SecProbe.io

CORRESP
1
filename1.htm

HNR Acquisition Corp.

3730 Kirby Drive, Suite 1200

Houston, TX 77098

September 27, 2023

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

Office of Energy & Transportation

100 F. Street, N.W.

Mail Stop 6010/3561

Washington, DC 20549

    Attention:
    Jenifer Gallagher, Staff Accountant

    John Cannarella, Staff Accountant

    Sandra Wall, Petroleum Engineer

    John Hodgin, Petroleum Engineer

    Liz Packebusch, Staff Attorney

    Karina Dorin, Staff Attorney

    Re:
    HNR Acquisition
    Corp.

    Amendment No. 4 to Preliminary Proxy Statement on
    Schedule 14A

    Filed September 11, 2023

    File No. 001-41278

Dear Miss Packebusch:

HNR Acquisition Corp. (the “Company”) confirms
receipt of the letter dated September 22, 2023, from the staff (the “Staff”) of the Securities and Exchange Commission
(the “Commission”) with respect to the above-referenced filing. Please find enclosed a complete copy of Amendment
No. 5 (“Amendment No. 5”) to the above-referenced filing (as amended by Amendment No. 5, the “Proxy Statement”).We
are responding to the Staff’s comments as set forth below. The Staff’s comments are set forth below, followed by the Company’s
response in bold:

Amendment No. 4 to Preliminary Proxy Statement on Schedule 14A

Cover Page

    1.
    We note you disclose that approval of the Purchase
    Proposal, Incentive Plan Proposal, the NYSE American Proposal and the Adjournment Proposal each require the affirmative vote of a
    majority of votes cast by holders of shares of SPAC Common Stock present in person or by proxy at the Special Meeting and entitled
    to vote thereon. You also disclose that approval of the Charter Proposal requires the affirmative vote of the holders of a majority
    of the SPAC Common Stock entitled to vote. This appears inconsistent with your disclosure that a failure to vote or provide voting
    instruction for the Purchase Proposal and the Charter Proposal will have the same effect as a vote Against the Purchase Proposal
    and Charter Proposal, but will have no effect on the outcome of any other proposal in this proxy. Please revise or advise.

RESPONSE: In response to the Staff’s comment, the
Company has updated the Proxy Statement throughout to indicate that an abstention only has the effect of a vote “AGAINST”
the Charter Proposal, but has no effect on the other proposals included in the proxy statement.

    2.
    We note you disclose here and elsewhere that the holders
    of OpCo Class B units will be required to exchange all of their Class B Units (a “Mandatory Exchange”) upon the occurrence
    of the following: (i) upon the direction of the Company with the consent of at least fifty percent (50%) of the holders of OpCo Class
    B Units; or (ii) upon the one-year anniversary of the Mandatory Conversion Trigger Date. However, you disclose on page 28 that the
    Mandatory Exchange will occur upon the Mandatory Conversion Trigger Date. Please advise or revise.

RESPONSE: In response to the Staff’s comment, the
Company has revised pages 28 and 32 of the Proxy Statement to clarify that the Mandatory Exchange occurs upon the occurrence of the following:
(i) upon the direction of the Company with the consent of at least fifty percent (50%) of the holders of OpCo Class B Units; or (ii) upon
the one-year anniversary of the Mandatory Conversion Trigger Date; which this matches the disclosure elsewhere in the Proxy Statement.

Summary Term Sheet, page 1

    3.
    We note the transactions contemplated by the membership
    interest purchase agreement, as amended and restated on August 28, 2023, will result in your post-purchase company organized in an
    “Up-C” structure. Please tell us whether the parties to the MIPA also entered into a tax receivable agreement, as is
    typically the case with Up-C structures. If so, please expand your disclosures throughout the proxy to provide details for this related
    agreement, and also file a copy of the agreement as an annex or exhibit.

RESPONSE: In response to the Staff’s comment, the
Company advises the Staff that no tax receivable agreement was entered into in connection with the A&R MIPA.

Q: What is an “Up-C” structure?, page 14

    4.
    Please expand your disclosure to explain the business
    or strategic rationale for use of the “Up-C” structure. Please also highlight any significant tax or other material benefits
    to CIC as Partner/Seller so long as it owns interests directly through Units of OpCo.

RESPONSE: In response to the Staff’s comment, the
Company has revised pages 15-16 of the Proxy Statement to provide the rationale for the use of the “Up-C” structure and the
tax benefits Seller received therefrom.

Summary of the Proxy Statement

Impact of the Purchase on HNRA’s Public Float, page 33

    5.
    Please revise to disclose all possible sources and
    extent of dilution that shareholders who elect not to redeem their shares may experience in connection with the business combination.
    For example, please disclose the impact of the OpCo Class B Units, the OpCo Preferred Units and the Preferred Stock PIPE at each
    of the redemption levels detailed in your sensitivity analysis, including any needed assumptions. We also note your disclosure on
    page 35.

