EON Resources Inc.
For the period ended Mar 31, 2025. Filed May 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
EONR$0.27+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-15.
0001213900-24-099136
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001213900-25-044224
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 83 current paragraphs.
52 unchanged; 24 reworded; 7 added; 27 removed; 11 previous and 0 current paragraphs rearranged.
Tables are not compared: 20 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Other Revenue
Current report
Interest expense was $1,744,246 for the three months ended March 31, 2025, compared to $1,860,582 for the three months ended March 31, 2024. The decrease in interest expense is driven by the decreases in the Senior Secured term loan and the Private Notes Payable.
Current report
During the three months ended March 31, 2025, the Company recorded $337,370 related to the amortization of financing costs compared to $813,181 for the three months ended March 31, 2024. These costs are attributable to deferred finance costs paid on the Senior Secured Term Loan, and discounts associated with the Private Notes Payable during 2023.
Current report
Change in fair value of warrant and convertible note liabilities
Current report
The change in fair value of convertible note liabilities consisted of a loss of $129,746 for the three months ended March 31, 2025.
Current report
Gain on extinguishment of liabilities
Current report
The Company recognized a gain on extinguishment of liabilities of $92,294 during the three months ended March 31, 2025 related to the exchange of certain notes payable and warrant liabilities for convertible note agreements.
Removed paragraphs (27)
Previous report
Impact of Coronavirus (“COVID-19”)
Previous report
The COVID-19 pandemic resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and created significant volatility, uncertainty and turmoil in the oil and gas industry. The decrease in demand for oil, combined with pressures on the global supply-demand balance for oil and related products, resulted in oil prices declining significantly in late February 2020. Since mid-2020, oil prices have improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19 variants, which have continued to inhibit a full global demand recovery. In addition, worldwide oil inventories are, from a historical perspective, very low and supply increases from the Organization of the Petroleum Exporting Countries (“OPEC”), Russia and other oil producing nations are not expected to be sufficient to meet forecasted oil demand growth in 2023, with many OPEC countries not able to produce at their OPEC agreed upon quota levels due to their lack of capital investments over the past few years in developing incremental oil supplies.
Previous report
Global oil price levels will ultimately depend on various factors and consequences beyond the Company’s control, such as: (i) the effectiveness of responses to combat the COVID-19 virus and their impact on domestic and worldwide demand, (ii) the ability of OPEC, Russia and other oil producing nations to manage the global oil supply, (iii) the timing and supply impact of any Iranian sanction relief on Iran’s ability to export oil, (iv) additional actions by businesses and governments in response to the pandemic, (v) the global supply chain constraints associated with manufacturing delays, and (vi) political stability of oil consuming countries.
Previous report
We continue to assess the impact of the COVID-19 pandemic on our company and may modify our response as the impact of COVID-19 continues to evolve.
Previous report
Certain prior year financial statements are not comparable to our current year financial statements due to the adoption of fresh start accounting as a result of the Acquisition. References to “Successor” relate to the financial position and results of operations of HNR Acquisition Corp subsequent to November 15, 2023. References to “Predecessor” relate to the financial position and results of operations of HNR Acquisition Corp prior to, and including, November 14, 2023.
Previous report
Pogo Royalty Overriding Royalty Interest Transaction
Previous report
Effective July 1, 2023, the Predecessor transferred to Pogo Royalty, a related party to the Predecessor, an assigned and undivided overriding royalty interest (“ORRI”) equal in amount to ten percent (10%) of our interest all oil, gas and minerals in, under and produced from each lease. The consideration received for the 10% ORRI was $10. Thus, a loss of $816,011 was recorded as a result of the conveyance in the previous year. Additionally, because of this transaction, our reserve balance was decreased as well our current net production volumes and revenues.
Previous report
Interest expense was $1,841,848 for the three months ended September 30, 2024, compared to $554,262 for the three months ended September 30, 2023. The Successor period interest expense is driven by the Senior Secured term loan entered into as part of the Closing, and the Private Notes Payable. The Predecessor interest expense for the three months ended September 30, 2023 relates to the Predecessor’s revolving credit facility outstanding and an increase in the weighted average interest rate. This revolving credit facility was not assumed in the Acquisition. Amortization of financing costs was $507,701 and was primarily associated with discount on our Private Notes Payable.
