Q4 2024 EON Resources Inc Earnings Call
Good day everyone and welcome to the EON Resources Inc. announces fiscal year 2024 earnings call on April 23rd, 2025.
At this time, all participants have been placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star one on your phone to enter the question queue at any time, and we will open the floor for three questions and comments after the presentation.
Speaker Change: If you're listening on webcast, you can submit a question by clicking on the Ask Question button on the left of your screen. Type your question into the box and hit the SIN button to submit your question. It is now my pleasure to turn the floor over to your host, Michael Porter, Sir The Floors
Michael Porter: Thank you, Matt. Good morning, ladies and gentlemen, and welcome to the Eon Resources Conference call. I have to read the forward-looking statements before we start. Then I'll turn the meeting over to management, and there will be a Q&A session at the end.
Um...
Michael Porter: This conference call includes forward-looking statements within the meanings of the private securities litigation reform act of 1995 that involves risks and uncertainties that could cause ethical results to differ materially from what is expected. Words such as expect believe anticipating ten seek may my plan.
Michael Porter: and any variations and similar words and expressions are intended to identify such forward-looking statements.
Michael Porter: That's forward-looking statements relate to future events or future results based on the current available information and reflect the company's management and current beliefs.
Michael Porter: The company's expectations are disclosed and the company's documents file from time to time on Edgar and with the Security Exchange Commission.
Michael Porter: With further ado, I would like to turn the call over to the president, Dante, the floor is yours.
Thank you, Mike.
Michael Porter: Welcome everybody. Thanks for dialing in. Thanks for buying our stock. Thanks for your keen interest. We really do appreciate that and I'd like to just state that this management team believes in our company. We're all purchasers of the stock. We're all owners of the stock and we all believe we work for each of our shareholders.
Michael Porter: So I just want to start with that. Why invest in eon resources?
Michael Porter: You know, especially look at the look at the world market right now, you've got volatility in the oil pricing, you've got terrorists that
Michael Porter: that also impact oil prices. So why look at our little company, especially when we lost money last year and we're priced at half a dollar?
So I want to start with the acid itself.
We purchased an asset.
Michael Porter: really at an originally a price of 120 million then rejected to 90 million and then made an agreement with the seller to readjust it to 60 million and it's got a billion barrels in place.
So it becomes our number one place to shop
Michael Porter: And yesterday we had a meeting internally to look at seven different acquisitions at the top of the list.
is the repurchase of a 10% royalty from the seller.
Michael Porter: for approximately 15 million. We have a binding agreement, we have a solid choice to fund this thing, it's it's gonna easily be the most a creative transaction to this company and it's already been released so it's in the news you can you can see it.
Michael Porter: Out there, so 100% one of the home runs we're going to hit this year is the purchase of a 10% royalty back from the seller and we've got the funding in place to make that happen on or before June 10th.
Um, um,
The
Michael Porter: 24 was a story of urban renewal. We had to repair and upgrade most of the field.
Surface Facilities, We Replace 14 Flow Lines and Impact It
Michael Porter: A bunch of wells. We had to replace 50 pumps. We had to improve electrical. We had to buy a hot oiler.
Michael Porter: to cure plugging due to paraffin and upgrade our electrical system. So now today we have a very reliable field producing normally 950 barrels a day with the thought that by the end of the year we should increase that by 50%.
Michael Porter: We are working to re-stack our capital stack and again the acquisition of the 10% royalty and the elimination of 40 million in
Michael Porter: In Shareholder Liability, 20 of that is a seller note, 20 of that is preferred shares that just go away and the acquisition of that royalty costs us about 20 million.
Michael Porter: So we're going to have to pay that cash on June 10th and we've got in place multiple sources of funding to make that happen.
Michael Porter: Also, we believe that by the end of the next couple of years, we're going to add 150.
Patterns, Water Flood Patterns, and the Seven Rivers Formation.
and these patterns are-
Michael Porter: They look like the top of a Las Vegas dice number five, we're in the center you have a producer and on the four corners you have injectors. [inaudible]
Michael Porter: So we've got 95 of those work in today that produce roughly
Michael Porter: 700 barrels a day, and we've got another 150 of those to go in the funding with on stream includes the funding to add another 50 patterns so we figure of those 150 patterns we can add 50 a year. I'm not sure if we can add 50 a year.
