Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Empire Petroleum Announces Results for Third Quarter of 2022 By: Empire Petroleum via Business Wire November 14, 2022 at 21:27 PM EST Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), today reported operational and financial results for the third quarter of 2022. KEY THIRD QUARTER 2022 HIGHLIGHTS Increased sales volumes by 3% to 2,232 barrels of oil equivalent per day (“Boe/d”) (60% oil, 19% natural gas and 21% natural gas liquids (“NGLs”)) from 2,158 Boe/d (62% oil, 18% natural gas and 20% NGLs) for the second quarter of 2022; Recorded revenue of $14.8 million that resulted in net income of $0.2 million, or $0.01 per diluted share, and Adjusted Net Income1 of $3.7 million, or $0.16 per diluted share; Generated Adjusted EBITDA1 of $4.8 million, or $23.36 per barrel of oil equivalent (“Boe”); Increased cash position in the third quarter by 27% to $15.7 million, reduced debt $0.4 million to $7.8 million during the quarter, and ended the period with $16.0 million of liquidity; and Made significant progress on the Company’s Starbuck Field Enhancement Program (the “Starbuck Program”), including beginning the waterflood conformance phase, re-perforated and stimulated productive intervals to ensure maximum hydrocarbon recovery, completed seven sidetracks, and finished certain surface facility upgrades that began in 2021. The Starbuck Program is targeted to provide a material increase in production and reserves, with the first three phases of the project expected to be completed by the end of 2022.; and Spudded four new non-operated Bakken wells with completion expected during the fourth quarter of 2022. Adjusted Net Income, EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Information” section later in this release for more information including reconciliations to the most comparable GAAP measure. MANAGEMENT COMMENTARY Tommy Pritchard, Chief Executive Officer of Empire, commented, “We were pleased with our overall results for the third quarter, which included increased collective production levels across our portfolio of assets. While the industry saw some pull back in commodity pricing levels during the third quarter, we continue to expect pricing levels to remain strong through the fourth quarter and into next year given current and projected supply and demand dynamics. I am also pleased to report that we continue to make significant progress on our Starbuck Program. We look forward to providing the market more details on our development activities as appropriate as we move through the program.” Mike Morrisett, President of Empire, added, “During the third quarter we remained focused on improving our financial standing, including further paydown of our outstanding debt as well as enjoying an enhanced liquidity position that increased more than 25% since the end of the second quarter that benefits our Company and its shareholders. We will continue to execute on targeted field development opportunities to organically expand our production while evaluating additional strategic opportunities to prudently expand our operational footprint and ensure our long-term success.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2022 Q3 2022 Q2 2022 % Change Q3 2022 vs. Q2 2022 Q3 2021 % Change Q3 2022 vs. Q3 2021 Net sales (Boe/d) 2,232 2,158 3 % 2,090 7 % Net sales (Boe) 205,380 196,412 5 % 192,303 7 % Realized price ($/Boe) $ 71.30 $ 83.48 (15 %) $ 50.11 42 % Revenue ($M) $ 14,792 $ 16,540 (11 %) $ 10,096 47 % Net income ($M) $ 216 $ 5,534 (96 %) $ (3,726) 106 % Adjusted Net Income ($M) $ 3,747 $ 5,967 (37 %) $ (2,434) 254 % Adjusted EBITDA ($M) $ 4,799 $ 6,922 (31 %) $ 7,778 (38 %) Net sales for the third quarter of 2022 were 2,232 Boe/d, including 1,346 net barrels of oil per day; 2,517 thousand cubic feet per day (“Mcf/d”), or 419 Boe/d, of natural gas; and 19,625 gallons per day, or 467 Boe/d, of NGLs. Contributing to the sequential increase from the second quarter of 2022 was increased sales volumes associated with Empire’s assets in New Mexico, Texas and Louisiana. This was partially offset by transitory declines in production for the Company’s assets in the Rockies Region primarily associated with taking certain well production offline temporarily as the Company completes the execution of the Starbuck Program. Empire reported $14.8 million of revenue for the third quarter of 2022 versus $16.5 million for the second quarter of 2022. The increase in sales volumes for all products was offset by lower realized pricing as compared to the second quarter. Operating expenses for the third quarter of 2022 were $8.5 million, which included a $1.4 million non-cash write-off associated with the Company’s joint development agreement with Petroleum & Independent Exploration, LLC and related entities (“PIE”). Excluding the PIE write-off, operating expenses were $7.1 million compared to $5.5 million for the second quarter of 2022 primarily as a result of increased workovers and other activities executed in advance of capital development programs at our New Mexico and Rockies Region assets. General and administrative expenses, excluding non-cash share-based compensation, was $2.0 million, or $9.93 per Boe, in the third quarter of 2022 versus $2.8 million, or $14.23 per Boe, for the second quarter of 2022. Contributing to the sequential decrease was lower professional service fees. Other expense for the third quarter of 2022 was $1.1 million compared to $0.2 million in the second quarter of 2022. Driving the increase was a non-cash $1.4 million settlement related to the purchase of Empire’s New Mexico assets. Net income for the third quarter was $0.2 million, or $0.01 per diluted share, versus $5.5 million, or $0.24 per diluted share, in the second quarter of 2022. Contributing to the sequential decrease was lower realized pricing partially offset by higher production, the non-cash $1.4 million PIE write-off and the non-cash $1.4 million settlement related to the purchase of the Company’s New Mexico assets. Adjusted Net Income for the third quarter was $3.7 million, or $0.16 per diluted share, versus $6.0 million, or $0.26 per diluted share, in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. Adjusted EBITDA was $4.8 million for the third quarter compared to $6.9 million in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the nine months ended September 30, 2022, the Company spent approximately $500,000 on additions to oil and natural gas properties as a result of non-operated drilling, and an additional $1.0 million on capitalized additions to oil and natural gas properties. The Company anticipates additional capital expenditures in the coming quarters that will be funded with cash flows from operations, debt, and/or equity issuances. Total liquidity at the end of the third quarter of 2022 was $16.0 million, including $15.7 million of cash and $0.3 million available on the Company’s Credit Facility. This represents a more than 25% increase in