EON Energy agrees to acquire South Justis Field in Permian Basin

EON Resources (EONR) announced that EON Energy has entered into a Purchase and Sale Agreement with WPP NM and Northwest Central to acquire all of their respective interests in the South Justis Field located in the Permian Basin in Lea County, New Mexico. The Company will exchange 1M Class A common shares of the Company without any cash consideration or debt for EON Energy to acquire a 94% working interest in the South Justis Field. With the estimated $1.2M in net annual cash flow, the transaction is expected to be accretive. The effective date of the acquisition is June 1.The transaction is expected to close June 20. South Justis is currently producing 108 barrels of oil per day from 19 actively producing wells which adds $1.2M in net cash flow annually with minimal impact to the G&A costs of the Company. We estimate that the production and related cash flow has the potential to double and triple within a year based upon the rate remaining idle wells in the South Justis Field can be returned to active production. The South Justis Field is located in Lea County, New Mexico in the Central Basin of the Permian Basin, the most prolific oil-producing region in the United States. The South Justis Field is located a short distance from Grayburg-Jackson Field in Eddy County, New Mexico allowing for efficiencies of scale. Original Oil in Place was 210M barrels of oil with 30M barrels produced to date. EON Energy believes 15M barrels of recoverable reserves can be developed with existing well recompletions and new well drilling. The property EON Energy is acquiring includes 5,360 leasehold acres with a total of 208 wells comprised of half being oil producing and the other half being water injection wells. There are 19 active oil producing wells. Producing zones in the South Justis Field are at a depth of 5,000 feet to 7,000 feet in the Glorietta, Blinebry, Tubb, Drinkard and Fusselman intervals. Approximate working interest acquired is 94% with a net revenue interest of 82%. The initial production from the SJF in the 1960’s was 6,000 BOPD, indicating good potential for high primary production rates from recompletions into untapped behind pipe pay zones, along with newly drilled wells. The South Justis Field historically has had a low decline rate curve. The South Justis Field produced a very steady 250 BOPD before wells went offline due to mechanical issues. Within the last three months, the Seller repaired and reactivated 6 wells to production adding 50 BOPD with minimal costs. This is EON Energy’s same strategy to increase South Justis oil production. The EON Energy team plans to return 30 wells this year to production with an expected average of 5-10 BOPD per well, yielding field wide production of 250 to 400 BOPD. EON Energy will combine lessons learned by the Seller and from the Company’s well stimulation experience in the Grayburg-Jackson field, to develop the SJF. Seller will operate SJF for the next few months for the benefit of EON Energy, with existing field employees transitioning to EON Energy.