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What changed in EMPIRE PETROLEUM CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EMPIRE PETROLEUM CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+275 added−205 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-28)

Top changes in EMPIRE PETROLEUM CORP's 2024 10-K

275 paragraphs added · 205 removed · 153 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

41 edited+25 added−16 removed9 unchanged
Biggest changeAs the Starbuck Field is strategically designed for EOR production, the Company anticipates EOR development to begin in the second quarter of 2024 with the goal of providing a meaningful increase in production beginning as soon as the second half of 2024 and going forward. 6 Empire has also logged five vertical pilot wells to help identify additional pay and extend existing reservoirs, which has confirmed three additional primary zones of interest and two secondary zones of interest.
Biggest changeEmpire has also logged five vertical pilot wells to help identify additional pay and extend existing reservoirs, which has confirmed three additional primary zones of interest and two secondary zones of interest. In addition, the Company has drilled a vertical appraisal well in the Starbuck Field to core two new target zones for development.
If the market price for oil and natural gas remains depressed in the future, it could have a material adverse effect on our ability to raise additional capital necessary to finance operations. Lower oil and natural gas prices may also reduce the amount of oil and natural gas, if any, that can be produced economically from our properties.
If the market price for oil and natural gas remains depressed in the future, it could have a material adverse effect on our ability to raise the additional capital necessary to finance operations. Lower oil and natural gas prices may also reduce the amount of oil and natural gas, if any, that can be produced economically from our properties.
We engage an independent petroleum engineering firm, CG&A, to prepare our annual reserve estimates and rely on CG&A’s expertise to ensure that reserve estimates are prepared in accordance with SEC guidelines. The technical person primarily responsible for the preparation of the reserve report is Zane Meekins, Executive Vice President. Mr.
We engage and consult with an independent petroleum engineering firm, CG&A, to prepare our annual reserve estimates and rely on CG&A’s expertise to ensure that reserve estimates are prepared in accordance with SEC guidelines. The technical person primarily responsible for the preparation of the reserve report is Zane Meekins, Executive Vice President. Mr.
Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. 5 In addition, we use social media to communicate with our investors and the public about our company, our businesses and our results of operations.
Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, we use social media to communicate with our investors and the public about our company, our businesses and our results of operations.
Empire operates the following wholly-owned subsidiaries in its areas of operations: • Empire New Mexico LLC (“Empire New Mexico”) ○ Empire New Mexico LLC d/b/a Green Tree New Mexico ○ Empire EMSU LLC ○ Empire EMSU-B LLC ○ Empire AGU LLC ○ Empire NM Assets LLC • Empire Rockies Region ○ Empire North Dakota LLC (“Empire North Dakota”) ○ Empire ND Acquisition LLC (“Empire NDA”) • Empire Texas (“Empire Texas”), consisting of the following entities: ○ Empire Texas LLC ○ Empire Texas Operating LLC ○ Empire Texas GP LLC ○ Pardus Oil & Gas Operating, LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC) • Empire Louisiana LLC (“Empire Louisiana”) Empire was incorporated in the state of Delaware in 1985.
Empire operates the following wholly-owned subsidiaries in its areas of operations: ● Empire New Mexico LLC (“Empire New Mexico”), consisting of the following entities: ○ Empire New Mexico LLC d/b/a Green Tree New Mexico ○ Empire EMSU LLC ○ Empire EMSU-B LLC ○ Empire AGU LLC ○ Empire NM Assets LLC ● Empire North Dakota (“Empire North Dakota”), consisting of the following entities: ○ Empire North Dakota LLC (“Empire North Dakota”) ○ Empire ND Acquisition LLC (“Empire NDA”) ● Empire Texas (“Empire Texas”), consisting of the following entities: ○ Empire Texas LLC ○ Empire Texas Operating LLC ○ Empire Texas GP LLC ○ Pardus Oil & Gas Operating, LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC) ● Empire Louisiana LLC (“Empire Louisiana”) Empire was incorporated in the state of Delaware in 1985.
Our team is broadly experienced in oil and natural gas operations and follows a strategy of outsourcing most accounting, human resources, and other non-core functions. Office Locations Our corporate headquarters are at 2200 South Utica Place, Suite 150, Tulsa, Oklahoma, with field offices in North Dakota, Texas, and New Mexico. 10
Our team is broadly experienced in oil and natural gas operations and follows a strategy of outsourcing most accounting, human resources, and other non-core functions. Office Locations Our corporate headquarters are at 2200 South Utica Place, Suite 150, Tulsa, Oklahoma, with field offices in North Dakota, Texas, and New Mexico. 11
Principal Customers We sell our oil, natural gas, and NGL production to marketers which is transported by truck or pipeline to storage facilities arranged by the marketers. Our marketing of oil and natural gas can be affected by factors beyond our control, the effects of which cannot be accurately predicted.
Principal Customers We sell our oil, natural gas, and NGLs production to marketers which is transported by truck or pipeline to storage facilities arranged by the marketers. Our marketing of oil and natural gas can be affected by factors beyond our control, the effects of which cannot be accurately predicted.
We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the “Investor Relations” sections.
We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation Fair Disclosure. Such disclosures will be included on our website in the “Investor Relations” sections.
Assets are located in the following formations: · Madison (primary source of production) · Bakken · Duperow · Red River · Ratcliffe/Mission Canyon The existing producing properties have experienced near-flat production rates over the last five years. We have been able to capitalize on operational improvements to allow more immediate recovery of reserves.
Assets are located in Madison (primary source of production), Bakken, Duperow, Red River, and Ratcliffe/Mission Canyon formations. The existing producing properties have experienced near-flat production rates over the last five years. We have been able to capitalize on operational improvements to allow a more immediate recovery of reserves.
Empire New Mexico Empire New Mexico was formed when we purchased producing assets from XTO in May 2021. These assets are located in Lea County, New Mexico and include approximately 670 gross (483 net) producing and injection wells on a contiguous and consolidated acreage position consisting of 48,000 gross (41,000 net).
Empire New Mexico Empire New Mexico was formed when we purchased producing assets from XTO in May 2021. These assets are located in Lea County, New Mexico, and include approximately 714 gross (529 net) producing and injection wells on a contiguous and consolidated acreage position consisting of 48,000 gross (41,000 net).
We have no firm delivery commitments for oil or natural gas. 7 Oil and Natural Gas Reserves Our primary mission is to optimize existing producing properties; as such, there are no reserves estimated for undeveloped properties, though we own acreage that can be drilled in the future and are also a non-operator WI owner on acreage subject to future drilling activities.
Oil and Natural Gas Reserves Our primary mission is to optimize existing producing properties; as such, there are no reserves estimated for undeveloped properties, though we own acreage that can be drilled in the future and are also a non-operator WI owner on acreage subject to future drilling activities.
The information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the social media channels listed in the “Investor Relations” section of our website. Properties We are an independent operator in four geographic areas in the United States.
Therefore, we encourage investors, the media and others interested in our company to review the information we post on the social media channels listed in the “Investor Relations” section of our website. 6 Properties We are an independent operator in four geographic areas in the United States.
Empire North Dakota Empire North Dakota includes approximately 138 gross (108 net) producing or injection wells on 24,000 gross (18,000 net) acres in North Dakota and western Montana. We also have smaller nonoperating interests in 70 gross (less than 1 net) vertical wells. These properties primarily produce oil with some related gas production.
Empire North Dakota Empire North Dakota includes approximately 232 gross (108 net) producing or injection wells on 24,480 gross (18,480 net) acres in North Dakota and western Montana. We also have smaller nonoperating interests in 106 gross (less than 1 net) vertical wells. These properties primarily produce oil with some related gas production.
As operator, we manage and influence production on operated properties. We use a combination of experienced field personnel and third-party service providers to execute our mission. Our producing properties have reasonably predictable production profiles and cash flows, subject to commodity price and cost fluctuations.
For our operated properties, we manage and influence production using a combination of experienced field personnel and third-party service providers to execute our mission. Our producing properties have reasonably predictable production profiles and cash flows, subject to commodity price and cost fluctuations.
Because of normal production declines, increased or decreased production due to future acquisitions, divestitures, and development, fluctuations in commodity prices and the effects of acquisitions or divestitures, the historical information presented below should not be interpreted as being indicative of future results.
Production and Operating Data The following table sets forth a summary of our production and operating data. Because of normal production declines, increased or decreased production due to future acquisitions, divestitures, and development, fluctuations in commodity prices and the effects of acquisitions or divestitures, the historical information presented below should not be interpreted as being indicative of future results.
Empire Texas owns concentrated acreage and stacked pay in the historically prolific East Texas Basin. Assets are concentrated in the Fort Trinidad Field in Houston and Madison Counties with high working interest and historical production from eight separate formations. We have begun technical work for uplift opportunities in Texas.
Assets are concentrated in the Fort Trinidad Field in Houston and Madison Counties with high working interest and historical production from eight separate formations. We have begun technical work for uplift opportunities in Texas.
Legislation affecting the oil and natural gas industry is constantly changing. Numerous federal and state departments and agencies have issued rules and regulations applicable to the oil and natural gas industry.
Numerous federal and state departments and agencies have issued rules and regulations applicable to the oil and natural gas industry.
We sell our produced oil under contracts using market-based pricing, which is adjusted for differentials based upon oil quality. We sell our natural gas and natural gas liquids under purchase contracts using market-based pricing, which is primarily sold at the lease location.
We do not transport, refine or process the oil we produce. We sell our produced oil under contracts using market-based pricing, which is adjusted for differentials based upon oil quality. We sell our natural gas and NGLs under purchase contracts using market-based pricing, which is primarily sold at the lease location.
The relevant field and reservoir technical information, which is updated at least annually, is assessed for validity when CG&A has technical meetings with our personnel. Current revenue and expense information is obtained from accounting records, which are subject to external quarterly reviews, annual audits, and internal controls over financial reporting.
The relevant field and reservoir technical information, which is updated at least annually, is assessed for validity when CG&A has technical meetings with our personnel. Our accounting records, operational data and well information used in the reserve estimation process are subject to internal and external quarterly reviews, annual audits, and internal controls over financial reporting.
To accomplish its mission, we plan on executing the following business strategies: · Cost-effectively optimize well production · Reduce unit operating costs and improve margins · Target proved developed producing acquisitions in predictable fields that have historically had low production decline and long lives · Focus on high-quality assets that add scale and provide synergies to our existing portfolio and core areas of operation We operate as a single segment as each of our operating areas have similar economic characteristics and each meet the criteria for aggregation as defined by accounting standards related to disclosures about segments of an enterprise.
To accomplish its mission, we plan to execute the following business strategies: ● Cost-effectively optimize well production ● Reduce unit operating costs and improve margins ● Target proved developed producing acquisitions in predictable fields that have historically had low production decline and long lives ● Focus on high-quality assets that add scale and provide synergies to our existing portfolio and core areas of operation We operate as a single operating segment.
While the loss of these purchasers may result in a temporary interruption in sales of, or a lower price for, our production, we believe that the loss of these purchasers would not have a material adverse effect on our operations, as there are alternative purchasers in our producing regions.
While the loss of these purchasers may result in a temporary interruption in sales of, or a lower price for, our production, we believe that the loss of these purchasers would not have a material adverse effect on our operations, as there are alternative purchasers in our producing regions. 9 Competition The oil and natural gas industry in the areas in which we operate is highly competitive.
Seasonality of Business Weather conditions often affect the demand for, and prices of, natural gas and can also delay oil and natural gas production. Demand for natural gas is traditionally higher in the winter, resulting in higher natural gas prices during the first and fourth quarters.
We are unable to predict the timing or duration of any such shortages. Seasonality of Business Weather conditions often affect the demand for, and prices of, natural gas and can also delay oil and natural gas production. Demand for natural gas is traditionally higher in the winter, resulting in higher natural gas prices during the first and fourth quarters.
This marketing effort endeavors to obtain the combined highest netback and most secure market available at that time. We sell oil production at the lease locations to third-party purchasers via truck transport or pipeline. We do not transport, refine or process the oil we produce.
Marketing Arrangements We market our oil and natural gas in accordance with standard energy industry practices. This marketing effort endeavors to obtain the combined highest netback and most secure market available at that time. We sell oil production at the lease locations to third-party purchasers via truck transport or pipeline.
We anticipate that the prices of oil and natural gas will fluctuate in the near future. 9 Regulation The oil and natural gas industry is subject to extensive federal, state and local laws and regulations governing the production, transportation and sale of hydrocarbons as well as the taxation of income resulting therefrom.
Regulation The oil and natural gas industry is subject to extensive federal, state and local laws and regulations governing the production, transportation and sale of hydrocarbons as well as the taxation of income resulting therefrom. Legislation affecting the oil and natural gas industry is constantly changing.
Reserve Estimation Process Reserve estimation is a subjective process as the underground accumulations of crude oil and natural gas cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment.
Prices of $75.45 per barrel of oil, $1.51 per Mcf and $9.82 per barrel of NGLs were utilized at December 31, 2023. 8 Reserve Estimation Process Reserve estimation is a subjective process as the underground accumulations of crude oil and natural gas cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment.