liquidity from $12.7 million as of June 30, 2022. As of September 30, 2022, the Company had total debt of $7.8 million and working capital of $11.3 million, which was a material increase from Empire’s working capital position of $1.1 million at December 31, 2021. Empire remains squarely focused on continuing to execute on its proven strategy to remain financially conservative as it evaluates additional opportunities to prudently invest in its current business and expand through targeted acquisitions that provide long-term value for its shareholders. CONFERENCE CALL INFORMATION An investor conference call to review the Company’s results will be held on Tuesday, November 15, 2022, at 12:00 p.m. Eastern (11:00 a.m. Central). The call will be hosted by Tommy Pritchard, the Company’s Chief Executive Officer, and Mike Morrisett, Empire’s President. Details for the conference call are as follows: Date: Tuesday, November 15, 2022 Time: 12:00 p.m. Eastern (11:00 a.m. Central) Telephone: 1-877-270-2148 (Toll free); 1-412-902-6510 (International); participants should ask to be joined into the Empire Petroleum Corporation call. Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=foO19cFK Replay: A webcast replay will be available on Empire’s website (www.empirepetroleumcorp.com) under "Investors Relations" on the "Events & Presentations" page following the call or via the webcast link listed above. The replay will be available through November 15, 2023. ABOUT EMPIRE PETROLEUM Empire Petroleum Corporation is a publicly traded, Tulsa-based oil and gas company with current producing assets in Texas, Louisiana, North Dakota, Montana, and New Mexico. Management is focused on organic growth and targeted acquisitions of proved developed assets with synergies with its existing portfolio of wells. More information about Empire can be found at www.empirepetroleumcorp.com. SAFE HARBOR STATEMENT This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company’s estimates, strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2021, and its other filings with the SEC. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and other risks and uncertainties related to the conduct of business by the Company. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Revenue: Oil Sales $ 11,501,521 $ 13,329,366 $ 7,761,584 $ 35,247,309 $ 13,882,077 Gas Sales 1,587,542 1,446,435 855,507 4,019,400 1,536,569 Natural Gas Liquids Sales 1,637,808 1,763,546 1,439,799 5,133,872 1,913,191 Other 22,921 24,913 71,043 71,877 154,018 Net Realized and Unrealized Gain (Loss) on Derivatives 42,474 (23,893 ) (32,271 ) (93,740 ) (572,220 ) Total Revenue 14,792,266 16,540,367 10,095,662 44,378,718 16,913,635 Costs and Expenses: Operating 8,505,640 5,503,850 3,597,124 19,200,436 7,328,066 Taxes - Production 1,112,246 1,137,841 678,295 3,151,325 1,266,808 Depletion, Depreciation & Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 General and Administrative 2,850,059 3,282,452 1,914,326 8,587,891 6,040,475 Total Cost and Expenses 13,350,107 10,716,430 7,796,297 33,378,547 17,542,394 Operating Income (Loss) 1,442,159 5,823,937 2,299,365 11,000,171 (628,759 ) Other Income and (Expense): Convertible Debt Modification Inducement Expense - - (2,276,813 ) - (2,276,813 ) Unrealized Gain on Embedded Conversion Option - - 689,215 - 92,931 Other Income (Expense) (1,100,888 ) (177,872 ) 29,687 (1,278,760 ) 190,387 Interest Expense (125,330 ) (111,785 ) (4,467,679 ) (347,763 ) (7,373,113 ) Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Net Income (Loss) per Common Share: Basic $ 0.01 $ 0.27 $ (0.23 ) $ 0.45 $ (0.75 ) Diluted $ 0.01 $ 0.24 $ (0.23 ) $ 0.41 $ (0.75 ) Weighted Average Number of Common Shares Outstanding: Basic 21,651,383 20,424,970 16,560,705 20,654,294 13,278,341 Diluted 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Production Volumes: Oil (Bbl) 123,804 123,167 114,495 361,226 220,780 Natural gas (Mcf) 231,522 208,363 224,118 653,829 379,600 Natural gas liquids (Gal) 1,805,523 1,617,751 1,699,112 5,109,649 2,598,655 Total (Boe) 205,380 196,412 192,303 591,856 345,919 Average daily equivalent sales (Boe/d) 2,232 2,158 2,090 2,168 1,267 Average Price per Unit: Oil ($/Bbl) $ 92.22 $ 108.06 $ 64.98 $ 96.90 $ 59.80 Natural gas ($/Mcf) $ 6.86 $ 6.37 $ 3.82 $ 6.15 $ 4.05 Natural gas liquids ($/Gal) $ 0.91 $ 1.09 $ 0.85 $ 1.00 $ 0.74 Total ($/Boe) $ 71.30 $ 83.48 $ 50.11 $ 74.45 $ 50.10 Operating Costs and Expenses per Boe: Oil and natural gas production $ 41.41 $ 28.02 $ 18.71 $ 32.44 $ 21.18 Production and ad valorem taxes $ 5.42 $ 5.79 $ 3.53 $ 5.32 $ 3.66 Depreciation, depletion, amortization and accretion $ 4.30 $ 4.03 $ 8.35 $ 4.12 $ 8.40 General & administrative (including share-based compensation) $ 13.88 $ 16.71 $ 9.95 $ 14.51 $ 17.46 General & administrative (excluding share-based compensation) $ 9.93 $ 14.23 $ 9.95 $ 11.68 $ 16.29 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2022 2021 ASSETS Current Assets: Cash $ 15,733,842 $ 3,611,871 Accounts Receivable 5,981,533 7,733,905 Unrealized Gain on Derivative Instruments 348,665 55,242 Inventory - Oil in Tanks 1,605,357 1,037,880 Prepaids 724,484 679,122 Total Current Assets 24,393,881 13,118,020 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 53,064,338 46,914,326 Less: Accumulated Depreciation, Depletion and Impairment (18,703,073 ) (17,525,918 ) 34,361,265 29,388,408 Other Property and Equipment, Net 1,535,765 1,288,611 Total Property and Equipment, Net 35,897,030 30,677,019 Unrealized Gain on Derivative Instruments - Long Term 51,660 194,018 Sinking Fund 5,450,000 4,810,000 Utility and Other Deposits 449,811 1,290,594 TOTAL ASSETS $ 66,242,382 $ 50,089,651 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 4,226,799 $ 4,329,535 Accrued Expenses 7,325,010 5,844,184 Current Portion of Lease Liability 251,117 180,105 Current Portion of Long-Term Notes Payable 1,258,804 1,700,663 Total Current Liabilities 13,061,730 12,054,487 Long-Term Notes Payable 5,174,783 6,117,091 Long-Term Note Payable - PIE 1,399,030 797,010 Long Term Lease Liability 613,899 646,311 Asset Retirement Obligations 21,722,407 20,640,599 Total Liabilities 41,971,849 40,255,498 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 0 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value 190,000,000 Shares Authorized, 21,443,293 and 19,840,648 Shares Issued and Outstanding, Respectively 81,550 79,362 Additional Paid-in Capital 74,048,678 68,988,134 Accumulated Deficit (49,859,695 ) (59,233,343 ) Total Stockholders' Equity 24,270,533 9,834,153 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,242,382 $ 50,089,651 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Cash Flows From Operating Activities: Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 809,641 486,903 - 1,672,823 406,250 Amortization of Right of Use Assets 44,627 50,901 47,935 135,234 54,363 Depreciation, Depletion and Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 Settlement of Asset Retirement Obligations - (342,344 ) - (342,344 ) - Loss on Settlement of Asset Retirement Obligations - 181,386 - 181,386 - Loss on XTO Final Settlement 1,448,363 - - 1,448,363 - PIE-Related Expense 1,399,030 - - 1,399,030 - Amortization of Loan Issue Costs - - - - 14,587 Right to Buy Issuance Costs - - - - 989,115 Unrealized Gain on Embedded Conversion Option - - (689,215 ) - (92,931 ) Amortization of Discount on Convertible Notes - - 4,090,214 - 6,670,129 Convertible Debt Modification Inducement Expense - - 2,276,813 - 2,276,813 Stock Issued for Interest Expense Payment - - 241,054 - 241,054 Forgiveness of Payroll Protection Plan Loan - - - - (160,700 ) Change in Operating Assets and Liabilities: Accounts Receivable 1,417,093 (355,618 ) (3,217,479 ) 304,009 (5,566,084 ) Unrealized Gain on Derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Inventory, Oil in Tanks (412,768 ) (216,911 ) 159,611 (567,477 ) (681,208 ) Prepaids, Current (184,958 ) 2,586 25,614 (45,362 ) 115,670 Other Assets 39,033 4,735 200,100 43,773 (6,807 ) Accounts Payable (1,459,997 ) 649,861 1,901,185 (2,464,573 ) 2,326,752 Accrued Expenses (208,689 ) 1,249,044 521,251 1,480,826 1,245,653 Net Cash Provided By Operating Activities 3,863,078 7,983,384 3,141,742 14,907,166 630,391 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties - (2,205,000 ) - (2,205,000 ) (17,869,779 ) Additions to Oil and Natural Gas Properties (276,024 ) (802,225 ) - (1,502,900 ) - Purchase of Other Fixed Assets (189,179 ) (109,578 ) (424,760 ) (307,787 ) (508,571 ) Cash Paid for Right of Use Assets (44,009 ) (48,402 ) - (135,244 ) - Sinking Fund Deposit - (160,000 ) (480,000 ) (640,000 ) (4,330,000 ) Investment in Related Party - - 1,250,000 - - Net Cash Used In Investing Activities (509,212 ) (3,325,205 ) 345,240 (4,790,931 ) (22,708,350 ) Cash Flows from Financing Activities: Proceeds from Debt Issued - - - - 19,599,850 Principal Payments of Debt (461,779 ) (462,436 ) (1,899,452 ) (1,384,167 ) (5,546,738 ) Proceeds from Stock and Warrant Issuance - - 583,102 - 11,054,661 Proceeds from Option and Warrant Exercise 405,220 2,887,183 - 3,389,903 - Net Cash Provided By (Used In) Financing Activities (56,559 ) 2,424,747 (1,316,350 ) 2,005,736 25,107,773 Net Change in Cash 3,297,307 7,082,926 2,170,632 12,121,971 3,029,814 Cash - Beginning of Period 12,436,535 5,353,609 1,016,877 3,611,871 157,695 Cash - End of Period $ 15,733,842 $ 12,436,535 $ 3,187,509 $ 15,733,842 $ 3,187,509 Empire Petroleum Corporation Non-GAAP Information Certain financial information included in Empire’s financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures include “Adjusted Net Income”, “EBITDA” and “Adjusted EBITDA”. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be reported by other companies. Adjusted Net Income is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods. ADJUSTED NET INCOME Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjusted for: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted Net Income $ 3,746,575 $ 5,967,457 $ (2,434,295 ) $ 13,742,799 $ (6,690,763 ) Diluted Weighted Average Shares Outstanding 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 Adjusted Net Income (Loss) Per Share $ 0.16 $ 0.26 $ (0.15 ) $ 0.60 $ (0.50 ) The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of loan issuance costs, ROU assets and discount on convertible notes, income tax (benefit) expense, and other non-cash items. Company management believes this presentation is relevant and useful because it helps investors understand Empire’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. EBITDA & ADJUSTED EBITDA Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Add Back: Interest Expense 125,330 111,785 4,467,679 347,763 7,373,113 DD&A 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion 342,619 336,488 327,018 1,009,107 881,638 Amortization of loan issuance costs - - - - 14,587 Amortization of ROU assets 44,627 50,901 47,935 135,234 54,363 Amortization of disc. on convertible notes - - 4,090,214 - 6,670,129 EBITDA $ 1,268,060 $ 6,489,253 $ 6,486,155 $ 12,295,540 $ 7,023,870 Consideration of noncash items: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted EBITDA $ 4,798,694 $ 6,922,430 $ 7,778,085 $ 16,664,691 $ 10,328,474 View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006137/en/Contacts Empire Petroleum Corporation: Tommy Pritchard, CEO Mike Morrisett, President 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 713-300-6321 wes@alpetrie.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Empire Petroleum Announces Results for Third Quarter of 2022 By: Empire Petroleum via Business Wire November 14, 2022 at 21:27 PM EST Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), today reported operational and financial results for the third quarter of 2022. KEY THIRD QUARTER 2022 HIGHLIGHTS Increased sales volumes by 3% to 2,232 barrels of oil equivalent per day (“Boe/d”) (60% oil, 19% natural gas and 21% natural gas liquids (“NGLs”)) from 2,158 Boe/d (62% oil, 18% natural gas and 20% NGLs) for the second quarter of 2022; Recorded revenue of $14.8 million that resulted in net income of $0.2 million, or $0.01 per diluted share, and Adjusted Net Income1 of $3.7 million, or $0.16 per diluted share; Generated Adjusted EBITDA1 of $4.8 million, or $23.36 per barrel of oil equivalent (“Boe”); Increased cash position in the third quarter by 27% to $15.7 million, reduced debt $0.4 million to $7.8 million during the quarter, and ended the period with $16.0 million of liquidity; and Made significant progress on the Company’s Starbuck Field Enhancement Program (the “Starbuck Program”), including beginning the waterflood conformance phase, re-perforated and stimulated productive intervals to ensure maximum hydrocarbon recovery, completed seven sidetracks, and finished certain surface facility upgrades that began in 2021. The Starbuck Program is targeted to provide a material increase in production and reserves, with the first three phases of the project expected to be completed by the end of 2022.; and Spudded four new non-operated Bakken wells with completion expected during the fourth quarter of 2022. Adjusted Net Income, EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Information” section later in this release for more information including reconciliations to the most comparable GAAP measure. MANAGEMENT COMMENTARY Tommy Pritchard, Chief Executive Officer of Empire, commented, “We were pleased with our overall results for the third quarter, which included increased collective production levels across our portfolio of assets. While the industry saw some pull back in commodity pricing levels during the third quarter, we continue to expect pricing levels to remain strong through the fourth quarter and into next year given current and projected supply and demand dynamics. I am also pleased to report that we continue to make significant progress on our Starbuck Program. We look forward to providing the market more details on our development activities as appropriate as we move through the program.” Mike Morrisett, President of Empire, added, “During the third quarter we remained focused on improving our financial standing, including further paydown of our outstanding debt as well as enjoying an enhanced liquidity position that increased more than 25% since the end of the second quarter that benefits our Company and its shareholders. We will continue to execute on targeted field development opportunities to organically expand our production while evaluating additional strategic opportunities to prudently expand our operational footprint and ensure our long-term success.