Michael Porter: On top of that we've got another 200 workovers available to develop behind-pipe potential. It's taken us a while to figure out how to stimulate these wells. We had frankly three failed fracked jobs using
Michael Porter: Fly ash and now we're using 2040 sand with low temperature resin and we've had a success and we've got another well that we think is going to be a success so we've had to walk slowly before we spend the money.
Michael Porter: and what we're talking about here is taking workovers done by our predecessors that ran close to half a million and do those for a hundred thousand.
$100,000 getting essentially the same results.
Michael Porter: So it's taking us time to really work this out. So now we think we can hit the gas with those workovers.
Michael Porter: We also published on February 26th, a press release regarding our horizontal drilling potential in the San Andreas where we identified 50 wells.
to develop another 20 million in recoverable reserves.
Michael Porter: Those wells would do 300, 400, maybe 500 barrels of oil per day. So they're humdingers, but we're going to be very cautious. We're looking at our offsets, we're learning from our competitors and they've been very open about best practices.
Michael Porter: So we want to say a big thank you to all those that operate nearest because they've really really opened up their books to say this works, this doesn't work, and we're taking full advantage of that.
with a drilling partner we're hoping to go.
Head-to-head, 50-50 on the Drilling Coss
Michael Porter: Get them to help us on the first few wells and then and then and then have added
Michael Porter: We've got 12 wells in the hopper right now to permit for drilling the commence in Q1 of 26.
Michael Porter: and we're planning on drilling, we think 5 or 6 wells a year for the next 10 years, we're not going to just hit it and go and blow, and that's just so that we can be cautious and cause the fact of about what we do.
Michael Porter: So, in summary, we expect a huge 26 and a much more improved 25.
Michael Porter: Developing the Seven Rivers Water Flood to get to an eventual 250 patterns at 20 barrels a day per pattern. It gives us a ton of oil. The San Andreas horizontal wells, 50 wells at 3, 4, 500 barrels a day per well also gives us a ton of oil.
Michael Porter: Results from the infrastructure repairs and upgrades we're seeing it now in the form of reduced decline rate so if I'm leaving you with a message your why to invest with us
Michael Porter: In 24, it was a disappointment that we didn't make more money, but we did fix the field. We did negotiate with the seller. I think a marvelous.
Michael Porter: a marvelous outcome to restack the capital stack which saves shareholders 40 million.
Michael Porter: And we did complete engineering that pointed the way to a profitable future which includes workovers, water flood expansion and drilling.
Michael Porter: In 25, we're going to make more oil, we're going to cut costs, we cut you're going to hear Jesse talk about cutting costs and in our operating.
to where our lifting costs for barrel is...
Michael Porter: Roughly $23.24 per barrel. We need to do the same kind of cuts to our G&A, so you're going to hear a little bit about that.
from Mitch Trotter.
Speaker Change: and then we're also going to make at least one acquisition.
Michael Porter: in this year with frankly our own royalty of our own property.
Michael Porter: But we're looking at more Permian properties, we're looking at gas.
Speaker Change: and we think there's lots of opportunities out there for us.
Speaker Change: In 26, it's going to be drilling, it's going to be extension of of water flood patterns and it's going to be workovers kind of more of the same but just more of 25. And with that, I'm going to turn it over to Mitch, please.
Speaker Change: Thanks, Dante. Hello. I'm Mitch Trotter, the CFO . I want to welcome those that have...
Mitch Trotter: Ben are the New Dark Hall and those that have been on calls before.
Mitch Trotter: And I want to thank you for attending today. There we go.
Mitch Trotter: In this call, I want to give you a little insight into the fiscal 24 results, the management team, the field team, as Dante has said, have made huge strides in 2024.
Mitch Trotter: So at the surface level, the numbers are not so obvious as Dante had stated, but the underlying numbers reflect solid progress in positioning for a bright future.
Mitch Trotter: We stabilized the field that was not developed as it should have been.
Mitch Trotter: Those numbers are in our study CapEx efforts in our balance sheet.
Mitch Trotter: The production was stabilized which is reflected in the revenue results which I'll show you on the later slide.
We've controlled lift or LOE cost.
Mitch Trotter: The LOE dropped from a higher run rate in Q1 and before to our baseline now about 700,000 a month which is remained steady now for the last nine months.
Mitch Trotter: Now, GNA expense did take the brunt of what we had to do, the TSPAC, clean up many acquisition or later matters, and a few slides will drill down into GNA.
Mitch Trotter: There's also the non-cash expenses slide that I've shown in the past. It does reflect our responsible hedging. It also certain aspects of what we've done to clean up the balance sheet for their underway.
