EON Resources Inc. filed its Form 10-Q for the first quarter of 2026 alongside an update on its San Andres drilling programme in Eddy County, New Mexico. The company reported commercial oil production from three vertical tests, progress on two horizontal wells and a net loss of 5,772,595 for the quarter.
#San Andres drilling programme progresses
During the first quarter, EON permitted 5 vertical San Andres test wells and the first 3 new horizontal wells. Three of the vertical wells were used for testing, and each produced oil in commercial quantities. The strongest result exceeded 100 barrels of oil per day.
The tests encountered virgin reservoir pressures. EON management believes this could support drilling locations beyond the original 92 planned, although the company has not provided a revised location count.
Horizontal drilling began in September 2026. Two of the three wells reached a total depth of 4,000 feet and penetrated over 6,000 feet of horizontal San Andres pay during September and October of this year, producing a total drilling length of 10,000 feet.
The third well encountered a high-pressure shallow water zone and had to be plugged. EON said future wells will use a longer intermediate casing string to avoid the zone. The company expects both completed wells to be placed on production this month using 3,000 barrels of fluid per day capacity electric submersible pumps. EON said results will be reported in November once well testing is available.
EON had previously issued an expected average of 400-600 BOPD for initial production from horizontal wells. This is an expectation from the company, rather than a reported result from the new wells.
#First-quarter financial results
Net oil production was 54,247 barrels in Q1-2026, compared with 62,702 barrels in Q1-2025. The average oil price was 80.82 in Q1-2026, versus 70.06 in Q1-2025.
Revenue net of derivatives was 4,223,108, compared with 4,535,734 in Q1-2025. Revenue as reported was 968,193, compared with 4,505,097 a year earlier. EON attributed the difference to a negative non-cash derivative impact of approximately $3.25 million, linked to oil-price movements and the higher oil price at the end of March 31, 2026.
The company said net oil production was lower by approximately 6K barrels in Q1-2026 as it worked to return certain infrastructure and wells to service. It also said production returned to the Q4-25 level in Q2-2026.
Total expenses were 7,171,539, including lease operating expenses of 2,528,313, depletion and depreciation of 1,790,976, other field-related costs of 445,679 and general and administrative costs of 2,406,571. EON reported total other expense of 1,112,363 and a net loss of 5,772,595, compared with a net loss of 2,056,518 in Q1-2025.
The company said ongoing general and administrative costs were averaging approximately $600K per month. It also said management was seeking further reductions in insurance premiums, legal fees and accounting costs. Under GAAP, many transaction-driven costs that are logically below-the-line costs are required to be classified as G&A.
Interest expense was 1,483,865 lower in Q1-2026 than in Q1-2025, which EON attributed to the retirement of senior debt on September 9, 2025, and reductions in private loans and convertible notes. Derivative valuations of warrants and other financial instruments produced a net expense of approximately $850K in Q1-2026.
#2025 financial restatement
EON restated the year ended December 31, 2025 after identifying an error in the calculation of Q4-2025 depletion expense. The restatement was filed on October 9, 2026, after the issue was identified on October 8.
The company said depletion expense had been overstated by $3.5 million and that the net loss after tax decreased by $2.6 million as a result.
#Reserves, hedging and company outlook
EON said the previously estimated reserve value for the San Andres horizontal development was $95.8 million PV-10, based on an oil price of $59.25, with the reserves classified as probable. The company said current estimated SEC oil pricing was in the $77.00 to $78.00 range. It expects oil prices and production results to affect the PV-10 value and reserve classification as the San Andres interval is developed.
EON also expects reserve values for the waterflood zones of the Grayburg-Jackson Field and the South Justis Unit to increase. The relevant prior reserve estimates were based on $64.54 per barrel for the Grayburg-Jackson waterflood zones and $64.25 for the South Justis Unit.
Oil from the new San Andres horizontal and test vertical wells in the Grayburg-Jackson Field is not hedged. Production from the South Justis Unit is also not hedged.
EON management believes the company can continue to deliver stable production from its two core properties. Management expects production and reserves to begin growing in the fourth quarter of 2026 as the first San Andres horizontal wells are drilled and come online. These statements remain subject to the risks and uncertainties described by the company, including the availability of funds, financing results and other business risks.
#Going-concern disclosure
EON said its annual report on Form 10-K for the year ended December 31, 2025 included an independent registered public accounting firm report with an explanatory paragraph stating that the consolidated financial statements were prepared assuming the company would continue as a going concern.
The company said the disclosure was required by Section 610(b) of the NYSE American Company Guide and did not represent a change or amendment to its filings for the fiscal year ended December 31, 2025.
#Company assets
EON describes itself as an independent upstream energy company with approximately 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 almost 1 billion barrels of estimated original oil in place. The South Justis Unit covers 5,360 contiguous acres in Lea County, New Mexico, with approximately 207 million barrels of original oil in place.
#Key Takeaways
- EON reported net oil production of 54,247 barrels and a net loss of 5,772,595 for Q1-2026.
- Three vertical San Andres tests produced oil in commercial quantities, with the best well exceeding 100 barrels of oil per day.
- Two horizontal wells reached a total depth of 4,000 feet and penetrated over 6,000 feet of horizontal pay; a third well was plugged after encountering a high-pressure shallow water zone.
- EON restated its 2025 results after finding a $3.5 million depletion-expense overstatement, reducing net loss after tax by $2.6 million.
- The company’s 2025 annual report included a going-concern explanatory paragraph from its independent registered public accounting firm.
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