RESPONSE: In response to the Staff’s comment, the
Company has revised the tables in the Proxy Statement to disclose the impact of the OpCo Class B Units, the OpCo Preferred Units and the
Preferred Stock PIPE at each of the redemption levels.

Ownership Structure of HNRA after the Closing, page 34

    6.
    We note that the chart reflects that OpCo Class B common
    units and OpCo Preferred Units are held by CIC Partner/Seller. Please revise this chart to include the number of OpCo Class B common
    units and OpCo Preferred Units held by CIC Partner/Seller. In addition, quantify the percentage of equity interests to be held in
    OpCo by CIC Partner /Seller.

RESPONSE: In response to the Staff’s comment, the
Company has updated the ownership structure chart after closing to indicate the number of OpCo Class B Unit, the number of OpCo Preferred
Units, and the percentage of units held by Seller assuming maximum redemption and maximum issuance of the OpCo Preferred Units.

    2

Summary of the Proxy Statement

Opinion of RSI & Associates, page 39

    7.
    Please expand your disclosure to clarify that RSI &
    Associates’ amended fairness opinion is based on the Cobb & Associates 3rd Party Engineering Study as of December 31, 2022
    revised on April 25, 2023 to exclude the 10% overriding royalty interest now held by Pogo Royalty, LLC. This comment also applies
    to the disclosure on page 123 and in the RSI & Associates, Inc. amended fairness opinion included as Annex C.

RESPONSE: In response to the Staff’s comment, the
Company has revised pages 41 and 126 and Annex C to include reference to the Cobb & Associates 3rd Party Engineering Study as of December
31, 2022 revised on June 30, 2023 to exclude the 10% overriding royalty interest now held by Pogo Royalty, LLC.

Unaudited Pro Forma Combined Financial Information

Notes to Unaudited Pro Forma Combined Financial Statements

Note 3 - Preliminary Price Allocation, page 92

    8.
    We note under the 50% redemption scenario you indicate
    the purchase price consideration includes the full amount of the Promissory Note to Sellers of Pogo and the issuance of 85,000 OpCo
    Preferred Units. However, we note pro forma adjustment (N) reflects the issuance of only $13,307,21 in principal under Seller Promissory
    Note, and there is no issuance of OpCo Preferred Units under the scenario on the pro forma balance sheet. Please address this inconsistency.

RESPONSE: In response to the Staff’s comment, the
Company has revised the Proxy Statement to remove the inconsistency and accurately reflected the estimated purchase price consideration.

    9.
    Please revise the details depicting the preliminary
    purchase price under the maximum redemption scenario to indicate 2,000,000 OpCo Preferred Units will be issued rather than 85,000
    OpCo Preferred Units.

RESPONSE: In response to the Staff’s comment, the
Company has revised the Proxy Statement to indicate 2,000,000 issued OpCo Preferred Units in the maximum redemption scenario.

Note 4 - Adjusted to Pro Forma Combined Financial Information,
page 93

    10.
    We note pro forma adjustment (D) reflects the issuance
    of 2,000,000 OpCo Class B units issued to the sellers of Pogo. Please refer to the guidance in FASB ASC 810-10-45-16, and revise
    your pro forma balance sheet to present the Seller’s ownership interest in OpCo as a noncontrolling interest rather than Additional
    paid in capital or explain in further detail why it is appropriately classified within your equity.

RESPONSE: In response to the Staff’s comment, the
Company has reviewed the guidance in FASB ASC 810-10-45-16. As the Company’s revised disclosures now indicate, the unaudited pro
forma combined financial information assumes the exercise of the OpCo Class B unit holders Exchange Right, whereby they elect to convert
outstanding Class B Units of OpCo, and whereby the OpCo elects to issue Class A Common shares of the Company. Therefore, the Company has
not presented any noncontrolling interest for the OpCo Class B Units issued to the sellers of POGO. We do note that the OpCo Preferred
Units issued to the Sellers in the maximum redemption scenario are presented as a noncontrolling interest of the Company’s subsidiary
in the maximum redemptions scenario, as required under FASB ASC 810-10-45-16.

    11.
    In the note for pro forma adjustment (E) you state
    that you are required to pay the $1,300,000 deferred underwriter commission in cash 90 days after the closing date. Please include
    a pro forma adjustment to reflect this obligation as a current liability.

RESPONSE: In response to the Staff’s comment, the
Company has revised its pro forma adjustments in the Proxy Statement to present the remaining deferred underwriter commission as a current
liability.

    12.
    We understand the maturity note of the promissory note
    is six months from the closing of the transactions contemplated by the MIPA. Please revise pro forma adjustment (N) to present the
    outstanding principal of the promissory note as a current liability.

