Financial Data and Key Metrics Changes - The company reported a cash loss per month of approximately $400,000, which is nearly half of what it was a year ago, indicating improved cost management [10][12] - Interest expenses decreased by $165,000 for the quarter due to note conversions as part of balance sheet cleanup efforts [19] - The company has maintained consistent income from operations in the range of $1,800,000 per quarter, with a slight uptick noted [21] Business Line Data and Key Metrics Changes - Oil production remained stable, with an uptick in oil revenue attributed to market price fluctuations, while gas revenues increased by $50,000 for the quarter due to higher gas prices [23] - Lease operating expenses (LOE) decreased to $683,000 per month in Q1, down from $700,000 to $750,000 in the previous year [19][33] - The company has approved 45 workovers, which are expected to significantly increase production once funding is secured [15] Market Data and Key Metrics Changes - The company hedged 70% of its oil production at $70 per barrel, which mitigates the impact of current market price fluctuations [11][23] - Gas prices have performed better than oil prices, leading to increased gas revenue [46] Company Strategy and Development Direction - The company is focused on reducing debt and improving its balance sheet by retiring senior debt and preferred shares [39][78] - There is a strategic emphasis on workovers to increase production in the near term, with plans for drilling in the longer term [39][78] - The company is exploring low-cost acquisitions to enhance its asset base amid low oil prices [40][78] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, stating that the stock is undervalued and that they are positioned for significant growth in the coming quarters [41][78] - The management believes that oil prices will stabilize around $70 per barrel, despite current market forecasts suggesting lower prices [62][66] - The company is actively seeking gas opportunities, including unconventional gas and specialty gas, to enhance revenue streams [46] Other Important Information - The company has made significant progress in reducing general and administrative (G&A) costs, with a target of a million-dollar reduction over the year [25][71] - The company is not planning to purchase its own drilling rig but may consider acquiring workover rigs as market conditions allow [68][69] Q&A Session Summary Question: Can you give us some color on your gas operations and what you think the future in gas will be for the company? - Management noted that gas prices have been more favorable than oil prices, and they are exploring gas opportunities, including specialty gas like helium [46][47] Question: How was your relationship with Chevron? - The company reported an excellent relationship with Chevron, which is interested in increasing oil production from the company [52][53] Question: Will the entire deal with Encore close in June, or can it be done in pieces? - Management indicated that the deal is likely to close all at once, with a target date in late June or early July [56] Question: Can you explain how the hedging program operates and do you make any money off of it? - The hedging program involves swaps that lock in prices for 70% of production, providing a safety net against market fluctuations [58] Question: Can you give your thoughts on the oil and gas business in '25 and how do you feel about what's been going on worldwide? - Management believes the Permian has peaked but expects oil prices to stabilize around $70, with a focus on workovers and better drilling practices [62][66] Question: Do you see an opportunity for you guys on as far as the rig count going down where you'll be able to get rigs at a cheaper price? - Management indicated that while they do not plan to buy a drilling rig, they may consider acquiring workover rigs if market conditions are favorable [68][69] Question: How do you look at 2025, especially with the industry under pressure? - Management is focused on further reducing costs and leveraging acquisitions to maintain a lean operation while expanding growth opportunities [70][73]

EON Resources Inc. Conference Call – April 2025 NYSE American: EONR https://www.EON-R.com/ Presenters 2 • Michael J. Porter – Investor Relations • Dante V. Caravaggio – CEO • Mitchell B. Trotter – CFO • Jesse J. Allen – VP of Operations Why Invest in EON Resources? 3 • World class Permian asset with 1 billion original barrels in place • Repaired and upgraded most of the field condition issues in 2024 • Agreement with Seller has huge benefits (see press release on Feb 11th) • Reduced the original $120 millio ...

