficiency. With a concerning debt-to-equity ratio of 13.89 and current ratio of 0.14, the company faces significant financial challenges. InvestingPro subscribers can access detailed financial health metrics and exclusive analysis through the comprehensive Pro Research Report, one of 1,400+ available for top US stocks.
Financial Highlights
- Revenue: $6 million, below the forecast of $6.64 million.
- Earnings per share: $0.29, surpassing the forecasted loss of $0.19.
- Lease Operating Expense reduced to $700,000 per month.
- Senior debt reduced from $28 million to $23 million.
Earnings vs. Forecast
EON Resources reported an EPS of $0.29, significantly outperforming the forecasted loss of $0.19. This represents a positive surprise of over 250%, a notable achievement compared to previous quarters. However, revenue of $6 million did not meet the forecasted $6.64 million, indicating challenges in achieving top-line growth.
Market Reaction
Following the earnings announcement, EON Resources’ stock rose by 1.92% in pre-market trading, reflecting investor optimism about the company’s earnings beat. The stock’s performance remains within its 52-week range, with a low of $0.351 and a high of $3, though it has fallen over 82% in the past year. The sole analyst covering the stock maintains a bullish stance with a $4.50 price target. InvestingPro analysis indicates the stock is currently overvalued, with additional insights available on the Most Overvalued Stocks list.
Outlook & Guidance
Looking ahead, EON Resources plans to increase production by 50% by the end of the year and target five to six wells drilled annually over the next decade. The company is also exploring multiple acquisition opportunities and aims to reduce general and administrative expenses. Future guidance suggests potential improvements in 2025 and 2026, with a focus on operational efficiency and strategic growth.
Executive Commentary
Dante, the President of EON Resources, expressed confidence in the company’s future, stating, "We think we’re gonna hit some home run balls in ’25." CFO Mitch Carter emphasized financial prudence, noting, "We’re opposed to excessive equity dilution and excessive debt." These statements highlight the company’s commitment to sustainable growth and financial stability.
Risks and Challenges
- Oil price volatility remains a significant risk, potentially impacting revenue and profitability.
- The competitive market in the Permian Basin for parts and services could pressure margins.
- Dependence on successful drilling and production expansion to meet growth targets.
- Potential regulatory changes in the drilling permit environment in New Mexico.
- The challenge of maintaining cost reductions while pursuing growth initiatives.
Q&A
During the earnings call, analysts raised concerns about market volatility and its impact on EON Resources’ operations. The company’s leadership addressed questions about accelerating work with higher oil prices and the improving drilling permit environment in New Mexico. Additionally, the volumetric funding arrangement with Onstream Capital was discussed as a strategic financial move.
Full transcript - EON Resources Inc (EONR) Q4 2024:
Matt, Conference Moderator, E.ON Resources: Good day, everyone, and welcome to the E. ON Resources Inc. Announces fiscal year twenty twenty four earnings call on 04/23/2025. We will 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 the send button 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, Legal/Compliance Representative, E.ON Resources: Thank you, Matt. Good morning, ladies and gentlemen, and welcome to the EON Resources conference call. I have to read the forward looking statements before we start, then I’ll turn the meeting over to management and there will be a Q and A session at the end. This conference call includes forward looking statements within the meanings 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, intend, seek, may, might, plan, and any variations and similar words and expressions are intended to identify such forward looking statements.
Such forward looking statements relate to future events or future results based on the current available information and reflect the company’s management and current beliefs. The company’s expectations are disclosed in the company’s documents filed from time to time on Edgar, and with the Securities Exchange Commission. With further ado, I would like to turn the call over to the President. Dante, the floor is yours.
Dante, President, E.ON Resources: Thank you, Mike. Welcome everybody. Thanks for dialing in. Thanks for buying our stock. Thanks for your keen interest.
We really do appreciate that. And I’d like to just state that this management team believes in our company. We’re all purchasers of the stock. We’re all owners of the stock. And we all believe we work for each of our shareholders.
So I just wanna start with that. Why invest in EON Resources? You know, especially look at the look at the world market right now. You’ve got volatility in the oil pricing. You’ve got, tariffs that that also impact oil prices.