Mitch Trotter: Now, key aspect of our 24 results is that the field has been making solid income from the
Mitch Trotter: The production growth and efforts to reduce GNA calls that will start to show up in 2025 puts Beyond in a good position for the future.
Mitch Trotter: After we drill down into the P&L aspects of this, we'll go to the balance sheet, that inequity. So let's talk about revenues. So next slide, please.
Thank you.
Mitch Trotter: Many of you have been on these calls before. I did add to this.
Mitch Trotter: to the slide now. The production levels, the oil prices, the split of the hedging of cash versus non-cash to help you understand the numbers better.
Mitch Trotter: The production was stable for the year, you can see that in there, the oil revenue fluctuations was mostly driven based on the market price of oil.
Mitch Trotter: Now, on the market price of oil looking forward, we are hedged through 2025 at 70% are greater and $70 of barrel are greater.
Mitch Trotter: So do know also that in Q2, the non-cash portion other than Q2, the non-cash portion of the hedging throw results up and down from our average of five million of cash revenues per quarter which has been studied across the board.
Mitch Trotter: Now let's take a look at the production impact on a P&L that Dante has been talking about. So next slide please.
Mitch Trotter: Again, this Dante's been discussing in Jesse Will. We're now in the phase of developing the field now that most of the maintenance and infrastructure enhancements are coming to a conclusion.
Mitch Trotter: You may have heard us talk about developing the wells in the Seven Rivers Water Flood. What does that mean?
Mitch Trotter: Average production from a well from a fric is expected to be about 20 gross barrels of oil per day.
Mitch Trotter: A recent new frack has come in at that level, Dante noted, and we're starting on some others so that's good news
Mitch Trotter: The cost of a workover frack is in 150, maybe up to 250 depending on variables, so that you can see from the table that the payback area is quite good at today's all prices.
David Smith,
Speaker Change: We've also talked a lot about the 50 wells, like Dante was saying, or increasing a thousand barrels of oil per day. The table shows you, you know, range impact for that 1000 impact, 1000 barrels of oil and increment plus or minus 10 dollars from the current oil price. I'm saying 65 bucks.
Speaker Change: Do know that the incremental change in L.O.E. at this level of increase in production of 1000 barrels a day is expected to be minimal because we're already running at our base level today and it will support that extra 1000 barrels.
David Smith, Unknown Executive, Mitchell Trotter
Speaker Change: Now, we've also released the study that Dante was talking about, the horizontal drilling program, and if you look on the white table
Speaker Change: It's, what does that mean? Well, first, the wells cost about 3.7 million to complete. Accordingly, we're looking for Drilling Partner as Dante noted, and there to share in the cost and reward. This is quite common in our industry.
and the table does reflect our 50% of both.
Speaker Change: The study indicates 300 to 400 barrels of oil per day average and have also done analysis on plus or minus $10 of the oil price.
Speaker Change: and just like the 7 River Sparks, the payback period looks quite good. Next to the G&A slides, please advance.
So here I want to discuss the two major drivers.
that impacted 2024, non-cash equity-based costs and the professional fees.
Speaker Change: and this leads us into cost reductions for 25. First, there's 2.8 million of non-catch equity based costs included in our GNA results.
Speaker Change: 700K comes from RSU's options for employees, directors, which is quite normal for a public company.
Thank you.
Speaker Change: But as we've been discussing age quarter, there's a main six of equity costs for fees, settlements, et cetera, that stem from agreements and instruments for the deeps back and acquisition closing. These costs do not repeat in 25.
also previously discussed, there's approximately 500,000 of
Speaker Change: Equity calls to clearing the liabilities and cleaning up the balance sheet.
Now moving on to the...
Speaker Change: 2.8 million professional fees for legal and audit. About half or a million four that stems also from the acquisition for filing complicated instruments on the balance sheet, settlements and agreements in very other trailing legal matters.
Speaker Change: While some of these costs do carry over into 25, we expect it will all dramatically reduce after Q2.
Speaker Change: Now, I'm not going to drill down into the other areas, except if I do want to note, going into 2025, there are certain cost reductions that we've already made beginning in January , namely our
Speaker Change: We have lower insurance rates in the neighborhood of half a million dollars. We've also reduced certain salary-related costs. So with that, I do want to go forward to the non-cash expenses to the next slide, please.
