Energy 11 Net Income Plunges 63% Amid Rising Costs

TL;DR

**Energy 11's Q2 earnings are a red flag, with net income tanking 63% despite debt paydown; stay cautious on this non-operator.**

AI Summary

Energy 11, L.P. reported a significant decrease in net income for the three months ended June 30, 2025, falling to $1,858,829 from $5,009,717 in the prior year, a 62.9% decline. For the six months ended June 30, 2025, net income was $7,440,756, down from $10,280,353 in 2024, representing a 27.6% decrease. Total revenue for the three-month period decreased by 2.6% to $16,543,412, primarily due to a drop in oil revenue from $15,064,068 to $13,732,158, despite increases in natural gas and natural gas liquids revenue. Operating costs and expenses rose substantially by 22.7% to $14,656,848 for the quarter, driven by higher production expenses and depreciation. The Partnership successfully paid down its BancFirst revolving credit facility by $5,000,000, reducing the balance to zero as of June 30, 2025, from $5,000,000 at December 31, 2024. Cash and cash equivalents significantly increased to $5,863,210 as of June 30, 2025, from $227,859 at December 31, 2024. The company continues to operate 309 producing wells in the Sanish field, North Dakota, with Chord Energy Corporation as the primary operator.

Why It Matters

This significant drop in net income and rising operating costs for Energy 11, L.P. signals potential headwinds for investors, despite the positive cash flow and debt reduction. The company's reliance on a single operator, Chord Energy Corporation, for 99% of its producing properties in North Dakota, introduces concentration risk that could impact future performance and competitive positioning. While the paydown of the $5,000,000 revolving credit facility is a positive for financial stability, the declining profitability per common unit from $0.26 to $0.10 for the quarter could deter new investment and pressure existing limited partners. The broader market may see this as a reflection of challenges in the non-operated oil and gas sector, particularly for smaller entities.

Risk Assessment

Risk Level: medium — The risk level is medium due to the substantial 62.9% decrease in net income for the three months ended June 30, 2025, from $5,009,717 to $1,858,829, coupled with a 22.7% increase in total operating costs and expenses to $14,656,848. Additionally, the Partnership's high concentration of credit risk, with substantially all accounts receivable due from Chord Energy Corporation, and 99% of producing properties operated by Chord, presents a significant single-entity dependency.

Analyst Insight

Investors should closely monitor Energy 11's next earnings report for signs of revenue stabilization and cost control, particularly production expenses. Given the significant decline in net income and the concentration risk with Chord Energy Corporation, a cautious approach is warranted; consider holding existing positions but deferring new investments until profitability trends reverse.

Financial Highlights

debt To Equity

0.03

revenue

$16,543,412

operating Margin

11.4%

total Assets

$342,314,040

total Debt

$9,312,886

net Income

$1,858,829

eps

$0.10

gross Margin

61.6%

cash Position

$5,863,210

revenue Growth

-2.6%

Revenue Breakdown

Key Numbers

• $1,858,829 — Net income for three months ended June 30, 2025 (62.9% decrease from $5,009,717 in Q2 2024)
• $7,440,756 — Net income for six months ended June 30, 2025 (27.6% decrease from $10,280,353 in H1 2024)
• $16,543,412 — Total revenue for three months ended June 30, 2025 (2.6% decrease from $16,986,275 in Q2 2024)
• $14,656,848 — Total operating costs and expenses for three months ended June 30, 2025 (22.7% increase from $11,948,823 in Q2 2024)
• $5,000,000 — Revolving credit facility balance (Paid down to zero as of June 30, 2025, from $5,000,000 at Dec 31, 2024)
• $5,863,210 — Cash and cash equivalents as of June 30, 2025 (Significant increase from $227,859 at Dec 31, 2024)
• 18,973,474 — Common units outstanding (Consistent number of units outstanding)
• $0.10 — Basic and diluted net income per common unit for Q2 2025 (Decreased from $0.26 in Q2 2024)

Key Players & Entities

• Energy 11, L.P. (company) — registrant
• Chord Energy Corporation (company) — operator of Sanish Field Assets
• BancFirst (company) — lender for revolving credit facility
• Energy 11 GP, LLC (company) — General Partner of the Partnership
• United States (regulator) — location of operations and revenue
• North Dakota (regulator) — state where all operations and assets are located
• Financial Accounting Standards Board (regulator) — issuer of accounting standards
• SEC (regulator) — regulator for financial reporting

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The Partnership's revenues are highly dependent on the market prices of oil and natural gas. A significant decrease in these prices, as seen in the oil revenue decline from $15,064,068 to $13,732,158 in Q2 2025, can materially impact profitability and financial condition.
• Production Expense Increases [medium — operational]: Operating costs and expenses rose by 22.7% to $14,656,848 in Q2 2025, driven by higher production expenses. This increase in operational costs, despite a slight overall revenue dip, significantly compressed margins.
• Depreciation and Depletion [medium — operational]: Depreciation, depletion, amortization and accretion increased by 32.9% to $7,194,457 in Q2 2025 compared to $5,413,886 in Q2 2024. This substantial rise in non-cash expenses negatively affects net income.
• Reliance on Third-Party Operator [medium — operational]: The Partnership operates as a non-operated working interest owner in the Sanish Field Assets, with Chord Energy Corporation as the primary operator. This reliance means the Partnership's operational success is subject to the operator's performance and decisions.
• Cash Flow Management [medium — financial]: While cash and cash equivalents increased significantly to $5,863,210 from $227,859, the substantial increase in operating costs and decrease in net income highlight the importance of careful cash flow management.