Previous report
Nine months ended September 30, 2024 (Successor) Compared to nine months ended September 30, 2023
Previous report
Oil and Natural Gas Sales
Previous report
Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes. For the nine months ended September 30, 2024, our oil and natural gas sales decreased 24% from the nine months ended September 30, 2023, driven by a 2% increase in realized prices, excluding the effect of settled commodity derivatives, and a 25% decrease in production volumes, and approximately $180,063 in derivative instrument losses in the nine months ended September 30, 2024. Realized production from oil and gas properties decreased due to the sale of the ORRI of 10% by the Predecessor in July 2023, and actual decrease in production due to an increase in well downtime, and the impact of water injection flowlines that needed repair or replacement.
Previous report
Derivative Contracts
Previous report
For the nine months ended September 30, 2024, our average realized oil price per barrel after reflecting settled derivatives was $73.87 compared to $73.03, for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, our settled derivatives decreased our realized oil price per barrel by $2.56 compared to decreasing the price per barrel by $3.47 for the nine months ended September 30, 2023. As of September 30, 2024, we ended the period with a $794,195 net derivative asset compared to a net asset of $467,687 as of December 31, 2023.
Previous report
Lease Operating Expenses
Previous report
Lease operating expenses were $6,530,431 for the nine months ended September 30, 2024, compared to $7,354,304 for the nine months ended September 30, 2023. On a per unit basis, production expenses increased 18% from $24.12 per BOE for the nine months ended September 30, 2023, to $28.54 per BOE for the nine months ended September 30, 2024, due primarily to increases in proactive maintenance activities.
Previous report
Production Taxes, Transportation and Processing
Previous report
Depletion, Depreciation and Amortization
Previous report
Depletion, depreciation and amortization (“DD&A”) was $1,506,242 for the nine months ended September 30, 2024, compared to $1,285,830 for the nine months ended September 30, 2023. DD&A was $6.58 per BOE for the nine months ended September 30, 2024 compared to $4.22 per BOE for the nine months ended September 30, 2023. The aggregate increase in DD&A expense for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was driven by the increase in the oil and gas properties balance due to the recognition of the reserves at fair value as a result of the acquisition of the Pogo business by us on November 15, 2023.
Previous report
Accretion of Asset Retirement Obligations
Previous report
Accretion expense was $83,926 for the nine months ended September 30, 2024, compared to $809,423 for the nine months ended September 30, 2023. Accretion expense was $0.37 per BOE for the nine months ended September 30, 2024, compared to $2.65 per BOE for the nine months ended September 30, 2023. The aggregate decrease in accretion expense for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was driven by changes in certain assumptions, specifically the inflation factor and discount rate as a result of the acquisition date where we revised our estimates as part of its fair value estimates for the acquired business on November 15, 2023
Previous report
General and Administrative
Previous report
General and administrative expenses were $6,868,749 for the nine months ended September 30, 2024, compared to $3,111,130 for the nine months ended September 30, 2023. The increase for general and administrative expenses is primarily due to increased cost of outsourced legal, professional, and accounting services from being a public company, and stock-based compensation in the current period of $1,516,933.
Previous report
Interest expense was $5,732,747 for the nine months ended September 30, 2024, compared to $1,429,200 for the nine months ended September 30, 2023. The Successor period interest expense is driven by the Senior Secured Term loan entered into as part of the Closing, and the Private Notes Payable. The Predecessor interest expense for the nine months ended September 30, 2023 relates to the Predecessor’s revolving credit facility outstanding and an increase in the weighted average interest rate. This revolving credit facility was not assumed in the Acquisition. Amortization of financing costs was $1,982,958 and was primarily associated with discount on our Private Notes Payable.
Previous report
Successful Efforts Method of Accounting
Previous report
We utilize the successful efforts method of accounting for crude oil and gas producing activities as opposed to the alternate acceptable full cost method. In general, we believe that net assets and net income are more conservatively measured under the successful efforts method of accounting for crude oil and gas producing activities than under the full cost method, particularly during periods of active exploration. The critical difference between the successful efforts method of accounting and the full cost method is that under the successful efforts method, exploratory dry holes and geological and geophysical exploration costs are charged against earnings during the periods in which they occur; whereas, under the full cost method of accounting, such costs and expenses are capitalized as assets, pooled with the costs of successful wells and charged against the earnings of future periods as a component of depletion expense.