So so why look at our little company, especially when we lost money last year and we’re we’re priced at half a dollar. So I wanna start with the asset itself. We purchased an asset really at a at a originally a price of 120,000,000, then rejigged it to 90,000,000 and then and then made an agreement with the seller to readjust it to 60,000,000 and it’s got a billion barrels in place. So it becomes our number one place to shop. And yesterday we had a meeting internally to look at seven different acquisitions at the top of the list is the repurchase of a 10% royalty from the seller for approximately fifteen million.
We have a binding agreement. We have a solid choice to fund this thing. It’s going to easily be the most accretive transaction to this company, and it’s already been released. So it’s in the news. You can you can see it out there.
So a %, one of the home runs we’re gonna hit this year is the purchase of a 10% royalty, back from the seller. And we’ve got the funding in place to make that happen on or before June 10. The ’24 was a story of urban renewal. We had to repair and upgrade most of the field surface facilities. We replaced 14 flow lines that impacted a bunch of wells.
We had to replace 50 pumps. We had to improve electrical. We had to buy a hot oiler to cure plugging due to paraffin and upgrade our electrical system. So now today we have a very reliable field producing nominally nine fifty barrels a day with the thought that by the end of the year we should increase that by 50%. We’re working to restack our capital stack and again the acquisition of the 10% royalty and the elimination of 40,000,000 shareholder liability, 20 of that is a seller note, 20 of that is preferred shares that just go away and acquisition of that royalty costs us about 20,000,000.
So we’re going to have to pay that cash on June 10 and we’ve got in place multiple sources of funding to make that happen. Also, we believe that by the end of the next couple of years we’re going to add 150 waterflood patterns in the Seven Rivers formation and these patterns are they look like the top of a Las Vegas dice number five where in the center you have a producer and on the four corners you have injectors. So we’ve got 95 of those working today that produce roughly 700 barrels a day and we’ve got another 50 of those to go. In the funding with Onstream includes the funding to add another 50 patterns. So we figure of those 50 patterns, we can add 50 a year.
On top of that, we’ve got another 200 workovers available to develop behind pipe potential. It’s taken us a while to figure out how to stimulate these wells. We had frankly three failed frac jobs using fly ash and now we’re using twentyforty sand with low temperature resin and we’ve had a success. And we’ve got another well that we think is going to be a success. So we’ve had to walk slowly before we spend the money.
And and what we’re talking about here is taking workovers done by our predecessors that ran close to half a million and do those for a hundred thousand a hundred thousand dollars getting essentially the same results. So it’s taken us time to really work this out. So now we think we can hit the gas with those workovers. We also published on February 26, a press release regarding our horizontal drilling potential in the San Andreas where we identified 50 wells to develop another 20,000,000 in recoverable reserves. Those wells will do 300, four hundred, maybe 500 barrels of oil per day.
So they’re humdingers, but we’re going to be very cautious. We’re looking at our offsets. We’re learning from our competitors and they’ve been very open about best practices. So we wanna say a big thank you to all those that operate near us because they’ve really opened up their books to say this works, this doesn’t work and we’re taking full advantage of that. With a drilling partner, we’re hoping to go head to head fiftyfifty on the drilling costs, get them to help us on the first few wells and then have at it.
We’ve got 12 wells in the hopper right now to permit for drilling to commence in Q1 of twenty six And we’re planning on drilling, we think, five or six wells a year for the next ten years. We’re not going to just hit it and go and blow. And that’s just so that we can be cautious and cost effective about what we do. So in summary, we expect a huge ’26 and a much more improved ’25, developing the 7 Rivers Waterflood to get to an eventual two fifty patterns at 20 barrels a day per pattern gives us a ton of oil. The San Andreas horizontal wells 50 wells at three, four, five hundred barrels a day per well also gives us a ton of ton of oil.
Results from the infrastructure repairs and upgrades, we’re seeing it now in the form of reduced decline rate. So if I’m leaving you with a message of why to invest with us, in ’24, it was a disappointment that we didn’t make more money, but we did fix the field. We we did negotiate with the seller. I think a marvelous a marvelous outcome to restack the capital stack, which, saved shareholders forty million. And, we did complete engineering that that pointed the way to a profitable future which includes workovers, waterflood expansion and drilling.
In ’25, we’re going to make more oil, we’re going to cut costs, we cut, you’re going to hear Jesse talk about cutting costs in in our operating to where our our lifting cost per barrel is roughly $23 20 4 dollars per barrel. We need to do the same kind of cuts to our G and A. So you’re gonna hear a little bit about that from from Mitch Trotter. And then we’re also gonna make at least one acquisition in this year with, frankly, our own royalty of our own property. But we’re looking we’re looking at more Permian properties.
