EON Resources Inc.: Form 10-Q for the period ended Jun 30, 2026

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to EON Resources, Inc. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to HNRAC Sponsors, LLC. References to the Predecessor refer to the business of Pogo Resources, LLC and its subsidiaries prior to the Closing Date. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K/A filed with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov (http://www.sec.gov). Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are an independent oil and natural gas company based in Texas and formed in 2017 that is focused on the acquisition, development, exploration, production and divestiture of oil and natural gas properties in the Permian Basin. The Permian Basin is located in west Texas and southeastern New Mexico and is characterized by high oil and liquids-rich natural gas content, multiple vertical and horizontal target horizons, extensive production histories, long-lived reserves and historically high drilling success rates. Our properties are in the Grayburg-Jackson Field (the “GJF”) in Eddy County, New Mexico, and South Justis Field (the “SJF”) in Lea County, New Mexico which are both in the sub-area of the Permian Basin. LHO Operating, LLC, a subsidiary of the Company (“LHO”), focuses primarily on production through waterflooding recovery methods.

Our assets as mentioned above consist of contiguous leasehold positions in the GJF of approximately 13,700 gross (13,700 net) acres with an average working interest of 100%. We operate 100% of the net acreage across the GJF assets, all of which is net operated acreage of vertical wells with average depths of approximately 3,810 feet. In addition, the SJF has contiguous leasehold positions of approximately 5,400 gross (5,400) acres with an average working interest of 94%. We operate 100% of the net acreage across the SJF assets, all of which is net operated acreage of vertical wells with average depths of approximately 6,000 feet.

Our average daily production for the six months ended June 30, 2026 was 717 barrels of oil equivalent (“BOE”) per day. Our average daily production for the year ended December 31, 2025, was 734 BOE per day. The decrease in production is due to a lower net revenue interest and focus on bringing injector wells back online.

Selected Factors That Affect Our Operating Results

Our revenues, cash flows from operations and future growth depend substantially upon:

• the timing and success of production and development activities;
• the prices for oil and natural gas;
• the quantity of oil and natural gas production from our wells;
• changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil and natural gas;
• our ability to continue to identify and acquire high-quality acreage and development opportunities; and
• the level of our operating expenses.

In addition to the factors that affect companies in our industry generally, the location of substantially all of our acreage discussed above subjects our operating results to factors specific to these regions. These factors include the potential adverse impact of weather on drilling, production and transportation activities, particularly during the winter and spring months, as well as infrastructure limitations, transportation capacity, regulatory matters and other factors that may specifically affect one or more of these regions. 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 six months ended June 30, 2026 and 2025, was $(1.51) and ($0.54) per barrel, respectively. Our natural gas price differential during the six months ended June 30, 2026 and 2025, was $(1.44) and ($1.52) 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.

Market Conditions

The price that we receive for the oil and natural gas we produce is largely a function of market supply and demand. Because our oil and gas revenues are heavily weighted toward oil, we are more significantly impacted by changes in oil prices than by changes in the price of natural gas. World-wide supply in terms of output, especially production from properties within the United States, the production quota set by OPEC, and the strength of the U.S. dollar can adversely impact oil prices.

Historically, commodity prices have been volatile, and we expect the volatility to continue in the future. Factors impacting the future oil supply balance are world-wide demand for oil, as well as the growth in domestic oil production.

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 six months ended June 30, 2026 and 2025.

(1) Based on average NYMEX closing prices.

For the six months ended June 30, 2026, the average NYMEX oil pricing was $83.87 per barrel of oil, or 23% higher than the average NYMEX price per barrel for the six months ended June 30, 2025. Our settled derivatives decreased our realized oil price per barrel by $11.68 for the six months ended June 30, 2026, compared to an increase of $1.85 per barrel for the six months ended June 30, 2025. Our average realized price per BOE after reflecting settled derivatives and location differentials was $64.59 and $65.46 for the six months ended June 30, 2026 and 2025, respectively.

The average NYMEX natural gas pricing for the six months ended June 30, 2026, was $3.87 per Mcf, or 5% higher than the average NYMEX price of $3.67 per Mcf for the six months ended June 30, 2025.

Results of Operations

Three and six months ended June 30, 2026 compared to three and six months ended June 30, 2025

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.

(1) As restated represents restatements previously disclosed in the Company's Form 10-K/A for the year ended December 31, 2025. See Note 11.

Oil and Natural Gas Sales

Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes. For the three and six months ended June 30, 2026, our oil and natural gas sales increased 50% and 22%, respectively, from the three and six months ended June 30, 2025, excluding the effect of settled commodity derivatives, primarily driven by higher oil prices. Production volumes increased approximately 3% for the three months ended June 30, 2026 as compared to the same quarter in 2025 and approximately 2% for the six months ended June 30, 2026 as compared to the same period in 2025.

Production for the comparable periods is set forth in the following table:

(1) Natural gas is converted to BOE at the rate of one-barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not necessarily indicative of the relationship of oil and natural gas prices.

