HNR Acquisition Corp Reports Results for the Second Quarter Ended June 30, 2024
HOUSTON, TX / ACCESSWIRE / August 20, 2024 / HNR Acquisition Corp (NYSE:HNRA) (the "Company" or "HNRA") is an independent upstream energy company with oil and gas properties in the Permian Basin. Today, the Company announces the earnings results for the second quarter of 2024.
Second Quarter and Six Months Ended June 30th Results:
Total revenue for the second quarter ended June 30, 2024 was $5.06 million
Net Loss for the quarter decreased by $4.06 million to $638,000, or ($0.12) per share, as compared to the first quarter 2024.
Total revenue for the six months ended June 30,2024 was $ 8.34 million.
Net loss for the six months ended June 30, 2024 was $5.33 million, or ($1.00) per share.
As of June 30, 2024, the Company had $3.06 million in cash and cash equivalents.
Since November 15, 2023, the Company has paid down its senior debt by $2.18 million.
The acquired company was operated by the predecessor for most of 2023, and therefore 2023 results are not comparable to the 2024 results of the Company.
Lease Operating Expenses ("LOE") and Capital Expenditures ("capex"):
The main area in which the Company spends monetary resources is in the field. The expenditures take the form of (i) LOE for maintaining the field wells and infrastructure, (ii) capex for new production and well development, and (iii) capex for enhancing current infrastructure and wells servicing the current reserves.
In June 2024, management conducted a full review of field expenditures since acquisition. The review was performed with a focus on capex to enhance current infrastructure because of the condition of the field at acquisition date. This review included an analysis of the top 22 major suppliers and, where applicable, a detailed review of over 2,000 invoices.
The results of management's review revealed that the systems inherited with the acquisition did not properly capture all capex work. Specifically, the systems missed the capturing of capex relating to enhancing current infrastructure. This was rectified in Q2 with improved processes. The impact of the review resulted in an improvement in Q1 results leading to a restatement of $824K from LOE to infrastructure capex in the Q1 and year-to-date results.
The LOE by month for Q1 and Q2 are approximately $765K and $700K, respectively. This $65K improvement in Q2 was a result of spending efforts focused on long-term impacts. As stated previously, our target LOE per month is in the $650K to $675K range for the current level of production.
The capex spent across the first half of 2024 for enhancing current infrastructure falls into three primary categories. The following categories and the links to the press releases issued provide the public insight into the Company's operations.
Upgraded satellite test stations: Upgrading Satellite Stations for Improved Reliability, Operational Efficiencies and Increased Production
Upgrades to flowlines: Cost Reductions and Return of Wells to Production with Flowline Improvements
Upgrades to the electrical systems: Increases Electrical Capacity and Improves Reliability with Electrical Upgrades
"The review by Jesse Allen, VP of Operations, David O'Brian, Field Superintendent, and Mark Williams, VP of Finance, resulted in improved Q1 results. But more importantly, it showed that they are good stewards of company money as the money was well spent," said Mitchell B. Trotter the CFO of HNRA. "Production has stabilized from the decline prior to acquisition, and is now showing improvement."
Other Notable Results:
Revenues for oil and gas were the same quarter to quarter as the production and average market prices did not vary significantly. The non-cash derivate charge for hedging that was a negative $2.0 million in Q1 was only a negative $83K in Q2. A non-cash derivate charge is driven by the inverse impact of oil prices. For HNRA, the charge reflects the large increase in oil price from December 31, 2023 to March 31, 2024, which remained at a similar level on June 30, 2024. The increase in oil price in Q1 was generally positive for the Company.
The general and administrative ("G&A") charges reflect the professional fees and insurance costs of being a public company. Included in G&A, are one-time non-cash equity fee charges of $574K and $360K for Q1 and Q2, respectively. These non-cash fees were primarily incurred by cleaning up existing agreements to better the Company's position going forward, and ultimately towards improving the Company's cash and balance sheet positions.
The Company incurred a one-time gain of $1.72 million on extinguishment of liabilities in Q2 by negotiating a settlement on an existing agreement that removed certain accounts payables from the balance sheet
The change in the fair value of warrant liability resulted in a non-cash charge of $624K against earnings in Q1. Based on the valuation as of June 30, 2024, the liability decreased resulting in an increase in earnings of $277K in Q2.
Likewise, the change in the fair value of forward purchase agreement liability resulted in a non-cash charge of $349K against earnings in Q1. Based on the valuation as of June 30, 2024, the liability decreased resulting in an increase in earnings of $24K in Q2
The amortization of financing costs also showed a positive trend going from a charge of $813K in Q1 down to a charge of $662K in Q2 based on timing of the debt instruments at the closing of the acquisition on November 15, 2013.
"HNRA purchased a poorly maintained oil field, and for the first six months, our team dedicated itself to using capital for maintenance investments to upgrade satellite testing stations, clean and repair flowlines, upgrade electrical systems, cure downhole issues, and increase production," said Jesse Allen, VP of Operations, HNRA. "After six months, we are now in a much better place, and production has increased without many disruptions."
"In addition to all the improvements in the field infrastructure, we purchased a hot oil truck and rig, which will help us mitigate downtime due to plugged lines which will keep wells producing," Allen added. "The result will be increased oil and gas production with reduced down time."
"The decisions we have made regarding field operation have already reduced expenses," said Dante Caravaggio, President and CEO, HNRA. "Our team's activities are reducing costs and increasing production. We expect Q3, and then Q4, results to continue to improve as we increase production and implement cost reductions."
"Our acquisition of the Grayburg-Jackson field holds a lot of potential for us, especially in the Seven Rivers and San Andres formations. We have as much as 34 million barrels of recoverable near-term reserves available to us once we can prove the reserves by perforating and stimulating the behind pipe potential in San Andres," added Caravaggio. "The planned perforations and stimulations of 2 to 12 existing producing wells in the San Andres will be in conjunction with recompletion of 100-plus wells in Seven Rivers to increase production of the existing 15 million barrels of proven reserves in that zone."
Conference Call
The Company will hold its second quarter/six months conference call on August 21, 2024, at 3:00 p.m. eastern time to review HNRA's financial results, discuss recent events and conduct a short Q&A.
The call will be chaired by Dante Caravaggio, President & CEO, and Mitchell B. Trotter, Chief Financial Officer. Jesse Allen, Vice President of Operations, will also be available to answer questions.
An audio webcast of the conference call will be available within two hours of the call on the HNRA website. To listen to a live broadcast, visit the website at least 15 minutes prior to the scheduled start to register, download and install any necessary audio software.
To participate in the live teleconference:
Domestic: 888-506-0062
International: 973-528-0011
Participant Access Code: 877852
To listen to a replay of the teleconference, which will be available through Friday, September 17, 2024, please visit the investor relations section of the HNRA website or call one of the numbers below:
Domestic Replay: 877-481-4010
International Replay: 919-882-2331
Access Code: 51108
For the webcast: https://www.webcaster4.com/Webcast/Page/2999/51108
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 we 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 slow decline rate.
About HNR Acquisition Corp
HNRA 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. HNRA'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.
HNRA's Class A Common Stock trades on the NYSE American (NYSE:HNRA) and our public warrants trade on the NYSE American (NYSE:HNRAW). For more information on HNRA, please visit the Company's website: https://www.hnra-nyse.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.
Investor Relations
Michael J. Porter, President
PORTER, LEVAY & ROSE, INC.
[email protected]
SOURCE: HNR Acquisition Corp
View the original press release on accesswire.com