Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Empire Petroleum Announces Results for Third Quarter 2023 By: Empire Petroleum via Business Wire November 13, 2023 at 07:00 AM EST ~ Strategic Initiatives Executed in Q3 Further Position Empire for Long-Term Success ~ ~ Continuing to Make Significant Progress on Starbuck Drilling Program ~ Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), an oil and gas company with producing assets in New Mexico, North Dakota, Montana, Texas and Louisiana, today announced operational and financial results for the third quarter of 2023. In addition, the Company provided an update on its targeted drilling program underway at its Starbuck field in North Dakota (the “Starbuck Drilling Program”). KEY THIRD QUARTER 2023 AND RECENT HIGHLIGHTS Posted net sales volumes of 2,048 barrels of oil equivalent per day (“Boe/d”) (64% oil, 19% natural gas liquids (“NGLs”) and 17% natural gas) compared to 2,135 Boe/d (66% oil, 16% NGLs, and 18% natural gas) for the second quarter of 2023. Sales volumes for the third quarter of 2022 were 2,232 Boe/d (60% oil, 21% NGLs, and 19% natural gas); Reported product revenue of $10.3 million, a net loss of $2.7 million, or $0.12 per diluted share, and an Adjusted Net Loss1 of $1.5 million, or $0.06 per diluted share; Generated Adjusted EBITDA1 of $0.1 million; Ended the third quarter of 2023 with approximately $11.3 million of liquidity; Executed on a number of strategic initiatives designed to support the capital structure and near to mid-term asset development plans for the Company, including: The Company and an indirect wholly-owned subsidiary of Energy Evolution Master Fund, Ltd. (“EEMF”) – Empire’s largest shareholder – collectively acquired strategic additional working interests in August in the Company’s three properties located in Lea County, New Mexico, including Eunice Monument South Unit A, Eunice Monument South Unit B, and Arrowhead Grayburg Unit; Secured bridge loans in September collectively totaling $10 million, including $5 million each from Phil Mulacek, Empire’s Chair of the Board of Directors, and EEMF, with the primary purpose of funding the Company’s targeted Starbuck Drilling Program; and Commenced the targeted Starbuck Drilling Program in October during which the Company expects to drill 10 to 14 wells at an estimated total cost of $20 million to $22 million. Initial well log results on the first two wells that have been drilled to target depth have shown positive indicators that materially exceed Empire’s initial expectations as to the targeted reservoir’s porosity and thickness. 1. Adjusted Net Income (Loss), 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 Mike Morrisett, President and Chief Executive Officer of Empire, commented, “We were pleased to see improvement in commodity prices during the third quarter. This timing is ideal as we continue to progress through our development campaign that began in the latter part of 2022 on our North Dakota assets and materially expanded in the second half of 2023 with the recent kick off of the Starbuck Drilling Program.” Mr. Morrisett continued, “Our capital development programs are designed to drive a meaningful increase in production levels and cash flow for the near and long-term benefit of our shareholders. A lot of time and effort was spent developing the programs and the positive initial results from the well logs on our first two wells being drilled is another clear indicator that all of the planning was well worth the effort. I want to thank everyone involved for their hard work and dedication as we continue to successfully execute our targeted development activities.” Phil Mulacek, Chair of the Board of Empire, further commented, “We are clearly encouraged with the initial well log results from the first two wells of the Starbuck Drilling Program. We look forward to drilling targeted laterals of 5,000 to 6,500 feet within the target Upper Charles Formation. Loans have been advanced to the Company to fund the drilling and completion activities. As we move through our drilling program, we will continue to apply the lessons learned to improve overall performance of a target production growth.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2023 Q3 2023 Q2 2023 % Change Q3 2023 vs. Q2 2023 Q3 2022 % Change Q3 2023 vs. Q3 2022 Net sales (Boe/d) 2,048 2,135 (4 %) 2,232 (8 %) Net sales (Boe) 188.396 194,306 (3 %) 205,380 (8 %) Realized price - all products ($/Boe) $ 54.75 $ 50.22 9 % $ 68.03 (20 %) Product Revenue ($M) $ 10,315 $ 9,758 (6 %) $ 13,973 (35 %) Net income (loss) ($M) $ (2,748) $ (2,465) (11 %) $ 216 NM Adjusted Net Income (Loss) ($M) $ (1,462) $ (2,398) 39 % $ 90 NM Adjusted EBITDA ($M) $ 134 $ 171 (22 %) $ 4,799 (97 %) NM – Not meaningful due to a change in signs. Net sales volumes were 2,048 Boe/d, including 1,306 barrels of oil per day; 387 barrels of NGLs per day, and 2,129 thousand cubic feet per day (“Mcf/d”), or 355 Boe/d, of natural gas. This is compared to net sales volumes for the second quarter of 2023 of 2,135 Boe/d, including 1,411 barrels of oil per day; 337 barrels of NGLs per day, and 2,322 thousand cubic feet per day (“Mcf/d”), or 387 Boe/d, of natural gas. Primarily driving the quarterly sequential decrease was lower oil sales volumes associated with Empire’s assets in New Mexico due to an annual turnaround of the Eunice Monument South Unit waterflood central facility. The Company looks forward to increasing its North Dakota asset production profile over the near to mid-term through its Starbuck Drilling Program currently underway that is targeted to drill up to 14 high rate-of-return wells. Empire reported $10.3 million of product revenue versus $9.8 million for the second quarter of 2023. Offsetting the increase in realized crude oil and natural gas sales pricing, was lower sales volumes for crude oil and natural gas as well as lower