HNR Acquisition Corp Reports Financial Results for Six Weeks as an Operating Company and for the Year Ended December 31, 2023

Rhea-AI Summary

HNR Acquisition Corp (HNRA) reported financial results for the initial six weeks as an operating company and for the full year 2023. Total revenues for the six weeks were $2,975,661, and for the full year were $27,214,142, a 23% decrease from 2022. Net income for the six weeks was a loss of $9,001,202 and a combined loss for the year was $4,030,338. One-time charges impacted results. HNRA's strategy involves optimizing drilling conditions and increasing production for revenue growth.

Positive

• HNRA is focused on improving critical infrastructure, increasing oil reserves, and optimizing well-spacing for enhanced production and profits.

• The successful water injection project in Seven Rivers is expected to lead to increased cash flow. A two-year hedging program on pre-sold oil production should provide a solid operating cash flow.

• The company has addressed challenges post-acquisition, such as restarting scale and corrosion inhibition programs, downhole acid cleanups, and repair and restart of water injection wells to maintain production levels.

Negative

• Total revenues decreased by 23% in 2023 compared to 2022 due to lower production volumes and market oil prices. Net loss for the year included significant one-time charges totaling $12.5 million, impacting the financial results negatively.

Insights

Financial Analyst

The reported 23% decrease in revenues for HNRA presents a potential concern, reflecting a combination of factors including lower production volumes and reduced market oil prices. While the latter is an external market condition that affects the entire sector, the former could indicate operational issues or natural decline in well productivity. The large net loss, accentuated by $12.5 million in one-time charges, initially paints a bleak picture. However, the CFO's mention of positive net income excluding these charges offers a silver lining indicating possible financial resilience. The initiation of a hedging program on oil production could be viewed favorably as it may safeguard against future oil price volatility, potentially stabilizing cash flows. Investors may find reassurance in this financial position, although it's important to maintain vigilance over the company's ability to manage its debt service requirements and operational expenses within the context of these hedges.

Oil & Gas Industry Analyst

The strategic focus on optimizing drilling conditions and enhancing oil recovery via technology, such as the successful water injection project, showcases HNRA's commitment to sustain production growth. This approach, alongside new well-spacing and completion techniques, could be integral in increasing cash flow and long-term profitability. Notably, the discovery of additional oil reserves and the commencement of a well work program to test these reserves offer potential for increased asset value. The operational challenges following the acquisition are not uncommon in the industry and the company's capacity to address these effectively demonstrates operational resilience. The maintenance of daily production and the potential for increased output over the coming months are critical factors for investors to monitor, as these will directly influence HNRA's future financial performance.

HOUSTON, TX / ACCESSWIRE / May 3, 2024 / HNR Acquisition Corp (NYSE American:HNRA) (the "Company" or "HNRA") is an independent oil and gas company focused on the acquisition, development, exploration and production of oil and gas properties in the Permian Basin in New Mexico. Today, the Company announces its initial six-week results as an operating company beginning November 15, 2023, and for the year ended December 31, 2023.

Prior to November 15, 2023, HNRA operated as a special purpose acquisition company (SPAC). In accordance with GAAP, the reported results of operations prior to November 15, 2023 are that of the predecessor entity.

Total revenues for the first six weeks ended December 31, 2023 were $2,975,661 for HNRA. The combined successor and predecessor total revenues were $27,214,142 for the year ended December 31, 2023, a 23% decrease from the predecessor total revenues for the year ended December 31, 2022 of $35,403,940. The decrease in revenues for 2023 was due primarily to lower production volumes as well as a reduction in market oil prices.

Net Income for the six weeks ended December 31, 2023 was a loss of $9,001,202 and a combined loss for the year of $4,030,338. These results were impacted by one-time charges included in G&A and acquisition costs totaling $12.5 million. Net income (loss) per common share was ($0.77) on a full year combined results based on weighted average shares outstanding of 5,235,131.

"Following the acquisition, our team executed a plan focused on assessing the condition of field surface and subsurface assets. As a result, we found more work was needed to improve critical infrastructure - mostly flow line work - which is now underway. In addition, we found more oil reserves were in place than first believed, so we prepared a well work program to perforate and stimulate test wells to prove these reserves. This work is just now ready to begin this month", Joseph V Salvucci Sr, Chairman of the Board stated.

"HNRA's strategy involves optimizing effective drilling conditions and sustaining production growth which drives revenues and earnings," Dante Caravaggio, President and CEO stated. "Our successful water injection project in the Seven Rivers leads us to believe that, through enhanced oil production with technology, we can see a very healthy and increased cash flow. We also have the opportunity to optimize well-spacing through new completion techniques and oil recovery, which can also increase our cash flow and profits," he concluded.

"Although we recorded a Net Loss of approximately $4 million for the year ended December 31, 2023, this included a one-time charge for acquisition costs of approximately $12.5 million. Without such a one-time charge, the Company would have instead seen positive Net Income.," Mitchell B. Trotter, CFO explained. "At the end of 2023, we introduced a two-year hedging program on pre-sold oil production. In 2024, we hedged 207,000 barrels of oil at a minimum of $70.00 a barrel and 180,000 barrels of oil at approximately $70.00 a barrel which will cover debt service requirements and operating expenses against oil price decreases. We believe this is a good financial position to be in at this time and should provide HNRA with a solid operating cash flow."

"Since taking over operations in mid-November, we were met with many challenges that were not anticipated, but our management and field teams were able solve a number of these issues," Jesse Allen, Vice President-Operations said. "The resilience of our team enabled us to reengage our chemical vendor to restart scale and corrosion inhibition programs as well as perform several downhole acid cleanups on several of our wells resulting in production increases. Since November 2023, we have engaged a second oil rig to assist, repair and restart on a number of water injection wells, as necessary, and I am happy to say we have been able to maintain daily production. In addition, since our acquisition, we have identified an additional number of wells that need stimulation, which will increase production over the next few months," he concluded.

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. On November 15, 2023, HNRA acquired its operating entity, LH Operating, LLC, whose assets include interests in the Grayburg-Jackson oil field in the prolific Permian Basin in Eddy County, New Mexico.

HNRA's Class A Common Stock trades on the NYSE American (NYSE American:HNRA) and a class of our public warrants trades on the NYSE American (NYSE American: 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.
mike@plrinvest.com

SOURCE: HNR Acquisition Corp

View the original press release on accesswire.com

FAQ

What were the total revenues for the full year 2023 for HNR Acquisition Corp (HNRA)?

The total revenues for HNR Acquisition Corp (HNRA) for the full year 2023 were $27,214,142, reflecting a 23% decrease from the previous year.

What was the net income for the six weeks ended December 31, 2023 for HNRA?

The net income for the six weeks ended December 31, 2023, was a loss of $9,001,202 for HNR Acquisition Corp (HNRA).

What strategy is HNRA focusing on for revenue growth?

HNRA is concentrating on optimizing drilling conditions, increasing oil reserves, and implementing new completion techniques to enhance production and profits.

How did HNRA address challenges post-acquisition?

Post-acquisition, HNRA addressed challenges by restarting scale and corrosion inhibition programs, performing downhole acid cleanups, and repairing and restarting water injection wells to maintain production levels.