8-K: EON Resources Identifies Potential for 20 Million Barrels of Untapped Oil in Grayburg-Jackson Field

EON Resources Inc. announces a preliminary assessment indicating the potential to recover an additional 20 million barrels of oil and 16 billion cubic feet of natural gas through horizontal drilling in the lower San Andres reservoirs of the Grayburg-Jackson Field.

Summary

• EON Resources Inc. has completed a preliminary assessment of the horizontal potential of the lower San Andres reservoirs in the Grayburg-Jackson Field in Eddy County, New Mexico.
• The assessment suggests the possibility of recovering an additional 20 million barrels of oil and 16 billion cubic feet of natural gas.
• The company's current waterflood program has proven reserves of 15 million barrels of oil and 3 billion cubic feet of natural gas.
• The assessment uses modern geoscience software and workflows to create a 3D geologic model.
• The company believes that drilling 5,000-foot horizontal wells is the best way to exploit the stranded oil in the lower San Andres.
• The wells in the largest analog field in the San Andres trend had an average initial production (IP) of 436 barrels of oil per day (BOPD) and an average estimated ultimate recovery (EUR) of 79.4 barrels of oil per foot.
• Using the same parameters, a 5,000-foot horizontal well in the Grayburg-Jackson field would have an average EUR of 397,000 barrels of oil per well.
• Assuming a typical well cost of $3.75 million, the breakeven point is estimated at 156 thousand barrels of oil.
• The company plans to permit 12 San Andres horizontal drilling locations in late 2025 or early 2026.
• The company acquired LH Operating, LLC (LHO) in November 2023, which included 13,700 acres in the Grayburg-Jackson Oil Field.
• The mapped original-oil-in-place (OOIP) in the LHO leasehold is approximately 956,000,000 barrels of oil.
• The December 2023 reserve report from William H. Cobb and Associates, Inc. reflects LHO to have proven reserves of approximately 15.4 million barrels of oil and 3.5 billion cubic feet of natural gas.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the potential for increased oil recovery in the Grayburg-Jackson Field, supported by preliminary assessments and comparisons to analog fields. However, it also acknowledges the uncertainties and risks associated with the project, preventing a higher score.

Positives

• The preliminary assessment indicates a significant potential for additional oil recovery in the Grayburg-Jackson Field.
• The company's existing waterflood program has already established proven reserves.
• The estimated EUR for horizontal wells suggests strong economic potential.
• The company has a large acreage position in the Grayburg-Jackson Oil Field.
• The company is using modern geoscience software and workflows for its analysis.

Negatives

• The assessment is preliminary and requires further analysis.
• The estimated recoveries are based on an analog field and may not be fully representative of the Grayburg-Jackson Field.
• The company cannot guarantee that the estimated recoveries will be achieved.
• The company's plans are subject to permitting approvals and other regulatory factors.

Risks

• The actual oil recovery may differ from the preliminary assessment.
• The cost of drilling and completing horizontal wells may be higher than estimated.
• Changes in oil and gas prices could impact the economic viability of the project.
• Delays in permitting or regulatory approvals could impact the project timeline.
• The company's ability to secure financing for the project is uncertain.

Future Outlook

EON Resources is focused on expanding its successful Seven Rivers waterflood and plans to permit 12 San Andres horizontal drilling locations in late 2025 or early 2026, contingent on Bureau of Land Management permitting.

Management Comments

• Jesse Allen, VP of Operations, stated that the company is focused on expanding its successful Seven Rivers waterflood as a priority this year, while setting the stage for a new phase of growth by permitting 12 San Andres horizontal drilling locations in late 2025 or early 2026.

Industry Context

This announcement highlights the ongoing efforts to enhance oil recovery in the Permian Basin, particularly in mature fields like Grayburg-Jackson, through the application of advanced technologies such as horizontal drilling and reservoir characterization.

Comparison to Industry Standards

• The document compares EON's Grayburg-Jackson Field to the State Line Area, a major economic producing field in the San Andres trend.
• The State Line Area wells had an average initial production (IP) of 436 barrels of oil per day (BOPD) and an average estimated ultimate recovery (EUR) of 79.4 barrels of oil per foot.
• EON estimates that a 5,000-foot horizontal well in the Grayburg-Jackson field would have an average EUR of 397,000 barrels of oil per well, based on the State Line Area parameters.
• The document suggests that the Grayburg-Jackson field has superior reservoir quality compared to the State Line Area, potentially leading to higher recoveries.

Stakeholder Impact

• Shareholders may benefit from increased oil production and potential revenue growth.
• Employees may have opportunities for new roles in the development of the Grayburg-Jackson Field.
• The local community may benefit from increased economic activity.

Next Steps

• Ongoing comprehensive, multi-disciplinary analysis of the field incorporating petrophysics, geology and engineering data.
• Creation of a 3D geologic model incorporating extensive well control.
• Identification of new drilling locations.
• Permitting 12 San Andres horizontal drilling locations in late 2025 or early 2026.
• Expanding the successful Seven Rivers waterflood.

Key Dates