Production and Reserves - EON Resources has 956 million barrels of Original Oil in Place (OOIP) and expects to triple proven reserves in the next 3-4 years[9]. - Production is projected to increase by 1,000 barrels per day over the next 24 months, with a target of 2.5 times increase in BOEPD by the end of 2028[18]. - EON plans to utilize 550 existing wells in the Grayburg-Jackson oil field to recover proven reserves without new drilling, minimizing upfront capital expenditures[20]. - EON's waterflood development in the Seven Rivers zone has stabilized production at approximately 1,000 BOEPD after initial increases to 1,400 BOEPD[18]. - The company operates 550 producing wells, tapping into 40% of the reserves, with 85% of production being crude oil[50]. - The company holds 13,700 gross acres across 23 leases, with a 100% working interest and an average net revenue interest of 74%[48]. Cost Management - The company aims to reduce workover costs per well to approximately $150,000 from original estimates of $250,000 through scientific and analytical approaches[19]. - EON anticipates a reduction in general and administrative costs in 2025 compared to 2024, including a $500,000 reduction in insurance costs[19]. - Lease operating expenses averaged $765,000 per month in Q1 and decreased to $700,000 for the rest of 2024[52]. - General and administrative costs included $2.8 million in equity-based costs, primarily related to employee equity instruments and acquisition-related fees[57]. Financial Performance - Total revenues for the year amounted to $19,418,919, with cash-based revenues averaging approximately $5 million per quarter[52][53]. - The average oil price per barrel fluctuated, with Q3 averaging $83.80 and Q4 dropping to $67.05, impacting overall revenues[53]. - The company has a Reserve Based Loan (RBL) of $28 million with a current balance of $23 million, maturing in three years at a 15% interest rate[61]. - The company has hedged over 70% of its production at $70 or higher for 2025, mitigating risks associated with oil price fluctuations[54]. Strategic Initiatives - The company is implementing AI automation to enhance operational efficiencies and reduce costs as new wells are brought into production[19]. - EON is actively exploring acquisition opportunities in the Permian Basin, which has seen over $100 billion in recent M&A activity[14]. - The Northwest Shelf of the Permian Basin is noted for having the largest recoverable reserves among unconventional basins in the U.S.[32]. - The company is planning a horizontal drilling program in the San Andres, expected to commence in Q1 of 2026[18].

Production and Revenue - Average daily production for Q1 2025 was 749 BOE per day, down from 848 BOE per day in Q1 2024, representing a 12% decrease [145][157]. - Total revenues for Q1 2025 were $4,564,598, an increase of 39% compared to $3,283,099 in Q1 2024 [156]. - Average realized oil price per barrel after reflecting settled derivatives was $65.12 in Q1 2025, compared to $62.53 in Q1 2024, indicating an increase of 8.5% [160]. - The average NYMEX oil price for Q1 2025 was $71.84 per barrel, which is 7% lower than the average price of $77.56 in Q1 2024 [151][152]. - The average NYMEX natural gas price for Q1 2025 was $4.94 per Mcf, a 95% increase from $2.67 per Mcf in Q1 2024 [154]. Expenses and Costs - Lease operating expenses decreased to $1,921,321 in Q1 2025 from $2,299,518 in Q1 2024, a reduction of approximately 16.5% [162]. - Depletion, depreciation, and amortization (DD&A) expenses were $97,075 in Q1 2025, significantly lower than $476,074 in Q1 2024, reflecting a decrease of 79.7% [164]. - Production taxes, transportation, and processing costs were $397,216 in Q1 2025, down from $428,280 in Q1 2024, maintaining a consistent 9% of oil and natural gas sales [163]. - General and administrative expenses decreased to $2,084,545 for the three months ended March 31, 2025, down from $2,309,824 in 2024, primarily due to reduced stock-based compensation [166]. - Interest expense decreased to $1,744,246 for the three months ended March 31, 2025, compared to $1,860,582 in 2024, driven by reductions in Senior Secured term loan and Private Notes Payable [167]. Financial Performance - The company recorded a loss on derivative contracts of $85,071 in Q1 2025, compared to a loss of $1,997,247 in Q1 2024, indicating improved management of price risk [159]. - Other revenue related to water services was $117,532 in Q1 2025, down from $130,588 in Q1 2024, reflecting a decrease of 10% [161]. - Accretion expense increased to $335,771 for the three months ended March 31, 2025, from $33,005 in the same period of 2024, with a per BOE increase from $0.43 to $4.98 [165]. - The company recorded a gain on extinguishment of liabilities of $92,294 during the three months ended March 31, 2025, related to the exchange of certain notes payable and warrant liabilities [172]. Cash Flow and Financing - The company reported negative cash flow from operations of $1,827,355 for the three months ended March 31, 2025, compared to positive cash flow of $3,700,686 for the year ended December 31, 2024 [175]. - Net cash used in investing activities for the three months ended March 31, 2025, was $1,117,540, primarily for development costs, compared to $591,003 in 2024 [178]. - Net cash provided by financing activities was $3,047,431 for the three months ended March 31, 2025, mainly from the sale of common stock under the Common Stock Purchase agreement [179]. - The company has a three-year Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 to support operations and production growth [175]. - The company had no off-balance sheet arrangements as of March 31, 2025 [180]. Debt and Liabilities - As of March 31, 2025, the company had outstanding debt totaling $22,563,093 under the Senior Secured Term Loan, $15,000,000 under the Seller Promissory Note, and $2,900,000 of private notes payable, with a working capital deficit of $27,937,557 [174].