Year Ended December 31, 2023 Year Ended December 31, 2022 Production and operating data: Net sales volumes: Oil (Bbl) 487,869 482,818 Natural gas (Mcf) 854,274 875,647 Natural gas liquids (Bbl) 136,013 160,809 Total (Boe) 766,261 789,568 Average price per unit: Oil (a) $ 75.19 $ 93.16 Natural gas $ 2.02 $ 5.18 Natural gas liquids $ 12.21 $ 22.76 Total (Boe) $ 52.29 $ 67.34 Operating costs and expenses per Boe: Lease operating expense (excluding workovers) $ 21.70 $ 19.92 Workovers $ 15.66 $ 9.95 Total Lease operating expense $ 37.36 $ 29.87 Production and ad valorem taxes $ 3.97 $ 4.99 Depreciation, depletion, amortization and accretion $ 6.33 $ 4.19 General & administrative (excluding stock-based compensation) $ 15.71 $ 12.18 Stock-based compensation $ 4.10 $ 3.44 (a) Excludes the effect of net cash receipts from (payments on) derivatives.
For the Years Ended December 31, 2024 2023 Production and operating data: Net sales volumes: Oil (Bbl) 581,159 487,869 Natural gas (Mcf) 916,955 854,274 Natural gas liquids (Bbl) 150,091 136,013 Total (Boe) 884,076 766,261 Average price per unit: Oil (1) $ 71.44 $ 75.19 Natural gas $ 0.37 $ 2.02 Natural gas liquids $ 14.21 $ 12.21 Total (Boe) $ 49.76 $ 52.29 Operating costs and expenses per Boe: Lease operating expense (excluding workovers) $ 24.46 $ 21.70 Workovers $ 6.71 $ 15.65 Total Lease operating expense $ 31.16 $ 37.36 Production and ad valorem taxes $ 4.26 $ 3.97 Depreciation, depletion, amortization and accretion $ 12.74 $ 6.33 General & administrative (excluding stock-based compensation) $ 14.23 $ 15.71 Stock-based compensation $ 2.44 $ 4.10 Total General & administrative $ 16.67 $ 19.81 (1) Excludes the effect of net cash receipts from (payments on) derivatives.
Oil Natural Gas NGL (Mbbl) (MMcf) (Mbbl) MBoe Proved developed at December 31, 2023 6,924 6,104 1,171 9,112 Proved developed at December 31, 2022 8,826 12,936 2,262 13,244 Net proved reserves were calculated using an unweighted arithmetic average of the first-day-of-the-month price within the 12-month period for the year.
The following table represents our oil and natural gas reserves: Oil Natural Gas NGLs Total (MBbl) (MMcf) (MBbl) MBoe Proved developed at December 31, 2024 7,001 6,064 1,215 9,227 Proved developed at December 31, 2023 6,924 6,104 1,171 9,112 Net proved reserves were calculated using an unweighted arithmetic average of the first-day-of-the-month price within the 12-month period for the year.
The oil and natural gas industry periodically experiences shortages of drilling and workover rigs, equipment, pipe, materials and personnel, which can delay workover and exploration activities and cause significant price increases. We are unable to predict the timing or duration of any such shortages.
In addition to competition for drilling, pressure pumping and workover equipment, we are also affected by the availability of related equipment and materials. The oil and natural gas industry periodically experiences shortages of drilling and workover rigs, equipment, pipe, materials, and personnel, which can delay workover and exploration activities and cause significant price increases.
The heavy and increasing regulatory burdens on the oil and natural gas industry increase our cost of doing business and, consequently, affect profitability. Our oil and natural gas operations are also subject to numerous federal, state and local laws and regulations relating to environmental protection.
The heavy and increasing regulatory burdens on the oil and natural gas industry increase our cost of doing business and, consequently, affect profitability.
As a result, our competitors may be able to pay more for desirable properties, or to evaluate, bid for and purchase a greater number of properties or prospects than our financial or personnel resources will permit. In addition to competition for drilling, pressure pumping and workover equipment, we are also affected by the availability of related equipment and materials.
Many of these competitors have financial, technical and personnel resources substantially larger than ours. As a result, our competitors may be able to pay more for desirable properties, or to evaluate, bid for and purchase a greater number of properties or prospects than our financial or personnel resources will permit.
The Starbuck Drilling Program’s first well came online in December 2023 and a total of five wells in the Upper Charles formation have been placed on production as of the filing date of this report. The Company is currently optimizing completions while increasing the core production through its enhanced oil recovery (“EOR”) program.
In the fourth quarter of 2023, the Company commenced a program to further develop its Starbuck Field located in North Dakota (the “Starbuck Drilling Program”). The Starbuck Drilling Program’s first well came online in December 2023 and a total of 13 wells in the Upper Charles formation have been placed in production as of the filing date of this report.
The data will then be added to the development plan while the vertical well will be placed on production in the first quarter of 2024. Empire Texas Empire Texas includes approximately 121 gross (106 net) producing wells on approximately 43,000 gross (30,000 net) acres as well as 77 miles of gathering lines and pipelines with related facilities and equipment.
Empire Texas Empire Texas includes approximately 119 gross (106 net) producing wells on approximately 43,000 gross (30,000 net) acres as well as 77 miles of gathering lines and pipelines with related facilities and equipment. Empire Texas owns concentrated acreage and stacked pay in the historically prolific East Texas Basin.
All prices and costs associated with operating wells were held constant in accordance with SEC guidelines. Prices of $75.45 per barrel of oil, $1.51 per Mcf and $9.82 per barrel of NGL were utilized at December 31, 2023. Prices of $91.14 per barrel and $4.23 per Mcf and $36.29 per barrel of NGL were utilized at December 31, 2022.
All prices and costs associated with operating wells were held constant in accordance with SEC guidelines. Prices of $71.66 per barrel of oil, $0.95 per Mcf and $24.54 per barrel of NGLs were utilized at December 31, 2024.
ITEM 1. BUSINESS. In this Form 10-K, references to “Empire”, the “Company”, “we”, “our”, and “us” refer to Empire Petroleum Corporation and its wholly-owned subsidiaries, unless context indicates otherwise. On March 8, 2022, our common stock began trading on the NYSE American under the symbol “EP” and CUSIP 292034303.
ITEM 1. BUSINESS. In this Form 10-K, references to “Empire”, the “Company”, “we”, “our”, and “us” refer to Empire Petroleum Corporation and its wholly-owned subsidiaries, unless context indicates otherwise. Overview Empire Petroleum Corporation is an independent energy company that engages in unlocking value in developed assets.
His qualifications include a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa in 1984 and he is a member of the Society of Petroleum Engineers. Mr. Weatherl has been estimating and evaluating reserves for over 35 years. The primary inputs to the reserve estimation process are technical information, financial data, ownership interest and production data.
He is also a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers. The primary inputs to the reserve estimation process are technical information, financial data, ownership interest and production data.
In addition, the Company has drilled a vertical appraisal well in the Starbuck Field to core two new target zones for development. The two new primary target zones of development have been successfully cored and the cores are under analysis.
The two new primary target zones of development have been successfully cored and the cores are under analysis. The data will then be added to a future development plan while the vertical wells have been placed in production during 2024.
At December 31, 2023 and 2022, we had approximately 1,000 gross (710 net) producing and injection wells.
At December 31, 2024 and 2023, we had approximately 1,072 gross (748 net) producing and injection wells. We have no firm delivery commitments for oil or natural gas.
Competition The oil and natural gas industry in the areas in which we operate is highly competitive. We encounter strong competition from numerous parties, ranging generally from small independent producers to major integrated companies. We primarily encounter significant competition in acquiring properties.
We encounter strong competition from numerous parties, ranging generally from small independent producers to major integrated companies. We primarily encounter significant competition in acquiring properties. At higher commodity prices, we also face competition in contracting for oil field services, rigs, pressure pumping and workover equipment, and securing trained personnel.
Empire New Mexico’s properties are in the following formations: · Grayburg/San Andres (primary source of production) · Queen-Seven Rivers-Yates · Devonian · Abo · Blineberry · Tubb · Drinkard We have begun technical work for uplift opportunities in New Mexico.
We also have 15 royalty interest (“RI”) wells with an average overriding royalty interest (“ORRI”) of 0.6%. Empire New Mexico’s assets primarily produce oil with accompanying natural gas and NGLs production. Empire New Mexico’s properties are located in Grayburg/San Andres (primary source of production), Queen-Seven Rivers-Yates, Devonian, Abo, Blineberry, Tubb, and Drinkard formations.
Empire Louisiana Empire Louisiana includes 12 gross (10 net) producing wells and three saltwater disposal wells in the Miocene, Frio, Cockfield, and Wilcox formations. Empire Louisiana’s assets primarily produce oil. Production and Operating Data The following table sets forth a summary of our production and operating data for the years ended December 31, 2023 and 2022.
In the fourth quarter of 2024, the Company initiated a return-to-production program on four wells primarily focused on facility work on the existing saltwater disposal system. 7 Empire Louisiana Empire Louisiana includes 7 gross (5 net) producing wells and three saltwater disposal wells in the Miocene, Frio, Cockfield, and Wilcox formations. Empire Louisiana’s assets primarily produce oil.
For 2023, 70% of revenues from oil, natural gas, and NGL sales were to three customers. For 2022, 68% of revenues from oil, natural gas, and NGL sales were to four customers.
For 2024, 78% of revenues from oil, natural gas, and NGLs sales were to four customers. For 2023, 70% of revenues from oil, natural gas, and NGLs sales were to four customers. No other purchaser accounted for more than 10% of our total revenues during the respective periods.
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Prior to trading on the NYSE American, our common stock was accessible on the OTCQB. Overview Empire Petroleum Corporation is an independent energy company that engages in unlocking value in developed assets.
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For additional information, see Note 18 – Segment Reporting of Notes to Consolidated Financial Statements.
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We also have 14 RI wells with an average ORRI of 11%. Empire New Mexico’s assets primarily produce oil with natural gas and NGLs accompanying oil production.
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The information we post on social media could be deemed to be material information.
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In the fourth quarter of 2023, the Company commenced a program to further develop its Starbuck Field located in North Dakota (the “Starbuck Drilling Program”). Empire expects 2024 to be a year of progress as it continues to advance the Starbuck Drilling Program.
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The Company is currently optimizing completions while increasing the core production through its enhanced oil recovery (“EOR”) program. As the Starbuck Field is strategically designed for EOR production, the Company has experienced an increase in production throughout 2024 which is anticipated to continue into 2025.
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The Company currently has one rig in the Starbuck Field.
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Estimates of economically recoverable oil and natural gas reserves depend on several variable factors, including but not limited to historical production from the area compared with production from other producing areas, and assumptions about: reservoir size; the effects of regulations by governmental agencies; future oil and natural gas prices; future operating costs; severance and excise taxes; operational risks; development costs; and workover and remedial costs.
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The following table represents our oil and natural gas reserves at December 31, 2023 and 2022.
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Some or all of these assumptions may vary considerably from actual results.
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The quantities of oil and natural gas that are ultimately recovered, production and operating costs, and future oil and natural gas prices may differ from those assumed in these estimates. Our internal professionals work closely with our external engineers to ensure the integrity, accuracy, and timeliness of data that is furnished to them for their reserve estimation process.
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For these and other reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any group of properties, classifications of those oil and natural gas reserves based on the risk of recovery, and estimates of the future net cash flows from oil, and natural gas reserves prepared by different engineers or by the same engineers but at different times may vary substantially.
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He is also a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers. Brian Weatherl, Vice President of Engineering for the Company, is responsible for our reservoir engineering, and is a qualified reserve estimator and is responsible for overseeing CG&A during the preparation of the annual reserve estimates.
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Such estimates may be subject to periodic downward or upward adjustments. Actual production, revenues, and expenditures regarding our oil, NGLs, and natural gas reserves will likely vary from estimates, and those variances may be material.
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His professional qualifications meet or exceed the qualifications of reserve estimators set forth in the “Standards Pertaining to Estimation and Auditing of Oil and Natural Gas Reserve Information” promulgated by the Society of Petroleum Engineers.
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Our reserves database is updated and maintained by our Senior Reserves Engineer who has the appropriate technical qualifications to maintain and assist in the preparation of reserve estimates. The Senior Reserves Engineer has over 40 years of industry experience, a degree in engineering from Tulane University in 1978, a licensed professional, and holds several memberships in professional petroleum engineer organizations.
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All current financial data such as commodity prices, lease operating expenses, production taxes and field level commodity price differentials are updated in the reserve database and then analyzed to ensure that they have been entered accurately and that all updates are complete.
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Once the reserves database has been appropriately updated, Empire will meet with CG&A who will then review the relevant information and validate the estimates. CG&A will work with the Senior Reserves Engineer to resolve any differences in reserve estimates. CG&A will then finalize the reserve report once any differences are resolved and provide a final report to the Company.