We’re looking at gas, and we think there’s lots of opportunities out there for us. In ’26, it’s going to be drilling, it’s going to be extension of waterflood patterns and it’s going to be workovers, Kinda more of the same, but just more of 25. And with that, I’m gonna turn it over to Mitch, please.
Mitch Carter, CFO, E.ON Resources: Thanks, Dante. Hello. I’m Mitch Carter, the CFO. I wanna welcome those that have been or the new to our call and those that have been on calls before. And I wanna thank you for attending today.
There we go. In this call, I wanna give you a little insight into the fiscal twenty four results. The management team, the field team, as Dantia said, have made huge strides in 2024. So at the surface level, the numbers are not so obvious, as Dantia stated. But the underlying numbers reflect solid progress and positioning for a bright future.
We stabilized the field, it was not developed as it should have been. Those numbers are in our steady CapEx efforts in our balance sheet. The production was stabilized, which is reflected in the revenue results, which I’ll show you on a later slide. We’ve controlled lift or LOE cost. The LOE dropped from a higher run rate q one and before to our baseline now of about 700,000 a month, which has remained steady now for the last nine months.
Now g and a expense did take the brunt of what we had to do to de SPAC, clean up many acquisition related matters. In a few slides, we’ll drill down into g and a. There’s also the noncash expenses slide that I’ve shown in the past. It does reflect our responsible hedging. It also certain aspects of what we’ve done to clean up the balance sheet that are is underway.
Now a key aspect of our 24 results is that the field has been making solid income from the outcome. The production growth and efforts to reduce G and A costs that will start to show up in 2025 puts EON in a good position for the future. After we drill down into the p and l aspects of this, we’ll go to the balance sheet, debt, and equity. So let’s talk about revenues. So next slide, please.
Many of you have been on these calls before. I did add to to the slide now the production levels, the oil prices, the split of hedging of cash versus noncash to help you understand the numbers better. The production was stable for the year. You can see that in there. The oil revenue fluctuations was mostly driven based on the market price of oil.
Now on the market price of oil, looking forward, we are hedged through 2025 at 75 70% or greater and $70 a barrel or greater. So do note also that in q two, the noncash portion other than q two, the noncash portion of the hedging drove results up and down from our average of $5,000,000 of cash revenues per quarter, which has been steady across the board. Now let’s take a look at the production impact on the P and L that Dante’s been talking about. So next slide, please. Again, as Dante’s been discussing and Jesse will, we’re now in the phase of developing the field now that most of the maintenance and infrastructure enhancements are coming to a conclusion.
You may have heard us talk about developing the wells in the 7 Rivers waterflood. What does that mean? Average production from a well, from a frac, is expected to be about 20 gross barrels of oil per day. A recent new frac has come in at that level, as Dante noted, and we’re starting on some others, so that’s good news. The cost of a workover frac is in the 150, maybe up to $2.50 depending on variables.
So that you can see from the table that the payback period is quite good at today’s oil prices. We’ve also talked a lot about the 50 wells, like Dante was saying, or increasing a thousand barrels of oil per day. The table shows you the P and L range impact for that 1,000 impact. 1,000 barrels of oil in increment, plus or minus $10 from the current oil price. I’m saying $65.
Do note that the incremental change in LOE at this level of increase of production of a thousand barrels of ink a day is expected to be minimal because we’re already running at our base level today, and it will support that extra thousand barrels. Now we’ve also released the study that Dante was talking about, the horizontal drilling program. And if you look on the right table, it’s what does that mean? Well, first, the wells cost about 3,700,000.0 to complete. Accordingly, we’re looking for a drilling partner as Dante noted.
And they’re to share in the cost and reward. This is quite common in our industry. The table does reflect our 50% of both. The study indicates 300 to 400 barrels of oil per day average, and I’ve also done analysis on plus or minus $10 of the oil price. And just like the Seven Rivers fracs, the payback period looks quite good.
Next to the g and a slide, so please advance. So here, I wanna discuss the two major drivers that impacted 2024, equity based costs and the professional fees. And this leads us into cost reductions for ’25. First, there’s 2,800,000.0 of noncash equity based costs included in our G and A results. 700 k comes from RSUs, options for employees, directors, is quite normal for a public company.