Financial Data and Key Metrics Changes - The company reported a stabilization in production, achieving approximately 950 barrels of oil per day, with expectations to increase this by 50% by the end of the year [12][19] - Lease operating expenses (LOE) were reduced from over $800,000 per month to an average of $765,000 in 2024, with a target of around $700,000 per month for 2025 [65][66] - The company is hedged at 70% or greater at $70 per barrel through 2025, which provides some stability against market fluctuations [30][84] Business Line Data and Key Metrics Changes - The company is focusing on the Seven Rivers waterflood project, with plans to develop 250 patterns, each expected to produce 20 barrels of oil per day [19][20] - The horizontal drilling potential in the San Andres formation has been identified, with 50 wells expected to yield 300 to 500 barrels of oil per day [16][36] Market Data and Key Metrics Changes - The company is navigating volatility in oil pricing and tariffs that impact oil prices, which is a concern for the overall market [7][78] - The management expressed optimism about the oil market, suggesting that any reduction in oil prices may be short-lived due to the social costs faced by oil-producing countries [84] Company Strategy and Development Direction - The company plans to acquire a 10% royalty from the seller for approximately $15 million, which is expected to be accretive to shareholders [11][72] - Future strategies include cutting general and administrative expenses and lease operating expenses to improve profitability [21][74] - The company aims to make at least one acquisition in the year, focusing on Permian properties and gas opportunities [22][72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2024 but emphasized the importance of infrastructure repairs and upgrades for future profitability [20][25] - The company expects a significant improvement in 2025, with plans to increase production and reduce costs [19][21] - Management is optimistic about the potential for horizontal drilling and workovers, indicating a bright future for the company [90][91] Other Important Information - The company has made significant strides in cleaning up its balance sheet, including settling liabilities and reducing debt [43][45] - The management team is committed to a balanced approach to funding, avoiding excessive equity dilution and debt [48][51] Q&A Session Summary Question: What are your largest concerns that might negatively impact your plans? - The largest concern is market volatility, particularly oil prices and tariffs [78] Question: What are your plans regarding future use of stock in lieu of cash for accounts payable and other liabilities? - The company plans to use stock sparingly for settling debts related to acquisitions and services [80] Question: Are you still working on the workover wells, or is this less of a priority compared to Seven Rivers? - Workovers are a top priority and are tied to the development of the Seven Rivers project [87] Question: What are you doing to negotiate and benchmark parts, pumps, and other goods necessary for productivity savings? - The company conducts thorough bidding processes to ensure the best value for parts and services [95] Question: If oil prices recover to $85 to $90 per barrel, would you increase production faster? - The company would accelerate workovers and drilling if funding allows, but will proceed cautiously [102] Question: Is the $52.8 million revenue sharing of volumetric funding arrangement with Enstream Capital still on track for June 2025 closing? - The lender has indicated that the deal is still on track, but the company remains cautious [106][109] Question: What is your relationship with drilling permits in New Mexico? - The regulatory environment has improved, potentially reducing the permit process from eight to six months [115]

Financial Data and Key Metrics Changes - The company reported a stabilization in production, achieving approximately 950 barrels of oil per day, with expectations to increase this by 50% by the end of the year [10][15] - Lease operating expenses (LOE) were reduced from over $800,000 per month to an average of $765,000 in 2024, with a target of around $700,000 per month for 2025 [54][55] - The company aims to cut general and administrative (G&A) expenses significantly in 2025, with a focus on reducing costs related to equity-based compensation and professional fees [31][32] Business Line Data and Key Metrics Changes - The company is focusing on the development of the 7 Rivers waterflood, with plans to add 150 waterflood patterns, which are expected to produce an average of 20 barrels of oil per day per pattern [11][15] - Horizontal drilling potential in the San Andreas formation has been identified, with 50 wells expected to yield 300 to 500 barrels of oil per day [13][30] Market Data and Key Metrics Changes - The company is hedged through 