Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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 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. 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 three months ended March 31, 2026 was 759 barrels of oil equivalent ("BOE") per day. Our average daily production for the year ended December 31, 2025, was 734 BOE per day. The increase in production is due to an increase in operating wells from new well completions and well repairs.

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 three months ended March 31, 2026 and 2025, was $(1.65) and $(1.78) per barrel, respectively. Our natural gas price differential during the three months ended March 31, 2026 and 2025, was $(2.54) and $(2.10) 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 months ended March 31, 2026 and 2025.

​	​	For the three months ended March 31,						​
​	​	2026		​	​	2025		​
Average NYMEX Prices (1)	​	​	​	​	​	​	​	​
Oil (per Bbl)	​	$	71.98	​	​	$	71.84	​
Natural gas (per Mcf)	​	$	4.79	​	​	$	4.94	​

(1)	Based on average NYMEX closing prices.

For the three months ended March 31, 2026, the average NYMEX oil pricing was $71.98 per barrel of oil or 0.2% higher than the average NYMEX price per barrel for the three months ended March 31, 2025. Our settled derivatives decreased our realized oil price per barrel by $4.91 and $2.28 in the three months ended March 31, 2026, and 2025, respectively. Our average realized oil price per barrel after reflecting settled derivatives and location differentials was $65.42 and $67.78 for the three months ended March 31, 2026 and 2025, respectively.

The average NYMEX natural gas pricing for the three months ended March 31, 2026, was $4.79 per Mcf, or 3% lower than the average NYMEX price of $4.94 per Mcf for the three months ended March 31, 2025.

Results of Operations

Three months ended March 31, 2026 Compared to Three months ended March 31, 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.

​	​	Three Months Ended March 31, 2026		​	​	Three Months Ended March 31, 2025		​
​	​	​	​	​	​	​(As Restated)(1)		​
Revenues	​	​	​	​	​	​	​	​
Crude oil	​	$	4,384,267	​	​	$	4,392,605	​
Natural gas and natural gas liquids	​	​	80,291	​	​	​	80,032	​
Gain (loss) on derivative instruments, net	​	​	(3,579,475	)	​	​	(85,071	)
Other revenue	​	​	83,110	​	​	​	117,532	​
Total revenues	​	$	968,193	​	​	​	4,505,098	​
​	​	​	​	​	​	​	​	​
Average sales prices:	​	​	​	​	​	​	​	​
Oil (per Bbl)	​	$	70.33	​	​	$	70.06	​
Effect on gain (loss) of settled oil derivatives on average price (per Bbl)	​	​	(4.91	)	​	​	(2.28	)
Oil net of settled oil derivatives (per Bbl)	​	​	65.42	​	​	​	67.78	​
​	​	​	​	​	​	​	​	​
Natural gas (per Mcf)	​	$	4.79	​	​	$	4.94	​
​	​	​	​	​	​	​	​	​
Realized price on a BOE basis excluding settled commodity derivatives	​	$	65.37	​	​	$	66.35	​
Effect of gain (loss) on settled commodity derivatives on average price (per BOE)	​	​	(4.48	)	​	​	(2.12	)
Realized price on a BOE basis including settled commodity derivatives	​	$	60.89	​	​	$	64.23	​
​	​	​	​	​	​	​	​	​
Expenses	​	​	​	​	​	​	​	​
Production taxes, transportation and processing	​	​	414,004	​	​	​	397,216	​
Lease operating	​	​	2,528,313	​	​	​	2,190,767	​
Depletion, depreciation and amortization	​	​	1,790,976	​	​	​	97,075	​
Accretion of asset retirement obligations	​	​	31,675	​	​	​	6,992	​
General and administrative	​	​	2,406,571	​	​	​	1,808,890	​
Total expenses	​	​	7,171,539	​	​	​	4,500,940	​
​	​	​	​	​	​	​	​	​
Costs and expenses (per BOE):	​	​	​	​	​	​	​	​
Production taxes, transportation, and processing	​	$	6.06	​	​	$	5.89	​
Lease operating expenses	​	​	37.02	​	​	​	32.50	​
Depreciation, depletion, and amortization expense	​	​	26.22	​	​	​	1.44	​
Accretion of asset retirement obligations	​	​	0.46	​	​	​	0.10	​
General and administrative	​	​	35.24	​	​	​	26.84	​
​	​	​	​	​	​	​	​	​
Net producing wells at period-end	​	​	472	​	​	​	342	​

(1)

As restated represents restatements previously disclosed in the Company's Form 10-K 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. Excluding the effect of settled commodity derivatives, our oil and natural gas sales for the three months ended March 31, 2026 were flat compared to the three months ended March 31, 2025, despite a 1% increase in production volumes. Production volumes increased for the three months ended March 31, 2026 from the three months ended March 31, 2025 as a result of increased operating wells from the Company's South Justis Field acquired in late June of 2025.

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

​	​	For the Three Months Ended March 31,						​
​	​	2026		​	​	2025		​
Production:	​	​	​	​	​	​	​	​
Oil (MBbl)	​	​	62	​	​	​	63	​
Natural gas (MMcf)	​	​	36	​	​	​	28	​
Total (MBOE)(1)	​	​	68	​	​	​	67	​
​	​	​	​	​	​	​	​	​
Average daily production:	​	​	​	​	​	​	​	​
Oil (Bbl)	​	​	693	​	​	​	697	​
Natural gas (Mcf)	​	​	397	​	​	​	314	​
Total (BOE)(1)	​	​	759	​	​	​	749	​

(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 loss on derivative contracts of $3,579,475 for the three months ended March 31, 2026, compared to a loss of $85,071 for the three months ended March 31, 2025. Higher commodity prices in the three months ended March 31, 2026, resulted in realized losses of $306,024 compared to realized losses of $142,859 for the three months ended March 31, 2025. For the three months ended March 31, 2026, unrealized losses were $3,273,451 compared to an unrealized gain of $57,788 for the three months ended March 31, 2025.