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2022 Q3 2022 Q2 2022 % Change Q3 2022 vs. Q2 2022 Q3 2021 % Change Q3 2022 vs. Q3 2021 Net sales (Boe/d) 2,232 2,158 3 % 2,090 7 % Net sales (Boe) 205,380 196,412 5 % 192,303 7 % Realized price ($/Boe) $ 71.30 $ 83.48 (15 %) $ 50.11 42 % Revenue ($M) $ 14,792 $ 16,540 (11 %) $ 10,096 47 % Net income ($M) $ 216 $ 5,534 (96 %) $ (3,726) 106 % Adjusted Net Income ($M) $ 3,747 $ 5,967 (37 %) $ (2,434) 254 % Adjusted EBITDA ($M) $ 4,799 $ 6,922 (31 %) $ 7,778 (38 %) Net sales for the third quarter of 2022 were 2,232 Boe/d, including 1,346 net barrels of oil per day; 2,517 thousand cubic feet per day (“Mcf/d”), or 419 Boe/d, of natural gas; and 19,625 gallons per day, or 467 Boe/d, of NGLs. Contributing to the sequential increase from the second quarter of 2022 was increased sales volumes associated with Empire’s assets in New Mexico, Texas and Louisiana. This was partially offset by transitory declines in production for the Company’s assets in the Rockies Region primarily associated with taking certain well production offline temporarily as the Company completes the execution of the Starbuck Program. Empire reported $14.8 million of revenue for the third quarter of 2022 versus $16.5 million for the second quarter of 2022. The increase in sales volumes for all products was offset by lower realized pricing as compared to the second quarter. Operating expenses for the third quarter of 2022 were $8.5 million, which included a $1.4 million non-cash write-off associated with the Company’s joint development agreement with Petroleum & Independent Exploration, LLC and related entities (“PIE”). Excluding the PIE write-off, operating expenses were $7.1 million compared to $5.5 million for the second quarter of 2022 primarily as a result of increased workovers and other activities executed in advance of capital development programs at our New Mexico and Rockies Region assets. General and administrative expenses, excluding non-cash share-based compensation, was $2.0 million, or $9.93 per Boe, in the third quarter of 2022 versus $2.8 million, or $14.23 per Boe, for the second quarter of 2022. Contributing to the sequential decrease was lower professional service fees. Other expense for the third quarter of 2022 was $1.1 million compared to $0.2 million in the second quarter of 2022. Driving the increase was a non-cash $1.4 million settlement related to the purchase of Empire’s New Mexico assets. Net income for the third quarter was $0.2 million, or $0.01 per diluted share, versus $5.5 million, or $0.24 per diluted share, in the second quarter of 2022. Contributing to the sequential decrease was lower realized pricing partially offset by higher production, the non-cash $1.4 million PIE write-off and the non-cash $1.4 million settlement related to the purchase of the Company’s New Mexico assets. Adjusted Net Income for the third quarter was $3.7 million, or $0.16 per diluted share, versus $6.0 million, or $0.26 per diluted share, in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. Adjusted EBITDA was $4.8 million for the third quarter compared to $6.9 million in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the nine months ended September 30, 2022, the Company spent approximately $500,000 on additions to oil and natural gas properties as a result of non-operated drilling, and an additional $1.0 million on capitalized additions to oil and natural gas properties. The Company anticipates additional capital expenditures in the coming quarters that will be funded with cash flows from operations, debt, and/or equity issuances. Total liquidity at the end of the third quarter of 2022 was $16.0 million, including $15.7 million of cash and $0.3 million available on the Company’s Credit Facility. This represents a more than 25% increase in liquidity from $12.7 million as of June 30, 2022. As of September 30, 2022, the Company had total debt of $7.8 million and working capital of $11.3 million, which was a material increase from Empire’s working capital position of $1.1 million at December 31, 2021. Empire remains squarely focused on continuing to execute on its proven strategy to remain financially conservative as it evaluates additional opportunities to prudently invest in its current business and expand through targeted acquisitions that provide long-term value for its shareholders. CONFERENCE CALL INFORMATION An investor conference call to review the Company’s results will be held on Tuesday, November 15, 2022, at 12:00 p.m. Eastern (11:00 a.m. Central). The call will be hosted by Tommy Pritchard, the Company’s Chief Executive Officer, and Mike Morrisett, Empire’s President. Details for the conference call are as follows: Date: Tuesday, November 15, 2022 Time: 12:00 p.m. Eastern (11:00 a.m. Central) Telephone: 1-877-270-2148 (Toll free); 1-412-902-6510 (International); participants should ask to be joined into the Empire Petroleum Corporation call. Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=foO19cFK Replay: A webcast replay will be available on Empire’s website (www.empirepetroleumcorp.com) under "Investors Relations" on the "Events & Presentations" page following the call or via the webcast link listed above. The replay will be available through November 15, 2023. ABOUT EMPIRE PETROLEUM Empire Petroleum Corporation is a publicly traded, Tulsa-based oil and gas company with current producing assets in Texas, Louisiana, North Dakota, Montana, and New Mexico. Management is focused on organic growth and targeted acquisitions of proved developed assets with synergies with its existing portfolio of wells. More information about Empire can be found at www.empirepetroleumcorp.com. SAFE HARBOR STATEMENT This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company’s estimates, strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2021, and its other filings with the SEC. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and other risks and uncertainties related to the conduct of business by the Company. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Revenue: Oil Sales $ 11,501,521 $ 13,329,366 $ 7,761,584 $ 35,247,309 $ 13,882,077 Gas Sales 1,587,542 1,446,435 855,507 4,019,400 1,536,569 Natural Gas Liquids Sales 1,637,808 1,763,546 1,439,799 5,133,872 1,913,191 Other 22,921 24,913 71,043 71,877 154,018 Net Realized and Unrealized Gain (Loss) on Derivatives 42,474 (23,893 ) (32,271 ) (93,740 ) (572,220 ) Total Revenue 14,792,266 16,540,367 10,095,662 44,378,718 16,913,635 Costs and Expenses: Operating 8,505,640 5,503,850 3,597,124 19,200,436 7,328,066 Taxes - Production 1,112,246 1,137,841 678,295 3,151,325 1,266,808 Depletion, Depreciation & Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 General and Administrative 2,850,059 3,282,452 1,914,326 8,587,891 6,040,475 Total Cost and Expenses 13,350,107 10,716,430 7,796,297 33,378,547 17,542,394 Operating Income (Loss) 1,442,159 5,823,937 2,299,365 11,000,171 (628,759 ) Other Income and (Expense): Convertible Debt Modification Inducement Expense - - (2,276,813 ) - (2,276,813 ) Unrealized Gain on Embedded Conversion Option - - 689,215 - 92,931 Other Income (Expense) (1,100,888 ) (177,872 ) 29,687 (1,278,760 ) 190,387 Interest Expense (125,330 ) (111,785 ) (4,467,679 ) (347,763 ) (7,373,113 ) Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Net Income (Loss) per Common Share: Basic $ 0.01 $ 0.27 $ (0.23 ) $ 0.45 $ (0.75 ) Diluted $ 0.01 $ 0.24 $ (0.23 ) $ 0.41 $ (0.75 ) Weighted Average Number of Common Shares Outstanding: Basic 21,651,383 20,424,970 16,560,705 20,654,294 13,278,341 Diluted 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Production Volumes: Oil (Bbl) 123,804 123,167 114,495 361,226 220,780 Natural gas (Mcf) 231,522 208,363 224,118 653,829 379,600 Natural gas liquids (Gal) 1,805,523 1,617,751 1,699,112 5,109,649 2,598,655 Total (Boe) 205,380 196,412 192,303 591,856 345,919 Average daily equivalent sales (Boe/d) 2,232 2,158 2,090 2,168 1,267 Average Price per Unit: Oil ($/Bbl) $ 92.22 $ 108.06 $ 64.98 $ 96.90 $ 59.80 Natural gas ($/Mcf) $ 6.86 $ 6.37 $ 3.82 $ 6.15 $ 4.05 Natural gas liquids ($/Gal) $ 0.91 $ 1.09 $ 0.85 $ 1.00 $ 0.74 Total ($/Boe) $ 71.30 $ 83.48 $ 50.11 $ 74.45 $ 50.10 Operating Costs and Expenses per Boe: Oil and natural gas production $ 41.41 $ 28.02 $ 18.71 $ 32.44 $ 21.18 Production and ad valorem taxes $ 5.42 $ 5.79 $ 3.53 $ 5.32 $ 3.66 Depreciation, depletion, amortization and accretion $ 4.30 $ 4.03 $ 8.35 $ 4.12 $ 8.40 General & administrative (including share-based compensation) $ 13.88 $ 16.71 $ 9.95 $ 14.51 $ 17.46 General & administrative (excluding share-based compensation) $ 9.93 $ 14.23 $ 9.95 $ 11.68 $ 16.29 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2022 2021 ASSETS Current Assets: Cash $ 15,733,842 $ 3,611,871 Accounts Receivable 5,981,533 7,733,905 Unrealized Gain on Derivative Instruments 348,665 55,242 Inventory - Oil in Tanks 1,605,357 1,037,880 Prepaids 724,484 679,122 Total Current Assets 24,393,881 13,118,020 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 53,064,338 46,914,326 Less: Accumulated Depreciation, Depletion and Impairment (18,703,073 ) (17,525,918 ) 34,361,265 29,388,408 Other Property and Equipment, Net 1,535,765 1,288,611 Total Property and Equipment, Net 35,897,030 30,677,019 Unrealized Gain on Derivative Instruments - Long Term 51,660 194,018 Sinking Fund 5,450,000 4,810,000 Utility and Other Deposits 449,811 1,290,594 TOTAL ASSETS $ 66,242,382 $ 50,089,651 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 4,226,799 $ 4,329,535 Accrued Expenses 7,325,010 5,844,184 Current Portion of Lease Liability 251,117 180,105 Current Portion of Long-Term Notes Payable 1,258,804 1,700,663 Total Current Liabilities 13,061,730 12,054,487 Long-Term Notes Payable 5,174,783 6,117,091 Long-Term Note Payable - PIE 1,399,030 797,010 Long Term Lease Liability 613,899 646,311 Asset Retirement Obligations 21,722,407 20,640,599 Total Liabilities 41,971,849 40,255,498 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 0 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value 190,000,000 Shares Authorized, 21,443,293 and 19,840,648 Shares Issued and Outstanding, Respectively 81,550 79,362 Additional Paid-in Capital 74,048,678 68,988,134 Accumulated Deficit (49,859,695 ) (59,233,343 ) Total Stockholders' Equity 24,270,533 9,834,153 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,242,382 $ 50,089,651 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Cash Flows From Operating Activities: Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 809,641 486,903 - 1,672,823 406,250 Amortization of Right of Use Assets 44,627 50,901 47,935 135,234 54,363 Depreciation, Depletion and Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 Settlement of Asset Retirement Obligations - (342,344 ) - (342,344 ) - Loss on Settlement of Asset Retirement Obligations - 181,386 - 181,386 - Loss on XTO Final Settlement 1,448,363 - - 1,448,363 - PIE-Related Expense 1,399,030 - - 1,399,030 - Amortization of Loan Issue Costs - - - - 14,587 Right to Buy Issuance Costs - - - - 989,115 Unrealized Gain on Embedded Conversion Option - - (689,215 ) - (92,931 ) Amortization of Discount on Convertible Notes - - 4,090,214 - 6,670,129 Convertible Debt Modification Inducement Expense - - 2,276,813 - 2,276,813 Stock Issued for Interest Expense Payment - - 241,054 - 241,054 Forgiveness of Payroll Protection Plan Loan - - - - (160,700 ) Change in Operating Assets and Liabilities: Accounts Receivable 1,417,093 (355,618 ) (3,217,479 ) 304,009 (5,566,084 ) Unrealized Gain on Derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Inventory, Oil in Tanks (412,768 ) (216,911 ) 159,611 (567,477 ) (681,208 ) Prepaids, Current (184,958 ) 2,586 25,614 (45,362 ) 115,670 Other Assets 39,033 4,735 200,100 43,773 (6,807 ) Accounts Payable (1,459,997 ) 649,861 1,901,185 (2,464,573 ) 2,326,752 Accrued Expenses (208,689 ) 1,249,044 521,251 1,480,826 1,245,653 Net Cash Provided By Operating Activities 3,863,078 7,983,384 3,141,742 14,907,166 630,391 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties - (2,205,000 ) - (2,205,000 ) (17,869,779 ) Additions to Oil and Natural Gas Properties (276,024 ) (802,225 ) - (1,502,900 ) - Purchase of Other Fixed Assets (189,179 ) (109,578 ) (424,760 ) (307,787 ) (508,571 ) Cash Paid for Right of Use Assets (44,009 ) (48,402 ) - (135,244 ) - Sinking Fund Deposit - (160,000 ) (480,000 ) (640,000 ) (4,330,000 ) Investment in Related Party - - 1,250,000 - - Net Cash Used In Investing Activities (509,212 ) (3,325,205 ) 345,240 (4,790,931 ) (22,708,350 ) Cash Flows from Financing Activities: Proceeds from Debt Issued - - - - 19,599,850 Principal Payments of Debt (461,779 ) (462,436 ) (1,899,452 ) (1,384,167 ) (5,546,738 ) Proceeds from Stock and Warrant Issuance - - 583,102 - 11,054,661 Proceeds from Option and Warrant Exercise 405,220 2,887,183 - 3,389,903 - Net Cash Provided By (Used In) Financing Activities (56,559 ) 2,424,747 (1,316,350 ) 2,005,736 25,107,773 Net Change in Cash 3,297,307 7,082,926 2,170,632 12,121,971 3,029,814 Cash - Beginning of Period 12,436,535 5,353,609 1,016,877 3,611,871 157,695 Cash - End of Period $ 15,733,842 $ 12,436,535 $ 3,187,509 $ 15,733,842 $ 3,187,509 Empire Petroleum Corporation Non-GAAP Information Certain financial information included in Empire’s financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures include “Adjusted Net Income”, “EBITDA” and “Adjusted EBITDA”. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be reported by other companies. Adjusted Net Income is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods. ADJUSTED NET INCOME Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjusted for: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted Net Income $ 3,746,575 $ 5,967,457 $ (2,434,295 ) $ 13,742,799 $ (6,690,763 ) Diluted Weighted Average Shares Outstanding 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 Adjusted Net Income (Loss) Per Share $ 0.16 $ 0.26 $ (0.15 ) $ 0.60 $ (0.50 ) The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of loan issuance costs, ROU assets and discount on convertible notes, income tax (benefit) expense, and other non-cash items. Company management believes this presentation is relevant and useful because it helps investors understand Empire’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. EBITDA & ADJUSTED EBITDA Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Add Back: Interest Expense 125,330 111,785 4,467,679 347,763 7,373,113 DD&A 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion 342,619 336,488 327,018 1,009,107 881,638 Amortization of loan issuance costs - - - - 14,587 Amortization of ROU assets 44,627 50,901 47,935 135,234 54,363 Amortization of disc. on convertible notes - - 4,090,214 - 6,670,129 EBITDA $ 1,268,060 $ 6,489,253 $ 6,486,155 $ 12,295,540 $ 7,023,870 Consideration of noncash items: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted EBITDA $ 4,798,694 $ 6,922,430 $ 7,778,085 $ 16,664,691 $ 10,328,474 View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006137/en/Contacts Empire Petroleum Corporation: Tommy Pritchard, CEO Mike Morrisett, President 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 713-300-6321 wes@alpetrie.com
Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), today reported operational and financial results for the third quarter of 2022. KEY THIRD QUARTER 2022 HIGHLIGHTS Increased sales volumes by 3% to 2,232 barrels of oil equivalent per day (“Boe/d”) (60% oil, 19% natural gas and 21% natural gas liquids (“NGLs”)) from 2,158 Boe/d (62% oil, 18% natural gas and 20% NGLs) for the second quarter of 2022; Recorded revenue of $14.8 million that resulted in net income of $0.2 million, or $0.01 per diluted share, and Adjusted Net Income1 of $3.7 million, or $0.16 per diluted share; Generated Adjusted EBITDA1 of $4.8 million, or $23.36 per barrel of oil equivalent (“Boe”); Increased cash position in the third quarter by 27% to $15.7 million, reduced debt $0.4 million to $7.8 million during the quarter, and ended the period with $16.0 million of liquidity; and Made significant progress on the Company’s Starbuck Field Enhancement Program (the “Starbuck Program”), including beginning the waterflood conformance phase, re-perforated and stimulated productive intervals to ensure maximum hydrocarbon recovery, completed seven sidetracks, and finished certain surface facility upgrades that began in 2021. The Starbuck Program is targeted to provide a material increase in production and reserves, with the first three phases of the project expected to be completed by the end of 2022.; and Spudded four new non-operated Bakken wells with completion expected during the fourth quarter of 2022. Adjusted Net Income, EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Information” section later in this release for more information including reconciliations to the most comparable GAAP measure. MANAGEMENT COMMENTARY Tommy Pritchard, Chief Executive Officer of Empire, commented, “We were pleased with our overall results for the third quarter, which included increased collective production levels across our portfolio of assets. While the industry saw some pull back in commodity pricing levels during the third quarter, we continue to expect pricing levels to remain strong through the fourth quarter and into next year given current and projected supply and demand dynamics. I am also pleased to report that we continue to make significant progress on our Starbuck Program. We look forward to providing the market more details on our development activities as appropriate as we move through the program.” Mike Morrisett, President of Empire, added, “During the third quarter we remained focused on improving our financial standing, including further paydown of our outstanding debt as well as enjoying an enhanced liquidity position that increased more than 25% since the end of the second quarter that benefits our Company and its shareholders. We will continue to execute on targeted field development opportunities to organically expand our production while evaluating additional strategic opportunities to prudently expand our operational footprint and ensure our long-term success.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2022 Q3 2022 Q2 2022 % Change Q3 2022 vs. Q2 2022 Q3 2021 % Change Q3 2022 vs. Q3 2021 Net sales (Boe/d) 2,232 2,158 3 % 2,090 7 % Net sales (Boe) 205,380 196,412 5 % 192,303 7 % Realized price ($/Boe) $ 71.30 $ 83.48 (15 %) $ 50.11 42 % Revenue ($M) $ 14,792 $ 16,540 (11 %) $ 10,096 47 % Net income ($M) $ 216 $ 5,534 (96 %) $ (3,726) 106 % Adjusted Net Income ($M) $ 3,747 $ 5,967 (37 %) $ (2,434) 254 % Adjusted EBITDA ($M) $ 4,799 $ 6,922 (31 %) $ 7,778 (38 %) Net sales for the third quarter of 2022 were 2,232 Boe/d, including 1,346 net barrels of oil per day; 2,517 thousand cubic feet per day (“Mcf/d”), or 419 Boe/d, of natural gas; and 19,625 gallons per day, or 467 Boe/d, of NGLs. Contributing to the sequential increase from the second quarter of 2022 was increased sales volumes associated with Empire’s assets in New Mexico, Texas and Louisiana. This was partially offset by transitory declines in production for the Company’s assets in the Rockies Region primarily associated with taking certain well production offline temporarily as the Company completes the execution of the Starbuck Program. Empire reported $14.8 million of revenue for the third quarter of 2022 versus $16.5 million for the second quarter of 2022. The increase in sales volumes for all products was offset by lower realized pricing as compared to the second quarter. Operating expenses for the third quarter of 2022 were $8.5 million, which included a $1.4 million non-cash write-off associated with the Company’s joint development agreement with Petroleum & Independent Exploration, LLC and related entities (“PIE”). Excluding the PIE write-off, operating expenses were $7.1 million compared to $5.5 million for the second quarter of 2022 primarily as a result of increased workovers and other activities executed in advance of capital development programs at our New Mexico and Rockies Region assets. General and administrative expenses, excluding non-cash share-based compensation, was $2.0 million, or $9.93 per Boe, in the third quarter of 2022 versus $2.8 million, or $14.23 per Boe, for the second quarter of 2022. Contributing to the sequential decrease was lower professional service fees. Other expense for the third quarter of 2022 was $1.1 million compared to $0.2 million in the second quarter of 2022. Driving the increase was a non-cash $1.4 million settlement related to the purchase of Empire’s New Mexico assets. Net income for the third quarter was $0.2 million, or $0.01 per diluted share, versus $5.5 million, or $0.24 per diluted share, in the second quarter of 2022. Contributing to the sequential decrease was lower realized pricing partially offset by higher production, the non-cash $1.4 million PIE write-off and the non-cash $1.4 million settlement related to the purchase of the Company’s New Mexico assets. Adjusted Net Income for the third quarter was $3.7 million, or $0.16 per diluted share, versus $6.0 million, or $0.26 per diluted share, in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. Adjusted EBITDA was $4.8 million for the third quarter compared to $6.9 million in the second quarter of 2022, with the decrease substantially due to lower realized pricing partially offset by higher production. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the nine months ended September 30, 2022, the Company spent approximately $500,000 on additions to oil and natural gas properties as a result of non-operated drilling, and an additional $1.0 million on capitalized additions to oil and natural gas properties. The Company anticipates additional capital expenditures in the coming quarters that will be funded with cash flows from operations, debt, and/or equity issuances. Total liquidity at the end of the third quarter of 2022 was $16.0 million, including $15.7 million of cash and $0.3 million available on the Company’s Credit Facility. This represents a more than 25% increase in liquidity from $12.7 million as of June 30, 2022. As of September 30, 2022, the Company had total debt of $7.8 million and working capital of $11.3 million, which was a material increase from Empire’s working capital position of $1.1 million at December 31, 2021. Empire remains squarely focused on continuing to execute on its proven strategy to remain financially conservative as it evaluates additional opportunities to prudently invest in its current business and expand through targeted acquisitions that provide long-term value for its shareholders. CONFERENCE CALL INFORMATION An investor conference call to review the Company’s results will be held on Tuesday, November 15, 2022, at 12:00 p.m. Eastern (11:00 a.m. Central). The call will be hosted by Tommy Pritchard, the Company’s Chief Executive Officer, and Mike Morrisett, Empire’s President. Details for the conference call are as follows: Date: Tuesday, November 15, 2022 Time: 12:00 p.m. Eastern (11:00 a.m. Central) Telephone: 1-877-270-2148 (Toll free); 1-412-902-6510 (International); participants should ask to be joined into the Empire Petroleum Corporation call. Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=foO19cFK Replay: A webcast replay will be available on Empire’s website (www.empirepetroleumcorp.com) under "Investors Relations" on the "Events & Presentations" page following the call or via the webcast link listed above. The replay will be available through November 15, 2023. ABOUT EMPIRE PETROLEUM Empire Petroleum Corporation is a publicly traded, Tulsa-based oil and gas company with current producing assets in Texas, Louisiana, North Dakota, Montana, and New Mexico. Management is focused on organic growth and targeted acquisitions of proved developed assets with synergies with its existing portfolio of wells. More information about Empire can be found at www.empirepetroleumcorp.com. SAFE HARBOR STATEMENT This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company’s estimates, strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2021, and its other filings with the SEC. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and other risks and uncertainties related to the conduct of business by the Company. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Revenue: Oil Sales $ 11,501,521 $ 13,329,366 $ 7,761,584 $ 35,247,309 $ 13,882,077 Gas Sales 1,587,542 1,446,435 855,507 4,019,400 1,536,569 Natural Gas Liquids Sales 1,637,808 1,763,546 1,439,799 5,133,872 1,913,191 Other 22,921 24,913 71,043 71,877 154,018 Net Realized and Unrealized Gain (Loss) on Derivatives 42,474 (23,893 ) (32,271 ) (93,740 ) (572,220 ) Total Revenue 14,792,266 16,540,367 10,095,662 44,378,718 16,913,635 Costs and Expenses: Operating 8,505,640 5,503,850 3,597,124 19,200,436 7,328,066 Taxes - Production 1,112,246 1,137,841 678,295 3,151,325 1,266,808 Depletion, Depreciation & Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 General and Administrative 2,850,059 3,282,452 1,914,326 8,587,891 6,040,475 Total Cost and Expenses 13,350,107 10,716,430 7,796,297 33,378,547 17,542,394 Operating Income (Loss) 1,442,159 5,823,937 2,299,365 11,000,171 (628,759 ) Other Income and (Expense): Convertible Debt Modification Inducement Expense - - (2,276,813 ) - (2,276,813 ) Unrealized Gain on Embedded Conversion Option - - 689,215 - 92,931 Other Income (Expense) (1,100,888 ) (177,872 ) 29,687 (1,278,760 ) 190,387 Interest Expense (125,330 ) (111,785 ) (4,467,679 ) (347,763 ) (7,373,113 ) Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Net Income (Loss) per Common Share: Basic $ 0.01 $ 0.27 $ (0.23 ) $ 0.45 $ (0.75 ) Diluted $ 0.01 $ 0.24 $ (0.23 ) $ 0.41 $ (0.75 ) Weighted Average Number of Common Shares Outstanding: Basic 21,651,383 20,424,970 16,560,705 20,654,294 13,278,341 Diluted 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Production Volumes: Oil (Bbl) 123,804 123,167 114,495 361,226 220,780 Natural gas (Mcf) 231,522 208,363 224,118 653,829 379,600 Natural gas liquids (Gal) 1,805,523 1,617,751 1,699,112 5,109,649 2,598,655 Total (Boe) 205,380 196,412 192,303 591,856 345,919 Average daily equivalent sales (Boe/d) 2,232 2,158 2,090 2,168 1,267 Average Price per Unit: Oil ($/Bbl) $ 92.22 $ 108.06 $ 64.98 $ 96.90 $ 59.80 Natural gas ($/Mcf) $ 6.86 $ 6.37 $ 3.82 $ 6.15 $ 4.05 Natural gas liquids ($/Gal) $ 0.91 $ 1.09 $ 0.85 $ 1.00 $ 0.74 Total ($/Boe) $ 71.30 $ 83.48 $ 50.11 $ 74.45 $ 50.10 Operating Costs and Expenses per Boe: Oil and natural gas production $ 41.41 $ 28.02 $ 18.71 $ 32.44 $ 21.18 Production and ad valorem taxes $ 5.42 $ 5.79 $ 3.53 $ 5.32 $ 3.66 Depreciation, depletion, amortization and accretion $ 4.30 $ 4.03 $ 8.35 $ 4.12 $ 8.40 General & administrative (including share-based compensation) $ 13.88 $ 16.71 $ 9.95 $ 14.51 $ 17.46 General & administrative (excluding share-based compensation) $ 9.93 $ 14.23 $ 9.95 $ 11.68 $ 16.29 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2022 2021 ASSETS Current Assets: Cash $ 15,733,842 $ 3,611,871 Accounts Receivable 5,981,533 7,733,905 Unrealized Gain on Derivative Instruments 348,665 55,242 Inventory - Oil in Tanks 1,605,357 1,037,880 Prepaids 724,484 679,122 Total