NGLs realized pricing. This was partially offset by a 16% increase in sequential NGLs sales volumes primarily associated with the Company’s New Mexico assets due to increasing gas well output to capitalize on higher natural gas pricing. Lease operating expenses were $7.1 million in both the third and second quarter of 2023. On a Boe basis, third quarter lease operating expenses were $37.42 per Boe versus $36.54 per Boe for the second quarter. Production and ad valorem taxes were $0.8 million, which was a slight increase from $0.7 million for the second quarter of 2023, and were 7.7% and 7.4% of total product revenue, respectively, for the third and second quarters of 2023. General and administrative (“G&A”) expense, excluding share-based compensation expense, was $2.6 million ($13.70 per Boe) versus $1.9 million ($9.75 per Boe) for the second quarter of 2023. Empire recorded a net loss of $2.7 million, or $0.12 per diluted share, compared to a net loss of $2.5 million, or $0.11 per diluted share, for the second quarter of 2023. The Company posted an Adjusted Net Loss for the third quarter of $1.5 million, or $0.06 per diluted share, versus an Adjusted Net Loss of $2.4 million, or $0.11 per diluted share, in the second quarter of 2023. Adjusted EBITDA was $0.1 million versus $0.2 million for the second quarter of 2023. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the three months and nine months ended September 30, 2023, the Company invested approximately $2.5 million and $5.6 million, respectively, in capital expenditures primarily related to recompletion and other activities in multiple states as Empire seeks to bring production online from existing wells, as well as expenditures related to the Company’s new horizontal drilling in North Dakota. Total liquidity at the end of the third quarter of 2023 was $11.3 million, including $11.0 million of cash and $0.3 million of availability on the Company’s credit facility. Empire remains squarely focused on continuing to execute on its strategy to remain financially conservative and target opportunities that provide long-term value for the Company’s shareholders. DEVELOPMENT PROGRAM UPDATE The Company is drilling the first two of ten to 14 wells to begin the 2023-2024 Starbuck Drilling Program. The first well was spud on October 11, 2023 and drilled to a depth of approximately 3,600 feet, thereby penetrating the targeted Upper Charles Formation. The development plan is to drill and log a vertical well, then build a radius and cement casing across the vertical and radius, and lastly a horizontal section is drilled and completed. The post drill results to date indicate the reservoir at three times thicker than pre-drill estimates and porosities that are three to six times better than pre-drill estimates. Oil and gas was observed at surface with higher than expected pore pressures. The Company expects the first well to be completed in the next 15 to 20 days. The Company looks forward to keeping investors apprised of its progress. 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, 2022, 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. Other than as required by applicable securities laws, the Company does not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Revenue: Oil Sales $ 9,492,127 $ 9,147,611 $ 11,501,521 $ 27,578,453 $ 35,247,309 Gas Sales (1) 411,217 248,686 1,526,148 1,315,938 3,731,946 Natural Gas Liquids ("NGLs") Sales (1) 411,624 362,181 945,317 1,278,759 3,201,947 Total Product Revenues 10,314,968 9,758,478 13,972,986 30,173,150 42,181,202 Other 17,050 18,361 22,921 54,775 71,877 Gain (Loss) on Derivatives (1,185,921 ) (66,657 ) 42,474 (1,319,401 ) (93,740 ) Total Revenue 9,146,097 9,710,182 14,038,381 28,908,524 42,159,339 Costs and Expenses: Lease Operating Expense 7,050,054 7,099,000 7,751,755 20,669,217 16,981,057 Production and Ad Valorem Taxes 792,241 721,275 1,112,246 2,271,630 3,151,325 Depletion, Depreciation & Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 General and Administrative Expense: General and Administrative 2,580,464 1,894,204 2,040,418 7,497,947 6,915,068 Stock-Based Compensation 158,792 1,180,806 809,641 2,289,237 1,672,823 Total General and Administrative Expense 2,739,256 3,075,010 2,850,059 9,787,184 8,587,891 Total Cost and Expenses 11,779,999 12,011,688 12,596,222 36,066,646 31,159,168 Operating Income (Loss) (2,633,902 ) (2,301,506 ) 1,442,159 (7,158,122 ) 11,000,171 Other Income and (Expense): Interest Expense (249,796 ) (184,887 ) (125,330 ) (671,982 ) (347,763 ) Other Income (Expense) 1,350 21,484 (1,100,888 ) 23,256 (1,278,760 ) Income (Loss) before Taxes (2,882,348 ) (2,464,909 ) 215,941 (7,806,848 ) 9,373,648 Income Tax (Provision) Benefit 134,720 - - 134,720 - Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Net Income (Loss) per Common Share: Basic $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.45 Diluted $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.41 Weighted Average Number of Common Shares Outstanding: Basic 22,727,639 22,105,704 21,651,383 22,320,207 20,654,294 Diluted 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 (1) Presentation for the three and nine months ended September 30, 2022 reflects reclassification of gathering and processing costs from lease operating expense, which is consistent with the presentation of results for the first three quarters of 2023 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Production Volumes: Oil (Bbl) 120,177 128,413 123,804 368,847 361,226 Natural gas (Mcf) 195,908 211,293 231,522 638,419 653,829 Natural gas liquids (Bbl) 35,568 30,678 42,989 106,002 121,658 Total (Boe) 188,396 194,306 205,380 581,251 591,855 Average daily equivalent sales (Boe/d) 2,048 2,135 2,232 2,129 2,168 Average Price per Unit: Oil ($/Bbl) $ 78.98 $ 71.24 $ 92.90 $ 74.77 $ 97.58 Natural gas ($/Mcf) $ 2.10 $ 1.18 $ 6.59 $ 2.06 $ 5.71 Natural