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Our ownership in mineral interests and well production data are subject to internal controls and are incorporated into the reserve database as well as verified internally by our personnel to ensure accuracy and completeness.
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We anticipate that the prices of oil and natural gas will fluctuate in the near future. Title to Properties Our title to properties are subject to royalty, overriding royalty, carried, net profits, working and other similar interests and contractual arrangements customary in the oil and natural gas industry, to liens for current taxes not yet due and to other encumbrances.
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Once the reserve database has been updated with current information, and the relevant technical support material has been assembled, CG&A meets with technical personnel to review field performance and future development plans in order to verify the validity of estimates.
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As is customary in the industry in the case of undeveloped properties, only cursory investigation of record title is made at the time of acquisition. Drilling title opinions are usually prepared before commencement of drilling operations.
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Following these reviews, the reserve database is furnished to CG&A so that it can prepare its independent reserve estimate and final report. The reserve estimates prepared by CG&A are reviewed and compared to internal estimates by Mr. Weatherl. Material reserve estimation differences are reviewed between CG&A and our technical personnel and additional data is provided to address any variances.
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We believe we have satisfactory title to substantially all of our active properties in accordance with standards generally accepted in the natural gas and oil industry. Nevertheless, we are involved in title disputes from time to time that may result in litigation.
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If the supporting documentation does not justify additional changes, CG&A reserves are accepted. In the event that additional data supports a reserve estimation adjustment, CG&A will analyze the additional data and may make changes it solely deems necessary. Additional data is usually comprised of updated production information on new wells.
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The Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”), also known as the Superfund law, and comparable state statutes impose strict, joint and several liabilities on owners and operators of sites and on persons who disposed of or arranged for the disposal of “hazardous substances” found at such sites.
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Once the review is completed and all material differences are reconciled the reserve report is finalized and our reserve database is updated with the final estimates provided by CG&A. 8 Marketing Arrangements We market our oil and natural gas in accordance with standard energy industry practices.
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These persons include the owner or operator of the site where the release occurred, persons who disposed or arranged for the disposal of hazardous substances at the site, and any person who accepted hazardous substances for transportation to the site.
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At higher commodity prices, we also face competition in contracting for oil field services, rigs, pressure pumping and workover equipment and securing trained personnel. Many of these competitors have financial, technical and personnel resources substantially larger than ours.
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CERCLA authorizes the EPA, state environmental agencies, and in some cases third parties, to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur.
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These laws and regulations may impose substantial liabilities if we fail to comply or if any contamination resu lts from our operations. Employees At December 31, 2023, we had 50 full-time employees, not including contract personnel and outsourced service providers.
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It is not uncommon for the neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.
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Although CERCLA currently excludes petroleum from its definition of “hazardous substance,” state laws affecting our operations may impose clean-up liability relating to petroleum and petroleum related products. 10 Our oil and natural gas operations are also subject to numerous federal, state and local laws and regulations relating to environmental protection.
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These laws and regulations may impose substantial liabilities if we fail to comply or if any contamination results from our operations. Various state governments and regional organizations comprising state governments have enacted legislation and promulgated rules restricting GHG emissions or promoting the use of renewable energy, and additional such measures are frequently under consideration.
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Although it is not possible at this time to estimate how potential future requirements addressing GHG emissions would impact operations on the Company properties and revenue, either directly or indirectly, any future federal, state or local laws or implementing regulations that may be adopted to address GHG emissions could require the operators of our properties to incur new or increased costs to obtain permits, operate and maintain equipment and facilities, install new emission controls, acquire allowances to authorize GHG emissions, pay taxes related to GHG emissions or administer a GHG emissions program.
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Regulation of GHGs could also result in a reduction in demand for and production of oil and natural gas. Additionally, to the extent that unfavorable weather conditions are exacerbated by global climate change or otherwise, the Company properties may be adversely affected to a greater degree than previously experienced.
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Our sales of crude oil are affected by the availability, terms, and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate regulation. The Federal Energy Regulatory Commission (“FERC”), regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions.
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The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state.
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Insofar as effective interstate and intrastate rates are equally applicable to all comparable shippers, we believe that the regulation of oil transportation rates will not affect our operations in any way that is of material difference from those of our competitors. Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a final note, climate change could have an effect on the severity of weather (including hurricanes, droughts and floods), sea levels, water availability and quality, and meteorological patterns. If such effects were to occur, our development and production operations have the potential to be adversely affected.
Biggest changeThe increasing attention to climate change may result in further claims or investigations against us, and heightened societal or political pressures may increase the possibility that liability could be imposed on us in such matters without regard to our causation of, or contribution to, the asserted damage or violation, or to other mitigating factors. 19 As a final note, climate change could have an effect on the severity of weather (including hurricanes, droughts and floods), sea levels, water availability and quality, and meteorological patterns.
The price of our common stock may fluctuate significantly, which could negatively affect us and holders of our common stock. Our common stock trades on the NYSE American. The trading price of our common stock may fluctuate significantly in response to a number of factors, many of which are beyond our control.
The price of our common stock may fluctuate significantly, which could negatively affect us and the holders of our common stock. Our common stock trades on the NYSE American. The trading price of our common stock may fluctuate significantly in response to a number of factors, many of which are beyond our control.
Increases in the level of indebtedness could have adverse effects on our financial condition and results of operations, including: · imposing additional cash requirements on us in order to support interest payments, which reduces the amount we have available to fund our operations and other business activities; · increasing the risk that we may default on our debt obligations; · increasing our vulnerability to adverse changes in general economic and industry conditions, economic downturns and adverse developments in our business; · limiting our ability to sell assets, engage in strategic transactions or obtain additional financing for working capital, capital expenditures, general corporate and other purposes; · limiting our flexibility in planning for or reacting to changes in our business and the industry in which we operate; and · increasing our exposure to a rise in interest rates, which will generate greater interest expense.
Increases in the level of indebtedness could have adverse effects on our financial condition and results of operations, including: · imposing additional cash requirements on us in order to support interest payments, which reduces the amount we have available to fund our operations and other business activities; 13 · increasing the risk that we may default on our debt obligations; · increasing our vulnerability to adverse changes in general economic and industry conditions, economic downturns and adverse developments in our business; · limiting our ability to sell assets, engage in strategic transactions or obtain additional financing for working capital, capital expenditures, general corporate and other purposes; · limiting our flexibility in planning for or reacting to changes in our business and the industry in which we operate; and · increasing our exposure to a rise in interest rates, which will generate greater interest expense.
Also, institutional lenders may decide not to provide funding for fossil fuel energy companies based on climate change related concerns, which could affect our access to capital for potential growth projects. General Operations The oil and natural gas industry is highly competitive, and our size may put us at a disadvantage in competing for resources.
Also, institutional lenders may decide not to provide funding for fossil fuel energy companies based on climate change related concerns, which could affect our access to capital for potential growth projects. 15 General Operations The oil and natural gas industry is highly competitive, and our size may put us at a disadvantage in competing for resources.
Potential adverse effects could include damages to our facilities from powerful winds, extreme temperatures, or rising waters in low-lying areas, disruption of our production activities either because of climate related damages to our facilities or in our costs of operation potentially arising from such climatic effects, less efficient or non- routine operating practices necessitated by climate effects or increased costs for insurance coverage in the aftermath of such effects.
Potential adverse effects could include damage to our facilities from powerful winds, extreme temperatures, or rising waters in low-lying areas, disruption of our production activities either because of climate related damages to our facilities or in our costs of operation potentially arising from such climatic effects, less efficient or non- routine operating practices necessitated by climate effects or increased costs for insurance coverage in the aftermath of such effects.
We have no control over the operations or activities of offsetting operators. 16 Acquisitions involve a number of risks, including the risk that we will discover unanticipated liabilities or other problems associated with the acquired business or property. In assessing potential acquisitions, we consider information available in the public domain and information provided by the seller.
We have no control over the operations or activities of offsetting operators. Acquisitions involve a number of risks, including the risk that we will discover unanticipated liabilities or other problems associated with the acquired business or property. In assessing potential acquisitions, we consider information available in the public domain and information provided by the seller.
There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our exploration and development activities. 20 Other A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our exploration and development activities. Other A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
Moreover, President Biden highlighted addressing climate change as a priority of his administration, issued several executive orders related to climate change and recommitted the United States to long-term international goals to reduce emissions, and continues to require the incorporation of climate change considerations into executive agency decision-making.
Moreover, Former President Biden highlighted addressing climate change as a priority of his administration, issued several executive orders related to climate change and recommitted the United States to long-term international goals to reduce emissions, and continues to require the incorporation of climate change considerations into executive agency decision-making.
Our ability to meet our debt obligations and reduce our level of indebtedness depends on future performance, which is affected by general economic conditions and financial, business and other factors, many of which are outside of the scope of management’s control. 12 Our business requires substantial capital expenditures.
Our ability to meet our debt obligations and reduce our level of indebtedness depends on future performance, which is affected by general economic conditions and financial, business and other factors, many of which are outside of the scope of management’s control. Our business requires substantial capital expenditures.
President Biden signed an executive order calling for the development of a “climate finance plan” and, separately, the Federal Reserve has joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector.
Former President Biden signed an executive order calling for the development of a “climate finance plan” and, separately, the Federal Reserve has joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector.
Consequently, they will not reflect the prices ordinarily received or that will be received for oil and natural gas production because of varying market conditions, nor may they reflect the actual costs that will be required to produce or develop the oil and natural gas properties.
Consequently, it will not reflect the prices ordinarily received or that will be received for oil and natural gas production because of varying market conditions, nor may they reflect the actual costs that will be required to produce or develop the oil and natural gas properties.
Estimates of economically recoverable oil and natural gas reserves and of future net cash flows depend upon a number of variable factors and assumptions, including the following: · historical production from the area compared with production from other producing areas; · the assumed effects of regulations by governmental agencies; · the quality, quantity and interpretation of available relevant data; · assumptions concerning future commodity prices; and · assumptions concerning future operating costs, severance and ad valorem taxes, development costs and workover and remedial costs.
Estimates of economically recoverable oil and natural gas reserves and of future net cash flows depend upon a number of variable factors and assumptions, including the following: · historical production from the area compared with production from other producing areas; · the assumed effects of regulations by governmental agencies; · the quality, quantity and interpretation of available relevant data; · assumptions concerning future commodity prices; and · assumptions concerning future operating costs, severance and ad valorem taxes, development costs and workover costs including remediation.
President Biden has issued several executive orders focused on addressing climate change, including items that may impact costs to produce, or demand for, oil and gas. There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies may elect in the future to shift some or all of their investments into other sectors.
Former President Biden issued several executive orders focused on addressing climate change, including items that may impact costs to produce, or demand for, oil and gas. There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies may elect in the future to shift some or all of their investments into other sectors.
Our actual production, revenues and expenditures with respect to reserves will likely be different from estimates and the differences may be material. 11 As required by the SEC, the estimated discounted future net cash flows from proved reserves are based on the average previous twelve months first-of-month prices preceding the date of the estimate and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower.
Our actual production, revenues and expenditures with respect to reserves will likely be different from estimates and the differences may be material. 12 As required by the SEC, the estimated discounted future net cash flows from proved reserves are based on the average previous twelve months first-of-month prices preceding the date of the estimate and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower.
If oil, natural gas and NGL prices fall below current levels for an extended period of time and all other factors remain equal, we may incur impairment charges in the future. Such charges could have a material adverse effect on our results of operations for the periods in which they are recorded.
If oil, natural gas and NGLs prices fall below current levels for an extended period of time and all other factors remain equal, we may incur impairment charges in the future. Such charges could have a material adverse effect on our results of operations for the periods in which they are recorded.
Our two largest stockholders, Energy Evolution Master Fund, Ltd. and Phil Mulacek, have been a significant source of capital for our acquisitions of oil and natural gas properties and the development of our oil and natural gas reserves. We have been dependent on this capital to fund our growth plans, including our current drilling programs.
Our two largest stockholders, Energy Evolution Master Fund, Ltd. (“Energy Evolution”) and Phil Mulacek, have been a significant source of capital for our acquisitions of oil and natural gas properties and the development of our oil and natural gas reserves. We have been dependent on this capital to fund our growth plans, including our current drilling programs.
Reserves The Standardized Measure and PV-10 of estimated reserves may not be accurate estimates of the current fair value of estimated proved oil and natural gas reserves. Standardized Measure is a reporting convention that provides a common basis for comparing oil and natural gas companies subject to the rules and regulations of the SEC.
Reserves The Standardized Measure of estimated reserves may not be accurate estimates of the current fair value of estimated proved oil and natural gas reserves. Standardized Measure is a reporting convention that provides a common basis for comparing oil and natural gas companies subject to the rules and regulations of the SEC.
In addition, declines in oil, natural gas and NGL prices may increase the likelihood that some of these working interest owners, particularly those that are smaller and less established, are not able to fulfill their joint activity obligations.
In addition, declines in oil, natural gas and NGLs prices may increase the likelihood that some of these working interest owners, particularly those that are smaller and less established, are not able to fulfill their joint activity obligations.