Previous report
Forward Purchase Agreement Valuation
Previous report
We have determined that the FPA Put Option, including the Maturity Consideration, within the Forward Purchase Agreement is (i) a freestanding financial instrument and (ii) a liability (i.e., an in-substance written put option). This liability was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date in accordance with ASC 480. The fair value of the liability was estimated using a Monte-Carlo Simulation in a risk-neutral framework. Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”). For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted back to present. Finally, the value of the forward is calculated as the average present value over all simulated paths. The model also considered the likelihood of a dilutive offering of common stock.
Reworded paragraphs (24)
Previous wording
Our average daily production for the nine months ended September 30, 2024 was 814 barrel of oil equivalent (“BOE”) per day. Our average daily production for the year ended December 31, 2023, was 1,022 BOE per day. The decrease in production is due to an increase in well downtime, water injection flowlines that needed repair or replacement, and the conveyance of the 10% Override royalty interest to Pogo Royalty.
Current wording
Our average daily production for the three months ended March 31, 2025 was 749 barrel of oil equivalent (“BOE”) per day. Our average daily production for the year ended December 31, 2024, was 798 BOE per day. The decrease in production is due to an increase in well downtime, water injection flowlines that needed repair or replacement, and the conveyance of the 10% Override royalty interest to Pogo Royalty.
Previous wording
The price at which our oil and natural gas production are sold typically reflects either a premium or discount to the New York Mercantile Exchange (“NYMEX”) benchmark price. Thus, our operating results are also affected by changes in the oil price differentials between the applicable benchmark and the sales prices we receive for our oil production. Our oil price differential to the NYMEX benchmark price during the nine months ended September 30, 2024 and 2023, was $(2.07) and $(3.22) per barrel, respectively. Our natural gas price differential during the nine months ended September 30, 2024 and 2023, was $0.04 and $0.03 per one thousand cubic feet (“Mcf”), respectively. Fluctuations in our price differentials and realizations are due to several factors such as gathering and transportation costs, takeaway capacity relative to production levels, regional storage capacity, gain/loss on derivative contracts and seasonal refinery maintenance temporarily depressing demand.
Current wording
The price at which our oil and natural gas production are sold typically reflects either a premium or discount to the New York Mercantile Exchange (“NYMEX”) benchmark price. Thus, our operating results are also affected by changes in the oil price differentials between the applicable benchmark and the sales prices we receive for our oil production. Our oil price differential to the NYMEX benchmark price during the three months ended March 31, 2025 and 2024, was $(1.98) and $(5.51) per barrel, respectively. Our natural gas price differential during the three months ended March 31, 2025 and 2024, was $0.79 and $0.54 per one thousand cubic feet (“Mcf”), respectively. Fluctuations in our price differentials and realizations are due to several factors such as gathering and transportation costs, takeaway capacity relative to production levels, regional storage capacity, gain/loss on derivative contracts and seasonal refinery maintenance temporarily depressing demand.
Previous wording
Prices for various quantities of natural gas and oil that we produce significantly impact our revenues and cash flows. The following table lists average NYMEX prices for oil and natural gas for the three and nine months ended September 30, 2024 and 2023.
Current wording
Prices for various quantities of natural gas and oil that we produce significantly impact our revenues and cash flows. The following table lists average NYMEX prices for oil and natural gas for the three months ended March 31, 2025 and 2024.
Previous wording
For the nine months ended September 30, 2024, the average NYMEX oil pricing was $78.50 per barrel of oil or 7% lower than the average NYMEX price per barrel for the nine months ended September 30, 2023. Our settled derivatives decreased our realized oil price per barrel by $2.56 and $3.47 in the nine months ended September 30, 2024, and 2023, respectively. Our average realized oil price per barrel after reflecting settled derivatives and location differentials was $77.12 and $74.23 for the three months ended September 30, 2024 and 2023, respectively. Our average realized oil price per barrel after reflecting settled derivatives and location differentials was $73.87 and $73.03 for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
For the three months ended March 31, 2025, the average NYMEX oil pricing was $71.84 per barrel of oil or 7% lower than the average NYMEX price per barrel for the three months ended March 31, 2024. Our settled derivatives decreased our realized oil price per barrel by $2.28 and $2.05 in the three months ended March 31, 2025, and 2024, respectively. Our average realized oil price per barrel after reflecting settled derivatives and location differentials was $67.78 and $72.15 for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The average NYMEX natural gas pricing for the nine months ended September 30, 2024, was $2.11 per Mcf, or 14% lower than the average NYMEX price of $2.47 per Mcf for the nine months ended September 30, 2023.