[inaudible]
Speaker Change: Hitting on them quickly, hedging we've discussed, GNAs, we've already discussed. The warrant liability look in the past, stop, grab the price.
at the end of each quarter.
Speaker Change: that's a new one that is for certain convertible notes, that it all reverses in Q1 and goes away by the end of the quarter.
That's just a popping an out. And then...
Speaker Change: Number five, the Ford Purchase Agreement, the FBA, it was terminated in November . So it reversed out all the impact during the year as gone by the end of Q4 and the balance sheet goes to zero, we've cleaned it up.
Speaker Change: Finance and cost, same as before, all the way since Acquisition. And then number seven, the settlement of liabilities. That was a Q2 event. We picked up remain seven and settling certain liabilities to clean up the balance sheet.
Speaker Change: So with that, I do want to go forward to the ballot sheets and next slide please [inaudible]
Speaker Change: And I might spend a lot of time here, but we'll cover a little bit of debt and equity changes on the upcoming slides.
Speaker Change: But what I did want to mention is that the company has made and is continuing to make improvements to the balance sheet.
Speaker Change: The FBA contract is a noted liability. It was all cleared Q4 going at the end of December
Speaker Change: Select the tables and mobilities were settled during the year or cleared via equity issuance.
Speaker Change: We've also started the process where we clean up our private loans and want liabilities that are current into long-term convertible notes starting in Q4. We started that process.
Speaker Change: Cleaning up the balance sheet has always been our goal since the beginning and many of you shareholders have told us to clean up the balance sheet, which we totally agree.
Speaker Change: and so we have press releases, shareholder letters, describing other actions in process.
with that. I want to touch on that slide.
Speaker Change: Next slide please, real quickly. There's not a real lot of change from the past. I'm not going to spend a lot of time on it, but I do want to note that the RBL are senior debt. It started with $8.28 million is now at $23 based on the amortization schedule in our payments.
So go for the next slide for the equity.
Speaker Change: There's not a lot of changes from Q3, so I'm not going to spend a lot of time on this one either, but I do want you to note that at the end of the year we had 10 million of Class A shares.
and we still hit 500.
Speaker Change: 1,000 Class B shares which are voting only rights, but it has a one-to-one conversion to Class A. And after the end of the year, all the Class B was converted, so that balance sheet of items been cleaned up and goes away.
Speaker Change: But I do want to talk in the dead side, the financing side, the funding option, so next slide please.
Now here.
Speaker Change: There's been a lot of press releases, shareholder letters on what we're doing, our development plans, except everything, take some type of funding, whether it's internal cash flow, or other funding.
Speaker Change: Just let y'all know, we believe in a proper and balanced approach to our funding fundraise. We are opposed excessive equity pollution and excessive debt needs to be balanced.
Speaker Change: So, our business and our business, the main sources are biometric funding, debt financing, equity instruments.
Karen Smith, Unknown Executive, Mitchell Trotter,
Speaker Change: Most of you know a lot about different data instruments and equity instruments that are out there and I will sit there and go through all those options.
Speaker Change: We do listen to many proposals on some stuff that makes sense and some stuff that just doesn't make sense. We reject a lot of them up front because, you know, they're just not in the best interest of the company and not in the best interest of the shareholders.
So we don't entertain those [inaudible]
Speaker Change: Now, instead I want to spend a little bit of time talking about the biometric funding which some of you may or may not know about.
Speaker Change: And it is described in further detail if you want to read our March 20th press release.
Thank you.
Speaker Change: In short, it is a product production revenue sharing instrument that is near that nor Acquis.
Speaker Change: Instead is essentially a portion of the production and related revenues carved out to pay the investor.
Speaker Change: Once the investor makes his agreed upon return, the production and revenues revert back to the company.
Thank you.
Yeah.
Speaker Change: The payment now will fluctuate up and down with production and oil prices that mitigates a lot of risk for the company
Speaker Change: Certainly our cash flow it matches, so it also minimizes or reduces default risk to the company because it's not a traditional.
And also, it does not dilute our common stock.
Speaker Change: Yeah, where are our plan uses? We have three of them for this year, one field development. That's Dante talked about the on-stream, the 50 wells in that program.
Speaker Change: That's a prime example of what we can use it for, but also a horizontal drilling partner that we've alluded to. That's a different version of a volumetric funding.
Speaker Change: which is the second one, the cellar consideration agreement which we've talked about, it's in the press releases and then third, when there's refinancing, we're appropriate, we may use that.