2025 at prices of $70 per barrel or greater, which provides some stability against market fluctuations [25][26] - Oil price volatility and tariffs are highlighted as significant market concerns that could impact the company's performance [6][68] Company Strategy and Development Direction - The company plans to acquire a 10% royalty from the seller for approximately $15 million, which is expected to be the most accretive transaction for the company [8][16] - Future strategies include focusing on workovers, waterflood expansions, and drilling, with a cautious approach to ensure cost-effectiveness [15][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by market volatility but expresses optimism about the company's ability to weather these challenges and achieve profitability in 2026 [62][100] - The company is committed to improving operational efficiency and reducing costs to enhance profitability [17][64] Other Important Information - The company has made significant infrastructure repairs and upgrades, which have contributed to a reduced decline rate in production [16][49] - A focus on safety was emphasized, with no reportable incidents in 2024 [48] Q&A Session Summary Question: What are your largest concerns that might negatively impact your plans? - The largest concern is market volatility, particularly fluctuations in oil prices and tariffs [68][69] Question: What are your plans regarding future use of stock in lieu of cash for accounts payable and other liabilities? - The company plans to use stock sparingly for settling debts and ongoing services [69][70] Question: Are you still working on the workovers wells or is this less of a priority? - Workovers are a top priority and are tied to the development of the 7 Rivers project [77][78] Question: What are you doing to negotiate and benchmark parts, pumps, and other goods necessary for productivity savings? - The company conducts thorough bidding processes to ensure cost-effectiveness in procurement [81][83] Question: If oil prices recover significantly, will you increase production faster? - The company would accelerate workovers and drilling if funding allows, but will proceed cautiously [85][86] Question: Is the $52,800,000 revenue sharing arrangement with Onstream Capital still on track for June 2025 closing? - The lender has indicated that the deal is still on track, but the company remains cautious [90][91] Question: What is your relationship with drilling permits in New Mexico? - The regulatory environment is improving, potentially reducing the time required for drilling permits [96][97]

Production and Revenue - For the year ended December 31, 2024, the average daily production was 798 BOE per day, a decrease of 22% from 1,022 BOE per day in 2023[333]. - Oil production for the year ended December 31, 2024, was 256 MBbl, down 27% from 349 MBbl in 2023, while natural gas production decreased from 355 MMcf in 2023 to 213 MMcf in 2024[347]. - Total revenues for the year ended December 31, 2024, were $19,418,919, a 15% decrease from $24,238,482 in 2023, primarily due to a 28% decrease in production volumes[346]. Pricing and Costs - The average realized oil price per barrel after reflecting settled derivatives was $73.61 for the year ended December 31, 2024, compared to $69.06 for 2023, reflecting a 6% increase[340]. - The company's oil price differential to the NYMEX benchmark was $(1.03) per barrel in 2024, an improvement from $(4.95) per barrel in 2023[335]. - Lease operating expenses for the year ended December 31, 2024, were $8,614,080, with a per BOE increase of 19% to $29.59 due to higher maintenance and labor costs[351]. - Production taxes, transportation, and processing costs were $1,715,792 for 2024, representing 8.7% of oil and natural gas sales, consistent with 8.9% in 2023[352]. Financial Performance - The company recorded a loss on derivative contracts of $850,374 for the year ended December 31, 2024, compared to a gain of $392,765 in 2023[349]. - Depletion, depreciation and amortization (DD&A) increased to $2,407,098 for the year ended December 31, 2024, from $1,849,876 in 2023, with a DD&A rate of $8.27 per BOE, up 48% from $4.53 per BOE in 2023[353]. - Accretion expense decreased to $144,988 in 2024 from $859,102 in 2023, with a per BOE cost of $0.50 compared to $2.32 in 2023, driven by changes in inflation and discount rate assumptions[354]. - General and administrative expenses rose to $10,381,095 in 2024 from $7,253,384 in 2023, including stock-based compensation of $2,778,991[355]. - Interest expense increased significantly to $7,643,200 in 2024 from $1,043,312 in the Successor period of 2023, primarily due to the Senior Secured Term Loan[357]. - The company reported a positive cash flow from operations of $3,700,686 for the year ended December 31, 2024, compared to $484,474 in the Successor period of 2023[368]. Debt and Liabilities - As of December 31, 2024, the company had