EON Resources Inc.

Yes sir, good afternoon ladies and gentlemen and welcome to our conference call for the third quarter. We will make a presentation and then we will open it up for questions. I gotta get some legal things out of the way first. This call includes forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 that involves risk and uncertainties that could cause actual results To differ materially from what is expected, words such as expect, believe, anticipate, intend, estimate, plan, possible, should, and variations in similar words and expressions are not intended to identify such forward-looking statements. But in the absence of these words does not mean that a statement is not forward-looking. The company's expectations are disclosed in the company's document filed from time to time on EDGAR with the Securities and Exchange Commission. Before I turn the call over to Dante, let me just say that any shareholder who has not voted for the upcoming annual meeting, please vote. And if you have any questions, just give me a holler and I will be more than happy to walk you through the whole thing. Dante, good afternoon. The call is yours.

Yeah, thank you, Mike. I'm Dante Caravaggio, President and CEO. I'm pleased to be here with each of you. Like most of you, I hope, I'm a shareholder in this company. It's public record how many shares I own. And I just have to start with saying I think we're an incredibly good bargain at this level. And I'm going to start this off with some opening remarks. Encourage all of you to talk to us either through this forum or or send us notes direct, I'll give an overview of the field. I'm going to give you the plan for us to achieve 2,000 barrels a day in 2025. And now that we've been a public company for a year, I'll make a few observations by looking in the rearview mirror. So the first thing I'm going to highlight is Q3 was a good quarter. We had record revenues of $7.4 million and record operating income of $1.9 million. But I'm also going to say most of that delta is due to Mitch's hedging and Jesse's efficient operations, and they're going to go into detail on both. And it's not necessarily a good thing when you make money on hedging because some of that is non-cash. In our case, a lot of it is non-cash, and I just want to be straight with all of you. Looking forward, we have step-changing actions ongoing now to position us for a great 2025. Our key focus being workovers. And our plan in workovers is to do 50 a year and add about 1,000 barrels a day a year. That's going to consume us in 2025 and 2026. We have just started on 300. High potential workovers, Jesse will talk about that. It's part of a 50-well package that will drag much of the way through 2025. And Mitch will discuss recent events that improves our balance sheet and equity position. So with that, I'm going to flip to the oil field. I'm going to review with you some of the particulars of the field, the most exciting part of this field. is that we're in the Permian, we're pure Permian play, and we have a billion barrels of oil under our 14,000 acres. And it's stacked pay, meaning we have multiple zones to perforate and stimulate. So currently we've got roughly 15 million of proven reserves. We published a press release a number of months ago that said we believe there's 50 million. and recoverable reserves, and all the data that we've got since then says that number is low. The zones that are in our mineral rights, which are down to 4,000 feet under those 14,000 acres, include the Yates, the Seven Rivers, the Queen, the Grayburg, and the San Andreas. And you can see those on the right side in the middle of that table on the right side of your screen. of your slide there. Our focus areas are really the Seven Rivers and the San Andreas. We are doing a test in these first three wells in the Yates that we're very interested to see how it goes. We are mostly an oil play. 85% of our revenues comes from oil. We make a little gas. We have 550 wells and we have 95 active water flood patterns. The nice thing about a water flood is that it gives you sustainability of that oil producing rate, meaning you don't get a spike up and a spike down, which is the typical tight curve production decline you get from, I'll say, a normal Permian fracked well. With that, I'm going to move to our path to 2,000 barrels a day. So just leave it on this slide, Amina. The first thing we did since buying the property is infrastructure hardening. We had to replace 14 flow lines, 50 downhole pumps, two expensive horizontal water injection pumps. We did 75 acid jobs, and we did major electrical upgrades. All those things allowed us to, I'll say, be – at a sustainable 1,000 barrels a day, which we're bouncing around. Then we've done a lot of engineering with reservoir engineering and geologists and petrophysicists, and that's to look at these wells and determine what's the best way to develop the field. I hate to mention this, but the way we got those records, it was in 450 different boxes, so it's a little bit of sifting through – for needles in a haystack, but these guys came up with some fantastic revelations. And the end result is we've got 50 workovers ready to go. We're doing three right now. We have an artificial intelligence app in development for the field that will increase our uptime and reduce our lease operating expense. And that's been beta tested. It should be rolled out, we hope, the end of this month. The real secret to the future and to making 2,000 barrels a day is workovers, workovers in the Seven Rivers and San Andreas. And we don't know yet if the Yates is going to be good or not, but we're testing it. These workovers from all of our engineering work tell us they'll do 35 barrels a day each at a cost of $150,000 each. and that's about half what our predecessor owner was spending. And the capex per year we're going to need is around $7.5 million per year to generate this additional 1,000 barrels a day of sustainable production. So that's really our business plan for 2025. 2026 is going to look much the same with a little bit of drilling, and we're starting now to look at drilling locations. We are a water flood, but we do rely upon fracturing. And so we're not really looking in 25 to do drill, baby, drill. It's low-cost work over, baby, low-cost work over, baby. So that would be our theme in 25. However, in 26, I won't say that we won't move toward a drill, baby, drill scenario, but drilling is very expensive. A vertical well is about $1 million. A horizontal well is about $3 million. And then these workovers, as I mentioned, are $150,000. So we're going to go with this thing kind of slow and low cost to get there. With that, I'm going to turn it over to Mitch.

Thank you, Dante. Hello, I'm Mitch Trotter. I'm the CFO. We have talked to many of you on these past earnings calls and on individual basis. So I want to thank you all for attending today. In this call, I will be giving insights into the Q3 results and all the operations. And then later, I'll turn it over to Jesse to drill down into operations. Before I get into the presentation and the slides, I first want to say the accounting team and the auditors did a really good job of getting the 10Q ready, and they were actually ready to file early. But we decided to delay by a day, and that was for a good reason, a pending subsequent event. And that's where we settled with the FPA provider. And the details are disclosed in the 10Q subsequent event, so you'd have it. But just a few highlights is it removes the potential, future potential of 3 million shares. It removes a 5.6 million liability that's on the balance sheet. Now that goes away at the end of the year. And the provider did receive some restricted shares, so they really can't sell them or anything for a good six months. So when I get into the deck, I will hit the top side results. I will go to the revenue and non-cash expenses and then equity and debt structures, all similar to what I've done in the past. But if you need a deeper dive, please reach out to Mike Porter and he'll schedule a one-on-one. Many of y'all have done that in the past. So with that, I want to go to the slide on income summary, statement summary. So a couple items in this slide before we just drill it down into more into the revenues and non-cash item. But most notably, and Dante alluded to that, we will break even at the operating income after corporate G&A, excluding the non-cash hedging derivatives we'll talk about in a minute, for the first time. The first two quarters from day one, we've always had positive earnings from the field but never enough to cover the corporate G&A until this quarter. So that's good news. We had said that in the past, we would get there and we did. Now, G&A cost, they dropped 30K a month. We're running now at 745 a month. And our typical G&A is very similar to a public company. Now, 45% are employee related. 35% relates to professional fees. 15% to insurance, and 5% other. The other major line item is lease operating expenses, which averaged $765,000 per month back in Q1. But for the last six months, we've been running at a very good level of $700K per month. This is what we expect to sustain in the short term. And we are focused on, Jesse especially, to driving it down to $650K a month. And that'll be over the midterm. And that is a sustainable level with some development. Now the long term, the LOE will be driven up proportionally related to the future development of the field. So we're in really good shape, I think, with the LOE.