gas liquids ($/Bbl) $ 11.57 $ 11.81 $ 21.99 $ 12.06 $ 26.32 Total ($/Boe) $ 54.75 $ 50.22 $ 68.03 $ 51.91 $ 71.27 Operating Costs and Expenses per Boe: Lease operating expense $ 37.42 $ 36.54 $ 37.74 $ 35.56 $ 28.69 Production and ad valorem taxes $ 4.21 $ 3.71 $ 5.42 $ 3.91 $ 5.32 Depreciation, depletion, amortization and accretion $ 6.36 $ 5.75 $ 4.30 $ 5.74 $ 4.12 General & administrative expense: General & administrative expense $ 13.70 $ 9.75 $ 9.93 $ 12.90 $ 11.68 Stock-based compensation $ 0.84 $ 6.08 $ 3.94 $ 3.94 $ 2.83 Total general & administrative expense $ 14.54 $ 15.83 $ 13.88 $ 16.84 $ 14.51 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2023 2022 ASSETS Current Assets: Cash $ 11,034,834 $ 11,944,442 Accounts Receivable 7,226,146 7,780,239 Derivative Instruments - 121,584 Inventory - Oil in Tanks 1,564,684 1,840,274 Prepaids 591,732 1,048,434 Total Current Assets 20,417,396 22,734,973 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 74,620,878 63,986,339 Less: Accumulated Depreciation, Depletion and Impairment (22,014,050 ) (20,116,696 ) Total Oil and Gas Properties, Net 52,606,828 43,869,643 Other Property and Equipment, Net 1,867,911 1,441,529 Total Property and Equipment, Net 54,474,739 45,311,172 Sinking Fund - 2,779,000 Utility and Other Deposits 1,374,771 719,930 TOTAL ASSETS $ 76,266,906 $ 71,545,075 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 6,051,027 $ 5,843,366 Accrued Expenses 5,726,117 9,461,010 Derivative Instruments 1,053,606 - Current Portion of Lease Liability 424,819 256,975 Term Note Payable - Related Party 1,060,004 - Current Portion of Long-Term Debt 4,549,585 2,059,309 Total Current Liabilities 18,865,158 17,620,660 Long-Term Debt 116,507 4,063,115 Bridge Loans - Related Parties 10,000,000 - Term Note Payable - Related Party - 1,076,987 Lease Liability 654,524 547,692 Derivative Instruments 59,949 - Asset Retirement Obligations 27,742,852 25,000,740 Total Liabilities 57,438,990 48,309,194 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 6 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value, 190,000,000 Shares Authorized, 22,892,280 and 22,093,503 Shares Issued and Outstanding, Respectively 82,414 81,615 Additional Paid-in Capital 78,566,843 75,303,479 Accumulated Deficit (59,821,341 ) (52,149,213 ) Total Stockholders' Equity 18,827,916 23,235,881 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,266,906 $ 71,545,075 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Cash Flows From Operating Activities: Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 158,792 1,180,806 809,636 2,289,237 1,672,823 Amortization of Right of Use Assets 124,171 87,560 44,627 287,956 135,234 Depreciation, Depletion and Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 (Gain) Loss on Derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,914 ) (87,042 ) (244,805 ) Loss on XTO Final Settlement - - 1,448,363 - 1,448,363 PIE-Related Expense - - 1,399,030 - 1,399,030 Change in Operating Assets and Liabilities: Accounts Receivable 467,151 (1,189,280 ) 1,417,093 (1,572,038 ) 304,009 Inventory, Oil in Tanks (26,255 ) 155,057 (412,768 ) (292,057 ) (567,477 ) Prepaids, Current 202,867 618,737 (184,958 ) 911,416 (45,362 ) Accounts Payable 1,892,377 (1,587,886 ) (1,459,997 ) 194,438 (2,464,573 ) Accrued Expenses (89,808 ) (464,538 ) (208,689 ) (3,732,113 ) 1,480,826 Other Long Term Assets and Liabilities (292,782 ) (436,523 ) 39,026 (942,916 ) (117,185 ) Net Cash Provided By Operating Activities 2,027,399 (2,917,916 ) 3,863,078 5,957,231 ) 14,907,166 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties (1,424,419 ) (670,000 ) - (2,094,419 ) (2,205,000 ) Additions to Oil and Natural Gas Properties (2,468,688 ) (917,843 ) (276,024 ) (5,596,535 ) (1,502,900 ) Purchase of Other Fixed Assets (26,478 ) (125,866 ) (189,179 ) (179,514 ) (307,787 ) Cash Paid for Right of Use Assets (223,606 ) (117,560 ) (44,009 ) (427,711 ) (135,244 ) Sinking Fund Deposit - - - 2,779,000 (640,000 ) Net Cash Used In Investing Activities (4,143,191 ) (1,831,269 ) (509,212 ) (5,519,179 ) (4,790,931 ) Cash Flows from Financing Activities: Principal Payments of Debt (644,224 ) (719,838 ) (1,384,167 ) (1,933,198 ) (1,384,167 ) Proceeds from Bridge Loans and Related Parties 10,000,000 - 922,388 10,000,000 - Proceeds from Option and Warrant Exercises 2,500,000 - 405,220 2,500,000 3,389,903 Net Cash Provided By (Used In) Financing Activities 11,855,776 (719,838 ) (56,559 ) 10,566,802 2,005,736 Net Change in Cash 9,739,984 (5,469,023 ) 3,297,307 (909,608 ) 12,121,971 Cash - Beginning of Period 1,294,850 6,763,873 12,436,535 11,944,442 3,611,871 Cash - End of Period $ 11,034,834 $ 1,294,850 $ 15,733,842 $ 11,034,834 $ 15,733,842 Supplemental Cash Flow Information: Cash Paid for Interest $ 398,033 $ 292,022 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 (Loss)”, “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 (Loss) 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjusted for: (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted Net Income (Loss) $ (1,462,243 ) $ (2,398,252 ) $ 89,541 $ (5,919,630 ) $ 10,311,889 Diluted Weighted Average Shares Outstanding 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 Adjusted Net Income (Loss) Per Share $ (0.06 ) $ (0.11 ) $ - $ (0.27 ) $ 0.45 The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of right of use assets 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Add Back: Interest Expense 249,796 184,887 125,330 671,982 347,763 DD&A 727,943 711,042 539,543 2,061,474 1,429,788 Accretion 470,505 405,361 342,619 1,277,141 1,009,107 Impairment cost - - - - - Amortization of right of use assets 124,171 87,560 44,627 287,956 135,234 Income Taxes (134,720 ) - - (134,720 ) - EBITDA $ (1,309,933 ) $ (1,076,059 ) $ 1,268,060 $ (3,508,295 ) $ 12,295,540 Consideration of noncash items: Stock compensation and issuances 158,792 