RESPONSE: In response to the Staff’s comment, the
Company has revised its pro forma adjustments in the Proxy Statement to present the Seller Promissory Note as a current liability.

Adjustments to Unaudited Pro Forma Combined Statements of Operations,
page 94

    13.
    Please revise your pro forma statements of operations
    to present net income or loss from continuing operations attributable to the controlling interest as required by Rule 11-02(a)(5)
    of Regulation S-X.

RESPONSE: In response to the Staff’s comment, the
Company has revised its pro forma statements of operations in the Proxy Statement to present net income or loss from continuing operations
attributable to the controlling interest. As noted in our response to comment 10, there is no portion of the subsidiary’s results
of operations applicable to a non-controlling interest in the “no redemptions” and “50% redemptions” scenarios.
In the “maximum redemptions” scenario, under the terms of the A&R OpCo LLC Agreement, the OpCo Preferred Unit holders
do not receive any share of net profits or losses, and as such, no net income or loss attributable to noncontrolling interest is presented
in the pro forma statements of operations.

    3

Unaudited Pro Forma Combined Financial Information

Notes to Unaudited Pro Forma Combined Financial Information

6. Supplemental Oil and Gas Reserve Information (Unaudited), page
97

    14.
    Please expand the discussion of the pro forma estimates
    of proved oil and gas reserves and discounted future net cash flows prepared by William M. Cobb & Associates to reference the
    pro forma reserve reports, as of December 31, 2021 (updated July 12, 2023) and 2022 (updated April 25, 2023), respectively, which
    exclude the 10% overriding royalty interest not acquired in the amended transaction. Also, identify the corresponding attachments
    filed as Annex D and Annex E, respectively, and modify Table of Contents to clarify these reports represent the pro forma estimates,
    e.g. excludes the 10% overriding royalty interest not acquired in the amended transaction. Refer to the disclosure requirements in
    Item 1202(a)(8) of Regulation S-K and FASB ASC 932-235-50-10 and 50-36.

RESPONSE: In response to the Staff’s comment, the
Company has revised page 99 and the Table of Contents of the Proxy Statement.

    15.
    Please modify the pro forma presentations of the estimated
    net quantities of oil and gas reserves (page 97), the standardized measure of discounted future net cash flows (page 98), and the
    changes in standardized measure (page 98) to reconcile the original transaction estimates for the historical HNR Acquisition Corporation
    and Pogo Resources, LLC to the current amended transaction estimates (reduced by the 10% overriding royalty interest) for Pogo Resources,
    LLC and the resulting Pro Forma Combined estimates.

RESPONSE: In response to the Staff’s comment, the Company has
revised disclosure on pages 100 and 101 of the Proxy Statement.

    16.
    The pro forma summary of changes in estimated proved
    reserves includes “revisions of previous estimates” which references footnote (1); however, footnote (1) and its accompanying
    explanation are not provided. Please revise your disclosure to provide the referenced footnote to identify and quantify each individual
    factor that contributed to the overall change in the line item. If two or more unrelated factors are combined to arrive at the overall
    change, your revised disclosure should separately identify and quantify each factor, including offsetting factors, so the change
    in net reserve quantities between periods is fully explained. Refer to the disclosure requirements in FASB ASC 932-235-50-5.

RESPONSE: In response to the Staff’s comment, the
Company has revised disclosure on page 100 of the Proxy Statement.

Background of the Purchase, page 114

    17.
    Please substantially expand your disclosure to discuss
    the negotiation of key aspects of the proposed transaction, including the “Up-C” structure, A&R MIPA, Option Agreement,
    Backstop Agreement, the Escrow Agreement, Board Designation Agreement and PIPE Investment. Your discussion should include the underlying
    reasons for the negotiation of such structure and agreements, and identify the individuals that participated in any negotiation and
    the material terms negotiated. For example, clarify how the parties determined the type and amount of consideration and the rational
    for reducing the purchase price from $120 million in the Original MIPA to $90 million in the A&R MIPA and the rationale for receiving
    an updated opinion from RSI & Associates.

RESPONSE: In response to the Staff’s comment, the
Company has revised pages 121-123 of the Proxy Statement to provide expanded disclosure regarding the negotiation of key aspects of the
amended transaction.

Fairness Opinion of RSI & Associates, Inc., page 123

    18.
    We note RSI & Associates, Inc. has updated their
    fairness opinion. Please clarify whether HNRA paid an additional fee for the revised opinion. In this regard we note your disclosure
    regarding the aggregate fee of $54,210 is unchanged in this amendment.

RESPONSE: In response to the Staff’s comment, the
Company has revised page 127 of the Proxy Statement to indicate the aggregate fee payable to RSI & Associates of $75,829.

    4

Proposal No. 3 - The NYSE American Proposal, page 137

    19.
    We note that Proposal No. 3 does n