Speaker Change: So at this point, I do want to conclude my presentation. We will take questions at the end of the call. And if you need a deeper dive and then time may permit or it's
Speaker Change: More detail than is proved for this larger group setting. Just reach out to Mike Porter and he'll schedule a one-on-one call. We've done some of these. With that, I want to hand it off to Jesse for the Operations Review.
Well, thank you, Mitch.
Speaker Change: Good morning all, I'm Jesse Allen, the VP of Operations, and today I will discuss the highlights of our 2024 operations, what we did to stabilize production, and what we will do to increase production in the future, and what we've already initiated here in Quarter 1.
First though, I'd like to start off with safety.
Speaker Change: In 2024, our field operations team did a wonderful job of
Staying safe, we had no reportable incidents in 2024.
Speaker Change: And as part of that program, we do have weekly safety meetings in which all of these operators come in and discuss near misses and what we can do to actually improve operations and improve the safety, although it's been very, very good thus far.
Speaker Change: So in 2024, 2024 highlights. When we took over the property, the daily production was basically in a free fall. And so our first order of business is what's going on? Why is that happening?
Speaker Change: and so we started initiating procedures and work that enable us to just stabilize the production at about 950 barrels all the day, and so what did we do? Well, first.
Speaker Change: We realize that we're going to have to do several infrastructure upgrades.
Speaker Change: that would enable us to keep our wells on production because that's the key. You got to keep everything in production to the tanks.
Speaker Change: and so what we ended up starting with, we realized that a water injection concline from one of our major water stations was in need of replacement, so we've initiated that. We also discovered that we had
Speaker Change: A lot of idle wells that were down due to flow lines that had holes in them and needed to be replaced and so we did that type of work and as Dante alluded, he's a...
Speaker Change: We've done over 20 now. In that last count, it was 2526 that we've done. And that enabled us to return about 60 barrels of all the day to production.
Speaker Change: The Water Injection Line, that project is not quite complete, but I anticipate once we resume water injection in this part of the water flood that will regain about 50 to 75 barrels all the day.
Speaker Change: So what else did we do? We actually actually had to do some electrical upgrades.
Bye-bye.
Speaker Change: and that's replacing some conduit, electrical wire that had been compromised. But the really big project was the replacement of a large transformer that power went to one of our water injection, our water stations.
Speaker Change: We were not able to operate that particular water station at 100% capacity.
Speaker Change: And the only way we were going to be able to do that was to replace an outdated and ancient transformer that was there and we did that. It was a big project. Now we're operating at 100% of that water injection station.
Speaker Change: What else did we do? Well we ended up replacing several of our horizontal water pumps.
in several of the water stations.
Speaker Change: We ended up swapping out a pump that was too small, used it in another water station to enable us to have a full-time injection there. That is key to our water flood operations. We have to put water in the ground, know exactly where we're putting it and keep our rates up in order to continue to...
Increase up production, or at least maintain production production.
And so that's...
Speaker Change: Part of what we did to stabilize the production. In addition, we purchased a hot oil unit. We use that every day, and Dante alluded to mainly that's to flush out flow lines, do pressure tests on flow lines, etc., and so on. And that reduced our L.O.E. about 30k per month over third party use of a hot oil unit.
Speaker Change: I'll talk a little bit more about that as I discuss the L.O.E. We also produced some also purchased
Speaker Change: Several portable well testers to enable us to test our wells and have a much better idea that the work we're doing has actually been fruitful and increasing production.
So with that, let me get into L.O.E.
Speaker Change: From the beginning of 2024 when we took over the the operations, Ella, we was basically out of sight. It was greater than 800,000 a day or a month, 800,000 dollars per month. We were able to reduce that to an average in 2024, 765,000.
Speaker Change: and we're hopeful that as we come into 2025, we're going to be around $700,000 per month from our least operating expense and we anticipate even reducing that further.
Next slide please.
Bye.
Speaker Change: So what are our plans for stabilizing precinct production? What have we done? As mentioned, we have been trying to figure out the formula to stimulate these wells.
Speaker Change: as Dante mentioned, we did three with fly ash, they didn't turn out as expected and so we moved on to pumping low temperature resin coated sand and what's key about that is
Speaker Change: The past workovers and reconpletions that were done a lot of profit was pumped.
Speaker Change: We produce a lot of that propant back. It gets into our pumps and our flow lines. And so we had to do something different to eliminate that sand
Speaker Change: And so last several jobs we've done we pumped low temperature resin coated sand and they've been successful in the first one that's come in at 20 barrels all the day. And that's what we expect on a go forward basis as an average.