1,180,806 809,641 2,289,237 1,672,829 (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Write-off of JDA Note Receivable - - 1,399,030 - 1,399,030 XTO Final Settlement - - 1,448,363 - 1,448,363 Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted EBITDA $ 134,244 $ 171,404 $ 4,798,694 $ 533,440 $ 17,754,003 View source version on businesswire.com: https://www.businesswire.com/news/home/20231111368958/en/ContactsEmpire Petroleum Corporation: Mike Morrisett, President & CEO 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 281-740-1334 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 2023 By: Empire Petroleum via Business Wire November 13, 2023 at 07:00 AM EST ~ Strategic Initiatives Executed in Q3 Further Position Empire for Long-Term Success ~ ~ Continuing to Make Significant Progress on Starbuck Drilling Program ~ Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), an oil and gas company with producing assets in New Mexico, North Dakota, Montana, Texas and Louisiana, today announced operational and financial results for the third quarter of 2023. In addition, the Company provided an update on its targeted drilling program underway at its Starbuck field in North Dakota (the “Starbuck Drilling Program”). KEY THIRD QUARTER 2023 AND RECENT HIGHLIGHTS Posted net sales volumes of 2,048 barrels of oil equivalent per day (“Boe/d”) (64% oil, 19% natural gas liquids (“NGLs”) and 17% natural gas) compared to 2,135 Boe/d (66% oil, 16% NGLs, and 18% natural gas) for the second quarter of 2023. Sales volumes for the third quarter of 2022 were 2,232 Boe/d (60% oil, 21% NGLs, and 19% natural gas); Reported product revenue of $10.3 million, a net loss of $2.7 million, or $0.12 per diluted share, and an Adjusted Net Loss1 of $1.5 million, or $0.06 per diluted share; Generated Adjusted EBITDA1 of $0.1 million; Ended the third quarter of 2023 with approximately $11.3 million of liquidity; Executed on a number of strategic initiatives designed to support the capital structure and near to mid-term asset development plans for the Company, including: The Company and an indirect wholly-owned subsidiary of Energy Evolution Master Fund, Ltd. (“EEMF”) – Empire’s largest shareholder – collectively acquired strategic additional working interests in August in the Company’s three properties located in Lea County, New Mexico, including Eunice Monument South Unit A, Eunice Monument South Unit B, and Arrowhead Grayburg Unit; Secured bridge loans in September collectively totaling $10 million, including $5 million each from Phil Mulacek, Empire’s Chair of the Board of Directors, and EEMF, with the primary purpose of funding the Company’s targeted Starbuck Drilling Program; and Commenced the targeted Starbuck Drilling Program in October during which the Company expects to drill 10 to 14 wells at an estimated total cost of $20 million to $22 million. Initial well log results on the first two wells that have been drilled to target depth have shown positive indicators that materially exceed Empire’s initial expectations as to the targeted reservoir’s porosity and thickness. 1. Adjusted Net Income (Loss), 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 Mike Morrisett, President and Chief Executive Officer of Empire, commented, “We were pleased to see improvement in commodity prices during the third quarter. This timing is ideal as we continue to progress through our development campaign that began in the latter part of 2022 on our North Dakota assets and materially expanded in the second half of 2023 with the recent kick off of the Starbuck Drilling Program.” Mr. Morrisett continued, “Our capital development programs are designed to drive a meaningful increase in production levels and cash flow for the near and long-term benefit of our shareholders. A lot of time and effort was spent developing the programs and the positive initial results from the well logs on our first two wells being drilled is another clear indicator that all of the planning was well worth the effort. I want to thank everyone involved for their hard work and dedication as we continue to successfully execute our targeted development activities.” Phil Mulacek, Chair of the Board of Empire, further commented, “We are clearly encouraged with the initial well log results from the first two wells of the Starbuck Drilling Program. We look forward to drilling targeted laterals of 5,000 to 6,500 feet within the target Upper Charles Formation. Loans have been advanced to the Company to fund the drilling and completion activities. As we move through our drilling program, we will continue to apply the lessons learned to improve overall performance of a target production growth.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2023 Q3 2023 Q2 2023 % Change Q3 2023 vs. Q2 2023 Q3 2022 % Change Q3 2023 vs. Q3 2022 Net sales (Boe/d) 2,048 2,135 (4 %) 2,232 (8 %) Net sales (Boe) 188.396 194,306 (3 %) 205,380 (8 %) Realized price - all products ($/Boe) $ 54.75 $ 50.22 9 % $ 68.03 (20 %) Product Revenue ($M) $ 10,315 $ 9,758 (6 %) $ 13,973 (35 %) Net income (loss) ($M) $ (2,748) $ (2,465) (11 %) $ 216 NM Adjusted Net Income (Loss) ($M) $ (1,462) $ (2,398) 39 % $ 90 NM Adjusted EBITDA ($M) $ 134 $ 171 (22 %) $ 4,799 (97 %) NM – Not meaningful due to a change in signs. Net sales volumes were 2,048 Boe/d, including 1,306 barrels of oil per day; 387 barrels of NGLs per day, and 2,129 thousand cubic feet per day (“Mcf/d”), or 355 Boe/d, of natural gas. This is compared to net sales volumes for the second quarter of 2023 of 2,135 Boe/d, including 1,411 barrels of oil per day; 337 barrels of NGLs per day, and 2,322 thousand cubic feet per day (“Mcf/d”), or 387 Boe/d, of natural gas. Primarily driving the quarterly sequential decrease was lower oil sales volumes associated with Empire’s assets in New Mexico due to an annual turnaround of the Eunice Monument South Unit