Current wording
The average NYMEX natural gas pricing for the three months ended March 31, 2025, was $4.94 per Mcf, or 95% higher than the average NYMEX price of $2.13 per Mcf for the three months ended March 31, 2024.
Previous wording
Three months ended September 30, 2024 (Successor) Compared to Three months ended September 30, 2023
Current wording
Three months ended March 31, 2025 Compared to Three months ended March 31, 2024
Previous wording
Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes. For the three months ended September 30, 2024, our oil and natural gas sales decreased 18% from the three months ended September 30, 2023, driven by a 6% increase in realized prices, excluding the effect of settled commodity derivatives, and a 17% decrease in production volumes, and $1,900,662 in derivative instrument gains in the three months ended September 30, 2024. Realized production from oil and gas properties decreased due to the sale of the ORRI of 10% by the Predecessor in July 2023 and actual decrease in production due to an increase in well downtime, and the impact of water injection flowlines that needed repair or replacement.
Current wording
Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes. For the three months ended March 31, 2025, our oil and natural gas sales decreased 12% from the three months ended March 31, 2024, excluding the effect of settled commodity derivatives, and a 12% decrease in production volumes. Production volumes decreased for the three months ended March 31, 2025 from the three months ended March 31, 2024 as a result of increased flaring of natural gas during the current period.
Previous wording
We enter into commodity derivatives instruments to manage the price risk attributable to future oil production. We recorded a gain on derivative contracts of $1,900,662 for the three months ended September 30, 2024, compared to a loss of $1,436,100 for the three months ended September 30, 2023. Higher commodity prices in the three months ended September 30, 2024, resulted in realized losses of $107,969 compared to realized losses of $600,740 for the three months ended September 30, 2023. For the three months ended September 30, 2024, unrealized gains were $2,008,631 compared to unrealized losses of $835,360 for the three months ended September 30, 2023.
Current wording
We enter into commodity derivatives instruments to manage the price risk attributable to future oil production. We recorded a loss on derivative contracts of $85,071 for the three months ended March 31, 2025, compared to a loss of $1,997,247 for the three months ended March 31, 2024. Higher commodity prices in the three months ended March 31, 2025, resulted in realized losses of $142,859 compared to realized losses of $137,154 for the three months ended March 31, 2024. For the three months ended March 31, 2025, unrealized gains were $57,788 compared to unrealized losses of $1,860,093 for the three months ended March 31, 2024.
Previous wording
For the three months ended September 30, 2024, our average realized oil price per barrel after reflecting settled derivatives was $77.12 compared to $74.23 for the three months ended September 30, 2023. For the three months ended September 30, 2024, our settled derivatives decreased our realized oil price per barrel by $1.61 compared to decreasing the price per barrel by $7.80 for the three months ended September 30, 2023. As of September 30, 2024, we ended the period with a $794,195 net derivative asset compared to a net asset of $467,687 as of December 31, 2023.
Current wording
For the three months ended March 31, 2025, our average realized oil price per barrel after reflecting settled derivatives was $65.12 compared to $62.53 for the three months ended March 31, 2024. For the three months ended March 31, 2025, our settled derivatives decreased our realized oil price per barrel by $2.12 compared to decreasing the price per barrel by $1.79 for the three months ended March 31, 2024. As of March 31, 2025, we ended the period with a $164,185 net derivative asset compared to a net asset of $106,397 as of December 31, 2024.
Previous wording
Other revenue was $98,452 for the three months ended September 30, 2024, compared to $143,714 for the three months ended September 30, 2023. The revenue is related to providing water services to a third party. The contract is for one year starting on September 1, 2022, and can be renewed by mutual agreement.
Current wording
Other revenue was $117,532 for the three months ended March 31, 2025, compared to $130,588 for the three months ended March 31, 2024. The revenue is related to providing water services to a third party. The contract is for one year starting on September 1, 2022, and has been renewed by mutual agreement.
Previous wording
Lease operating expenses were $2,136,732 for the three months ended September 30, 2024, compared to $2,449,140 for the three months ended September 30, 2023. On a per unit basis, production expenses increased 4.8% from $26.60 per BOE for the three months ended September 30, 2023, to $27.87 per BOE for the three months ended September 30, 2024, due primarily to increases in proactive maintenance activities.