For the three months ended March 31, 2026, our average realized oil price per barrel of oil equivalent after reflecting settled derivatives was $60.89 compared to $64.23 for the three months ended March 31, 2025. For the three months ended March 31, 2026, our settled derivatives decreased our realized oil price per barrel by $4.48 compared to decreasing the price per barrel by $2.12 for the three months ended March 31, 2025. As of March 31, 2026, we ended the period with a $3,210,117 net derivative liability compared to a net asset of $63,334 as of December 31, 2025.

Other Revenue

Other revenue was $83,110 for the three months ended March 31, 2026, compared to $117,532 for the three months ended March 31, 2025. The revenue is related to providing water services to a third party.

Lease Operating Expenses

Lease operating expenses were $2,528,313 for the three months ended March 31, 2026, compared to $2,190,767 for the three months ended March 31, 2025. On a per unit basis, production expenses increased 14.0% from $32.50 per BOE for the three months ended March 31, 2025, to $37.02 per BOE for the three months ended March 31, 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 $414,004 for the three months ended March 31, 2026, compared to $397,216 for the three months ended March 31, 2025. As a percentage of oil and natural gas sales, these costs were 9% in the three months ended March 31, 2026 and 2025. 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 $1,790,976 for the three months ended March 31, 2026 compared to $97,075 for the three months ended March 31, 2025. DD&A was $26.22 per BOE for the three months ended March 31, 2026, compared to $1.44 per BOE for the three months ended March 31, 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 addition 5% overriding royalty interest to Virtus, along with a change in reserve classification from proved to probable in 2025.

Accretion of Asset Retirement Obligations

Accretion expense was $31,675 for the three months ended March 31, 2026, compared to $6,992 for the three months ended March 31, 2025. Accretion expense was $0.46 per BOE for the three months ended March 31, 2026, compared to $0.10 per BOE for the three months ended March 31, 2025. The aggregate increase in accretion expense for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was driven by changes in certain assumptions.

General and Administrative

General and administrative expenses were $2,406,571 for the three months ended March 31, 2026, compared to $1,808,890 for the three months ended March 31, 2025. The increase in general and administrative expenses is primarily due to increased professional fees during the current period, partially offset by decreased stock-based compensation in the current period of $271,941 compared to $368,093 in the comparative period.

Interest Expense and amortization of financing costs

Interest expense was $260,381 for the three months ended March 31, 2026, compared to $1,744,246 for the three months ended March 31, 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 months ended March 31, 2026, the Company recorded $486,268 related to the amortization of financing costs compared to $337,370 for the three months ended March 31, 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 loss from the change in fair value of derivative liabilities of $438,637 and $129,721 during the three months ended March 31, 2026 and 2025, respectively, 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 a gain from the change in fair value of the Put Option Right of $71,000 and $113,000 during the three months ended March 31, 2026 and 2025, respectively.

The change in fair value of warrant liabilities consisted of a loss of $162,520 for the three months ended March 31, 2025, 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. 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 $129,746 for the three months ended March 31, 2025 related to a prior convertible note accounted for at fair value.

Gain on extinguishment of liabilities

The Company recognized a loss on extinguishment of liabilities of $391,819 during the three months ended March 31, 2025 related to the exchange of certain notes payable and warrant liabilities for convertible note agreements.

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 March 31, 2026, we had outstanding debt of $3,746,454 in private notes payable with related parties, $3,050,000 of convertible notes payable and $1,380,679 from merchant cash advances. A total of $1,980,679 of this is due within one year. As of March 31, 2026, we had $129,772 of cash and cash equivalents on hand, and a working capital deficit of $22,600,412.

We had negative cash flow from operations of $305,976 for the three months ended March 31, 2026 and 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 three months ended March 31, 2026 and 2025 are as follows:

​	​	Three Months Ended March 31, 2026		​	​	Three Months Ended March 31, 2025		​
​	​	​	​	​	​	​(As Restated)(1)​		​
Net cash (used in) operating activities	​	$	(305,976	)	​	$	(1,827,355	)
Net cash (used in) investing activities	​	​	(1,088,790	)	​	​	(1,117,540	)
Net cash provided by financing activities	​	​	1,149,502	​	​	​	3,047,431	​
Net change in cash and cash equivalents	​	$	(245,264	)​	​	$	102,536	​

(1)

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

Operating Activities

The change in net cash flow used operating activities for the three months ended March 31, 2026, as compared to 2025 is primarily due to higher realized market prices for crude oil, offset by decreases in production volumes and higher operating expenses.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was exclusively related to $1,088,790 and $1,117,540, respectively in development costs for our reserves.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2026 were primarily related to the issuance of new convertible notes payable resulting in proceeds of $1,692,000, $100,000 in proceeds from related party notes payable, partially offset by repayments of merchant cash advances of $642,498. Cash flows used in financing activities for 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.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2026.

Contractual obligations

We have contractual commitments under our Convertible Notes Private Notes Payable and Merchant Cash Advances which include periodic interest payments. 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.