waterflood central facility. The Company looks forward to increasing its North Dakota asset production profile over the near to mid-term through its Starbuck Drilling Program currently underway that is targeted to drill up to 14 high rate-of-return wells. Empire reported $10.3 million of product revenue versus $9.8 million for the second quarter of 2023. Offsetting the increase in realized crude oil and natural gas sales pricing, was lower sales volumes for crude oil and natural gas as well as lower NGLs realized pricing. This was partially offset by a 16% increase in sequential NGLs sales volumes primarily associated with the Company’s New Mexico assets due to increasing gas well output to capitalize on higher natural gas pricing. Lease operating expenses were $7.1 million in both the third and second quarter of 2023. On a Boe basis, third quarter lease operating expenses were $37.42 per Boe versus $36.54 per Boe for the second quarter. Production and ad valorem taxes were $0.8 million, which was a slight increase from $0.7 million for the second quarter of 2023, and were 7.7% and 7.4% of total product revenue, respectively, for the third and second quarters of 2023. General and administrative (“G&A”) expense, excluding share-based compensation expense, was $2.6 million ($13.70 per Boe) versus $1.9 million ($9.75 per Boe) for the second quarter of 2023. Empire recorded a net loss of $2.7 million, or $0.12 per diluted share, compared to a net loss of $2.5 million, or $0.11 per diluted share, for the second quarter of 2023. The Company posted an Adjusted Net Loss for the third quarter of $1.5 million, or $0.06 per diluted share, versus an Adjusted Net Loss of $2.4 million, or $0.11 per diluted share, in the second quarter of 2023. Adjusted EBITDA was $0.1 million versus $0.2 million for the second quarter of 2023. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the three months and nine months ended September 30, 2023, the Company invested approximately $2.5 million and $5.6 million, respectively, in capital expenditures primarily related to recompletion and other activities in multiple states as Empire seeks to bring production online from existing wells, as well as expenditures related to the Company’s new horizontal drilling in North Dakota. Total liquidity at the end of the third quarter of 2023 was $11.3 million, including $11.0 million of cash and $0.3 million of availability on the Company’s credit facility. Empire remains squarely focused on continuing to execute on its strategy to remain financially conservative and target opportunities that provide long-term value for the Company’s shareholders. DEVELOPMENT PROGRAM UPDATE The Company is drilling the first two of ten to 14 wells to begin the 2023-2024 Starbuck Drilling Program. The first well was spud on October 11, 2023 and drilled to a depth of approximately 3,600 feet, thereby penetrating the targeted Upper Charles Formation. The development plan is to drill and log a vertical well, then build a radius and cement casing across the vertical and radius, and lastly a horizontal section is drilled and completed. The post drill results to date indicate the reservoir at three times thicker than pre-drill estimates and porosities that are three to six times better than pre-drill estimates. Oil and gas was observed at surface with higher than expected pore pressures. The Company expects the first well to be completed in the next 15 to 20 days. The Company looks forward to keeping investors apprised of its progress. 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, 2022, 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. Other than as required by applicable securities laws, the Company does not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Revenue: Oil Sales $ 9,492,127 $ 9,147,611 $ 11,501,521 $ 27,578,453 $ 35,247,309 Gas Sales (1) 411,217 248,686 1,526,148 1,315,938 3,731,946 Natural Gas Liquids ("NGLs") Sales (1) 411,624 362,181 945,317 1,278,759 3,201,947 Total Product Revenues 10,314,968 9,758,478 13,972,986 30,173,150 42,181,202 Other 17,050 18,361 22,921 54,775 71,877 Gain (Loss) on Derivatives (1,185,921 ) (66,657 ) 42,474 (1,319,401 ) (93,740 ) Total Revenue 9,146,097 9,710,182 14,038,381 28,908,524 42,159,339 Costs and Expenses: Lease Operating Expense 7,050,054 7,099,000 7,751,755 20,669,217 16,981,057 Production and Ad Valorem Taxes 792,241 721,275 1,112,246 2,271,630 3,151,325 Depletion, Depreciation & Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 General and Administrative Expense: General and Administrative 2,580,464 1,894,204 2,040,418 7,497,947 6,915,068 Stock-Based Compensation 158,792 1,180,806 809,641 2,289,237 1,672,823 Total General and Administrative Expense 2,739,256 3,075,010 2,850,059 9,787,184 8,587,891 Total Cost and Expenses 11,779,999 12,011,688 12,596,222 36,066,646 31,159,168 Operating Income (Loss) (2,633,902 ) (2,301,506 ) 1,442,159 (7,158,122 ) 11,000,171 Other Income and (Expense): Interest Expense (249,796 ) (184,887 ) (125,330 ) (671,982 ) (347,763 ) Other Income (Expense) 1,350 21,484 (1,100,888 ) 23,256 (1,278,760 ) Income (Loss) before Taxes (2,882,348 ) (2,464,909 ) 215,941 (7,806,848 ) 9,373,648 Income Tax (Provision) Benefit 134,720 - - 134,720 - Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Net Income (Loss) per Common Share: Basic $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.45 Diluted $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.41 Weighted Average Number of Common Shares Outstanding: Basic 22,727,639 22,105,704 21,651,383 22,320,207 20,654,294 Diluted 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 (1) Presentation for the three and nine months ended September 30, 2022 reflects reclassification of gathering and processing costs from lease operating expense, which is consistent with the presentation of results for the first three quarters of 2023 