We have six shares of Series A Voting Preferred Stock currently issued and outstanding. The Series A Voting Preferred Stock was issued in connection with the strategic investment in us by Energy Evolution Master Fund, Ltd. For so long as the Series A Voting Preferred Stock is outstanding, our board of directors will consist of six directors.
We have six shares of Series A Voting Preferred Stock currently issued and outstanding. The Series A Voting Preferred Stock was issued in connection with the strategic investment in us by Energy Evolution. For so long as the Series A Voting Preferred Stock is outstanding, our board of directors will consist of six directors.
Additionally, utilization of any NOL depends on many factors, including our ability to generate future taxable income, which cannot be assured. At December 31, 2023, we had a tax valuation allowance recorded on the NOLs.
Additionally, utilization of any NOL depends on many factors, including our ability to generate future taxable income, which cannot be assured. At December 31, 2024, we had a full tax valuation allowance recorded on the NOLs.
A full Section 382 analysis was prepared in 2023 and it was determined that our NOLs were subject to limitations under Section 382.
A full Section 382 analysis was prepared in 2024, and it was determined that our NOLs were subject to limitations under Section 382.
Therefore, Standardized Measure and PV-10 included in this report should not be construed as accurate estimates of the current market value of our proved reserves. Estimates of proved reserves and future net cash flows are not precise. The actual quantities of our proved reserves and future net cash flows may prove to be lower than estimated.
Therefore, the Standardized Measure included in this report should not be construed as an accurate estimate of the current market value of our proved reserves. Estimates of proved reserves and future net cash flows are not precise. The actual quantities of our proved reserves and future net cash flows may prove to be lower than estimated.
At December 31, 2023, all of our total estimated proved reserves were attributable to properties located in these areas.
At December 31, 2024, all of our total estimated proved reserves were attributable to properties located in these areas.
General market conditions, including the level of, and fluctuations in, the trading prices of stocks generally could also have a similar negative impact. The stock markets regularly experience price and volume volatility that affects many companies’ stock prices without regard to the operating performance of those companies.
General market conditions, including the level of, and fluctuations in, the trading prices of stocks generally could also have a similar negative impact. The stock markets regularly experience price and volume volatility that affects many companies’ stock prices without regard to the operating performance of those companies. Volatility of this type may affect the trading price of our common stock.
At December 31, 2023, we had approximately $24.3 million of federal NOLs generated in prior years that could offset against future taxable income, however, $4.7 million of the NOLs were limited as of December 31, 2023 due to ownership changes. NOLs created prior to 2018 have a 20-year expiration period and NOLs arising after 2017 have an indefinite life.
At December 31, 2024, we had approximately $35.8 million of federal NOLs generated in prior years that could offset against future taxable income, however, $2.4 million of the NOLs were limited as of December 31, 2024 due to ownership changes. NOLs created prior to 2018 have a 20-year expiration period and NOLs arising after 2017 have an indefinite life.
Volatility of this type may affect the trading price of our common stock. 21 Provisions of our certificate of incorporation and bylaws and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for our common stock.
Provisions of our certificate of incorporation and bylaws and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for our common stock.
The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business. We have had material weaknesses in our internal control over financial reporting in prior fiscal years.
We depend greatly on the efforts of our executive officers and other key employees to manage our operations. The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business. We have had material weaknesses in our internal control over financial reporting in prior fiscal years.
This exclusive forum provision is intended to apply to claims arising under Delaware state law and is not intended to apply to claims arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
This exclusive forum provision is intended to apply to claims arising under Delaware state law and is not intended to apply to claims arising under the Securities Act or the Exchange Act.
Our dependence on the operators and other working interest owners for these projects and our limited ability to influence operations and associated costs could prevent the realization of our targeted returns on capital with respect to acquisition, exploration and development activities.
Our ability to exercise influence over operations and costs for the properties we do not operate is limited. Our dependence on the operators and other working interest owners for these projects and our limited ability to influence operations and associated costs could prevent the realization of our targeted returns on capital with respect to acquisition, exploration and development activities.
Lower prices also negatively impact the value of our proved reserves. Volatility in the price of oil could force us (as well as other operators) to re-evaluate our current capital expenditure budget and make changes accordingly that we believe are in the best interest of us and our stockholders.
Volatility in the price of oil could force us, as well as other operators, to re-evaluate our current capital expenditure budget and make changes accordingly that we believe are in the best interest of us and our stockholders.
These factors include, but are not limited to, the following: · changes in global supply and demand for oil and natural gas, which could be negatively affected by concerns about public health crises, pandemics and epidemics, such as the COVID-19 pandemic; · the price and quantity of imports of foreign oil and natural gas; · political conditions, including trade or other economic sanctions, armed conflict in Ukraine and the Middle East, the price cap on Russian oil and embargoes, in or affecting other oil-producing activity; · the level of global oil and natural gas exploration and production activity; · the level of global oil and natural gas inventories; · weather conditions, including extreme climatic events; · technological advances affecting energy consumption; and · the price and availability of alternative fuels. 14 Lower oil and natural gas prices may not only decrease our revenues on a per unit basis but also may reduce the amount of oil and natural gas that we can produce economically.
These factors include, but are not limited to, the following: · changes in global supply and demand for oil and natural gas, which could be negatively affected by concerns about public health crises, pandemics and epidemics, such as the COVID-19 pandemic; · the price and quantity of imports of foreign oil and natural gas; · political conditions, including trade or other economic sanctions, armed conflict in Ukraine and the Middle East, the price cap on Russian oil and embargoes, in or affecting other oil-producing activity; · the level of global oil and natural gas exploration and production activity; · the level of global oil and natural gas inventories; · weather conditions, including extreme climatic events; · technological advances affecting energy consumption; and · the price and availability of alternative fuels.
If our operating performance declines, we may need to obtain waivers under the Credit Facility to avoid being in default.
If our operating performance declines, we may need to obtain waivers under the Credit Facility, and have done so in the past, to avoid being in default.
In the event any of our project partners do not pay their share of such costs, we would likely have to pay those costs, and we may be unsuccessful in any efforts to recover these costs from our partners, which could materially adversely affect our financial position. 18 Because we cannot control activities on properties we do not operate, we cannot directly control the timing of exploitation.
In the event any of our project partners do not pay their share of such costs, we would likely have to pay those costs, and we may be unsuccessful in any efforts to recover these costs from our partners, which could materially adversely affect our financial position.
Legislation Climate change legislation, regulations restricting emissions of “greenhouse gases” (GHG’s) or legal or other action taken by public or private entities related to climate change could result in increased operating costs and reduced demand for the oil and natural gas that we produce.
Legislation Climate change legislation, regulations restricting emissions of GHG’s or legal or other action taken by public or private entities related to climate change could result in increased operating costs and reduced demand for the oil and natural gas that we produce. The threat of climate change continues to attract considerable attention in the United States and around the world.
Our total indebtedness at December 31, 2023 was $5.7 million. At December 31, 2023, commitments from a financial institution under a Revolving Credit Facility (the “Credit Facility”) with Empire North Dakota and Empire NDA were approximately $10.0 million, of which approximately $5.5 million was unused and approximately $4.5 million was outstanding.
Our total indebtedness at December 31, 2024, was $11.3 million. At December 31, 2024, commitments from a financial institution under a Revolving Credit Facility (the “Credit Facility”) with Empire North Dakota and Empire NDA were approximately $19.8 million, of which approximately $8.7 million was unused and approximately $11.1 million was outstanding.
If we are unable to comply with the covenants in our agreements governing our indebtedness, including the Credit Facility, there could be a default under the terms of such agreements, which could result in an acceleration of payment of funds that we have borrowed.
The loss of this capital could have a material adverse effect on our business, especially our growth plans. 14 If we are unable to comply with the covenants in our agreements governing our indebtedness, including the Credit Facility, there could be a default under the terms of such agreements, which could result in an acceleration of payment of funds that we have borrowed.
The final rules make existing regulations more stringent, expand the scope of source types covered by the rules and require states to develop plans to reduce methane and volatile organic compound emissions from existing sources. These new rules will likely be subject to legal challenges.
The final rules make existing regulations more stringent, expand the scope of source types covered by the rules and require states to develop plans to reduce methane and volatile organic compound emissions from existing sources. These new rules have been subject to legal challenges. The Trump Administration may seek to revise or repeal these rules.
These regulations subject us to increased operating costs and potential liability associated with the use and disposal of hazardous materials. Although these laws and regulations have not had a material adverse effect on our financial condition or results of operations, there can be no assurance that we will not be required to make material expenditures in the future.
Although these laws and regulations have not had a material adverse effect on our financial condition or results of operations, there can be no assurance that we will not be required to make material expenditures in the future.
The threat of climate change continues to attract considerable attention in the United States and around the world. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.
Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.
Alternatively, if a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Alternatively, if a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. The credit risk of our counterparties could adversely affect us.
The success and timing of development, exploitation and exploration activities on properties operated by others depend upon a number of factors that may be outside our control, including but not limited to the timing and amount of capital expenditures; the operator’s expertise and financial resources; the approval of other participants in drilling wells; and the selection of technology.
The success and timing of development, exploitation and exploration activities on properties operated by others depend upon a number of factors that may be outside our control, including but not limited to the timing and amount of capital expenditures; the operator’s expertise and financial resources; the approval of other participants in drilling wells; and the selection of technology. 20 Where we are not the majority owner or operator of a particular oil and natural gas project, we may have no control over the timing or amount of capital expenditure associated with the project.
If we do seek to refinance existing indebtedness, there can be no guarantee that we would be able to execute the refinancing on favorable terms or at all.
Management continues to review existing indebtedness, and may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate existing indebtedness. If we do seek to refinance existing indebtedness, there can be no guarantee that we would be able to execute the refinancing on favorable terms or at all.
We are subject to various environmental risks, and governmental regulation relating to environmental matters. We are subject to a variety of federal, state and local governmental laws and regulations related to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous materials.
We are subject to a variety of federal, state and local governmental laws and regulations related to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous materials. These regulations subject us to increased operating costs and potential liability associated with the use and disposal of hazardous materials.
We periodically assess our properties for impairment based on future estimates of proved and non-proved reserves, oil and natural gas prices, production rates and operating, development and reclamation costs based on operating budget forecasts.
These types of charges will reduce our earnings and stockholders’ equity and could adversely affect our stock price. 17 We periodically assess our properties for impairment based on future estimates of proved and unproved reserves, oil and natural gas prices, production rates and operating, development and reclamation costs based on operating budget forecasts.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. A cyber incident involving our information systems and related infrastructure, or that of our business partners, could disrupt our business plans and negatively impact our operations.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
To date, expenditures related to complying with these laws and for remediation of existing environmental contamination have not been significant in relation to our operations.
To date, expenditures related to complying with these laws and for remediation of existing environmental contamination have not been significant in relation to our operations. There can be no assurance that the trend of more expansive and stricter environmental legislation and regulations will not continue.
Our operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which we may conduct oil, natural gas and NGL exploration and production activities, and reduce demand for the oil, natural gas and NGL we produce.
The challenges involved in the integration process may include retaining key employees and maintaining employee morale, addressing differences in business cultures, processes and systems and developing internal expertise regarding acquired properties. 18 Our operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which we may conduct oil, natural gas, and NGLs exploration and production activities, and reduce demand for the oil, natural gas, and NGLs we produce.
Our bylaws provide that the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for certain legal actions between us and our stockholders.
Accordingly, the holder(s) of our Series A Voting Preferred Stock have effective control of our board of directors for so long as the voting rights of the Series A Voting Preferred Stock remain in effect. 23 Our bylaws provide that the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for certain legal actions between us and our stockholders.
Much of the investor community has developed negative sentiment towards investing in our industry over the past few years. Recent equity returns in the sector versus other industry sectors have led to lower oil and gas representation in certain key equity market indices.
Recent equity returns in the sector versus other industry sectors have led to lower oil and gas representation in certain key equity market indices.
If we are unable to fund required capital expenditures with respect to non-operated properties, our interests in those properties may be reduced or forfeited. Our ability to exercise influence over operations and costs for the properties we do not operate is limited.
Because we cannot control activities on properties we do not operate, we cannot directly control the timing of exploration. If we are unable to fund required capital expenditures with respect to non-operated properties, our interests in those properties may be reduced or forfeited.
If we breach our covenants and cannot obtain a waiver from the required lender, we would be in default and the lender could exercise its rights, as described above, and we could be forced into bankruptcy or liquidation. 13 A negative shift in stakeholder sentiment towards the oil and natural gas industry and increased attention to ESG matters and conservation matters could adversely affect our ability to raise equity and debt capital.
If we breach our covenants and cannot obtain a waiver from the required lender, we would be in default and the lender could exercise its rights, as described above, and we could be forced into bankruptcy or liquidation.
The adoption of legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or to comply with new regulatory or reporting requirements.
The full impact of these actions is uncertain at this time, and it is unclear what additional initiatives may be adopted or implemented that may have adverse effects upon our operations. 21 The adoption of legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or to comply with new regulatory or reporting requirements.