Current wording
Lease operating expenses were $1,921,321 for the three months ended March 31, 2025, compared to $2,299,518 for the three months ended March 31, 2024. On a per unit basis, production expenses decreased 0.6% from $29.93 per BOE for the three months ended March 31, 2024, to $28.50 per BOE for the three months ended March 31, 2025.
Previous wording
We pay production taxes, transportation and processing costs based on realized oil and natural gas sales. Production taxes, transportation and processing costs were $489,524 for the three months ended September 30, 2024, compared to $602,449 for the three months ended September 30, 2023. As a percentage of oil and natural gas sales, these costs were 9% and 9% in the three months ended September 30, 2024, and 2023, respectively. Production taxes, transportation, and processing as a percent of total oil and natural gas sales are consistent with historical trends.
Current wording
We pay production taxes, transportation and processing costs based on realized oil and natural gas sales. Production taxes, transportation and processing costs were $397,216 for the three months ended March 31, 2025, compared to $428,280 for the three months ended March 31, 2024. As a percentage of oil and natural gas sales, these costs were 9% in the three months ended March 31, 2025 and 2024. Production taxes, transportation, and processing as a percent of total oil and natural gas sales are consistent with historical trends.
Previous wording
Depletion, depreciation and amortization (“DD&A”) was $507,626 for the three months ended September 30, 2024, compared to $426,838 for the three months ended September 30, 2023. DD&A was $6.62 per BOE for the three months ended September 30, 2024 compared to $4.64 per BOE for the three months ended September 30, 2023. The aggregate increase in DD&A expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was driven by the increase in the oil and gas properties balance due the recognition of the reserves at fair value as a result of the acquisition of the Pogo business by us on November 15, 2023.
Current wording
Depletion, depreciation and amortization (“DD&A”) was $97,075 for the three months ended March 31, 2025 compared to $476,074 for the three months ended March 31, 2024. DD&A was $1.44 per BOE for the three months ended March 31, 2025, compared to $6.20 per BOE for the three months ended March 31, 2024. The aggregate decrease in DD&A expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was driven by the decrease in oil and gas production.
Previous wording
Accretion expense was $10,395 for the three months ended September 30, 2024, compared to $200,789 for the three months ended September 30, 2023. Accretion expense was $0.14 per BOE for the three months ended September 30, 2024, compared to $2.18 per BOE for the three months ended September 30, 2023. The aggregate decrease in accretion expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was driven by changes in certain assumptions, specifically the inflation factor and discount rate as a result of the acquisition date where we revised our estimates as part of its fair value estimates for the acquired business on November 15, 2023.
Current wording
Accretion expense was $335,771 for the three months ended March 31, 2025, compared to $33,005 for the three months ended March 31, 2024. Accretion expense was $4.98 per BOE for the three months ended March 31, 2025, compared to $0.43 per BOE for the three months ended March 31, 2024. The aggregate increase in accretion expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was driven by changes in certain assumptions, specifically the inflation factor.
Previous wording
General and administrative expenses were $2,235,263 for the three months ended September 30, 2024, compared to $981,751 for the three months ended September 30, 2023. The increase in general and administrative expenses is primarily due to increased cost of outsourced legal, professional, and accounting services from being a public company, and stock-based compensation in the current period of $326,995.
Current wording
General and administrative expenses were $2,084,545 for the three months ended March 31, 2025, compared to $2,309,824 for the three months ended March 31, 2024. The decrease in general and administrative expenses is primarily due to decreased stock-based compensation in the current period of $368,093 compared to $699,248 in the comparative period.
Previous wording
The change in fair value of forward purchase agreement consisted of a loss of $4,209,294 for the three months ended September 30, 2024 for the Successor related to the inputs used in our fair value estimate of the FPA Put Option, primarily the decline in our stock price during the three months ended September 30, 2024. The key inputs to the fair value estimate include our stock price, which declined during the Successor period, and the likelihood, timing and price of a potential dilutive offering.
Current wording
The change in fair value of forward purchase agreement consisted of a loss of $349,189 for the three months ended March 31, 2024 related to the inputs used in our fair value estimate of the FPA Put Option, primarily the decline in our stock price during the three months ended March 31, 2024. The key inputs to the fair value estimate include our stock price, which declined during the Successor period, and the likelihood, timing and price of a potential dilutive offering. The FPA put option was settled during the year ended December 31, 2024 and therefore no change in fair value was recorded in the three months ended March 31, 2025.