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Production Volumes: Oil (Bbl) 120,177 128,413 123,804 368,847 361,226 Natural gas (Mcf) 195,908 211,293 231,522 638,419 653,829 Natural gas liquids (Bbl) 35,568 30,678 42,989 106,002 121,658 Total (Boe) 188,396 194,306 205,380 581,251 591,855 Average daily equivalent sales (Boe/d) 2,048 2,135 2,232 2,129 2,168 Average Price per Unit: Oil ($/Bbl) $ 78.98 $ 71.24 $ 92.90 $ 74.77 $ 97.58 Natural gas ($/Mcf) $ 2.10 $ 1.18 $ 6.59 $ 2.06 $ 5.71 Natural gas liquids ($/Bbl) $ 11.57 $ 11.81 $ 21.99 $ 12.06 $ 26.32 Total ($/Boe) $ 54.75 $ 50.22 $ 68.03 $ 51.91 $ 71.27 Operating Costs and Expenses per Boe: Lease operating expense $ 37.42 $ 36.54 $ 37.74 $ 35.56 $ 28.69 Production and ad valorem taxes $ 4.21 $ 3.71 $ 5.42 $ 3.91 $ 5.32 Depreciation, depletion, amortization and accretion $ 6.36 $ 5.75 $ 4.30 $ 5.74 $ 4.12 General & administrative expense: General & administrative expense $ 13.70 $ 9.75 $ 9.93 $ 12.90 $ 11.68 Stock-based compensation $ 0.84 $ 6.08 $ 3.94 $ 3.94 $ 2.83 Total general & administrative expense $ 14.54 $ 15.83 $ 13.88 $ 16.84 $ 14.51 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2023 2022 ASSETS Current Assets: Cash $ 11,034,834 $ 11,944,442 Accounts Receivable 7,226,146 7,780,239 Derivative Instruments - 121,584 Inventory - Oil in Tanks 1,564,684 1,840,274 Prepaids 591,732 1,048,434 Total Current Assets 20,417,396 22,734,973 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 74,620,878 63,986,339 Less: Accumulated Depreciation, Depletion and Impairment (22,014,050 ) (20,116,696 ) Total Oil and Gas Properties, Net 52,606,828 43,869,643 Other Property and Equipment, Net 1,867,911 1,441,529 Total Property and Equipment, Net 54,474,739 45,311,172 Sinking Fund - 2,779,000 Utility and Other Deposits 1,374,771 719,930 TOTAL ASSETS $ 76,266,906 $ 71,545,075 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 6,051,027 $ 5,843,366 Accrued Expenses 5,726,117 9,461,010 Derivative Instruments 1,053,606 - Current Portion of Lease Liability 424,819 256,975 Term Note Payable - Related Party 1,060,004 - Current Portion of Long-Term Debt 4,549,585 2,059,309 Total Current Liabilities 18,865,158 17,620,660 Long-Term Debt 116,507 4,063,115 Bridge Loans - Related Parties 10,000,000 - Term Note Payable - Related Party - 1,076,987 Lease Liability 654,524 547,692 Derivative Instruments 59,949 - Asset Retirement Obligations 27,742,852 25,000,740 Total Liabilities 57,438,990 48,309,194 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 6 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value, 190,000,000 Shares Authorized, 22,892,280 and 22,093,503 Shares Issued and Outstanding, Respectively 82,414 81,615 Additional Paid-in Capital 78,566,843 75,303,479 Accumulated Deficit (59,821,341 ) (52,149,213 ) Total Stockholders' Equity 18,827,916 23,235,881 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,266,906 $ 71,545,075 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Cash Flows From Operating Activities: Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 158,792 1,180,806 809,636 2,289,237 1,672,823 Amortization of Right of Use Assets 124,171 87,560 44,627 287,956 135,234 Depreciation, Depletion and Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 (Gain) Loss on Derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,914 ) (87,042 ) (244,805 ) Loss on XTO Final Settlement - - 1,448,363 - 1,448,363 PIE-Related Expense - - 1,399,030 - 1,399,030 Change in Operating Assets and Liabilities: Accounts Receivable 467,151 (1,189,280 ) 1,417,093 (1,572,038 ) 304,009 Inventory, Oil in Tanks (26,255 ) 155,057 (412,768 ) (292,057 ) (567,477 ) Prepaids, Current 202,867 618,737 (184,958 ) 911,416 (45,362 ) Accounts Payable 1,892,377 (1,587,886 ) (1,459,997 ) 194,438 (2,464,573 ) Accrued Expenses (89,808 ) (464,538 ) (208,689 ) (3,732,113 ) 1,480,826 Other Long Term Assets and Liabilities (292,782 ) (436,523 ) 39,026 (942,916 ) (117,185 ) Net Cash Provided By Operating Activities 2,027,399 (2,917,916 ) 3,863,078 5,957,231 ) 14,907,166 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties (1,424,419 ) (670,000 ) - (2,094,419 ) (2,205,000 ) Additions to Oil and Natural Gas Properties (2,468,688 ) (917,843 ) (276,024 ) (5,596,535 ) (1,502,900 ) Purchase of Other Fixed Assets (26,478 ) (125,866 ) (189,179 ) (179,514 ) (307,787 ) Cash Paid for Right of Use Assets (223,606 ) (117,560 ) (44,009 ) (427,711 ) (135,244 ) Sinking Fund Deposit - - - 2,779,000 (640,000 ) Net Cash Used In Investing Activities (4,143,191 ) (1,831,269 ) (509,212 ) (5,519,179 ) (4,790,931 ) Cash Flows from Financing Activities: Principal Payments of Debt (644,224 ) (719,838 ) (1,384,167 ) (1,933,198 ) (1,384,167 ) Proceeds from Bridge Loans and Related Parties 10,000,000 - 922,388 10,000,000 - Proceeds from Option and Warrant Exercises 2,500,000 - 405,220 2,500,000 3,389,903 Net Cash Provided By (Used In) Financing Activities 11,855,776 (719,838 ) (56,559 ) 10,566,802 2,005,736 Net Change in Cash 9,739,984 (5,469,023 ) 3,297,307 (909,608 ) 12,121,971 Cash - Beginning of Period 1,294,850 6,763,873 12,436,535 11,944,442 3,611,871 Cash - End of Period $ 11,034,834 $ 1,294,850 $ 15,733,842 $ 11,034,834 $ 15,733,842 Supplemental Cash Flow Information: Cash Paid for Interest $ 398,033 $ 292,022 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 (Loss)”, “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 (Loss) 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjusted for: (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted Net Income (Loss) $ (1,462,243 ) $ (2,398,252 ) $ 89,541 $ (5,919,630 ) $ 10,311,889 Diluted Weighted Average Shares Outstanding 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 Adjusted Net Income (Loss) Per Share $ (0.06 ) $ (0.11 ) $ - $ (0.27 ) $ 0.45 The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of right of use assets 