This concentration of assets exposes us to additional risks, such as changes in field-wide rules and regulations that could cause us to permanently or temporarily shut-in all of our wells within a field. Our insurance policies may not adequately protect us against certain unforeseen risks.
This concentration of assets exposes us to additional risks, such as changes in field-wide rules and regulations that could cause us to permanently or temporarily shut-in all of our wells within a field. A significant portion of our oil, natural gas, and NGLs sales are concentrated in only a few purchasers, which increases our exposure to substantial sales interruptions.
Management may be required to dedicate significant time and effort to the integration process, which could divert its attention from other business opportunities and concerns. The challenges involved in the integration process may include retaining key employees and maintaining employee morale, addressing differences in business cultures, processes and systems and developing internal expertise regarding acquired properties.
Management may be required to dedicate significant time and effort to the integration process, which could divert its attention from other business opportunities and concerns.
The emissions fee and funding provisions of the law could increase operating costs within the oil and natural gas industry and accelerate the transition away from fossil fuels, which could in turn adversely affect our business and results of operations. 19 At the international level, the United Nations ("UN") -sponsored "Paris Agreement" requires member states to submit non-binding, individually-determined reduction goals known as Nationally Determined Contributions every five years after 2020.
The emissions fee and funding provisions of the law could increase operating costs within the oil and natural gas industry and accelerate the transition away from fossil fuels, which could in turn adversely affect our business and results of operations.
The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business. W e depend greatly on the efforts of our executive officers and other key employees to manage our operations.
A cyber incident involving our information systems and related infrastructure, or that of our business partners, could disrupt our business plans and negatively impact our operations. 22 The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business.
There can be no assurance that the trend of more expansive and stricter environmental legislation and regulations will not continue. 15 If forecasted prices for oil, natural gas and NGL decrease, we may be required to take significant future write-downs of the financial carrying values of our properties in the future.
If forecasted prices for oil, natural gas, and NGLs decrease, we may be required to take significant future write-downs of the financial carrying values of our properties in the future. Accounting rules require that we periodically review the carrying value of our proved and unproved properties for possible impairment.
In accordance with customary industry practice, we maintain insurance against some, but not all, of the risks described in this report. There can be no assurance that any insurance will be adequate to cover our losses or liabilities. We cannot predict the continued availability of insurance, or its availability at premium levels that justify its purchase.
There can be no assurance that any insurance will be adequate to cover our losses or liabilities. We cannot predict the continued availability of insurance, or its availability at premium levels that justify its purchase. Hedging transactions may expose us to risk of financial loss or limit participation in commodity price increases and involve other risks.
If we are unable to replace our current and future production, cash flows and the value of reserves may decrease, adversely affecting our business, financial condition and results of operations. Financing We have indebtedness and may incur substantially more debt. Higher levels of indebtedness make us more vulnerable to economic downturns and adverse business developments.
If we are unable to replace our current and future production, cash flows and the value of reserves may decrease, adversely affecting our business, financial condition and results of operations. New technologies may cause our exploration and development methods to become obsolete, causing an adverse effect on our production.
President Biden has recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing the United States' emissions by 50 to 52% below 2005 levels by 2030. Various U.S. states and local governments have also publicly committed to furthering the goals of the Paris Agreement.
Former President Biden recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing the United States' emissions by 50 to 52% below 2005 levels by 2030. Subsequent UN climate conferences have called for additional action to transition away from fossil fuels or otherwise reduce GHG emissions.
Unproved properties are evaluated at the lower of cost or fair market value. These types of charges will reduce our earnings and stockholders’ equity and could adversely affect our stock price.
Unproved properties are evaluated at the lower of cost or fair market value.
PV-10, a non-GAAP (Generally Accepted Accounting Principles) financial measure, is a similar reporting convention that we have disclosed in this report. Both measures require the use of operating and development costs prevailing as of the date of computation.
This measure requires the use of operating and development costs prevailing as of the date of computation.
Removed
In addition, we had approximately $1.1 million outstanding under a joint development agreement with a related party as of December 31, 2023 (See Note 4 of Notes to Consolidated Financial Statements). Management continues to review existing indebtedness, and may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate existing indebtedness.
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Our industry is subject to rapid and significant technological advancements, including the introduction of new products and services using new technologies. As competitors use or develop new technologies, we may be at a competitive disadvantage, and competitive pressures may force us to implement new technologies at a substantial cost.
Removed
The loss of this capital could have a material adverse effect on our business, especially our growth plans.
Added
In addition, our competitors may have greater financial, technical, and personnel resources that allow them to enjoy technological advantages and may allow them to implement new technologies before we can. We cannot be sure that we can implement technologies timely or at an acceptable cost.
Removed
Accounting rules require that we periodically review the carrying value of our proved and unproved properties for possible impairment.
Added
One or more technologies we use or that we may implement may become obsolete or may not work as we expected, and we may be hurt financially and operationally as a result. Financing We have indebtedness and may incur substantially more debt. Higher levels of indebtedness make us more vulnerable to economic downturns and adverse business developments.
Removed
For example, at COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that over 450 firms in the financial sector across 45 countries committed to net zero goals. The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero emissions by 2050.
Added
A negative shift in stakeholder sentiment towards the oil and natural gas industry and increased attention to ESG matters and conservation matters could adversely affect our ability to raise equity and debt capital. Much of the investor community has developed negative sentiment towards investing in our industry over the past few years.
Removed
In November 2021, the Federal Reserve issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities.
Added
Lower oil and natural gas prices may not only decrease our revenues on a per unit basis but also may reduce the amount of oil and natural gas that we can produce economically. Lower prices also negatively impact the value of our proved reserves.
Removed
Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities. 17 Additionally, in March 2024, the SEC issued a final rule that requires a public company to disclose, among other things, material climate-related risks, activities to mitigate or adapt to such risks, information about the company’s board of directors' oversight of climate-related risks and management’s role in managing material climate-related risks, and information on any climate-related targets or goals that are material to the company’s business, results of operations, or financial condition.
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For the year ended December 31, 2024, the Company sold 78% of its oil, natural gas, and NGLs revenues to four customers. No other customer made up more than 10%.
Removed
The final rule also requires, on a phased-in basis, disclosure of Scope 1 and/or Scope 2 GHG emissions by certain larger public companies, which currently would not apply to Empire given its size, when those emissions are material and the filing of an attestation report covering the required disclosure of such company’s Scope 1 and/or Scope 2 emissions.
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As a result of this concentration, we are exposed to the impact of our sales if one of these customers fails to meet their obligations or ceases its relationship with the Company.
Removed
The new rule is already subject to legal challenges. Although the ultimate impact of the new rule on our business is uncertain given such legal challenges, compliance with the new rule, if upheld, may result in additional legal, accounting and financial compliance costs.
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The loss in revenues may result in a disruption in the Company’s cash flows limiting the ability to meet its obligations or investing in capital projects. 16 Our insurance policies may not adequately protect us against certain unforeseen risks. In accordance with customary industry practice, we maintain insurance against some, but not all, of the risks described in this report.
Removed
Where we are not the majority owner or operator of a particular oil and natural gas project, we may have no control over the timing or amount of capital expenditures associated with the project.
Added
While intended to reduce the effects of volatile oil and natural gas prices, derivative contracts designed as hedges expose us to risk of financial loss in some circumstances, including when there is a change in the expected differential between the underlying price in the derivative contract and actual prices received, or when the counterparty to the derivative contract defaults on its contractual obligations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese include, but are not limited to, an understanding of access controls, a records and information management policy, change control procedures, risk and control registry, attestation report reviews, and configuration standards. Employee awareness of cybersecurity risks and threats is also an important part of an effective control environment. We periodically communicate to employees about this cybersecurity awareness.
Biggest changeWe are actively assessing the technological risks to our key IT systems and information and are implementing controls to identify and manage cybersecurity risks associated with all third-party service providers. These include, but are not limited to, an understanding of access controls, a records and information management policy, change control procedures, risk and control registry, and configuration standards.
There can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies and procedures will be effective. Our risk factors, which can found be found in Item 1A. “Risk Factors,” include further detail about the material cybersecurity risks we face.
There can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies and procedures will be effective. Our risk factors, which can be found in Item 1A. “Risk Factors,” include further detail about the material cybersecurity risks we face.
Our cybersecurity program will consist of policies, procedures, systems, controls and technology designed to help prevent, identify, detect and mitigate cybersecurity risk and will be based on a cybersecurity framework, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity framework. 22 To protect our IT systems and information from cybersecurity risks, we, through our third-party provider, use various security tools that help prevent, identify, escalate, investigate, resolve, and recover from identified cybersecurity vulnerabilities and incidents in a timely manner.
Our cybersecurity program consists of policies, procedures, systems, controls and technology designed to help prevent, identify, detect and mitigate cybersecurity risk and will be based on a cybersecurity framework, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity framework. 24 To protect our IT systems and information from cybersecurity risks, we use and continue to implement various security tools that help prevent, identify, escalate, investigate, resolve, and recover from identified cybersecurity vulnerabilities and incidents in a timely manner.
Governance Our Audit Committee has oversight of our cybersecurity risk processes, as part of its overall oversight of our risk management program. Our CFO is informed about and facilitates prevention, detection, mitigation, and remediation efforts through regular communication and reporting from the third party provider.
Governance Our Audit Committee has oversight of our cybersecurity risk processes, as part of its overall oversight of our risk management program. Our Chief Executive Officer is informed about and facilitates prevention, detection, mitigation, and remediation efforts through regular communication and reporting from our IT Director.
As a part of this process, we have engaged an independent third-party specialist to review our cybersecurity environment, including formal reviews and assessments, and we have requested specific, actionable recommendations for improvement and implementation.
As a part of this process, we engaged and worked with an independent third-party specialist to review our cybersecurity environment, which included a formal review and assessment, and determined specific, actionable recommendations for improvement and implementation.
There can be no assurance that there will not be incidents in the future or that they will not materially affect us, including our business strategy, results of operations, or financial condition. Risk Management and Strategy Overview Currently, we rely on our third party for much of our cybersecurity efforts.
There can be no assurance that there will not be incidents in the future or that they will not materially affect us, including our business strategy, results of operations, or financial condition.
Internally, we are working towards formally employing and documenting a risk-based approach to cybersecurity which aligns with corporate strategy, risk management and governance, and adaptable information technology (“IT”) infrastructure.
Risk Management and Strategy Overview We continue the process of designing and implementing a formal risk-based approach to cybersecurity which aligns with corporate strategy, risk management and governance, and adaptable information technology (“IT”) infrastructure.
Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks to our IT systems and information.
This should lead to an educated, informed, and prepared workforce, with an awareness of potential cybersecurity threats, how they may occur, and how to report and escalate such matters. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks to our IT systems and information.
ITEM 1C. CYBERSECURITY. The Company, with the assistance of a third party, has policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats.
ITEM 1C. CYBERSECURITY. The Company continues to implement policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats. We employ a variety of tools designed to identify, assess and maintain security measures to meet regulatory requirements, and possess technical personnel to maintain the security of our data and cybersecurity infrastructure.
In 2024, we plan to require each of our employees to complete annual information security training, in addition to other training requirements. This should lead to an educated, informed, and prepared workforce, with an awareness of potential cybersecurity threats, how they may occur, and how to report and escalate such matters.
Employee awareness of cybersecurity risks and threats is also an important part of an effective control environment. We periodically communicate to employees about this cybersecurity awareness. We are working on an implementation plan to require each of our employees to complete an annual information security training course, in addition to other training requirements.
Removed
We engage third party personnel resources to implement and maintain security measures to meet regulatory requirements, and we intend to add internal personnel and further investments to maintain the security of our data and cybersecurity infrastructure.
Added
These include monitoring and detection programs, network security measures, firewall monitoring devices and multi-factor authentication which are all overseen by our IT Director, who possesses the necessary expertise to implement the appropriate tools and processes to effectively manage cybersecurity risks.
Removed
These include the utilization of a third-party security operations center connected to a network operation center to identify, investigate, and resolve any cybersecurity threats and incidents. We assess, at least annually, the technological risks to our key IT systems and information. We have implemented controls to identify and manage cybersecurity risks associated with all third-party service providers.
Added
With over 30 years of experience in the oil and natural gas industry, our IT Director has 12 years of cybersecurity experience where he has led several teams introducing cybersecurity initiatives and implementing robust frameworks and response plans against cyber threats.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. Reserved 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 30
Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Reserved 26 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 35 Item 8.
Added
Financial Statements and Supplementary Data 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 Item 9A. Controls and Procedures 35 Item 9B. Other Information 36 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 36 PART III Item 10. Directors, Executive Officers and Corporate Governance 37 Item 11. Executive Compensation 37 Item 12.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 37 Item 13. Certain Relationships and Related Transactions and Director Independence 37 Item 14. Principal Accountant Fees and Services 37 PART IV Item 15. Exhibits and Financial Statement Schedules 38 Item 16.