outstanding debt of $23,641,517 under the Senior Secured Term Loan and a working capital deficit of $31,213,674[365]. - The company recognized a gain on extinguishment of liabilities of $1,638,138 during the year ended December 31, 2024, including a gain of $1,720,000 related to the settlement of royalties payable[360][361]. - The change in fair value of warrant liabilities resulted in a loss of $804,004 in 2024, compared to a gain of $187,704 in the Successor period of 2023[362]. Investments and Equity - Net cash used in investing activities for 2024 was primarily due to the development of crude oil and gas properties, with significant cash outflows in the previous year for compliance upgrades[370]. - The company has a three-year equity line with a maximum funding limit of $150,000,000, having received $6,992,906 in cash proceeds from the sale of 7,000,000 shares under this agreement[367]. Risk Management - The Company uses derivative financial instruments to mitigate commodity price risk, with fair value changes recognized in consolidated statements of operations[386]. - Realized and unrealized gains and losses from derivative financial instruments are reported as a component of revenues in the consolidated statements of operations[386]. - Cash flows from derivative contract settlements are reflected in operating activities in the consolidated statements of cash flows[386]. - The Company records liabilities for ongoing litigation and environmental remediation, with actual costs potentially varying from estimates due to legal interpretations and regulatory changes[384]. - The fair value of the Forward Purchase Agreement liability was estimated using a Monte-Carlo Simulation, considering future stock price simulations and contractual terms[385]. - The Company is classified as a smaller reporting company and is not required to provide additional market risk disclosures[388].

Production and Reserves - EON Resources Inc. has 956 million barrels of Original Oil in Place (OOIP) and expects to triple proven reserves in the next 3-4 years[5] - Production is projected to increase by 1,000 barrels per day (bbl/day) over the next 24 months[5] - EON has identified an additional 34 million barrels of oil in unperforated legacy zones, with plans for infield drilling to optimize recovery[15] - The Grayburg-Jackson oil field has 550 existing wells that can be utilized to recover proven reserves without new drilling, minimizing upfront capital expenditures[17] - The company expects full waterflood development to raise gross plateau oil rates to approximately 3,700 BOPD for PDP + PDNP + PUD[43] - The company operates 550 producing wells and has 95 active patterns, tapping into 40% of the reserves[40] - The total Original Oil in Place (OOIP) for the 158 patterns is estimated at 50 million barrels of oil (MMBO)[29] Financial Performance - The company reported revenues of $15,708,239 year-to-date, with Q3 revenues reaching $7,364,346, marking a significant increase from previous quarters[47] - The financial results were impacted by non-cash expenses, with net income for Q3 reported at $(3,841,171)[47] - Net loss for the year-to-date (YTD) was $9,172,468, with Q3 net loss at $3,841,171[56] - Total expenses for the year-to-date (YTD) were $16,316,136, with Q3 expenses at $5,379,540[56] - The company reported a one-time gain of $1.7 million from the extinguishment of liabilities in Q2[56] Operational Efficiency - The company aims to reduce workover costs per well from $250,000 to approximately $150,000[16] - The company is implementing an AI application for operators to improve efficiencies and increase production[15] - The company is recycling water from its field and an offset producer to minimize operational costs and avoid using fresh water sources[17] - The company aims to reduce lifting costs as part of its operational excellence strategy[61] - General and administrative costs decreased by $30,000 per month in Q3[47] Strategic Initiatives - EON's acquisition strategy focuses on building a diversified portfolio of long-life oil and natural gas properties in North America[18] - The company has a Reserve Based Loan (RBL) balance of $25.1 million with a 15% interest rate and a five-year amortization schedule[59] - There are 14.9 million warrants outstanding convertible to 11.2 million Class A shares at an exercise price of $11.50[58] - The company has $15 million of preferred units at a subsidiary level, which will convert to common stock after two years[58] Market Context - The Permian Basin contributes 62% of the total oil output in the U.S. and is expected to remain resource-rich until approximately 2040[22]