Speaker Change: We also are bringing idle wells back on production that have some type of downhole failure when we took over production there was an excessive, excessive number of wells that were down for whatever reason.
Speaker Change: Some of them are more severe than others and we've started returning nose-wells to production and that again helps stabilize and increase production a little bit. In addition
Speaker Change: As we stated, our water floods and the injection wells are very important and we found that there were injection wells that were down for various reasons and we returned some of those back to injection that is an ongoing program.
Finally,
As
Speaker Change: What's been really highlight is the what our technical team uncovered as far as the horizontal potential in the Sin Andrews formation.
Speaker Change: That is we've done our technical presentation. It's on the website you can view it there and we're actively taking the partner to come in and help with the cost.
Speaker Change: and so the plan currently is we're in the process of permitting those 12 wells and we hope to have those permitted here in 2025 with a kickoff of the first three wells toward the end of 2025 and into the first quarter of 2026.
Dante: So with that, of course we do have a Q&A at the end. I'm going to turn it back over to Dante for some concluding remarks.
Dante, take it away please [inaudible]
Yeah, thank you. Thank you, Jesse. Thank you, Mitch.
Speaker Change: So guys, to wrap up our presentation here, we think we're going to hit some home run balls in 25 and we think that's going to put us in position to be the best performing micro-cap oil and gas company.
Speaker Change: on the big board. The first one up is going to be conclude the settlement with a seller that adds 40 million in value to the shareholders.
Speaker Change: So that works out to be a little more than $2 share, we're going to get that done mid-year.
Speaker Change: The next one up is the Drilling Partner. I believe we'll select the Drilling Partner in the next three months We've got meaningful dialogue going on with three and we're going to cut the best deal that we can for our shareholders.
Speaker Change: The next one up is part of the financing for the settlement with the seller is the financing to do 50 workovers all to be completed this year. That's going to be another home run ball.
Speaker Change: We're going to make at least one acquisition this year. Certainly, we're going to acquire the 10% royalty on our own field, and I believe we'll do at least one more. And the last home run ball is to cut our GNAs and our
Speaker Change: Lisa operating expense as much as we possibly can to weather the storm of oil prices.
Speaker Change: So that's it. That's that's kind of a five home run inning and and we think that's going to that's going to be top competition
Speaker Change: for our other public companies that we compete with. With that, I'll turn it back over to Matt to start the Q&A, please.
David Smith, Michael Porter, Unknown Executive, David Smith, Hnr Acquisition
Matt: Certainly, everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time.
Matt: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
Matt: We do ask that participants please ask one question and one follow up and re-enter the queue.
Matt: Once again, if you have any questions or comments, please press star one on your phone. Please
Bye.
Bye-bye.
Speaker Change: Thank you. Once again everyone, if you have any questions or comments please press star then one on your phone. Please hold Wallypole for questions.
I'm
Michael Porter: Thank you. That concludes our verbal Q&A. For those of you listening on webcasts, you can submit a question at this time by clicking on the Ask Question button on the left of your screen. Type your question into the box and hit the Send button to submit your question. I will now turn the call over to Michael Porter for remaining questions.
Michael Porter: Thank you, Matt. Gentleman, the first question that comes up that says congratulations on your progress. What are your largest concerns that might negatively impact your plans?
Michael Porter: And also, what are your plans regarding future use of stock in lieu of cash for AP and other liabilities and the follow-up question is how is the stock valued and is it fully registered when issued? Gentlemen, would you please answer the questions?
Speaker Change: Let me start that one and then I'll turn a little bit on to the over to Dante.
for our largest concern.
Speaker Change: It's of course the market. Everybody's got that. Oil prices go up and down, stock prices, the market tariffs and all that. That's everybody from Exxon and Apple, down to companies like us. Nobody knows what's going on.
and let me of grasp the...
Speaker Change: to stop questions and then I'll give Dante to talk about other concerns that he may have.
Speaker Change: Now, how are we going to use the future stock for the cash for APs and other lovelies? Well, the 500K already talked about. Over half of that was settling.
That's that related to that acquisition, okay?
Speaker Change: the rest. It's been for ongoing people that are heavily invested in our company as in providing services to us in the field and through high and consulting type arrangements.
We will use it sparingly.