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Form 10-K Summary 40 Signatures 41 2 FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K constitute "forward-looking statements” within the meaning Section 27A of the Securities Act of 1933, as amended (the "Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act”).
Added
Additionally, forward-looking statements may be made orally or in press releases, conferences, reports, on our website or otherwise, in the future by us or on our behalf.
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All statements, other than statements of historical facts, which address activities, events, or developments that Empire expects, believes, or anticipates will or may occur in the future, including future sources of financing and other possible business developments, are forward-looking statements.
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By their very nature, forward-looking statements require management to make assumptions that may not materialize or that may not be accurate. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such forward-looking statements.
Added
Factors that could cause actual results to differ materially from the results discussed in such forward-looking statements include, but are not limited to, those discussed in Item 1A (“Risk Factors”) and elsewhere in this Form 10-K and in other documents that we file with or furnish to the Securities and Exchange Commission (the “SEC”), and the following: · changes in oil, natural gas and natural gas liquids prices and the demand for oil, natural gas and natural gas liquids; · our ability to replace reserves and efficiently develop current reserves; · uncertainties inherent in estimating oil and gas reserves; · management’s ability to execute our business plan; · delays and other difficulties related to producing oil, natural gas and natural gas liquids; · delays and other difficulties related to regulatory and governmental approvals and restrictions; · availability of sufficient capital to execute management’s business plan, including future cash flows from operations, available borrowing capacity under revolving credit facilities, from our two largest stockholders and otherwise; · management's ability to make acquisitions on economically acceptable terms and management's ability to integrate acquisitions; · weather and environmental conditions; · unforeseen engineering, mechanical or technological difficulties in working over wells; · costs of operations and operating hazards; · competition from other natural resource companies; · unanticipated reductions in the borrowing base under the revolving credit facility we are party to; · the availability of sufficient pipeline and other transportation facilities and equipment to carry our production to market and the impact of these facilities on our realized prices; · our ability to retain key members of senior management and key technical and financial employees; · the identification of and severity of adverse events and governmental responses to these or other environmental events; · future Environmental, Social and Governance compliance developments and increased attention to such matters which could adversely affect our ability to raise equity and debt capital; · the effect of our derivative activities; · impacts of public health crises, pandemics and epidemics, such as the coronavirus pandemic ("COVID-19"); · A cyber incident involving our information systems and related infrastructure, or that of our business partners; · the effects of governmental and environmental regulation; and · general economic conditions including inflation, tariffs and interest rates.
Added
All forward-looking statements are expressly qualified in their entirety by the cautionary statements in this section and elsewhere in this Form 10-K. Other than as required by applicable securities laws, we undertake no duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise.
Added
Readers should not place undue reliance on these forward-looking statements. All forward-looking statements speak only as of the date of this report or, if earlier, as of the date they were made. 3 GLOSSARY OF TERMS The following are abbreviations and definitions of certain terms used within this Annual Report on Form 10-K. ASC – Accounting Standards Codification.
Added
ASU – Accounting Standards Update. Basin – A large natural depression on the earth’s surface in which sediments, generally brought by water, accumulate. Bbl – One barrel or 42 U.S. gallons liquid volume of oil or other liquid hydrocarbons.
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Boe – Barrel of oil equivalent, determined using a ratio of six Mcf of natural gas equal to one barrel of oil equivalent. The ratio does not assume price equivalency and, given price differentials, the price for a barrel of oil equivalent for natural gas differs significantly from the price for a barrel of oil.
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A barrel of NGLs also differs significantly in price from a barrel of oil. CG&A – Cawley, Gillespie & Associates, Inc.
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Completion – The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency. DD&A – Depreciation, depletion and amortization.
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Development Well – A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. EPA – United States Environmental Protection Agency. ESG – Environmental, Social and Governance.
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Exploratory Well – A well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. Generally, a well that is not a development well, a service well, or a stratigraphic test well.
Added
FASB – Financial Accounting Standards Board. Federal Deposit Insurance Corporation or FDIC – An independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.
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Field – An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. GHG – Greenhouse gas. LOE – Lease Operating Expense, a current period expense incurred to operate a well. MBbls – One thousand barrels of crude oil or other liquid hydrocarbons.
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MBoe – One thousand barrels of oil equivalent, determined using a ratio of six Mcf of natural gas equal to one barrel of oil equivalent. MMBoe – One million barrels of oil equivalent, determined using a ratio of six Mcf of natural gas equal to one barrel of oil equivalent. Mcf – One thousand cubic feet.
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MMcf – One million cubic feet. National Institute of Standards and Technology or NIST – An agency of the United States Department of Commerce whose mission is to promote American innovation and industrial competitiveness. Net acres or net wells – The sum of the fractional working interests owned in gross acres or gross wells.
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New York Mercantile Exchange – A commodity futures exchange owned and operated by CME Group of Chicago. NYSE American – NYSE American Stock Exchange. NGLs – Natural gas liquids measured in barrels. NGLs are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which have different uses and different pricing characteristics.
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Net revenue interest or NRI –The total revenue interest controlled by an entity in a specific oil or gas production unit, including a well, lease, or drilling unit. New Mexico Oil Conservation Division – The New Mexico Oil Conservation Division regulates oil and gas activity in New Mexico.
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The Division gathers well production data, permits new wells, enforces the division’s rules and the state’s oil and gas statutes, makes certain abandoned wells are properly plugged, and ensures the land is responsibly restored.
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Operator – An oil and gas joint venture participant that manages the joint venture, pays venture costs, and bills the venture’s non-operators for their share of venture costs. The operator is also responsible to market all oil, gas, and NGLs production, except for those non-operators who take their production in-kind.
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OTCQB – The over-the-counter (“OTC”) market exchange for the middle tier of three marketplaces for trading OTC stocks. Overriding Royalty Interest or ORRI – A royalty interest that is created out of the operating or working interest. Unlike a royalty interest, an overriding royalty interest terminates with the operating interest from which it was created or carved out of.
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Plugging and abandonment or P&A – Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another stratum or to the surface. 4 Proved developed producing reserves or PDP – Reserves that can be expected to be recovered from existing wells and completions with existing equipment and operating methods.
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Proved undeveloped reserves – Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required.
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PV-10 – The present value, discounted at 10% per annum, of future net revenues (estimated future gross revenues less estimated future costs of production, development, and asset retirement costs) associated with reserves and is not necessarily the same as market value. PV-10 does not include estimated future income taxes.
Added
Unless otherwise noted, PV-10 is calculated using the pricing scheme required by the SEC. PV-10 of proved reserves is calculated the same as the standardized measure of discounted future net cash flows, except that the standardized measure of discounted future net cash flows includes future estimated income taxes discounted at 10% per annum.
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Reasonable Certainty – A high degree of confidence. Recompletion – The process of re-entering an existing wellbore that is either producing or not producing and completing in new reservoirs in an attempt to establish or increase existing production.
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Reservoir – A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is separate from other reservoirs. Royalty Interest or RI – The mineral owner’s share of production, free of costs, but subject to severance taxes unless the lessor is a government.
Added
SEC – United States Securities and Exchange Commission.
Added
Standardized Measure – The present value of estimated future net revenue to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the SEC (using prices and costs in effect as of the date of estimation), less future development, production and income tax expenses, and discounted at 10% per annum to reflect the timing of future net revenue.
Added
Undeveloped acreage – Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
Added
Working interest or WI – The ownership interest, generally defined in a Joint Operating Agreement (“JOA”), that gives the owner the right to drill, produce and/or conduct operating activities on the property and share in the sale of production, subject to all royalties, overriding royalties and other burdens and obligates the owner of the interest to share in all costs of exploration, development operations and all risks in connection therewith.
Added
Workover – Operations on a producing or injection well to restore or increase production. WTI – West Texas Intermediate. XTO – XTO Holdings, LLC, a subsidiary of ExxonMobil. Energy equivalent is determined by using the ratio of one barrel of crude oil, condensate or NGLs to six Mcf of natural gas. 5 PART I

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the NYSE American under the symbol "EP". Stockholders At March 28, 2024, there were approximately 1,250 stockholders of record of our common stock. Dividends We have never paid cash dividends on our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the NYSE American under the symbol "EP". Stockholders At March 25, 2025, there were approximately 1,350 stockholders of record of our common stock. Dividends We have never paid cash dividends on our common stock.
Issuer Repurchase of Equity Securities No private or open market repurchases of common stock were made by us during the fourth quarter of 2023. Unregistered Sales of Equity Securities No such sales that have not been previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Issuer Repurchase of Equity Securities No private or open market repurchases of common stock were made by us during the fourth quarter of 2024. Unregistered Sales of Equity Securities No such sales that have not been previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

37 edited+34 added−18 removed15 unchanged
Biggest changeYears Ended December 31, 2023 2022 $ Variance Variance % Oil revenues $ 36,684,494 $ 44,978,554 (8,294,060 ) -18% Natural gas revenues 1,726,754 4,534,370 (2,807,616 ) -62% NGL revenues 1,660,256 3,659,451 (1,999,195 ) -55% Total product revenues 40,071,504 53,172,375 Lease operating expense 28,625,481 23,584,039 5,041,442 21% Production and ad valorem taxes 3,044,411 3,943,466 (899,055 ) -23% Depreciation, depletion, amortization and accretion 4,852,555 3,307,097 1,545,458 47% Impairment — 936,620 (936,620 ) -100% General and administrative expense (excluding stock-based compensation) 12,034,184 9,614,948 2,419,236 25% Stock-based compensation 3,144,751 2,716,541 428,210 16% Cash-based interest expense 650,637 473,205 177,432 37% Non-cash interest expense 349,790 36,335 313,455 NM Operating Income (Loss) (11,625,091 ) 8,784,163 (20,409,254 ) NM Net Income (Loss) (12,469,605 ) 7,084,130 (19,553,735 ) NM NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
Biggest changeFor the Years Ended December 31, Percent 2024 2023 Change Oil revenues $ 41,515,661 $ 36,684,494 13% Natural gas revenues 343,503 1,726,754 -80% NGL revenues 2,132,666 1,660,256 28% Total product revenues 43,991,830 40,071,504 Lease operating expense 27,545,028 28,625,481 -4% Production and ad valorem taxes 3,770,078 3,044,411 24% Depreciation, depletion, amortization and accretion 11,263,010 4,852,555 132% General and administrative expense (excluding stock-based compensation) 12,581,859 12,034,185 5% Stock-based compensation 2,155,774 3,144,750 -31% Cash-based interest expense 894,282 650,637 37% Non-cash interest expense 620,987 349,790 78% Operating Loss (13,665,457 ) (11,625,091 ) 18% Net Loss (16,197,989 ) (12,469,605 ) 30% Revenues Revenues for 2024 increased compared to prior year primarily due to higher oil volumes in North Dakota due to our Starbuck Drilling Program partially offset by a slight overall decline in commodity prices.
The independent petroleum engineers evaluated 100% of our estimated proved producing reserve quantities and their related future net cash flows as of December 31, 2023. Estimates prepared by others may be higher or lower than these estimates.
The independent petroleum engineers evaluated 100% of our estimated proved producing reserve quantities and their related future net cash flows as of December 31, 2024. Estimates prepared by others may be higher or lower than these estimates.
Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2023 and 2022, a valuation allowance for deferred tax assets was recorded. Management applies the accounting standards related to uncertainty in income taxes.
Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2024 and 2023, a full valuation allowance for deferred tax assets was recorded. Management applies the accounting standards related to uncertainty in income taxes.
However, because of the current uncertainty as to our ability to achieve sustained profitability and the potential limitation of NOL carryforwards, a valuation reserve has been established that offsets the amount of any tax benefit available for each period presented in the consolidated statements of operations.
However, because of the current uncertainty as to our ability to achieve sustained profitability and the potential limitation of NOL carryforwards, a full valuation allowance has been established that offsets the amount of any tax benefit available for each period presented in the consolidated statements of operations.
Following are examples of how these estimates affect financial results: · an increase (decrease) in estimated proved oil, natural gas and NGL reserves can reduce (increase) our unit-of-production depletion and amortization rates; and · changes in the oil, natural gas and NGL reserves and the projected future cash flows from our properties can impact our periodic impairment analyses.
The following are examples of how these estimates affect financial results: · an increase (decrease) in estimated proved oil, natural gas and NGLs reserves can reduce (increase) our unit-of-production depletion and amortization rates; and · changes in the oil, natural gas and NGLs reserves and the projected future cash flows from our properties can impact our periodic impairment analysis.
The accuracy of reserve estimates is a function of: · The quality and quantity of available data; · The interpretation of that data; · The accuracy of various mandated economic assumptions; and · The judgments of the persons preparing the estimates. Proved reserves information included in this report is based on estimates prepared by independent petroleum engineers, Cawley Gillespie &Associates.
The accuracy of reserve estimates is a function of: · The quality and quantity of available data; · The interpretation of that data; · The accuracy of various mandated economic assumptions; and · The judgments of the persons preparing the estimates. Proved reserves information included in this report is based on estimates prepared by independent petroleum engineers, CG&A.
