EON Resources Inc. (NYSE American:EONR) has provided responses to investor questions ahead of its second-quarter earnings call, addressing current production, the San Andres horizontal drilling programme, borrowing costs and previous delays in regulatory filings.
#Waterflood production affected by weather and gas curtailment
The company said oil production from the Grayburg-Jackson Field, excluding output from the San Andres horizontal programme, was close to 900 BOPD. Production from the South Justis Unit was close to 50 BOPD.
EON said overall output was down 100 BOPD after heavy rains affected power supply from the local utility. Gas sales were also lower because the company’s midstream gas purchaser curtailed volumes during plant maintenance. Gas sales represent 2% of EON’s revenue stream.
EON said it expects production to be back over 1000 BOPD.
#San Andres wells enter initial production
The San Andres farmout agreement provides for an initial three-well drilling commitment. Under the agreement, EON receives a contractual carry through first production and delivery to the tanks, subject to the terms of the agreement.
Two horizontal wells have been drilled and completed and are now producing through permanent production facilities. The operator is monitoring performance while completion and production fluids are recovered and is continuing to gather operating data.
The first horizontal well encountered unexpected high-pressure water flow at shallow depths. After well-control procedures, the operator and EON agreed to plug and abandon the well. A substitute well is planned for the next drilling phase anticipated in early 2027 and will be carried under the applicable agreement terms.
EON said reliable production expectations for the two initial horizontal wells have not yet been established. The operator is evaluating the available data before issuing further production updates. The company also said permitting work for the 2027 development programme has advanced and that it does not anticipate permitting will be a significant constraint on development pace.
Future drilling activity remains dependent on operational results, capital availability, regulatory approvals, service availability and other customary development considerations.
#Company explains high borrowing costs
EON said it borrowed at 40% to 50% net effective interest rates, with most of that borrowing already repaid. According to the company, the financing was needed to repair broken surface equipment and idle wells in order to comply with NMOCD regulations. It said the work could not wait for new wells to generate funding.
The company also said late SEC registrations prevented it from using its ELOC because it could not issue an S-1 registration. EON said it is seeking financing at lower double-digit interest rates to help repay the short-term financing. It said the debt must be carried until a higher stock price supports limited ELOC use or debt financing is in place.
#Filing delays linked to complex transactions
EON attributed the late filing of its 2025 10-K to an audit that took significantly longer because of several complex transactions. These included the September 9th recapitalization and farmout agreement, the June 2025 South Justis acquisition, the purchase of one ORRI and sale of two ORRIs at the September 9th closing, the elimination of both senior debt instruments, the removal of preferred stock and Class B stock, the exchange of 35 private loans and warrants for new convertible notes, well over 100 note conversions and the settlement of many payables.
The company said these matters had significant GAAP and tax implications and contributed to delays in the Q1 and Q2 10-Q filings after the 10-K process was completed. EON said it is now current with all required filings and is NYSE compliant.
EON also acknowledged that its internal processes could be improved. It said there were no fundamental flaws in its processes and internal controls, while noting that steps to improve them are being implemented.
#Steps planned to support future filings
In June, EON engaged a late-filer specialist firm and said it has retained the firm. It has also engaged a nationally recognized audit services firm as an advisory firm.
The firms are assisting with process and procedure upgrades, the selection and installation of an accounting system better suited to EON’s needs, accounting work and the handling of complex transactions and instruments. EON said it is on pace to file its 10-Q for Q3 2026 timely.
#Permian Basin assets
EON describes itself as an independent upstream energy company focused on developing onshore oil and natural gas properties. The company has 20,000 leasehold acres in the Permian Basin and approximately 1.2 billion barrels of original oil in place.
The Grayburg-Jackson Field covers 13,700 contiguous leasehold acres in Eddy County, New Mexico, with stacked pay zones and almost 1 billion barrels of estimated original oil in place. The San Andres horizontal development programme commenced in August 2026.
The South Justis Unit comprises 5,360 contiguous acres in Lea County, New Mexico, with approximately 207 million barrels of original oil in place. EON said its geological and reservoir work on the Blinebry zone indicates development potential that management believes is similar in character to the opportunity identified in the Grayburg-Jackson Field.
#Key Takeaways
- Grayburg-Jackson Field production was close to 900 BOPD and South Justis Unit production was close to 50 BOPD, while overall output was down 100 BOPD after heavy-rain-related power disruption.
- Two San Andres horizontal wells are producing through permanent facilities, while a first well was plugged and abandoned after encountering unexpected high-pressure shallow water.
- A substitute San Andres well is planned for the next drilling phase anticipated in early 2027, with future activity subject to operational, funding, regulatory and service conditions.
- EON said it is current with required filings, NYSE compliant and on pace to file its Q3 2026 10-Q timely.
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