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Add Back: Interest Expense 249,796 184,887 125,330 671,982 347,763 DD&A 727,943 711,042 539,543 2,061,474 1,429,788 Accretion 470,505 405,361 342,619 1,277,141 1,009,107 Impairment cost - - - - - Amortization of right of use assets 124,171 87,560 44,627 287,956 135,234 Income Taxes (134,720 ) - - (134,720 ) - EBITDA $ (1,309,933 ) $ (1,076,059 ) $ 1,268,060 $ (3,508,295 ) $ 12,295,540 Consideration of noncash items: Stock compensation and issuances 158,792 1,180,806 809,641 2,289,237 1,672,829 (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Write-off of JDA Note Receivable - - 1,399,030 - 1,399,030 XTO Final Settlement - - 1,448,363 - 1,448,363 Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted EBITDA $ 134,244 $ 171,404 $ 4,798,694 $ 533,440 $ 17,754,003 View source version on businesswire.com: https://www.businesswire.com/news/home/20231111368958/en/ContactsEmpire Petroleum Corporation: Mike Morrisett, President & CEO 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 281-740-1334 wes@alpetrie.com
~ Strategic Initiatives Executed in Q3 Further Position Empire for Long-Term Success ~ ~ Continuing to Make Significant Progress on Starbuck Drilling Program ~
Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), an oil and gas company with producing assets in New Mexico, North Dakota, Montana, Texas and Louisiana, today announced operational and financial results for the third quarter of 2023. In addition, the Company provided an update on its targeted drilling program underway at its Starbuck field in North Dakota (the “Starbuck Drilling Program”). KEY THIRD QUARTER 2023 AND RECENT HIGHLIGHTS Posted net sales volumes of 2,048 barrels of oil equivalent per day (“Boe/d”) (64% oil, 19% natural gas liquids (“NGLs”) and 17% natural gas) compared to 2,135 Boe/d (66% oil, 16% NGLs, and 18% natural gas) for the second quarter of 2023. Sales volumes for the third quarter of 2022 were 2,232 Boe/d (60% oil, 21% NGLs, and 19% natural gas); Reported product revenue of $10.3 million, a net loss of $2.7 million, or $0.12 per diluted share, and an Adjusted Net Loss1 of $1.5 million, or $0.06 per diluted share; Generated Adjusted EBITDA1 of $0.1 million; Ended the third quarter of 2023 with approximately $11.3 million of liquidity; Executed on a number of strategic initiatives designed to support the capital structure and near to mid-term asset development plans for the Company, including: The Company and an indirect wholly-owned subsidiary of Energy Evolution Master Fund, Ltd. (“EEMF”) – Empire’s largest shareholder – collectively acquired strategic additional working interests in August in the Company’s three properties located in Lea County, New Mexico, including Eunice Monument South Unit A, Eunice Monument South Unit B, and Arrowhead Grayburg Unit; Secured bridge loans in September collectively totaling $10 million, including $5 million each from Phil Mulacek, Empire’s Chair of the Board of Directors, and EEMF, with the primary purpose of funding the Company’s targeted Starbuck Drilling Program; and Commenced the targeted Starbuck Drilling Program in October during which the Company expects to drill 10 to 14 wells at an estimated total cost of $20 million to $22 million. Initial well log results on the first two wells that have been drilled to target depth have shown positive indicators that materially exceed Empire’s initial expectations as to the targeted reservoir’s porosity and thickness. 1. Adjusted Net Income (Loss), 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 Mike Morrisett, President and Chief Executive Officer of Empire, commented, “We were pleased to see improvement in commodity prices during the third quarter. This timing is ideal as we continue to progress through our development campaign that began in the latter part of 2022 on our North Dakota assets and materially expanded in the second half of 2023 with the recent kick off of the Starbuck Drilling Program.” Mr. Morrisett continued, “Our capital development programs are designed to drive a meaningful increase in production levels and cash flow for the near and long-term benefit of our shareholders. A lot of time and effort was spent developing the programs and the positive initial results from the well logs on our first two wells being drilled is another clear indicator that all of the planning was well worth the effort. I want to thank everyone involved for their hard work and dedication as we continue to successfully execute our targeted development activities.” Phil Mulacek, Chair of the Board of Empire, further commented, “We are clearly encouraged with the initial well log results from the first two wells of the Starbuck Drilling Program. We look forward to drilling targeted laterals of 5,000 to 6,500 feet within the target Upper Charles Formation. Loans have been advanced to the Company to fund the drilling and completion activities. As we move through our drilling program, we will continue to apply the lessons learned to improve overall performance of a target production growth.” FINANCIAL AND OPERATIONAL RESULTS FOR THIRD QUARTER 2023 Q3 2023 Q2 2023 % Change Q3 2023 vs. Q2 2023 Q3 2022 % Change Q3 2023 vs. Q3 2022 Net sales (Boe/d) 2,048 2,135 (4 %) 2,232 (8 %) Net sales (Boe) 188.396 194,306 (3 %) 205,380 (8 %) Realized price - all products ($/Boe) $ 54.75 $ 50.22 9 % $ 68.03 (20 %) Product Revenue ($M) $ 10,315 $ 9,758 (6 %) $ 13,973 (35 %) Net income (loss) ($M) $ (2,748) $ (2,465) (11 %) $ 216 NM Adjusted Net Income (Loss) ($M) $ (1,462) $ (2,398) 39 % $ 90 NM Adjusted EBITDA ($M) $ 134 $ 171 (22 %) $ 4,799 (97 %) NM – Not meaningful due to a change in signs. Net sales volumes were 2,048 Boe/d, including 1,306 barrels of oil per day; 387 barrels of NGLs per day, and 2,129 thousand cubic feet per day (“Mcf/d”), or 355 Boe/d, of natural gas. This is compared to net sales volumes for