Production and Sales - Average daily production for the nine months ended September 30, 2024, was 814 BOE per day, down from 1,022 BOE per day for the year ended December 31, 2023[184] - Average daily production for oil decreased from 855 Bbl in September 2023 to 746 Bbl in September 2024, while natural gas production fell from 1,007 Mcf to 647 Mcf[203] - For the three months ended September 30, 2024, oil and natural gas sales decreased by 18% compared to the same period in 2023, driven by a 6% increase in realized prices and a 17% decrease in production volumes[202] Revenue and Pricing - Total revenues for the three months ended September 30, 2024, were $7,364,346, compared to $5,278,459 for the same period in 2023[200] - For the nine months ended September 30, 2024, total revenues were $15,708,240, a decrease of 23% from $20,322,608 in the same period of 2023[218] - Average realized oil price per barrel for the three months ended September 30, 2024, was $77.13, compared to $74.23 for the same period in 2023[200] - The average realized oil price per barrel for the nine months ended September 30, 2024, was $76.43, slightly down from $76.50 in the same period of 2023[218] - The average sales price for natural gas during the three months ended September 30, 2024, was $1.55 per Mcf, down from $2.83 per Mcf for the same period in 2023[200] - Average NYMEX oil pricing for the nine months ended September 30, 2024, was $78.50 per barrel, which is 7% lower than the average price of $84.30 for the same period in 2023[195] - The oil price differential to the NYMEX benchmark price during the nine months ended September 30, 2024, was $(2.07) per barrel, compared to $(3.22) per barrel for the same period in 2023[191] - The average NYMEX natural gas pricing for the nine months ended September 30, 2024, was $2.11 per Mcf, which is 14% lower than the average price of $2.47 per Mcf for the same period in 2023[196] Expenses - Total expenses for the three months ended September 30, 2024, were $5,379,540, compared to $4,660,967 for the same period in 2023[200] - Lease operating expenses decreased to $2,136,732 for the three months ended September 30, 2024, from $2,449,140 in the same period of 2023, while per unit production expenses increased by 4.8%[207] - General and administrative expenses increased significantly to $2,235,263 for the three months ended September 30, 2024, compared to $981,751 for the same period in 2023, primarily due to increased costs associated with being a public company[212] - Lease operating expenses decreased from $7,354,304 in the nine months ended September 30, 2023, to $6,530,431 in the same period of 2024[223] - General and administrative expenses surged to $6,868,749 in the nine months ended September 30, 2024, compared to $3,111,130 in 2023, largely due to increased legal and professional service costs[228] - Production taxes, transportation, and processing costs were $489,524 for the three months ended September 30, 2024, compared to $602,449 for the same period in 2023, maintaining a consistent percentage of 9% of oil and natural gas sales[209] - Production taxes, transportation, and processing costs were $1,326,789 for the nine months ended September 30, 2024, down from $1,774,310 in 2023, maintaining a consistent 9% of oil and natural gas sales[225] Gains and Losses - The company recorded a loss of $816,011 due to the conveyance of a 10% overriding royalty interest to Pogo Royalty[198] - The company reported a loss of $4,209,294 related to the change in fair value of forward purchase agreements for the three months ended September 30, 2024, primarily due to a decline in stock price[213] - A loss of $4,534,766 was recorded for the change in fair value of the forward purchase agreement for the nine months ended September 30, 2024, primarily due to a decline in stock price[229] - The company recorded a gain on derivative contracts of $1,900,662 for the three months ended September 30, 2024, compared to a loss of $1,436,100 for the same period in 2023[204] Cash Flow and Debt - The company reported a net cash provided by operating activities of $3,346,362 for the nine months ended September 30, 2024, down from $8,311,832 in 2023[235] - Net cash used in investing activities was $3,295,667 for the nine months ended September 30, 2024, primarily for development costs, compared to $5,058,869 in 2023[235] - As of September 30, 2024, the company had outstanding debt totaling $24,735,391 under its Senior Secured Term Loan, with a working capital deficit of $38,801,444[233] - The company has a Common Stock Purchase Agreement with a maximum funding limit of $150,000,000, having received $2,464,688 in cash proceeds from the sale of shares under this agreement[234] Derivative Financial Instruments - The company uses derivative financial instruments to mitigate exposure to commodity price risk associated with oil prices[255] - Derivative financial instruments are recorded at fair value on the consolidated balance sheets as either an asset or a liability[255] - The company does not apply hedge accounting for existing derivative financial instruments, recognizing changes in fair value in the consolidated statements of operations[255] - Realized and unrealized gains and losses from derivative financial instruments are reported as a single line item in revenues[255] - Cash flows from derivative contract settlements are reflected in operating activities in the consolidated statements of cash flows[255] - The company is classified as a smaller reporting company and is not required to provide additional market risk disclosures[258]