Previous wording
The change in fair value of warrant liabilities consisted of a loss of $137,911 for the three months ended September 30, 2024 related to fluctuations in the trading price of our warrants, a portion of which are accounted for as liabilities due to the redemption provisions in those issued to Private Note holders.
Current wording
The change in fair value of warrant liabilities consisted of a loss of $162,520 for the three months ended March 31, 2025, compared to a loss of $624,055 for the three months ended March 31, 2024, related to fluctuations in the trading price of our warrants, a portion of which are accounted for as liabilities due to the redemption provisions in those issued to Private Note holders.
Previous wording
As of September 30, 2024, we had outstanding debt of $24,735,391 under our Senior Secured Term Loan, $15,000,000 under the Seller Promissory Note, and $3,875,750 of outstanding private notes payable and $1,019,037 from merchant cash advances. A total of $15,048,293 of this is due within one year, including a $5,000,000 estimated excess cash flow payment under the terms of the Senior Secured Term Loan. As of September 30, 2024, we had $2,746,896 of cash and cash equivalents on hand, of which $2,600,000 is in an escrow account pursuant to the requirements of the Senior Secured Term Loan, and had a working capital deficit of $38,801,444. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
Current wording
As of March 31, 2025, we had outstanding debt of $22,563,093 under our Senior Secured Term Loan, $15,000,000 under the Seller Promissory Note, and $2,900,000 of outstanding private notes payable, $1,548,500 of convertible notes payable and $1,047,028 from merchant cash advances. A total of $8,654,397 of this is due within one year. As of March 31, 2025, we had $3,074,094 of cash and cash equivalents on hand, of which $2,600,000 is in an escrow account pursuant to the requirements of the Senior Secured Term Loan, and had a working capital deficit of $27,937,557. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
Previous wording
We had positive cash flow from operations of $3,346,362 for the nine months ended September 30, 2024 and $8,675,037 for the year ended December 31, 2023 on a pro forma basis of the combined Successor and Predecessor periods. Additionally, management’s plans to alleviate this substantial doubt include improving profitability through streamlining costs, maintaining active hedge positions for its proven reserve production, and the issuance of additional shares of Class A Common Stock. We have a three-year Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 that can fund our operations and production growth, and be used to reduce liabilities. Through the date of this filing, we have received $2,464,688 in cash proceeds related to the sale of 1,885,000 shares of common stock under this agreement and expect to continue to utilize it to fund operational needs. We cannot assure you, however, that any additional capital will be available to us on favorable terms or at all. Our capital expenditures could be curtailed if our cash flows decline from expected levels.
Current wording
We had negative cash flow from operations of $1,827,355 for the three months ended March 31, 2025 and positive cash flow from operations of $3,700,686 for the year ended December 31, 2024. Additionally, management’s plans to alleviate this substantial doubt include improving profitability through streamlining costs, maintaining active hedge positions for its proven reserve production, and the issuance of additional shares of Class A Common Stock. We have a three-year Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 that can fund our operations and production growth, and be used to reduce liabilities. Through the date of this filing, we have received $6,969,866 in cash proceeds related to the sale of 7,000,000 shares of common stock under this agreement and expect to continue to utilize it to fund operational needs. We cannot assure you, however, that any additional capital will be available to us on favorable terms or at all. Our capital expenditures could be curtailed if our cash flows decline from expected levels.
Previous wording
Sources and uses of cash for the nine months ended September 30, 2024 and 2023, are as follows:
Current wording
Sources and uses of cash for the three months ended March 31, 2025 and 2024, are as follows:
Previous wording
The decrease in net cash flow provided by operating activities for the nine months ended September 30, 2024, as compared to 2023 is primarily due to decreased production volumes, and higher general and administrative and acquisition costs associated with public filings.
Current wording
The change in net cash flow used operating activities for the three months ended March 31, 2025, as compared to 2024 is primarily due to decreased production volumes and a reduction in payable balances during the current period.
Previous wording
Net cash used in investing activities for the nine months ended September 30, 2024 was primarily related to $3,275,667 in development costs for our reserves. Cash flows used in investing activities in the Predecessor period for the nine months ended September 30, 2023 consisted primarily of $4,867,872 of cash paid for oil and gas property costs.
Current wording
Net cash used in investing activities for the three months ended March 31, 2025 was primarily related to $1,117,540 in development costs for our reserves. Cash flows used in investing activities for the three months ended March 31, 2024 consisted primarily of $571,003 of cash paid for development costs of our reserves.