Derivative Contracts

We enter into commodity derivatives instruments to manage the price risk attributable to future oil production. We recorded a gain on derivative contracts of $948,001 and a loss of $2,631,474 for the three and six months ended June 30, 2026, compared to gains of $889,479 and $804,408 for the three and six months ended June 30, 2025. Fluctuating oil prices in the three and six months ended June 30, 2026, resulted in realized losses of $1,210,926 and $1,516,950, respectively, compared to realized gains of $379,350 and $236,491 for the three and six months ended June 30, 2025. For the three and six months ended June 30, 2026, unrealized derivative gains were $2,158,927 and unrealized derivative losses were $1,114,524, respectively, compared to unrealized derivative gains of $510,129 and $567,917 for the three and six months ended June 30, 2025, respectively.

For the three and six months ended June 30, 2026, our average realized price per BOE of oil equivalent after reflecting settled derivatives was $68.69 and $64.59 compared to $67.13 and $65.46 for the three and six months ended June 30, 2025. For the three and six months ended June 30, 2026, our settled derivatives decreased our realized oil price per BOE by $19.67 and $11.68 compared to increasing the price per BOE by $6.34 and $1.85 for the three and six months ended June 30, 2025. As of June 30, 2026, we ended the period with a $1,051,190 net derivative liability compared to a net asset of $63,334 as of December 31, 2025.

Other Revenue

Other revenue was $98,609 and $181,719 for the three and six months ended June 30, 2026, compared to $105,089 and $222,621 for the three and six months ended June 30, 2025, respectively. Other revenue is related to providing water services to a third party.

Lease Operating Expenses

Lease operating expenses were $2,511,297 and $5,039,610 for the three and six months ended June 30, 2026, compared to $2,359,042 and $4,549,809 for the three and six months ended June 30, 2025. On a per unit basis, production expenses increased 3% and 9%, respectively, from $39.43 and $35.68 per BOE for the three and six months ended June 30, 2025, to $40.79 and $38.81 per BOE for the three and six months ended June 30, 2026. The increase in lease operating expenses in the current period was primarily a result of the additional cost related to the South Justis Field.

Production Taxes, Transportation and Processing

We pay production taxes, transportation and processing costs based on realized oil and natural gas sales. Production taxes, transportation and processing costs were $702,775 and $1,116,779 for the three and six months ended June 30, 2026, compared to $315,341 and $712,557 for the three and six months ended June 30, 2025. As a percentage of oil and natural gas sales, these costs were 13% and 11%, and 9% and 9% in the three and six months ended June 30, 2026 and 2025, respectively. Production taxes, transportation, and processing as a percent of total oil and natural gas sales are consistent with historical trends.

Depletion, Depreciation and Amortization

Depletion, depreciation and amortization (“DD&A”) was $2,136,209 and $3,927,185 for the three and six months ended June 30, 2026 compared to $458,190 and $555,265 for the three and six months ended June 30, 2025. DD&A was $34.70 and $30.24 per BOE for the three and six months ended June 30, 2026, compared to $7.66 and $4.36 per BOE for the three and six months ended June 30, 2025. The increase in the DD&A rate per BOE was driven by the increase in the oil and gas properties balance due to the development of the Seven Rivers waterflood interval and the decrease in the reserves balance due to the net conveyance of the additional 5% overriding royalty interest to Virtus, along with a change in reserve classification from proved to probable.

Accretion of Asset Retirement Obligations

Accretion expense was $32,864 and $64,539 for the three and six months ended June 30, 2026, compared to $8,513 and $15,505 for the three and six months ended June 30, 2025. Accretion expense was $0.53 and $0.50 per BOE for the three and six months ended June 30, 2026, compared to $0.14 and $0.12 per BOE for the three and six months ended June 30, 2025. The aggregate increase in accretion expense for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, was driven by changes in certain assumptions.

General and Administrative

General and administrative expenses were $2,375,349 and $4,781,920 for the three and six months ended June 30, 2026, compared to $1,808,345 and $3,617,235 for the three and six months ended June 30, 2025. The increase in general and administrative expenses is primarily due to increased professional fees during the current period. Stock-based compensation increased to $683,411 for the six months ended June 30, 2026 compared to $605,778 for the six months ended June 30, 2025.

Interest Expense and amortization of financing costs

Interest expense was $175,618 and $435,999 for the three and six months ended June 30, 2026, compared to $1,649,656 and $3,393,902 for the three and six months ended June 30, 2025. The decrease in interest expense is driven by the decreases in the Private Notes Payable and the Senior Secured Term Loan, along with the eventual settlement of the Senior Term Loan.

During the three and six months ended June 30, 2026, the Company recorded $607,562 and $1,093,830 related to the amortization of financing costs compared to $332,447 and $669,817 for the three and six months ended June 30, 2025. These costs are attributable to debt discount associated with the Company’s recent convertible notes payable.