Production and Sales - Average daily production for the six months ended June 30, 2024, was 814 BOE per day, down from 1,022 BOE per day for the year ended December 31, 2023, due to increased well downtime and repairs [182]. - For the three months ended June 30, 2024, oil and natural gas sales decreased by 26% to $X, driven by a 34% decrease in production volumes and $83,478 in derivative instrument losses [200]. - Average daily production for oil decreased from 1,002 Bbl in June 2023 to 674 Bbl in June 2024, while natural gas production decreased from 1,089 Mcf to 663 Mcf [201]. Revenue and Pricing - Total revenues for the three months ended June 30, 2024, were $5,060,795, a decrease from $7,284,959 for the same period in 2023 [198]. - For the six months ended June 30, 2024, total revenues decreased by 44% to $8,343,894 compared to $15,044,149 for the same period in 2023 [215]. - Average realized oil price per barrel after reflecting settled derivatives and location differentials was $75.81 for the three months ended June 30, 2024, compared to $71.57 for the same period in 2023, representing a 6.3% increase [194]. - The average NYMEX oil pricing for the six months ended June 30, 2024, was $79.64 per barrel, which is 6% higher than the average price of $74.92 for the same period in 2023 [194]. - The oil price differential to the NYMEX benchmark price during the six months ended June 30, 2024, was $(1.41) per barrel, compared to $(0.76) per barrel for the same period in 2023 [190]. Expenses and Losses - Total expenses for the three months ended June 30, 2024, were $5,389,896, compared to $4,139,346 for the same period in 2023, indicating an increase in operational costs [198]. - The company recorded a loss of $816,011 due to the conveyance of a 10% overriding royalty interest to Pogo Royalty, which also decreased reserve balance and current net production volumes [196]. - Lease operating expenses increased by 59% per BOE, from $18.60 in June 2023 to $29.50 in June 2024, totaling $2,094,181 [205]. - General and administrative expenses surged to $2,323,662 for the three months ended June 30, 2024, compared to $857,963 in the same period of 2023 [210]. - Interest expense rose significantly to $3,890,899 for the six months ended June 30, 2024, compared to $874,938 in 2023, driven by the Senior Secured Term Loan and Private Notes Payable [224]. Asset and Liability Management - The company reported a net derivative liability of $1,214,436 as of June 30, 2024, compared to a net asset of $467,687 as of December 31, 2023 [218]. - As of June 30, 2024, the company had outstanding debt totaling $44,671,000, with a working capital deficit of $32,552,654, raising substantial doubt about its ability to continue as a going concern [228]. - The company plans to improve profitability through cost streamlining and maintaining active hedge positions, alongside a three-year Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 [229]. Cash Flow and Investments - The company reported a positive cash flow from operations of $2,250,267 for the six months ended June 30, 2024, down from $5,594,971 in the same period of 2023 [230]. - Net cash used in investing activities for the six months ended June 30, 2024, was primarily related to $1,192,769 in development costs for reserves [231]. Derivative Instruments - The Company utilizes derivative financial instruments to manage commodity price risk related to oil prices, recorded at fair value on the balance sheet [249]. - The Company has opted not to apply hedge accounting for its derivative financial instruments, leading to recognition of fair value changes in the consolidated statements of operations [249]. - Realized and unrealized gains and losses from derivative instruments are reported as a single line item in revenues [249]. - Cash flows from derivative contract settlements are included in operating activities in the consolidated statements of cash flows [249]. Other Considerations - The company continues to assess the impact of the COVID-19 pandemic on operations and may modify its response as the situation evolves [186]. - The company operates 100% of its net acreage across approximately 13,700 gross acres in the Grayburg-Jackson Field in Eddy County, New Mexico [181]. - The effects of new accounting pronouncements are discussed in Note 2 of the consolidated financial statements [250]. - The Company qualifies as a smaller reporting company and is not required to provide certain market risk disclosures [250].