Interest Expense Cash-based interest expense increased as higher interest rates were partially offset by a lower outstanding balance under our Credit Facility. We have minimal interest-bearing vehicle and equipment notes payable. Non-cash interest expense is primarily attributable to the related party note payable as described in Note 7 of Notes to Consolidated Financial Statements.
Interest Expense Cash-based interest expense increased slightly due to a higher outstanding balance under our Credit Facility partially offset by lower interest rates. We have minimal interest-bearing vehicle and equipment notes payable. Non-cash interest expense is primarily attributable to the conversion to equity of the related party note payable as described in Note 7 of Notes to Consolidated Financial Statements.
Overview Our primary business is the optimization and development of oil and gas interests. In 2022 we had net income from operations but have incurred losses from operations in 2023 and in years prior to 2022. There is no assurance that we will be profitable or obtain funds necessary to finance our future operations.
Overview Our primary business is the optimization and development of oil and gas interests. We have incurred losses from operations in 2024 and 2023. There is no assurance that we will be profitable or obtain funds necessary to finance our future operations.
Impairment of Oil and Gas Properties We assess our proved properties for impairment using estimates of future undiscounted cash flows. This assessment requires significant judgment and assumptions including commodity price outlooks, estimates of reserve quantities, expected lease operating costs and capital costs.
The actual impact would depend on the specific areas impacted. 33 Impairment of Oil and Gas Properties We assess our proved properties for impairment using estimates of future undiscounted cash flows. This assessment requires significant judgment and assumptions including commodity price outlooks, estimates of reserve quantities, expected lease operating costs and capital costs.
Stock-based Compensation We utilize stock-based compensation to compensate members of management and retain talented personnel. Our stock-based compensation increased in 2023 due to a higher number of awards in 2023. We anticipate stock-based compensation to continue to be utilized in 2024 and beyond to attract and retain talented personnel and compensate our board members and consultants.
Our stock-based compensation decreased in 2024 due to a lower number of awards in 2024. We anticipate stock-based compensation to continue to be utilized in 2025 and beyond to attract and retain talented personnel and compensate our board members and consultants.
Reserve quantities and future cash flows included in this report are prepared in accordance with guidelines established by the SEC and the Financial Accounting Standards Board (“FASB”).
Reserve quantities and future cash flows included in this report are prepared in accordance with guidelines established by the SEC and the FASB.
An impairment expense could result if oil and gas prices decline in the future as it may not be economic to develop some of these unproved properties.
An impairment expense could result if oil and gas prices decline in the future as it may not be economic to develop some of these unproved properties. We performed an assessment as of December 31, 2024 and 2023, and did not identify any impairments, respectively.
Such changes could trigger an impairment of our oil and natural gas properties and have an impact on our depletion expense prospectively. For example, a change of 10 percent in our total proved reserves could change our annual depletion and amortization expense by $350,000. The actual impact would depend on the specific areas impacted.
Such changes could trigger an impairment of our oil and natural gas properties and have an impact on our depletion expense prospectively. For example, a change of 10 percent in our total proved reserves could change our annual depletion expense by approximately $0.9 million.
We performed an assessment as of December 31, 2023 and did not identify any impairments. 29 Asset Retirement Obligation Asset retirement obligations (“AROs”) consist primarily of estimated future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment and facilities from leased acreage, and land restoration in accordance with applicable local, state and federal laws.
Asset Retirement Obligation Asset retirement obligations (“ARO”) consist primarily of estimated future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment and facilities from leased acreage, and land restoration in accordance with applicable local, state and federal laws.
Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.
Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to use judgment to make estimates and assumptions that affect certain amounts reported in the consolidated financial statements.
Capital Resources Capital Expenditures For 2023, additions to oil and natural gas properties totaled $27 million including $2.1 million related to acquisitions. The $25 million not related to acquisitions primarily reflects development of our North Dakota operations.
For 2023, additions to oil and natural gas properties totaled $27.0 million including $2.1 million related to acquisitions. The approximate $25.0 million not related to acquisitions primarily reflects development of our North Dakota operations. Related Party Transactions At times the Company may enter into transactions with related parties.
The following discussion should be read together with the consolidated financial statements and notes to consolidated financial statements, which are included in this Annual Report on Form 10-K in Item 8, Financial Statements and Supplementary Data, and the information set forth in Part I, Item 1A – Risk Factors.
This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future and should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements, which are included in this Annual Report on Form 10-K in Item 8, Financial Statements and Supplementary Data, and the information set forth in Part I, Item 1A – Risk Factors.
Management places emphasis on operating cash flow in managing our business, as operating cash flow considers the cash expenses incurred during the period and excludes non-cash expenditures not related directly to our operations. Production and Operating Data The following table sets forth a summary of our production and operating data for the years ended December 31, 2023 and 2022.
Management places emphasis on operating cash flow in managing our business, as operating cash flow considers the cash expenses incurred during the period and excludes non-cash expenditures not related directly to our operations.
We have no uncertain tax positions at either December 31, 2023 or December 31, 2022.
We had no uncertain tax positions at December 31, 2024, or December 31, 2023. 34
Year Ended December 31, 2023 Year Ended December 31, 2022 Production and operating data: Net sales volumes: Oil (Bbl) 487,869 482,818 Natural gas (Mcf) 854,274 875,647 Natural gas liquids (Bbl) 136,013 160,809 Total (Boe) 766,261 789,568 Average price per unit: Oil (a) $ 75.19 $ 93.16 Natural gas $ 2.02 $ 5.18 Natural gas liquids $ 12.21 $ 22.76 Total (Boe) $ 52.29 $ 67.34 Operating costs and expenses per Boe: Lease operating expense (excluding workovers) $ 21.70 $ 19.92 Workovers $ 15.66 $ 9.95 Total Lease operating expense $ 37.36 $ 29.87 Production and ad valorem taxes $ 3.97 $ 4.99 Depreciation, depletion, amortization and accretion $ 6.33 $ 4.19 General & administrative (excluding stock-based compensation) $ 15.71 $ 12.18 Stock-based compensation $ 4.10 $ 3.44 (a) Excludes the effect of net cash receipts from (payments on) derivatives.
See Note 7 for further details. 28 Production and Operating Data The following table sets forth a summary of our production and operating data: For the Years Ended December 31, 2024 2023 Production and operating data: Net sales volumes: Oil (Bbl) 581,159 487,869 Natural gas (Mcf) 916,955 854,274 Natural gas liquids (Bbl) 150,091 136,013 Total (Boe) 884,076 766,261 Average price per unit: Oil (1) $ 71.44 $ 75.19 Natural gas $ 0.37 $ 2.02 Natural gas liquids $ 14.21 $ 12.21 Total (Boe) $ 49.76 $ 52.29 Operating costs and expenses per Boe: Lease operating expense (excluding workovers) $ 24.46 $ 21.70 Workovers $ 6.71 $ 15.65 Total Lease operating expense $ 31.16 $ 37.36 Production and ad valorem taxes $ 4.26 $ 3.97 Depreciation, depletion, amortization and accretion $ 12.74 $ 6.33 General & administrative (excluding stock-based compensation) $ 14.23 $ 15.71 Stock-based compensation $ 2.44 $ 4.10 Total General & administrative $ 16.67 $ 19.81 (1) Excludes the effect of net cash receipts from (payments on) derivatives. 29 Results of Operations The following table reflects our summary of operating information.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis presents management’s perspective of our business, financial condition and overall performance.
In addition, 2023 includes interest from $10,000,000 of bridge loans from related parties that were subsequently converted to equity (See Note 15 of Notes to Consolidated Financial Statements). Income taxes We have generated net operating losses since inception, which would normally reflect a tax benefit in the consolidated statement of operations and a deferred asset on the consolidated balance sheet.
Income taxes We have generated net operating losses since inception, which would normally reflect a tax benefit in the consolidated statement of operations and a deferred asset on the consolidated balance sheet.
Because estimates and assumptions require significant judgment, future actual results could differ from those estimates and could have a significant impact on our results of operations, financial position and cash flows. We re-evaluate our estimates and assumptions at least on a quarterly basis.
As additional information becomes available, these estimates and assumptions are subject to change and thus impact amounts reported in the future. Because estimates and assumptions require significant judgment, future actual results could differ from those estimates and could have a significant impact on our results of operations, financial position and cash flows.
NGL sales volumes were lower in 2023 compared to 2022 primarily due to lower volumes in New Mexico. Lease Operating Expense and Production Taxes Lease operating expense was higher in 2023 primarily due to higher workover activities. Lease operating expense includes approximately $12.0 million of workover expense for 2023 as compared to approximately $7.9 million for 2022.
Lease operating expense includes approximately $5.9 million of total workover expense for 2024 as compared to approximately $12.0 million for 2023. The higher workover expense in 2023 was primarily in New Mexico as Empire continued to work over wells in the region to enhance and maintain production.
Cash Flows from Investing Activities Cash flows from investing activities in 2023 includes approximately $25 million of additions to oil and gas properties primarily due to the development of our operations in North Dakota, partially offset by approximately $9.9 million for a change in accounts payable related to capital expenditures.
Cash Flows from Investing Activities Cash flows from investing activities in 2024 include approximately $42.2 million of additions to oil and gas properties compared to approximately $25.0 million in 2023 primarily due to the development of our operations as part of our Starbuck Drilling Program in North Dakota.
For 2023, we had a loss before income taxes for which the tax benefit was offset by a change in valuation allowance. For 2022, we had income before income taxes which resulted in a tax provision that was offset by a change in the valuation allowance due to the anticipated use of the NOL carryforward and intangible drilling costs.
We had a loss before income taxes for 2024 and 2023, respectively, which the tax benefit was offset by a change in the valuation allowance. For 2024 and 2023, our effective tax rates were 0% and 1%, respectively.
We assess our oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its estimated future net cash flows. In 2022, estimated future cash flows from our properties in Louisiana were less than the net book value.
Accretion also increased slightly from prior period due to the new drilling activity. We assess our oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its estimated future net cash flows. There was no impairment recorded during the years ended December 31, 2024 and 2023.
Realized oil prices for 2023, were approximately $75.19 per barrel, while realized prices for the prior year were approximately $93.16 per barrel, a decrease in price of approximately 19%. Oil volumes were higher by approximately 5,000 barrels primarily due to increased production in North Dakota partially offset by lower production in New Mexico.
Realized oil prices for 2024 were approximately $71.44 per barrel, while realized prices for the prior year were approximately $75.19 per barrel, a decrease in price of approximately 5%.
It is expected that management will use a combination of cash on hand and cash flows from operations as well as seeking additional debt or equity funding to fund these ongoing activities. 27 Working Capital Working capital (presented below) was $(6.3) million as of December 31, 2023 compared to $5.1 million as of December 31, 2022, representing a change of approximately $(11.4) million.
It is expected that Empire will use a combination of debt or equity issuances, cash on hand, and cash flows from operations to fund capital programs, ongoing operations, and any potential acquisitions. 31 Working Capital Working capital is presented in the table below.
Realized natural gas prices for 2023, were approximately $2.02 per Mcf, while realized prices for the prior year were approximately $5.18 per Mcf, a decrease in price of approximately 61%. Realized NGL prices for 2023, were approximately $12.21 per barrel, while realized prices for the prior year were approximately $22.76 per barrel, a decrease in price of approximately 46%.
Realized natural gas prices for 2024 were approximately $0.37 per Mcf, while realized prices for the prior year were approximately $2.02 per Mcf, a decrease in price of approximately 82%. This is primarily due to the depressed natural gas prices in the third quarter of 2024 in New Mexico.
In addition, 2023 includes $2 million related to the acquisition of additional interest in our New Mexico oil and gas properties compared to $2.7 million of acquisitions in 2022.
In 2023, we received approximately $2.8 million due to the release of a negotiated sinking fund requirement and acquired additional interest in our New Mexico oil and gas properties for approximately $2.0 million.
For additional information regarding the Credit Facility, see Note 7 of Notes to Consolidated Financial Statements. The Company will require additional funds to satisfy these payables related to the capital spending program which are greater than estimated cash flows from operations over the next 12 months.
As of December 31, 2024, we had approximately $2.3 million in cash on hand and approximately $8.7 million available under our Credit Facility. Empire will require additional funds to satisfy the payables discussed above which are greater than estimated cash flows from operations over the next 12 months.
See Note 1 - Liquidity and Going Concern of Notes to Consolidated Financial Statements for further discussion of management’s plans. We expect to incur costs related to drilling activities in core areas.
In addition to the April Rights Offering and November Rights Offering, management continues to seek additional sources of capital via the debt or equity markets to improve liquidity going forward. See Liquidity and Going Concern in Note 1 of Notes to Consolidated Financial Statements for further discussion of management’s plans.