But as we’ve been discussing each quarter, there’s a million 6 of equity cost for fees, settlements, etcetera, that stem from agreements and instruments for the de SPAC and acquisition closing. These costs do not repeat in ’25. Also previously discussed, approximately 500,000 of equity cost to clearing liabilities and cleaning up the balance sheet. Now moving on to the 2,800,000 professional fees for legal and audit. About half or a million 4 of that stems also from the acquisition for filing complicated instruments on the balance sheet, settlements of agreements, and various other trailing legal matters.
While some of these costs do carry over into ’25, we expect it’ll all dramatically reduce after q two. Now I’m not gonna drill down into the other areas, except I do wanna note going into 2025, there are certain cost reductions that we’ve already made beginning in January. Namely, we have lower insurance rates in the neighborhood of half a million dollars. We’ve also reduced certain salary related costs. So with that, I do wanna go forward to the non cash expenses.
Next slide, please. So I’ve discussed this one in the past. Just like the past here, the financial table agrees to the file 10 k and the reference number is for you to follow. Hitting on them quickly. Hedging, we’ve discussed.
G and As, we’ve already discussed. The warrant liability, like in the past, stock drives the price at the end of each quarter. Derivative liability, that’s a new one that is for certain convertible notes that it all reverses in Q1 and goes away by the end of the quarter. So that’s just a pop in and out. And then number five, the Ford Purchase Agreement, the FBA, it was terminated in November.
So it reversed out all the impact during the year, is is gone by the end of q four, and the balance sheet goes to zero. We’ve cleaned it up. Financing costs, same as before, all the way since acquisition. And then number seven, the settlement of liabilities. That was a q two event.
We picked up $1.7 in settling certain liabilities to clean up the balance sheet. So with that, I do wanna go forward to the balance sheet. So next slide, please. And I’m not gonna spend a lot of time here, but we’ll cover a little bit of debt and equity changes on the upcoming slides. But what I do wanna mention is that the company has made and is continuing to make improvements to the balance sheet.
The FBA contract, as I noted, liability was all cleared q four, gone at the end of of December of twenty four. Select payables and liabilities were settled during the year or cleared via equity issuance. We’ve also started the process where we to clean up our private loans and warrant liabilities that are current into long term convertible notes starting in q four. We started that process. Because cleaning up the balance sheet has always been our goal since the beginning, and many of you shareholders have told us clean up the balance sheet, which we totally agree.
And so we have press releases, shareholder letters describing other actions and process. With that, I wanna touch on that slide, next slide please, real quickly. There’s not a real lot of change from the past. I’m not gonna spend a lot of time on it, but I do wanna note that the RBL, our our senior debt, that started at 28,000,000 is now at 23 based on the amortization schedule and our payments. So go for the next slide for the equity.
And there’s not a lot of changes from q three, so I’m not gonna spend a lot of time on this one either. But I do want you to note that at the end of the year, we had 10,000,000 of class a shares, and we still had 500,000 class b shares, which are voting only rights, but it has a one to one conversion to class a. And after the end of the year, all the class b was converted, so that balance sheet has been put item has been cleaned up and goes away. But I do wanna talk in the debt side, the financing side, the funding options. So next slide, please.
Now here, there’s been a lot of press releases, shareholder letters on what we’re doing, our development plans, etcetera. Everything takes some type of funding, whether it’s internal cash flow or other funding. Just to let y’all know, we believe in a proper and balanced approach to our funding fundraising. We are opposed to excessive equity dilution and excessive debt. It needs to be balanced.
So our business, in our business, the main sources are volumetric funding, debt financing, equity instruments. Now most of you know a lot about different debt instruments and equity instruments that are out there. I’m not gonna sit there and go through all those options. We do listen to many proposals on some stuff that makes sense and some stuff that just doesn’t make sense. We reject a lot of them upfront because they’re just not in the best interest of the company and not in the best interest of the shareholders.
So we don’t entertain those. Now, instead, I wanna spend a little bit of time talking about the volumetric funding, which some of you may or may not know about. And it is described in further detail if you wanna read our March 20 press release. But in short, it is a product, production, revenue sharing instrument that is near debt nor equity. Instead, it’s essentially a portion of the production and related revenues carved out to pay the investor.
Once the investor makes his agreed upon return, the production and revenues revert back to the company. Now the payments now will fluctuate up and down with production and oil prices. That mitigates a lot of risk for the company. Certainly our cash flow, it matches. So it also minimizes or reduces default risk to the company because it’s not a traditional loan.