Change in fair value of derivative liabilities and convertible note liabilities

The Company recognized a gain of $348,821 and a loss of $89,816 from the change in fair value of derivative liabilities during the three and six months ended June 30, 2026, respectively. The Company recognized a loss from the change in fair value of derivative liabilities of $755,558 and $885,279 during the three and six months ended June 30, 2025, respectively. The gain and losses related to changes in the fair value of the conversion features on convertible notes payable entered into in 2025 and 2026, primarily driven by fluctuations in the Company’s stock price. The Company also recognized gains from the change in fair value of the Put Option Right of $435,000 and $506,000 during the three and six months ended June 30, 2026, respectively, compared to gains of $449,000 and $562,000 during the three and six months ended June 30, 2025, respectively.

The change in fair value of warrant liabilities consisted of a gain of $10,030 for the three months ended June 30, 2025 and a loss of $152,490 for the six months ended June 30, 2025, related to fluctuations in the trading price of our warrants, a portion of which were accounted for as liabilities due to the redemption provisions in those issued to Private Note holders. All such warrants were settled during the year ended December 31, 2025.

The change in fair value of convertible note liabilities consisted of a loss of $1,931 and $131,677 for the three and six months ended June 30, 2025 related to a prior convertible note accounted for at fair value.

Loss on extinguishment of liabilities

The Company recognized a loss on extinguishment of liabilities of $914,518 and $1,306,337 during the three and six months ended June 30, 2025 related to the exchange of certain notes payable and warrant liabilities for convertible note agreements. The loss represents the excess of the fair value of the Convertible Notes issued, including the conversion features bifurcated and recognized as derivative liabilities, over the carrying amount of the promissory notes and warrant liabilities extinguished. No loss on extinguishment was recognized in the three and six months ended June 30, 2026. The 2025 amounts are presented as restated; as previously reported, the Company recognized gains on extinguishment of $207,307 and $299,601 for those periods. See Note 11.

Liquidity, Capital Resources and Going Concern

Our main sources of liquidity have been internally generated cash flows from operations and credit facility borrowings. Our primary use of capital has been for the development of oil and gas properties and the return of initial invested capital to our owners. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

As of June 30, 2026, we had outstanding debt of $3,746,454 in private notes payable with related parties, $4,250,000 of convertible notes payable and $2,337,036 of merchant cash advances. A total of $3,537,036 of this is due within one year. As of June 30, 2026, we had $691,672 of cash and cash equivalents on hand and a working capital deficit of $22,631,223.

We had net cash provided by operating activities of $211,023 for the six months ended June 30, 2026, compared to negative cash flow from operations of $7,645,418 for the year ended December 31, 2025. 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 equity line Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 that can fund our operations and production growth, and can be used to reduce liabilities. Through the date of this filing, we have received $11,130,586 in cash proceeds related to the sale of 17,000,000 shares of common stock under the Common Stock Purchase Agreement and expect to continue to utilize it to fund current 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. Until we have an effective registration statement on file with the Securities and Exchange Commission, we are unable to utilize the Common Stock Purchase Agreement. 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.

Cash Flows

Sources and uses of cash for the six months ended June 30, 2026 and 2025 are as follows:

Operating Activities

Net cash provided by operating activities was $211,023 for the six months ended June 30, 2026, compared to net cash used in operating activities of $2,296,949 for the six months ended June 30, 2025.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was exclusively related to $2,493,246 and $2,138,532, respectively, in development costs for our reserves.

Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2026 was primarily related to the issuance of new convertible notes payable resulting in proceeds of $2,820,000, $100,000 in proceeds from related party notes payable and $1,472,500 in proceeds from merchant cash advances, partially offset by repayments of merchant cash advances of $1,793,641. Net cash provided by financing activities during the six months ended June 30, 2025 were primarily related to the sale of common stock under the Common Stock Purchase Agreement of $7,024,332 and proceeds of $1,098,048 from short term notes payable offset by repayments of the Senior Secured Term Loan of $2,309,681 and Private Notes Payable of $1,287,805.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2026.

Contractual obligations

We have contractual commitments under our Convertible Notes Payable and Private Notes Payable which include interest obligations. We also have contractual commitments under our Merchant Cash Advances which require periodic repayments. See Note 5 to our interim condensed consolidated unaudited financial statements. We have contractual commitments that may require us to make payments upon future settlement of our commodity derivative contracts. See Note 4 to our interim condensed consolidated unaudited financial statements.

Our other liabilities represent current and noncurrent other liabilities that are primarily comprised of environmental contingencies, asset retirement obligations and other obligations for which neither the ultimate settlement amounts nor their timings can be precisely determined in advance.

Critical Accounting Estimates

For information on critical accounting policies, see “Critical Accounting Estimates” in the MD&A included in Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on September 28, 2026, as amended by Amendment No. 1 on Form 10-K/A filed on October 13, 2026.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal Executive Officer and our Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based upon their evaluation, our Principal Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective related to lack of sufficient accounting personnel to manage the Company’s financial accounting process including lack of proper preparation and review of account reconciliations, lack of segregation of duties, proper accounting for complex financial instruments and lack of design and implementation of controls related to oil and gas activities which constituted material weaknesses in our internal control over financial reporting. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Plan to Remediate the Material Weakness

Our plans at this time include hiring additional accounting staff and providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on September 28, 2026, as amended by Amendment No. 1 on Form 10-K/A filed on October 13, 2026.