As of December 31, 2023 2022 Current Assets $ 18,744,904 $ 22,734,973 Current Liabilities $ 25,049,572 $ 17,620,660 Working Capital $ (6,304,668 ) $ 5,114,313 Cash Flows Year Ended December 31, Cash flows provided by (used in): 2023 2022 Variance Operating activities $ (9,887,500 ) $ 18,055,783 $ (27,943,283 ) Investing activities (14,767,339 ) (11,413,487 ) (3,353,852 ) Financing activities 20,502,905 1,690,275 18,812,630 Cash Flows from Operating Activities Cash flows from operating activities in 2023 was impacted by lower commodity prices and higher operating expenses compared to 2022, partially offset by higher oil volumes.
As of December 31, 2024 2023 Current Assets $ 12,350,945 $ 18,744,904 Current Liabilities 21,270,471 25,049,572 Working Capital $ (8,919,526 ) $ (6,304,668 ) Cash Flows The following table summarizes our statements of cash flows: For the Years Ended December 31, Cash flows provided by (used in): 2024 2023 Change Operating activities $ 6,157,003 $ (9,887,500 ) $ 16,044,503 Investing activities (53,869,461 ) (14,767,339 ) (39,102,122 ) Financing activities 42,171,414 20,502,905 21,668,509 Cash Flows from Operating Activities The impact of higher oil production and lower workover expenses in 2024 compared to 2023 contributed to the increase in cash flows from operating activities.
For 2023 and 2022, our effective tax rates were 1% and 3%, respectively. Liquidity As noted below, our working capital is negative as of December 31, 2023 and is primarily a result of a higher level of payables related to capital spending in North Dakota.
Liquidity As noted below, our working capital is negative as of December 31, 2024, which is primarily the result of a lower cash balance due to capital spending as part of our Starbuck Drilling Program and return-to-production efforts in Texas.
Production taxes were lower for 2023 compared to 2022 as a result of the lower product revenues discussed above. Depreciation, Depletion, Amortization and Accretion and Impairment The higher DD&A in 2023 as compared to 2022 primarily related to a higher depletable basis from capital expenditures in 2023. Accretion expense was higher in 2023 as the overall obligation increases over time.
Production taxes were higher for 2024 compared to 2023 as a result of the higher product revenues discussed above. 30 Depreciation, Depletion, Amortization, Accretion and Impairment The higher DD&A in 2024 as compared to 2023 is due in part to the increase in production, the acquisition of additional working interest in New Mexico as well as the impact of the capitalized costs associated with the new drilling activity as part of our Starbuck Drilling Program in North Dakota.
Business Strategy Our business strategy is to obtain long-term growth in reserves and cash flow on a cost-effective basis. Management regularly evaluates potential acquisitions of properties that would enhance current core areas of operation. 25 Results of Operations The following table reflects our summary operating information.
Inflation The effect of inflation on the Company has generally been to increase its cost of operations, general and administrative costs and direct costs associated with oil and natural gas production. Business Strategy Our business strategy is to obtain long-term growth in reserves and cash flow on a cost-effective basis.
Removed
Revenues Revenues for 2023 decreased compared to the prior year primarily due to lower realized oil, natural gas and NGL prices and lower NGL volumes, partially offset by higher oil volumes in North Dakota.
Added
Management regularly evaluates potential acquisitions of properties that would enhance current core areas of operation. Liquidity and Going Concern The Company has a revolving line of credit agreement with Equity Bank which requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis.
Removed
Workover expense in New Mexico increased due in part to a higher level of compliance-related activities. In addition, workover expense in North Dakota was higher for 2023 as the Company continued to work over wells in the state to enhance production alongside capital recompletions and sidetrack drilling started in 2022.
Added
As of December 31, 2024, the Company was in compliance with all required covenants and projected to be in compliance with all debt covenants over the next 12 months. However, the Company was in default of its covenants in the third quarter of 2024 but obtained a waiver on November 12, 2024, to alleviate all prior defaults.
Removed
As a result, we recorded a $936,000 impairment expense. 26 General and Administrative Expense (excluding stock-based compensation) General and Administrative Expense (excluding stock-based compensation) increased primarily due to higher employee expenses related to increased headcount in 2023 compared to 2022 and $505,000 related to severance expense for two executives in 2023 (See Note 14 of Notes to Consolidated Financial Statements).
Added
The Company carried a negative working capital of approximately $8.9 million as of December 31, 2024, an overall decline of approximately $2.6 million from the previous year. Cash on hand also declined approximately $5.5 million during the same period.
Removed
Board compensation expense, exclusive of stock-based compensation, was approximately $588,000 in 2023 as compared to $388,000 in 2022. In addition, 2023 expenses were higher due to legal costs related to potential financing transactions and compliance work related to our New Mexico operations.
Added
The overall decline in working capital and cash is primarily driven by the Starbuck Drilling Program in North Dakota which incurred substantial capital spend. Additionally, the Company initiated a return-to-production program in Texas which incurred additional unforeseen operational costs. The additional production from these projects did not fully offset the costs incurred and contributed to the overall negative financial trend.
Removed
In 2022, we recognized expenses totaling approximately $1,269,000 in conjunction with resolution of a Texas sales tax audit for prior periods for which the initial assessment was received in April 2022. This total includes consulting fees and an accrual for $528,000 for the final settlement which was paid in 2023.
Added
To meet its obligations, the Company increased its revolver commitment to $20.0 million in November 2024 and had two rights offerings in April and November of 2024 which raised approximately $30.5 million of capital, net of transaction costs, to help fund the capital spend projects.
Removed
In addition, the Company was not in compliance with the current ratio covenant under its Credit Facility as of December 31, 2023; however, the Company obtained a compliance waiver from the lender for December 31, 2023. As of December 31, 2023, we had approximately $8 million in cash on hand and approximately $5.5 million available on the Credit Facility.
Added
Additionally, as a result of increasing its revolver commitment, the Company had approximately $8.7 million remaining unused commitment as of December 31, 2024, which can be used for future obligations. However, the revolver commitment is reduced monthly by $0.25 million commencing on December 31, 2024 (See Note 7), limiting future access to capital.
Removed
Management has initiated plans to raise the necessary funds including the commencement of a rights offering expected to raise up to approximately $20.66 million (see Note 18 of Notes to Consolidated Financial Statements).
Added
While these debt and equity transactions provided additional funding towards these projects and other obligations, the Company still carried approximately $8.9 million of negative working capital at period end and future expected operating cash flows do not sufficiently meet the Company’s obligations for the next 12 months.
Removed
Phil Mulacek and Energy Evolution Master Funds, Ltd, both related parties of the Company and largest shareholders collectively owning 46% of the common shares outstanding, have indicated that they intend to participate in the rights offering and fully subscribe to the shares of Common Stock corresponding to their subscription rights and intend to exercise their over-subscription rights.
Added
Given the negative working capital and insufficient expected operating cash flow there is substantial doubt about the Company’s ability to continue as a going concern.
Removed
This change was primarily driven by payables related to the Starbuck Drilling Program.
Added
Empire has committed financial support from Phil Mulacek who owns approximately 21.2% of our common stock outstanding as of December 31, 2024, and Energy Evolution, our largest stockholder who owns approximately 31.9% of our common stock outstanding as of December 31, 2024. Both are related parties of the Company (see Note 14). Mr.
Removed
Cash flow from operating activities in 2022 benefited from higher commodity prices and higher natural gas and NGL volumes.
Added
Mulacek and Energy Evolution are willing and able to provide these additional funds, if required, for Empire to continue to meet its obligations over the next 12 months.
Removed
In 2022, we had approximately $11.4 million of additions to oil and gas properties primarily, partially offset by approximately $1.2 million for a change in accounts payable related to capital expenditures.
Added
These additional funds may be raised through related party warrants, or a related party note payable that may or may not have conversion rights into shares of common stock of Empire. 27 Management has considered these plans in evaluating FASB ASC 205-40, Presentation of Financial Statements - Going Concern .
Removed
In 2022, we began recompletions and other capitalizable efforts in multiple states as we sought to bring production online from existing wells and bring on new production from sidetrack drilling in North Dakota which led to an increase in additions to oil and natural gas properties in 2022.
Added
Management believes the above actions are sufficient to allow Empire to meet its obligations as they become due within one year after the date the financial statements are issued. Management believes that its plans, and support from the existing related-party stockholders discussed above, is probable and has alleviated the substantial doubt regarding Empire’s ability to continue as a going concern.
Removed
We also participated in the drilling of four non-operated wells through Empire Rockies Region in 2022 spending approximately $600,000. In 2022, we were able to negotiate for the release of the sinking fund requirement. Approximately $2.8 million and $2 million of the sinking fund balance was returned to us in 2023 and 2022, respectively.
Added
Recent Developments Empire has completed 13 wells in North Dakota related to our Starbuck Drilling Program during the year ended December 31, 2024. On February 16, 2024, Empire issued a Promissory Note to Energy Evolution, a related party. Energy Evolution advanced Empire $5.0 million.
Removed
Cash Flows from Financing Activities In 2023, we received $10 million from related parties in the form of bridge loans which were subsequently converted to our common shares (See Note 15 of Notes to Consolidated Financial Statements).
Added
On May 24, 2024, Energy Evolution elected to convert the Note to shares of common stock of Empire and received 800,000 shares under the terms of the Promissory Note. See Note 7 for further details. In April 2024, the Company completed a subscription rights offering (the "April Rights Offering”) which raised gross proceeds of approximately $20.7 million.
Removed
In 2023, we entered into a new revolving line of credit with Equity Bank (See Note 7 of Notes to Consolidated Financial Statements) and used approximately $4.5 million to retire the outstanding balance of our previous revolving line of credit with CrossFirst Bank.
Added
Each subscription right entitled the holder to purchase 0.161 shares of common stock at a subscription price of $5.00 per share per one whole share of common stock. The subscription rights were non-transferable and not listed for trading on any stock exchange or market.
Removed
Principal payments made on our revolving line of credit with CrossFirst Bank were approximately $1.5 million and $1.2 million in 2023 and 2022, respectively. In 2023, we received approximately $12.5 million from stock issuances and warrant exercises. In 2022, we received approximately $3.4 million in cash from warrant exercises.
Added
On April 9, 2024, Empire partially exercised a purchase option originally issued on August 9, 2023, (the "Purchase Option”) to acquire additional working interests in certain of Empire’s New Mexico properties from Energy Evolution.
Removed
We anticipate capital expenditures in 2024 that will be funded with cash on hand, cash flows from operations, debt, and/or equity issuances. 28 Related Party Transactions In 2023, we received $10 million in bridge loan funds from Phil Mulacek and Energy Evolution Master Fund, Ltd., related parties, which were subsequently converted to our common shares.
Added
The additional assets acquired represent approximately 60% of the total assets collectively acquired by Empire and Energy Evolution in the third quarter of 2023 (the "Option Assets”).
Removed
In addition, we sold shares to both parties and received $5 million in proceeds from each party. Both transactions are described further in Note 15 of Notes to Consolidated Financial Statements. These transactions were related party transactions for accounting purposes. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.
Added
As consideration, upon closing of the partial exercise of the Purchase Option, Empire issued Energy Evolution 600,000 shares of common stock of Empire based on an agreed upon price of $5.00 per share for an aggregate agreed upon value of $3.0 million which was 60% of the purchase price of $5.0 million under the Purchase Option.
Added
On August 8, 2024, Empire successfully extended the Purchase Option with the issuance of 16,800 shares of common stock to Energy Evolution to obtain the right to acquire the remaining Option Assets for an exercise price of $2.0 million subject to certain adjustments and payable in cash, unless the parties agree that some or all may be paid by issuance of common stock to Energy Evolution.
Added
The Purchase Option expires on August 9, 2026. In November 2024, Empire completed a subscription rights offering (the "November Rights Offering”) which raised gross proceeds of $10.0 million. Each subscription right entitled the holder to purchase 0.063 shares of common stock at a subscription price of $5.05 per share per one whole share of common stock.
Added
The subscription rights were non-transferable and not listed for trading on any stock exchange or market. On November 18, 2024, the Company entered into the First Amendment to the Credit Facility (the “First Amendment”) to increase the initial maximum revolver commitment to $20.0 million through December 29, 2026.
Added
Oil volumes were higher by approximately 93,000 barrels or 19% primarily due to new wells completed in North Dakota during the third quarter of 2024 as well as the acquisition of additional working interest in New Mexico.
Added
Realized NGLs prices for 2024 were approximately $14.21 per barrel, while realized prices for the prior year were approximately $12.21 per barrel, an increase in price of approximately 16%. Lease Operating Expense and Production Taxes Lease operating expense was lower in 2024 primarily due to lower workover activities partially offset by higher expenses related to an increase in production.
Added
General and Administrative Expense (excluding stock-based compensation) General and Administrative Expense (excluding stock-based compensation) increased primarily due to an increase in salaries and benefits associated with an increase in employee headcount. Stock-based Compensation We utilize stock-based compensation to compensate members of management and retain talented personnel.
Added
Phil Mulacek and Energy Evolution, both related parties of Empire and our largest two stockholders, owning 21.2% and 31.9%, respectively, of the common shares outstanding as of December 31, 2024, have indicated that they will, and have the ability to, provide sufficient support to sustain the operating, investing, and financing activities of Empire, as necessary.

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