And also, it does not dilute our common stock. Yeah. Where are our plan usage? We have three of them for this year. One, field development.
That’s Dante talked about the on stream, the 50 wells in that program, and that’s a prime example of what we can use it for. But also the horizontal drilling partner that we’ve alluded to, that’s a different version of a volumetric funding. What’s the second one? The seller consideration agreement, which we’ve talked about. It’s in the press releases.
And then third, when there’s refinancing where appropriate, we may use that. So so at this point, I do wanna conclude my presentation. We will take questions at the end of the call. And if you need a deeper dive, and time may permit, or it’s more detailed than is prudent for this larger group setting, just reach out to Mike Porter, and he’ll schedule a one on one call. We’ve done several of these.
With that, I wanna hand it off to Jesse for the operations review.
Jesse Allen, VP of Operations, E.ON Resources: Well, thank you, Mitch. Good morning all. I’m Jesse Allen, the VP of Operations. And today, I will discuss the highlights of our 2024 operations, what we did to stabilize production and what we will do to increase production in the future and what we’ve already initiated here in quarter one. First though, I’d like to start off with safety.
In 2024, our field operations team did a wonderful job of staying safe. We had no reportable incidents in 2024. And as part of that program, we do have weekly safety meetings in which all our lease operators come in and discuss near misses and what we can do to actually improve operations and improve the safety, although it’s been very, very good thus far. So in 2024, ’20 ’20 ’4 highlights. When we took over the property, the daily production was basically in a free fall.
And so our first order of business is what’s going on? Why is that happening? And so we started initiating procedures and work that enable us to just stabilize the production at about nine fifty barrels of oil a day. And so what did we do? Well, first we realized that we’re gonna have to do several infrastructure upgrades that would enable us to keep our wells on production because that’s the key.
You gotta keep everything producing to the tanks. And so what we ended up starting with, we realized that water injection trunk line from one of our major water stations was in need of replacement. So we’ve initiated that. We also discovered that we had a lot of idle wells that were down due to flow lines that had holes in them and needed to be replaced. And so we did that type of work.
And as Dante alluded, we’ve done over 20 now. And at last count, it was 25, 20 six that we’ve done. And that enabled us to return about 60 barrels of oil a day to production. The water injection line, that project is not quite complete, but I anticipate once we, resume water injection in this part of the water flood, that we’ll regain about 50 to 75 barrels all the day. So what else did we do?
Well, we actually had to do some electrical upgrades, and that’s replacing some conduit electrical wire that had been compromised. But the really big project was the replacement of a of a large transformer that power went to one of our water stations. We were not able to operate that particular water station at 100% capacity. And the only way we were gonna be able to do that was to replace an outdated and ancient transformer that was there. And we did that.
It was a big project. Now we’re operating at 100% of that water injection station. What else did we do? Well, we ended up replacing several of our horizontal water pumps in several of the water stations. We ended up swapping out a pump that was too small, used it in another water station to enable us to have a full time injection there.
That is key to our water flood operations. We have to put water in the ground, know exactly where we’re putting it, and keep our rates up in order to continue to increase our production or at least maintain production. And so that’s part of what we did to stabilize the production. In addition, we purchased a hot oil unit. We use that every day and Dante alluded mainly that’s to flush out flow lines, do pressure tests on on flow lines, etcetera, and so on.
And that reduced our LOE about 30 k per month over third party use of a hot oil unit. And I’ll talk a little bit more about that as I discuss the LOE. We also produced some also purchased several portable well stage well testers, you know, and they to enable us to test our wells and it and have a much better idea that the work we’re doing is actually been fruitful and increasing production. So with that, let me get into LOE. From the beginning of twenty twenty four when we took over the the operations, LOE was basically out of sight.
It was greater than 800,000 a day or a month, eight hundred thousand dollars per month. We were able to reduce that to an average in 2024 of 765,000. And we’re hopeful that as we come into 2025 we’re going to be around $700,000 per month on our lease operating expense. And we anticipate even reducing that further. Next slide please.
So what are our plans for stabilizing and increasing production? What have we done? As mentioned, we have been trying to figure out the formula to stimulate these wells. As Dante mentioned, we did three with fly ash. They didn’t turn out as expected.
And so we moved on to pumping low temperature resin coated sand. And what’s key about that is the past workovers and recompletions that were done, a lot of proppant was pumped. We produce a lot of that proppant back. It gets into our pumps and our flow lines. And so we had to do something different to eliminate that sand.