Industry Context

The oil and gas industry is characterized by significant price volatility for commodities like oil and natural gas, directly impacting producer revenues and profitability. Companies often operate with substantial fixed costs related to production and infrastructure. The trend towards increased production expenses and depreciation suggests potential challenges in managing operational efficiency or increased capital investment in existing assets.

Regulatory Implications

While this filing does not highlight specific new regulatory changes, the energy sector is subject to ongoing environmental regulations, permitting requirements, and potential changes in tax policies. Compliance with these regulations is crucial and can impact operational costs and the ability to develop or maintain production.

What Investors Should Do

1. Monitor commodity price trends for oil and natural gas, as they are the primary drivers of revenue and profitability.
2. Analyze the sustainability of the increased operating costs and depreciation, as these are significantly impacting net income.
3. Evaluate the impact of the debt reduction and increased cash position on the Partnership's financial flexibility and future investment capacity.
4. Assess the operational performance and strategic decisions of Chord Energy Corporation as the primary operator of the Sanish Field Assets.

Key Dates

• 2025-06-30: End of Q2 2025 — Reported significantly lower net income and increased operating costs compared to Q2 2024. Paid down revolving credit facility to zero and saw a substantial increase in cash reserves.
• 2025-06-30: Revolving credit facility balance — Reduced to $0 from $5,000,000 at December 31, 2024, indicating improved liquidity or debt reduction strategy.
• 2025-06-30: Cash and cash equivalents — Increased to $5,863,210 from $227,859 at December 31, 2024, suggesting strong cash generation or capital inflow.
• 2024-12-31: End of Fiscal Year 2024 — Previous period for comparison; had a $5,000,000 balance on the revolving credit facility and significantly lower cash reserves.

Glossary

Depreciation, depletion, amortization and accretion

Non-cash expenses that represent the reduction in value of oil and gas properties over time due to extraction (depletion), wear and tear (depreciation), and other factors. (A significant operating expense that increased substantially in Q2 2025, impacting net income.)

Sanish Field Assets

The Partnership's primary oil and natural gas properties located in Mountrail County, North Dakota, where it holds a non-operated working interest. (The core operational asset base for Energy 11, L.P.)

Non-operated working interest

Ownership in an oil or gas lease that includes the right to receive a share of production and revenue, but does not include the responsibility for operating the property. (Describes Energy 11, L.P.'s operational model and reliance on a third-party operator.)

Joint operating agreement

A contract between co-owners of a mineral lease that defines their rights and responsibilities, particularly regarding the operation of the property. (Governs the Partnership's relationship with the operator of the Sanish Field Assets.)

Variable consideration

A component of revenue that is not fixed and depends on future events or outcomes, such as commodity prices or production volumes. (Relevant to how Energy 11, L.P. recognizes revenue, which is tied to market indices and subject to adjustments.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, Energy 11, L.P. experienced a significant 62.9% decline in net income, falling to $1,858,829 from $5,009,717. This was driven by a 2.6% decrease in total revenue, primarily due to lower oil sales, coupled with a substantial 22.7% increase in operating costs and expenses. While debt has been eliminated from the revolving credit facility, and cash reserves have surged, the sharp drop in profitability and rising operational expenses present a bearish outlook.

Key Financial Figures

• $300,000 — 0.50% of the Maximum Credit Amount, or $300,000. Total capitalized loan costs, which we
• $30,000 — lso paid an annual fee to the Lender of $30,000, and an unused facility fee of 0.25% on
• $20.00 — pect to each of the common units equals $20.00 plus the Payout Accrual. The Partnershi

Filing Documents

• e11lp10q063025.htm (10-Q) — 551KB
• e11lpex31-1.htm (EX-31.1) — 10KB
• e11lpex31-2.htm (EX-31.2) — 10KB
• e11lpex32-1.htm (EX-32.1) — 4KB
• e11lpex32-2.htm (EX-32.2) — 4KB
• 0001185185-25-000955.txt ( ) — 2489KB
• energy11-20250630.xsd (EX-101.SCH) — 24KB
• energy11-20250630_cal.xml (EX-101.CAL) — 19KB
• energy11-20250630_def.xml (EX-101.DEF) — 109KB
• energy11-20250630_lab.xml (EX-101.LAB) — 197KB
• energy11-20250630_pre.xml (EX-101.PRE) — 116KB
• e11lp10q063025_htm.xml (XML) — 144KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 3 Consolidated Balance Sheets – June 30, 2025 and December 31, 2024 3 Consolidated Statements of Operations – Three and six months ended June 30, 2025 and 2024 4 Consolidated Statements of Partners' Equity – Three and six months ended June 30, 2025 and 2024 5 Consolidated Statements of Cash Flows – Six months ended June 30, 2025 and 2024 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 20 Item 4.

