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 [165] - 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 [180] - 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 [181] Revenue - 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 [178] - For the six months ended June 30, 2024, total revenues decreased by 44% to $8,343,894, primarily due to a 27% decrease in oil and natural gas sales [195] - Other revenue related to providing water services decreased to $260,818 for the six months ended June 30, 2024, from $317,721 in the same period of 2023 [199] Expenses - 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 [178] - General and administrative expenses for the three months ended June 30, 2024, were $2,323,662, significantly higher than $857,963 for the same period in 2023 [178] - Lease operating expenses increased by 59% from $18.60 per BOE in June 2023 to $29.50 per BOE in June 2024, totaling $2,094,181 [185] - General and administrative expenses rose significantly to $2,323,662 for the three months ended June 30, 2024, compared to $857,963 in the same period of 2023 [189] - Lease operating expenses decreased to $4,393,699 for the six months ended June 30, 2024, from $4,905,164 in the same period of 2023, while production expenses per BOE increased by 16% to $29.92 [200] - Production taxes, transportation, and processing costs were $837,265 for the six months ended June 30, 2024, down from $1,171,861 in 2023, maintaining a consistent 8% of oil and natural gas sales [201] - Depletion, depreciation, and amortization (DD&A) increased to $998,616 for the six months ended June 30, 2024, compared to $858,992 in 2023, with DD&A per BOE rising from $4.04 to $6.80 [202] - General and administrative expenses surged to $4,633,486 for the six months ended June 30, 2024, from $2,129,379 in 2023, largely due to increased costs associated with being a public company and stock-based compensation of $1,189,968 [203] - 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 [204] Financial Performance - 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 [176] - The company recorded a loss on derivative contracts of $2,080,725 for the six months ended June 30, 2024, compared to a gain of $763,043 for the same period in 2023 [197] - 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 [209] Debt and Liquidity - 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 [207] - 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 [208] Market Conditions - 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 [175] - The average NYMEX natural gas pricing for the six months ended June 30, 2024, was $2.11 per Mcf, which is 13% lower than the average price of $2.41 for the same period in 2023 [175] - 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 [172] Accounting and Reporting - The company has no off-balance sheet arrangements as of June 30, 2024 [212] - The company is classified as a smaller reporting company under Rule 12b-2 of the Exchange Act, thus not required to provide extensive market risk disclosures [227] - New accounting pronouncements are discussed in Note 2 of the consolidated financial statements, indicating potential impacts on financial reporting [227]
HNR Acquisition p(HNRA) - 2024 Q2 - Quarterly Report