It was causing excessive well pulls as a result. And so last several jobs we’ve done, we pumped low temperature resin coated sand and they’ve been successful. And the first one has come in at 20 barrels oil a day. And that’s what we expect on a go forward basis as an average. We also are bringing idle wells back on production that had some type of downhole failure.
When we took over production there was an excessive number of wells that were down for whatever reason. Some of them more severe than others and we’ve started returning those wells to production and that again helps stabilize and increase production a little bit. In addition, as we’ve stated, our water floods and the injection wells are very important and we found that there were injection wells that were down for various reasons and we’ve returned some of those back to injection, that is an ongoing program. Finally, what’s been really a highlight is what our technical team uncovered as far as the horizontal potential in the St. Andrews formation.
That is we’ve done our technical presentation. It’s on the website. You can view it there. And we’re actively seeking a partner to come in and help with the cost. And then and and so the plan currently is we’re in the process of permitting those 12 wells, and we hope to have those permitted here in 2025 with a kickoff of the first three wells toward the end of twenty twenty five and into the first quarter of twenty twenty six.
So with that, of course, we do have a Q and A at the end. I’m going to turn it back over to Dante for some concluding remarks. Dante, take it away, please.
Dante, President, E.ON Resources: Yeah. Thank you. Thank you, Jesse. Thank you, Mitch. So guys, to wrap up our presentation here, we think we’re gonna hit some home run balls in ’25.
And we think that’s gonna put us in position to be the best performing microcap oil and gas company on the big board. The first one up is going to be conclude the settlement with seller that adds $40,000,000 in value to the shareholders. So that works out to be a little more than $2 a share. We’re gonna get that done midyear. The next one up is the drilling partner.
I believe we’ll select the drilling partner in the next three months. We’ve got meaningful dialogue going on with three, and, we’re gonna cut the best deal that we can for our shareholders. The next one up is part of the financing for the settlement with the seller is the financing to do 50 workovers, all to be completed this year. That’s gonna be another home run ball. We’re gonna make at least one acquisition this year.
Certainly, we’re gonna acquire the 10% royalty on our own field, and I believe we’ll do at least one more. And the last home run ball is to cut our G and As and our lease operating expense as much as we possibly can to weather the storm of oil prices. So that’s it. That’s that’s kind of a five home run inning, and and, we think that’s gonna that’s gonna be tough competition for our for our other public companies that we compete with. With that, I’ll turn it back over to Matt to do, start the q and a, please.
Matt, Conference Moderator, E.ON Resources: Certainly. Everyone at this time will be conducting a question and answer session. We do that while posing your question, please pick up your handset if you’re listening on speaker Thank you. Once again, everyone, if you have any questions or comments, please press star then 1 on your phone. Thank you.
That concludes our verbal Q and A. For those of you listening on webcast, you can submit a 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, Legal/Compliance Representative, E.ON Resources: Thank you, Matt. Gentlemen, the first question that comes up, it says, congratulations on your progress. What are your largest concerns that might negatively impact your plans? And also, what are your plans regarding future use of stock in lieu of cash for AP and other liabilities? And the follow-up question is, how is the stock valued, and is it fully registered when issued?
Gentlemen, would you please answer the questions?
Mitch Carter, CFO, E.ON Resources: Let me start that one, and then I’ll turn a little bit on to over to Dante. First, our largest concern is, of course, the market. Everybody’s got that. Oil prices go up and down, stock prices, the market tariffs, and all that. That’s everybody from Exxon and Apple down to companies like us, nobody knows what’s going on.
And let me address the stock questions, and then I’ll give Dante to talk about other concerns that he may have. Now how are we gonna use the future stock for the cash for APs and other liabilities? Well, the 500 k I already talked about, over half of that was settling debts that related to acquisition. Okay? The rest, has been for ongoing people that are heavily invested in our company as in providing services to us in the field and through high end consulting type arrangements.
So we will use it sparingly. We’re not gonna use it in excessive amount. We haven’t in the past, and we don’t plan to in the future. Now how’s the stock value? That’s actually two different questions.
One is what is the valuation from a gap standpoint? And that’s just the base, that’s a gap thing based on the date of the grant and the stock price. But how do we value it with respect to the issue price is the bigger question, I believe, in here. And we are we’re not giving discounts on that. It is basically either at the trading value or a little bit above what it is right now, and it it’ll fluctuate.