Speaker Change: You know, we're not going to use an accessible mouth. We have it in the past and we don't plan to in the future
Speaker Change: Now, how's the stock value? That's actually two different questions. One is, what is the valuation from a gap standpoint? And that's just the base.
Speaker Change: that's a gap thing based on the date of the grant and the stock price. But how do we value it with respect to the issue price? It's a bigger question. I will leave in here. And we are not giving.
Speaker Change: Discounts. On that, it is basically either at the trading value or a little bit above what it is right now, and it'll fluctuate.
Speaker Change: So that's a game time decision each time as to what makes sense for all the parties involved whether we just use cash or is it worth it doing that. Now these shares are not registered. They are unregistered shares they get issued.
Speaker Change: and then the next S1 will allow us to register them.
Speaker Change: So you can look in the past at all the registered shares in our S1 filings.
Speaker Change: That's basically what it is. With that, Dante, did you want to hit on any of your larger concerns? Yeah, I'll just put one out there. I mean, we have a low lifting cost to $23 a barrel and if we can cut our GNAs.
Speaker Change: And if we can restructure our RBL, we bring all those costs down so we can make money at 35, 40
Speaker Change: $50 a barrel, but it also makes me want to look at gas, gas is behaving.
Better in the market than oil.
Speaker Change: So we may look at that, look at gas in the coming years at what we can do as a hedge against a week oil price but my own view and again as Mitch said nobody knows the future but I I see what the
Speaker Change: The social costs are to the Saudis and they need an oil price that's up there. So I think any reduction in oil price is going to be short-lived and we've got time on our side because we're we're almost fully hedged at 70.
Speaker Change: So I think we've got time to react and to study and to understand what the markets are going to give us so that's my response
Speaker Change: Thank you, sir. The next question, are you still working on the work-overs Wells or is this less of a priority list and the seven rivers is a priority?
Um, I'm, I'm, I try to answer that, um,
Speaker Change: The workovers are tied in with seven rivers, so some of the workovers are to add patterns. So some of the work we're doing right now is actually adding five spot patterns.
Speaker Change: Some of the workovers are to test the San Andreas with with vertical wells in preparation of drilling them horizontally. So the workovers are going to be a forever top priority. I mean we're going to be doing that for the next.
Speaker Change: You know, 10 years, which is develop behind pipe potential. We've got something like 10 different
Stacked.
Speaker Change: Pay Horizons with names like Oceanic and San Andreas and Seven Rivers and so on. So as we learn about these pay sections through workovers, which generally include shooting holes in the pipe and doing some kind of stimulation, whether it be
Jesse Allen: Acid or Frack, we just have no end to fun there. Now I'll go to Jesse, did I say that about right?
Jesse Allen: Yes, sir. Yeah, most of our workovers will be in the seven rivers, plugging back, and then adding seven river perforations, both in producers and injection wells.
Jesse Allen: And as you've mentioned, the vertical workovers that we have are to test.
Jesse Allen: intervals within St. Andrews. Our geophysic system has been able to identify three or four benches that we could potentially ...
Jesse Allen: Do Horizontal Wells. Our main bench is what is known as the Jackson Trotter, which is an interval, local interval name within the San Andres section.
So, yes.
We saved 50 horizontal wells currently. That could that.
Jesse Allen: Could double or triple with the identification of these additional benches that we could go horizontal so yeah the the future looks very very bright from it for us from a workover and or drilling horizontal completion standpoint.
So, best thank you.
. . . . .
Speaker Change: Another question. Good morning, Ian Ting. Curious what are you guys doing to negotiate in benchmark? Parts, pumps and other goods necessary in order to optimize, optimize productivity savings.
Speaker Change: Dundan, I think I can take that one there. Yeah, please No, that's obvious.
Dante: Yeah, obviously the Permian Basin and even where we're at in the Northwest Basin, they're in New Mexico. The prices are quite competitive and we do take typically two to three bids from vendors and
Dante: Not necessarily go with the cheapest, but whichever service affords us the best value. And that includes parts, services, rigs.
Dante: Downhole Pumps, Surface Pumps, you name it. We do a very thorough job of bidding those costs and then taking the vendor and or parts that provide the most value.
Dante: So, and so we're very very cost conscious you have to be in this environment especially if we end up in a period of of lower old prices less than 60 or 50 dollars per barrel.
Thank you, Paul. Next is your question now.
Speaker Change: Next question, if we get a nice recovery with WTI oil at $85 to $90 a barrel this summer, would you try to increase production faster, reworking horizontal wells, etc.?
