The Albany Gazette - EON Resources Inc. Announces Enstream Capital Funding LOI Upgraded to $52.8 Million; $22 Million for Seller Agreement; $21 Million for Senior Debt Pay-off; $9.8 Million for Field Development

The VMA capital will be utilized in three ways:

• $22 million to satisfy the Seller consideration, which will reap approximately $40 million in net shareholder value through agreed concessions of the Seller. The summary of the Agreement with Seller can be found on the EON website at Seller Agreement Press Release.

• $21 million to satisfy the net remaining pay-off of the senior reserve-based loan ("RBL"), which was originally $28 million on the acquisition date of the operating company in November 2023.

• $9.8 million for low-cost workovers of up to 45 wells on the Company's 13,700 leasehold acres in Eddy County, New Mexico.

Benefits of using VMA capital instead of debt or equity:

• Improves our monthly cash flow by over $250,000 per month, or $3 million a year. The RBL amortization payment is reduced by $700,000 and replaced by the VMA payment of approximately $450,000.

• No dilution to our common stock.

• Reduces major debt on our balance sheet by $40 million, which is more than $2.00 a share.

• Insulates EON from oil price risk as payments to Enstream are based on percentage revenue and not a fixed dollar amount.

• The ORRI reverts to EON after the contractual cash on cash payout via an option to buy-back the ORRI at a minimal amount.

• Minimizes/reduces default risk by not being a traditional loan, and as the payments are based on a percentage revenue.

• Provides capital to expand and develop untapped proven, but not developed, reserves.

• The LOI has a clause to exclude the drilling of new wells from the ORRI structure so that the Company can maximize the benefits of the planned horizonal drilling program in the San Andres interval as described in our press release on February 26, 2025 located at Horizonal Drilling Program Press Release.

• The balance sheet will be improved when final funding structure and GAAP accounting determines the impacts to debt reduction, minority interest and equity, and the asset value.

• Closing on the VMA, or an alternate financing arrangement, consummates the benefits of the agreement with the seller. Key benefits are: reduction of $40 million of obligations from the balance sheet; reduced number of shares to be issued for the preferred stock obligations; and reducing our net purchase price from an original $120 million to less than $60 million. The benefits are further described in the press release dated February 11, 2025 located at Seller Agreement Press Release, and the letter to our shareholders on March 12, 2025 located at EON Shareholder Letter.

"The volumetric funding with Enstream is neither debt nor equity," said Mitchell B. Trotter, CFO of EON. "Furthermore, we are retiring our reserve-based loan, which improves our cash flow by approximately $250,000 per month. This removes around $40 million of liabilities from our balance sheet."

"The use of this volumetric structure is an ideal and novel way for us to dramatically improve both our balance sheet and cash flow," said Dante Caravaggio, CEO and President of EON. "This $53 million cash infusion, plus our recently announced plan to commence a horizonal drilling program in the San Andres in the first quarter of 2026, sets the stage for an exciting high growth journey for the balance of this decade. We have a world class asset with a billion barrels of oil in place, and we are poised to maximize the potential. All aboard!"

About Enstream Capital Management, LLC

Enstream is a Dallas based energy merchant banking firm that provides asset-level funding to enable oil and gas operators to convert lower risk, proven non-producing and undeveloped reserves into production and for other linked special situations. Since 2006, Enstream has executed over $1 billion of investment banking services on behalf of energy clients. For more information on Enstream, please visit their website: https://ecmtx.com

About the Oil Field Property

In November 2023, the Company acquired LH Operating, LLC ("LHO") including its holdings in New Mexico of oil and gas waterflood production comprising 13,700 contiguous leasehold acres, 342 producing wells and 207 injection wells situated on 20 federal and 3 state leases in the Grayburg-Jackson Oil Field. The Grayburg-Jackson Oil Field is located on the Northwest Shelf of the prolific Permian Basin in Eddy County, New Mexico.

Leasehold rights of LHO, now a wholly owned subsidiary of the Company, include the Seven Rivers, Queen, Grayburg and San Andres intervals that range from as shallow as 1,500 feet to 4,000 feet in depth. The December 2023 reserve report from our third-party engineer, William H. Cobb and Associates, Inc. ("Cobb"), reflects LHO to have proven reserves of approximately 15.4 million barrels of oil and 3.5 billion cubic feet of natural gas. The mapped original-oil-in-place ("OOIP") in the LHO leasehold is approximately 876 million barrels of oil in the Grayburg and San Andres intervals and 80 million barrels in the Seven Rivers interval for a total OOIP of approximately 956,000,000 barrels of oil.

Our primary production is currently from the Seven Rivers zone. In addition to proven reserves, the Company believes it may access an additional 34 million barrels of oil by adding perforations in the Grayburg and San Andres formations. With proven oil reserves of over 15 million barrels, combined with the potential 34 million additional barrels from the Grayburg and San Andres zones, LHO should produce oil and a revenue stream for more than two decades with a low decline rate.

About EON Resources Inc.

EON is an independent upstream energy company focused on maximizing total returns to its shareholders through the development of onshore oil and natural gas properties in the United States. EON's long-term goal is to maximize total shareholder value from a diversified portfolio of long-life oil and natural gas properties built through acquisition and through selective development, production enhancement, and other exploitation efforts on its oil and natural gas properties.

EON's Class A Common Stock trades on the NYSE American Stock Exchange (NYSE American:EONR) and the Company's public warrants trade on the NYSE American Stock Exchange (NYSE American: EONR WS). For more information on EON, please visit the Company's website: https://eon-r.com/

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as "expects," "believes," "anticipates," "intends," "estimates," "seeks," "may," "might," "plan," "possible," "should" and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future results, based on currently available information and reflect the Company's management's current beliefs. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. Important factors - including the availability of funds, the results of financing efforts and the risks relating to our business - that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's documents filed from time to time on EDGAR (see www.edgar-online.com) and with the Securities and Exchange Commission (see www.sec.gov). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. 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.

Contact Information

Michael J. Porter
Investor Relations - President, PORTER, LEVAY & ROSE, INC.
[email protected]

SOURCE: EON Resources Inc.

View the original press release on ACCESS Newswire

(F.Allen--TAG)