So that’s a game time decision each time as to what makes sense for all the parties involved, whether we just use cash, or is it worth it doing that? Now these shares are not registered. They are unregistered shares. They get issued, and then the next s one will allow us to register them. So and you can look in the past at all the registered shares in our s one filing.
So that’s basically what it is with that. Dante, did you wanna hit on any of your larger concerns?
Dante, President, E.ON Resources: Yeah. I’ll just put I’ll put one out there. I mean, we we we have a low lifting cost to $23 a barrel. And if we can cut our G and As and if we can restructure our RBL, we bring all those costs down so we can make money at $35.40, $50 a barrel. But it also makes me wanna look at gas.
Gas is behaving better in the market than oil. So we we may look at that look at gas in the coming years at what what we can do as a hedge against a weak a weak oil price. But my my own view, and again, as Mitch said, nobody knows the future, but I I I see what the the social costs are to the Saudis, and they need an oil price that’s up there. So I think any reduction in oil price is gonna be short lived and we’ve got time on our side because we’re almost fully hedged at 70. So I think we’ve got time to react and to study and to understand what the markets are gonna give us.
So that’s my response.
Michael Porter, Legal/Compliance Representative, E.ON Resources: Thank you, sir. The next question, are you still working on the workovers wells or is this less of a priority list and the Seven Rivers is a priority?
Dante, President, E.ON Resources: I might try to answer that. The workovers are tied in with the Seven Rivers. So some of the workovers are to add patterns. So some of the work we’re doing right now is actually adding five spot patterns. Some of the workovers are to test the San Andreas with vertical wells in preparation of drilling them horizontally.
So the the workovers are gonna be a forever top priority. I mean, we’re gonna be doing that for the next, you know, ten years, which is develop behind pipe potential. We’ve got something like 10 different stacked pay horizons with names like Oceanic and and and and San Andreas and 7 Rivers and so on. So as we learn about these pay sections through workovers, which generally include shooting holes in the pipe and doing some kind of stimulation, whether it be acid or or or a frac, we we just, have no end of fun there. Now I’ll go to to, Jesse.
Did I say that about right?
Jesse Allen, VP of Operations, E.ON Resources: Yes, sir. Yeah. There’s yeah. Most of our workovers will be in the 7 Rivers plugging back and then adding 7 River perforations both in producers and injection wells. And as you’ve mentioned, the vertical workovers that we have are to test intervals within San Andres.
Our geophysicist has been able to identify three or four benches that we could potentially do horizontal wells. Our main bench is what is known as the Jackson slaughter, which is an interval local interval name within the San Andres section. So, yes, we we say 50 horizontal wells currently that could that could double or triple with the identification of these additional benches that we could go horizontal. So yes, the the future looks very, very bright from it for us from a workover and or drilling horizontal completion standpoint. So back to Another
Michael Porter, Legal/Compliance Representative, E.ON Resources: question. Good morning, Aon team. Curious, what are you guys doing to negotiate and benchmark parts, pumps and other goods necessary in order to optimize productivity savings?
Jesse Allen, VP of Operations, E.ON Resources: Dante, I think I can take that one there.
Dante, President, E.ON Resources: Yeah. Please.
Jesse Allen, VP of Operations, E.ON Resources: Go ahead. Yep. Obviously, the Permian Basin and even where we’re at in the Northwest Basin there in New Mexico, prices are quite competitive, and we do take, typically, two to three, bids from vendors and, not necessarily go with the cheapest, but which whichever service, affords us the best value. And that includes parts, services, rigs, downhole pumps, surface pumps, you name it. We do a very thorough job of bidding those costs and then taking the vendor and or parts that provide the most value.
So we’re very, very cost conscious. You have to be in this environment, especially if we end up in a period of lower oil prices less than $60 or $50 per barrel.
Michael Porter, Legal/Compliance Representative, E.ON Resources: That probably answers your question. If we get a nice recovery with WTI oil at $85 to $90 a barrel this summer, would you try to increase production faster, reworking horizontal wells, etcetera?
Dante, President, E.ON Resources: Yeah, I’ll answer that. Yeah, we would. We’re limited by the funds we can raise and as the oil prices go up, our access funds, greatly increases as does our access to funds with the stock price. So if we have more money, we’ll accelerate workovers, we’ll accelerate drilling horizontal wells, but not ridiculously so. You know, you’re you’re almost a little bit limited by, you know, what can our current staff do?