Previous wording
Net cash used by financing activities during the Successor period were primarily related to repayments of the Senior Secured Term Loan of $2,945,312 and Private Notes Payable of $43,750, partially offset by $1,184,272 in cash proceeds from sales of common stock under the Common Stock Purchase Agreement, $967,500 in cash proceeds from merchant cash advances, and an additional $450,000 in cash proceeds from the Private Notes Payable issued during the nine months ended September 30, 2024. Cash flows used in financing activities in the Predecessor period for the nine months ended September 30, 2023 consisted primarily of $2,000,000 in long-term debt repayments.
Current wording
Net cash provided by financing activities during the three months ended March 31, 2025 were primarily related to the sale of common stock under the Common Stock Purchase agreement of $4,341,532 and proceeds of $617,500 from short term notes payable offset by repayments of the Senior Secured Term Loan of $1,133,324 and Private Notes Payable of $778,277. Cash flows used in financing activities for the three months ended March 31, 2024 were primarily related to repayments of the Senior Secured Term Loan of $887,174 and Private Notes Payable of $33,750, partially offset by an additional $250,000 in cash proceeds from the Private Notes Payable issued during the three months ended March 31, 2024.
Previous wording
It should not be assumed that the standardized measure included as of December 31, 2023, is the current market value of our estimated proved reserves. In accordance with SEC requirements, we based the 2023 standardized measure on a twelve-month average of commodity prices on the first day of each month in 2023 and prevailing costs on the date of the estimate. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimate. See Note 12 of notes to the consolidated financial statements for additional information.
Current wording
It should not be assumed that the standardized measure included as of December 31, 2024, is the current market value of our estimated proved reserves. In accordance with SEC requirements, we based the 2024 standardized measure on a twelve-month average of commodity prices on the first day of each month in 2024 and prevailing costs on the date of the estimate. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimate. See Note 12 of notes to the consolidated annual financial statements for additional information.
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Previous report — wording carried elsewhere
Change in fair value of warrant liabilities
Previous report — wording carried elsewhere
The following table sets forth selected operating data for the periods indicated. Average sales prices are derived from accrued accounting data for the relevant period indicated.
Previous report — wording carried elsewhere
Production for the comparable periods is set forth in the following table:
Previous report — wording carried elsewhere
We enter into commodity derivatives instruments to manage the price risk attributable to future oil production. We recorded a loss on derivative contracts of $180,063 for the nine months ended September 30, 2024, compared to a loss of $673,057 for the nine months ended September 30, 2023. Higher commodity prices in the nine months ended September 30, 2024, resulted in realized losses of $506,571 compared to realized losses of $899,395 for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, unrealized gains were $326,508 compared to unrealized gains of $226,338 for the nine months ended September 30, 2023.
Previous report — wording carried elsewhere
Other revenue was $359,270 for the nine months ended September 30, 2024, compared to $461,435 for the nine months ended September 30, 2023. The revenue is related to providing water services to a third party. The contract is for one year starting on September 1, 2022, and can be renewed by mutual agreement.
Previous report — wording carried elsewhere
We pay production taxes, transportation and processing costs based on realized oil and natural gas sales. Production taxes, transportation and processing costs were $1,326,789 for the nine months ended September 30, 2024, compared to $1,774,310 for the nine months ended September 30, 2023. As a percentage of oil and natural gas sales, these costs were 9% and 9% in the nine months ended September 30, 2024, and 2023, respectively. Production taxes, transportation, and processing as a percent of total oil and natural gas sales are consistent with historical trends.
Previous report — wording carried elsewhere
Interest Expense and amortization of financing costs
Previous report — wording carried elsewhere
Change in fair value of forward purchase agreement
Previous report — wording carried elsewhere
The change in fair value of forward purchase agreement consisted of a loss of $4,534,766 for the nine months ended September 30, 2024 for the Successor related to the inputs used in our fair value estimate of the FPA Put Option, primarily due to the decline in our stock price on a year to date basis. The key inputs to the fair value estimate include our stock price, which declined during the Successor period, and the likelihood, timing and price of a potential dilutive offering.
Previous report — wording carried elsewhere
Change in fair value of warrant liabilities
Previous report — wording carried elsewhere
The change in fair value of warrant liabilities consisted of a loss of $484,799 for the nine months ended September 30, 2024 related to fluctuations in the trading price of our warrants, a portion of which are accounted for as liabilities due to the redemption provisions in those issued to Private Note holders.