Controls and Procedures

Controls and Procedures 20

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 21 Item 1A.

Risk Factors

Risk Factors 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3. Defaults upon Senior Securities 21 Item 4. Mine Safety Disclosures 21 Item 5. Other Information 21 Item 6. Exhibits 21

Signatures

Signatures 22 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Energy 11, L.P. Consolidated Balance Sheets June 30, December 31, 2025 2024 (unaudited) Assets Cash and cash equivalents $ 5,863,210 $ 227,859 Accounts receivable 8,623,961 13,152,609 Other current assets, net 40,257 155,581 Total Current Assets 14,527,428 13,536,049 Oil and natural gas properties, successful efforts method, net of accumulated depreciation, depletion and amortization of $ 189,485,167 and $ 175,017,198 , respectively 327,786,612 340,222,534 Other assets - 10,064 Total Assets $ 342,314,040 $ 353,768,647 Liabilities Accounts payable and accrued expenses $ 7,138,194 $ 7,731,188 Total Current Liabilities 7,138,194 7,731,188 Revolving credit facility - 5,000,000 Asset retirement obligations 2,174,692 2,195,629 Total Liabilities 9,312,886 14,926,817 Partners' Equity Limited partners' interest ( 18,973,474 common units issued and outstanding, respectively) 333,002,881 338,843,557 General partner's interest ( 1,727 ) ( 1,727 ) Class B Units ( 62,500 units issued and outstanding, respectively) - - Total Partners' Equity 333,001,154 338,841,830 Total Liabilities and Partners' Equity $ 342,314,040 $ 353,768,647 See notes to consolidated financial statements. 3 Table of Contents Energy 11, L.P. Consolidated Statements of Operations (Unaudited) Three Months Ended Three Months Ended Six Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Revenues Oil $ 13,732,158 $ 15,064,068 $ 30,614,673 $ 30,622,565 Natural gas 989,832 369,535 2,681,702 1,210,940 Natural gas liquids 1,821,422 1,552,672 4,106,968 3,554,431 Total revenue 16,543,412 16,986,275 37,403,343 35,387,936 Operating costs and expenses Production expenses 6,069,324 4,960,463 12,014,097 10,118,607 Production taxes 1,087,999 1,371,927 2,578,549 2,766,927 General and administrative expenses 305

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements June 30, 2025 (Unaudited) Note 1. Partnership Organization Energy 11, L.P. (the "Partnership") is a Delaware limited partnership formed to acquire producing and non-producing oil and natural gas properties onshore in the United States and to develop those properties. The initial capitalization of the Partnership of $ 1,000 occurred on July 9, 2013. The Partnership completed its best-efforts offering on April 24, 2017 with a total of approximately 19.0 million common units sold for gross proceeds of $ 374.2 million and proceeds net of offering costs of $ 349.6 million. As of June 30, 2025, the Partnership owned an approximate 24 % non-operated working interest in 309 producing wells and future development sites in the Sanish field located in Mountrail County, North Dakota (collectively, the "Sanish Field Assets"). Chord Energy Corporation ("Chord") is one of the largest producers in the basin and operates substantially all of the Sanish Field Assets. The general partner of the Partnership is Energy 11 GP, LLC (the "General Partner"). The General Partner manages and controls the business affairs of the Partnership. The Partnership's fiscal year ends on December 31. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for Article 10 of SEC Regulation S-X. Accordingly, they do not include all of the information required by generally accepted accounting principles ("GAAP") in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Partnership's audited consolidated financial statements included in its 2024 Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 2025 are

financial statements and notes to the consolidated financial statements

financial statements and notes to the consolidated financial statements. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. Cash balances may at times exceed federal depository insurance limits. Use of Estimates The preparation of financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial 7 Table of Contents Reclassifications Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation with no effect on previously reported net income, partners' equity or cash flows. Revenue Recognition The Partnership is bound by a joint operating agreement with the operator of each of its producing wells. Under the joint operating agreement, the Partnership's proportionate share of production is marketed at the discretion of the operators. The Partnership typically satisfies its performance obligations upon transfer of control of its products and records the related revenue in the month production is delivered to the purchaser. As the Partnership does not operate its properties, it receives actual oil, natural gas, and NGL sales volumes and prices, net of costs incurred by the operators, two to three months after the date production is delivered by the operator. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from the Partnership's operators are accrued in Accounts receivable in the consolidated balance sheets. Variances between the Partnership's estimated revenue and actual payments are recorded in the month the payment is recei

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