What what lessons learned can we digest and apply to the next wells? We’ve learned from some mistakes of the past. We thought we had a winner with acid stimulations. And frankly, last year, we went too fast and made some mistakes and then just slowed it down. So the answer is yes, we’ll we’ll accelerate, but not not to a ludicrous speed.
Mitch Carter, CFO, E.ON Resources: Let me let me add to that answer a little bit. Sure. Because there’s another obvious question in that. If it does get to that level, we’re watching it. So the horizontal wells are all incremental.
I will look at it, we will as a company, whether we hedge a little bit more, take advantage of the higher prices to lock in some future oil, like, we’re at $70 or greater because price was at the 85 to 90 range a year ago, and we locked it in all the way through the end of twenty twenty five thanks to that. So that will something like that pops up. We’re gonna take advantage either for later parts of ’25 or going into ’26. So we watch it to to make certain our hedging program is proper. So now back to you, Mike.
Michael Porter, Legal/Compliance Representative, E.ON Resources: Okay. Last question. Regarding the $52,800,000 revenue sharing of volumetric funding arrangement with Onstream Capital, is this funding deal still on track for June 2025 closing? Thank you.
Jesse Allen, VP of Operations, E.ON Resources: Dante, can take that one?
Dante, President, E.ON Resources: Yeah. I’ll answer it. It so far, the the lender is saying yes. And, until it closes, frankly, I’m nervous. But the indications I have is that we’re still on track.
If oil takes a precipitous drop, this number may reduce and we’re just gonna deal with it. We’ll just deal with it. And we’ve got backups in place to cover the shortage. So we’re we’ve we’ve got we’ve got a a backup a and a backup b and a backup c, but it would sure be helpful for us to have oil prices stabilized in the 65 range or better, you know, as we head into June.
Michael Porter, Legal/Compliance Representative, E.ON Resources: Okay. If you all don’t mind, I just got two more questions, so I’d like to put them out there. The first one is, financing for the 50 workovers is the goal to get this done in the next two or three months, or can you give us a timeline?
Mitch Carter, CFO, E.ON Resources: I’ll answer that. It really ties into the onstream, and part of that program has the the 52,000,000, 50 3 million, has just under 10,000,000 for those 50 wells. So that’s already prearranged, and it’ll close at the same time. And if things, for some reason, work out, maybe we can do it sooner. So, yeah, and then we’ll kick off the program of actually doing the work, which will take a few months.
Okay?
Michael Porter, Legal/Compliance Representative, E.ON Resources: Okay, and one more question. With President Trump saying drill baby, drill, are you seeing new drilling permits going through faster for your going forward? And what is your relationship with drilling permits with the state of New Mexico?
Dante, President, E.ON Resources: Yeah. I’ll let Jesse answer that.
Jesse Allen, VP of Operations, E.ON Resources: Yes. As most people probably know, regulatory environment in New Mexico is a little tougher than Texas. And so as Dante has already said, we deal with it. And the drilling permit process is typically eight or nine month process. But with the new administration, all indications are maybe that maybe that’s gonna be a five or six month process.
So to answer that question, yeah, it does look like the environment is improved for permitting. The same goes for the workovers. They have because our property is BLM land, Bureau of Land Management, federal land, and state land, we have to get approval typically from both agencies. And so workovers do take longer than they do in Texas, typically two to three months. And we are fighting a little bit of that now, but we’re working on relationships.
And, hopefully, by the time we’re funded, with NSTREAM, those permits will be approved, the workover permits. So to conclude, yes, the environment is improving, and it is probably a result of the new administration having come into office.
Michael Porter, Legal/Compliance Representative, E.ON Resources: Thank you. Dante, that’s the last comment, last question. I’m turning the meeting back over to you.
Dante, President, E.ON Resources: Yeah. Well, I just wanna say thank you to all our shareholders. We’re grateful for all of you. And, we know you’ve put your trust in us every time you buy a share, and we don’t wanna betray that trust. We are very optimistic on our future.
We think we’ll weather the storm, whatever it is, and we’ve got a lot of knobs to turn to, as we as we mentioned today, to keep us on track to a to a very profitable ’26. And we think in the trailing quarters of this year, you’re gonna see remarkable results from us. So with that, I’ll turn it back over to Matt to wrap it up.
Matt, Conference Moderator, E.ON Resources: 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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