EON Resources Inc. 2026 Q2 Earnings Call

Good morning, ladies and gentlemen, and welcome to the earnings conference call for EON Resources. This call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involves risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as expect, believe, anticipate, estimates, might, possible, should, and variations in similar words and expressions are intended to identify such forward-looking statements. The absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to further events or future events based on current available information and reflect the company's management's current beliefs. All information on the company can be acquired through the sec.gov website. Without further ado, I'd like to turn the call over to Dante. Dante, the floor is yours.

Thank you, Mike. Good morning to everybody. Thank you for dialing in. It's always a pleasure for us to address our shareholders, our vendors, our partners. Again, we really appreciate your investment in our stock. Again, on the forward statements that we are going to make, as Mike Porter mentioned, it is the views of the four of us presenting. It does not represent our contractors, our partners, our drilling partner, or anybody else. We have our own information, our own data, and we are going to present it here today to the best of our ability so that our shareholders can make an informed decision. Do we make sense to be an investment? We certainly hope that you conclude we do. Again, I'm Dante Caravaggio, the CEO and President.

We're going to have Mitch Trotter, the CFO, David Smith, our General Counsel, and Jesse Allen, our Vice President of Ops, present. I'm now flipping to our company overview. We own two properties. We own the Grayburg-Jackson Field with about 15,000 acres, and we own the South Justis Field with about 5,000 acres. Between the two of them, we've got about 1.2 billion barrels in place, and it's glorious. It really is something special to own something in the Permian with stack pay. It means that you can produce a zone, deplete it, and move on to the next zone. It also means you have a mixed bag of conventional and unconventional. It also means you can do a lot of things with it. You can waterflood it. You can produce it on primary. You can CO2 flood it. You can go horizontal. The blessing that we have in the Grayburg-Jackson Field, and we've talked about the San Andres, the depth is not so deep.

We're normally at 3,500 feet plus or minus, say, 1,000 feet because that zone varies that much, and it's generally over 1,000 feet thick. The cost to drill is not as great as if you were drilling a Wolfcamp well at 10,000 feet. We've talked about these drilling costs before, and it's still expensive. You're in the neighborhood of $3 million to drill one of these things, and with all the jewelry and production facilities and all this and that, you can add another half million to it without any trouble. Then we're going to talk today about the South Justis Field, which is deeper. You're talking about 6,000 feet.

You got to add another $1 million-$1.5 million to that to drill those. There's a lot of capital involved. There's a lot of fun, I think, owning our company right now. Thanks to our partner, Virtus, we got a couple wells in the works that hopefully soon we'll be able to announce how they're doing. I'm going to flip to the next slide here. Guys, the magic of our company and being a public company, we've got roughly, I'll say, $35 million worth of PDP production, and we have roughly 50 million shares outstanding. PDP is the king. That is the gold standard for reserves. It means it's proven, it's developed, it's producing. All the other reserves, if you talk about PDNP, it's not producing, but it's proven. If you talk about undeveloped, it could be there.

You're going to have to drill to be sure. If you talk about PUDs, it could be there. You're going to have to drill to be sure. But we have a lot more reserves outside the PDP realm that give me great comfort that says in 2027, we're going to be adding value to each share of stock by moving undeveloped reserves into the PDP category. That's where, frankly, the rubber meets the road. My goal in 2027 is to increase our PDP reserves appreciably, to get this to go over $100 million. That's going to take drilling. It's going to take acquisitions. It's going to take waterflooding. You're going to hear all about that. You're also going to hear for the first time more in depth about South Justis.

We think we're going to do it again with a farm-out agreement with a reputable partner that's going to bring in, frankly, the high risk money. The biggest risk in drilling is the first few wells, because we don't know what we're going to get. The people that will pony up and do that believe with their wallet that there's something there, and that's tough to borrow that kind of money. That's why you got to bring in a very skilled partner who can assess the quality of the formation, just as we do, and be ready to spend the money. Next slide. Really, if you look at 2024, 2025, Q1, Q2, all of it summarizes for me as groundwork for 2027, including what we are doing right now in Q3 and 2024.

You are going to see results in the last month, certainly in Christmas time, and possibly the end of November. We are laying the groundwork for a big 2027, and what that means is that we had PDP production that, frankly, the best thing I can say is we kept it flat. We kept it flat. We have been capital starved. We did not expand waterflood patterns. We did not do enough stimulations to drive the oil-producing rate up. We are going to do that, we believe, with the drill bit. We have converted ourselves from a, I will say, a little bit boring PDP waterflood company to a very exciting drill bit company.

We have two properties, and we believe we have two $100 million bets. The one we are on now, and nobody knows if it is really $100 million, that is our estimate. Nobody really knows until we drill on South Justis, is that going to produce $100 million for us? You are going to see some of these numbers calculated by our engineers and our geologists when Jesse speaks. These first two wells have been drilled. They are producing. We are not prepared to announce really anything about them yet. It is too soon. They have just been on a few weeks. We are anticipating a robust drilling program, and we are building a war chest of money based on loans, based on how we are going to get there so we can be ready when we get the cash calls as these wells get drilled. We do have a big news item.

We were late in our filings. It is an embarrassment. We cured it. Now we are compliant. It is going to be discussed more about our lessons learned when you hear from Mitch. I am making a commitment that every time we issue a share, we are going to add $2 of value in terms of PDP value from adding reserves. It is kind of easy to make that promise because we have so many reserves in the unproven, in the PDNP category, that all we need to do is get a little bit of drilling done. I say all we need to do, but we got a very competent partner who we have faith in that is going to get this going. As those reserves are developed through drilling, we will prove the reserves, and we will put those on our books.

We will also add waterflood patterns as the years goes by, and we will move reserves into PDP from PDNP as well. We also have in the planning for, frankly, this year, and this year is getting kind of short in the window, to do an acquisition. We had to have all of our filings current. Now we are there. Now the banks will talk to us. Now we can firm up our financing. Now we could sign a PSA should we reach agreement with a seller. With that, I am going to turn it over to David Smith to give you the year in review.

Thank you, Dante. This is David Smith. It is my pleasure and opportunity to introduce myself to give you a little review of the last couple of years. I have been in and around the oil and gas industry for the last 40 years. It is an exciting business. We have had so many accomplishments, it is hard to squeeze it all in in a short time period. We have issued lots of press releases that you can review. Just to touch on it a little bit, in November 2023, we purchased the Grayburg-Jackson Field for $90 million. We did that while we were a special purpose acquisition corporation, or a SPAC. I can tell you that that was our first achievement because most SPACs failed. SPACs were out of favor at that point in time.

To have succeeded as an oil and gas SPAC was even more notable. I have been around since the formation of this company and during the period when it was a SPAC, so I have seen a lot of the accomplishments. On September 9, 2025, that was another red letter day where we had a significant closing with a number of parties where we eliminated toxic financial instruments, we recapitalized our capital stack, we added over $70 million of shareholder value. That was a closing day. It all came down in a number of unrelated but related to us transactions where we dealt with the original sellers of the property. We were able to reduce the price of the Grayburg-Jackson Field down to about $60 million as one of the achievements in that closing, and that was part of what was added.