Current Assets 24,393,881 13,118,020 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 53,064,338 46,914,326 Less: Accumulated Depreciation, Depletion and Impairment (18,703,073 ) (17,525,918 ) 34,361,265 29,388,408 Other Property and Equipment, Net 1,535,765 1,288,611 Total Property and Equipment, Net 35,897,030 30,677,019 Unrealized Gain on Derivative Instruments - Long Term 51,660 194,018 Sinking Fund 5,450,000 4,810,000 Utility and Other Deposits 449,811 1,290,594 TOTAL ASSETS $ 66,242,382 $ 50,089,651 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 4,226,799 $ 4,329,535 Accrued Expenses 7,325,010 5,844,184 Current Portion of Lease Liability 251,117 180,105 Current Portion of Long-Term Notes Payable 1,258,804 1,700,663 Total Current Liabilities 13,061,730 12,054,487 Long-Term Notes Payable 5,174,783 6,117,091 Long-Term Note Payable - PIE 1,399,030 797,010 Long Term Lease Liability 613,899 646,311 Asset Retirement Obligations 21,722,407 20,640,599 Total Liabilities 41,971,849 40,255,498 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 0 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value 190,000,000 Shares Authorized, 21,443,293 and 19,840,648 Shares Issued and Outstanding, Respectively 81,550 79,362 Additional Paid-in Capital 74,048,678 68,988,134 Accumulated Deficit (49,859,695 ) (59,233,343 ) Total Stockholders' Equity 24,270,533 9,834,153 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,242,382 $ 50,089,651 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Cash Flows From Operating Activities: Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 809,641 486,903 - 1,672,823 406,250 Amortization of Right of Use Assets 44,627 50,901 47,935 135,234 54,363 Depreciation, Depletion and Amortization 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion of Asset Retirement Obligation 342,619 336,488 327,018 1,009,107 881,638 Settlement of Asset Retirement Obligations - (342,344 ) - (342,344 ) - Loss on Settlement of Asset Retirement Obligations - 181,386 - 181,386 - Loss on XTO Final Settlement 1,448,363 - - 1,448,363 - PIE-Related Expense 1,399,030 - - 1,399,030 - Amortization of Loan Issue Costs - - - - 14,587 Right to Buy Issuance Costs - - - - 989,115 Unrealized Gain on Embedded Conversion Option - - (689,215 ) - (92,931 ) Amortization of Discount on Convertible Notes - - 4,090,214 - 6,670,129 Convertible Debt Modification Inducement Expense - - 2,276,813 - 2,276,813 Stock Issued for Interest Expense Payment - - 241,054 - 241,054 Forgiveness of Payroll Protection Plan Loan - - - - (160,700 ) Change in Operating Assets and Liabilities: Accounts Receivable 1,417,093 (355,618 ) (3,217,479 ) 304,009 (5,566,084 ) Unrealized Gain on Derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Inventory, Oil in Tanks (412,768 ) (216,911 ) 159,611 (567,477 ) (681,208 ) Prepaids, Current (184,958 ) 2,586 25,614 (45,362 ) 115,670 Other Assets 39,033 4,735 200,100 43,773 (6,807 ) Accounts Payable (1,459,997 ) 649,861 1,901,185 (2,464,573 ) 2,326,752 Accrued Expenses (208,689 ) 1,249,044 521,251 1,480,826 1,245,653 Net Cash Provided By Operating Activities 3,863,078 7,983,384 3,141,742 14,907,166 630,391 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties - (2,205,000 ) - (2,205,000 ) (17,869,779 ) Additions to Oil and Natural Gas Properties (276,024 ) (802,225 ) - (1,502,900 ) - Purchase of Other Fixed Assets (189,179 ) (109,578 ) (424,760 ) (307,787 ) (508,571 ) Cash Paid for Right of Use Assets (44,009 ) (48,402 ) - (135,244 ) - Sinking Fund Deposit - (160,000 ) (480,000 ) (640,000 ) (4,330,000 ) Investment in Related Party - - 1,250,000 - - Net Cash Used In Investing Activities (509,212 ) (3,325,205 ) 345,240 (4,790,931 ) (22,708,350 ) Cash Flows from Financing Activities: Proceeds from Debt Issued - - - - 19,599,850 Principal Payments of Debt (461,779 ) (462,436 ) (1,899,452 ) (1,384,167 ) (5,546,738 ) Proceeds from Stock and Warrant Issuance - - 583,102 - 11,054,661 Proceeds from Option and Warrant Exercise 405,220 2,887,183 - 3,389,903 - Net Cash Provided By (Used In) Financing Activities (56,559 ) 2,424,747 (1,316,350 ) 2,005,736 25,107,773 Net Change in Cash 3,297,307 7,082,926 2,170,632 12,121,971 3,029,814 Cash - Beginning of Period 12,436,535 5,353,609 1,016,877 3,611,871 157,695 Cash - End of Period $ 15,733,842 $ 12,436,535 $ 3,187,509 $ 15,733,842 $ 3,187,509 Empire Petroleum Corporation Non-GAAP Information Certain financial information included in Empire’s financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures include “Adjusted Net Income”, “EBITDA” and “Adjusted EBITDA”. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be reported by other companies. Adjusted Net Income is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods. ADJUSTED NET INCOME Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Adjusted for: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted Net Income $ 3,746,575 $ 5,967,457 $ (2,434,295 ) $ 13,742,799 $ (6,690,763 ) Diluted Weighted Average Shares Outstanding 24,065,485 23,294,723 16,560,705 22,778,836 13,278,341 Adjusted Net Income (Loss) Per Share $ 0.16 $ 0.26 $ (0.15 ) $ 0.60 $ (0.50 ) The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of loan issuance costs, ROU assets and discount on convertible notes, income tax (benefit) expense, and other non-cash items. Company management believes this presentation is relevant and useful because it helps investors understand Empire’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. EBITDA & ADJUSTED EBITDA Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Net Income (Loss) $ 215,941 $ 5,534,280 $ (3,726,225 ) $ 9,373,648 $ (9,995,367 ) Add Back: Interest Expense 125,330 111,785 4,467,679 347,763 7,373,113 DD&A 539,543 455,799 1,279,534 1,429,788 2,025,407 Accretion 342,619 336,488 327,018 1,009,107 881,638 Amortization of loan issuance costs - - - - 14,587 Amortization of ROU assets 44,627 50,901 47,935 135,234 54,363 Amortization of disc. on convertible notes - - 4,090,214 - 6,670,129 EBITDA $ 1,268,060 $ 6,489,253 $ 6,486,155 $ 12,295,540 $ 7,023,870 Consideration of noncash items: Warrants and options granted in G&A 809,641 486,903 - 1,672,823 - Unrealized (gain) loss on derivatives (126,400 ) (53,726 ) (295,668 ) (151,065 ) (113,943 ) Write off of JDA note receivable 1,399,030 - - 1,399,030 - XTO final settlement - noncash settlement 1,448,363 - - 1,448,363 - Convertible debt modification inducement expense - - 2,276,813 - 2,276,813 Loss (gain) on conversion option - - (689,215 ) - (92,931 ) Right to buy issuance costs - - - - 989,115 Stock compensation expense - - - - 406,250 Forgiveness of PPP loan - - - - (160,700 ) Adjusted EBITDA $ 4,798,694 $ 6,922,430 $ 7,778,085 $ 16,664,691 $ 10,328,474 View source version on businesswire.com: https://www.businesswire.com/news/home/20221114006137/en/
Empire Petroleum Corporation: Tommy Pritchard, CEO Mike Morrisett, President 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 713-300-6321 wes@alpetrie.com