Speaker Change: Yeah, I'll I'll answer that. Yeah, we would, you know, we're limited by the funds we can raise and as as the oil prices go up our access to the funds.
Speaker Change: greatly increases as does our access to funds with the stock price.
Speaker Change: So if we have more money, we'll accelerate workovers, we'll accelerate
Speaker Change: Drilling horizontal wells, but not ridiculously so. You're almost a little bit limited by what can our current staff do, but what lessons learned can we digest and apply? Bye.
Speaker Change: For the next wells, we've learned from some mistakes of the past. We thought we had a winner with acid stimulations. And frankly, last year, we went too fast and made some mistakes and then just slowed it down.
Speaker Change: So the answers, yes, will accelerate but not to a ludicrous speed.
Speaker Change: Let me ask that answer a little bit because there's another obvious question in that if it does get to that level.
We're watching it. So, you know, the horse on the wheel, they're all incremental.
Speaker Change: I will look at it. We will as a company, whether we hedge a little bit more, take advantage of the higher prices to lock in some future oil like.
Speaker Change: We're at $70 a greater because price was at the 85 the 90 range a year ago and we locked it in all the way through the end of 2025 thanks to that so
Speaker Change: Something like that pops up, we're going to take advantage either for later parts of 25 or going into 26. So we watch it to make certain our hedging program is proper.
Two.
Speaker Change: Now back to you, Mike. Okay, last question regarding the 52.8 million revenue sharing of volumetric funding arrangement with on-string capital. Is this funding deal still on track for June 2025 closing? Thank you.
Speaker Change: Yeah, yeah, I'll answer it. It is so far the the lender is saying yes and
Speaker Change: until it closes, frankly, I'm nervous, but the indications I have is that we're still on track, if oil takes a precipitous drop.
Speaker Change: This number may reduce and we're just going to deal with it. We'll just deal with it and we've got backups in place to cover the shortage.
Speaker Change: So we've got a back up A and a back up B and a back up C, but it would sure be helpful for us to have oil prices stabilized in the 65 range or better, you know, as we head into June .
Speaker Change: If you all don't mind, I just got two more questions, so I'd like to put them out there. The first one is financing for the 50 workovers is the goal to get this done in the next two or three months, or can you give us a timeline?
I'll enter that though, yeah, really ties into the on-string and
Speaker Change: Part of that program has the 52 million, 53 million, as just under 10 million for those 50 wells.
Speaker Change: So that's already pre-arranged and it'll close at the same time. And if things for some reason work out, maybe we can do it sooner. So yeah, and then we'll pick off the program of actually doing the work, which we'll take.
few months.
Speaker Change: Okay, and one more question. With President Trump saying drill baby drill, are you seeing new drilling permits going through faster for your going forward and what is your relationship with drilling permits with the state of New Mexico?
Gallup tells you answer that.
Yes, most people probably know the...
Speaker Change: Regulatory Environment in New Mexico's little tough present Texas. And so as Dante has already said, we deal with it.
Speaker Change: and the Gilling Permit process is typically eight or nine month process.
Speaker Change: But with the new administration, all indications are maybe that maybe that's going to be a five or six month process. So the answer to that question yet it does.
Speaker Change: looked like the environment has improved for permini. The same goes for the workovers because our properties
Speaker Change: is BLM Land, Bureau Land Management, Federal Land, and State Land. We have to get approval typically from both agencies.
Speaker Change: And so, workovers do take longer than they do in Texas, typically two to three months, and we are fighting a little bit at that now, but we're working on relationships and hopefully by the time we're funded with then stream, those permits will be approved, the workover permits.
Speaker Change: So to conclude, yes, the environment is improving and it is probably a result of the new administration they are having come into office.
David Smith, Unknown Executive, Mitchell Trotter
Dante: Thank you. Dante, that's the last comment, a last question I'm turning the meeting back over to you.
Speaker Change: Yeah, well, I just want to say thank you to all our shareholders. We're grateful for all of you.
Dante: and we know you've put your trust in us every time you buy a share.
and we don't want to betray that trust. We are...
Dante: Very optimistic on our future. We think we'll weather the storm.
Dante: Whatever it is, and we've got a lot of knobs to turn to, as we mentioned today, to keep us on track to a very profitable.
Dante: 26 and we think in the trailing quarters of this year you're going to see remarkable results from us so with that I'll turn it back over to Matt to wrap it up.
Speaker Change: Thank you. Everyone is concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.