the second quarter of 2023 of 2,135 Boe/d, including 1,411 barrels of oil per day; 337 barrels of NGLs per day, and 2,322 thousand cubic feet per day (“Mcf/d”), or 387 Boe/d, of natural gas. Primarily driving the quarterly sequential decrease was lower oil sales volumes associated with Empire’s assets in New Mexico due to an annual turnaround of the Eunice Monument South Unit waterflood central facility. The Company looks forward to increasing its North Dakota asset production profile over the near to mid-term through its Starbuck Drilling Program currently underway that is targeted to drill up to 14 high rate-of-return wells. Empire reported $10.3 million of product revenue versus $9.8 million for the second quarter of 2023. Offsetting the increase in realized crude oil and natural gas sales pricing, was lower sales volumes for crude oil and natural gas as well as lower NGLs realized pricing. This was partially offset by a 16% increase in sequential NGLs sales volumes primarily associated with the Company’s New Mexico assets due to increasing gas well output to capitalize on higher natural gas pricing. Lease operating expenses were $7.1 million in both the third and second quarter of 2023. On a Boe basis, third quarter lease operating expenses were $37.42 per Boe versus $36.54 per Boe for the second quarter. Production and ad valorem taxes were $0.8 million, which was a slight increase from $0.7 million for the second quarter of 2023, and were 7.7% and 7.4% of total product revenue, respectively, for the third and second quarters of 2023. General and administrative (“G&A”) expense, excluding share-based compensation expense, was $2.6 million ($13.70 per Boe) versus $1.9 million ($9.75 per Boe) for the second quarter of 2023. Empire recorded a net loss of $2.7 million, or $0.12 per diluted share, compared to a net loss of $2.5 million, or $0.11 per diluted share, for the second quarter of 2023. The Company posted an Adjusted Net Loss for the third quarter of $1.5 million, or $0.06 per diluted share, versus an Adjusted Net Loss of $2.4 million, or $0.11 per diluted share, in the second quarter of 2023. Adjusted EBITDA was $0.1 million versus $0.2 million for the second quarter of 2023. CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY For the three months and nine months ended September 30, 2023, the Company invested approximately $2.5 million and $5.6 million, respectively, in capital expenditures primarily related to recompletion and other activities in multiple states as Empire seeks to bring production online from existing wells, as well as expenditures related to the Company’s new horizontal drilling in North Dakota. Total liquidity at the end of the third quarter of 2023 was $11.3 million, including $11.0 million of cash and $0.3 million of availability on the Company’s credit facility. Empire remains squarely focused on continuing to execute on its strategy to remain financially conservative and target opportunities that provide long-term value for the Company’s shareholders. DEVELOPMENT PROGRAM UPDATE The Company is drilling the first two of ten to 14 wells to begin the 2023-2024 Starbuck Drilling Program. The first well was spud on October 11, 2023 and drilled to a depth of approximately 3,600 feet, thereby penetrating the targeted Upper Charles Formation. The development plan is to drill and log a vertical well, then build a radius and cement casing across the vertical and radius, and lastly a horizontal section is drilled and completed. The post drill results to date indicate the reservoir at three times thicker than pre-drill estimates and porosities that are three to six times better than pre-drill estimates. Oil and gas was observed at surface with higher than expected pore pressures. The Company expects the first well to be completed in the next 15 to 20 days. The Company looks forward to keeping investors apprised of its progress. 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, 2022, 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. Other than as required by applicable securities laws, the Company does not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise. EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Revenue: Oil Sales $ 9,492,127 $ 9,147,611 $ 11,501,521 $ 27,578,453 $ 35,247,309 Gas Sales (1) 411,217 248,686 1,526,148 1,315,938 3,731,946 Natural Gas Liquids ("NGLs") Sales (1) 411,624 362,181 945,317 1,278,759 3,201,947 Total Product Revenues 10,314,968 9,758,478 13,972,986 30,173,150 42,181,202 Other 17,050 18,361 22,921 54,775 71,877 Gain (Loss) on Derivatives (1,185,921 ) (66,657 ) 42,474 (1,319,401 ) (93,740 ) Total Revenue 9,146,097 9,710,182 14,038,381 28,908,524 42,159,339 Costs and Expenses: Lease Operating Expense 7,050,054 7,099,000 7,751,755 20,669,217 16,981,057 Production and Ad Valorem Taxes 792,241 721,275 1,112,246 2,271,630 3,151,325 Depletion, Depreciation & Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 General and Administrative Expense: General and Administrative 2,580,464 1,894,204 2,040,418 7,497,947 6,915,068 Stock-Based Compensation 158,792 1,180,806 809,641 2,289,237 1,672,823 Total General and Administrative Expense 2,739,256 3,075,010 2,850,059 9,787,184 8,587,891 Total Cost and Expenses 11,779,999 12,011,688 12,596,222 36,066,646 31,159,168 Operating Income (Loss) (2,633,902 ) (2,301,506 ) 1,442,159 (7,158,122 ) 11,000,171 Other Income and (Expense): Interest Expense (249,796 ) (184,887 ) (125,330 ) (671,982 ) (347,763 ) Other Income (Expense) 1,350 21,484 (1,100,888 ) 23,256 (1,278,760 ) Income (Loss) before Taxes (2,882,348 ) (2,464,909 ) 215,941 (7,806,848 ) 9,373,648 Income Tax (Provision) Benefit 134,720 - - 134,720 - Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Net Income (Loss) per Common Share: Basic $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.45 Diluted $ (0.12 ) $ (0.11 ) $ 0.01 $ (0.34 ) $ 0.41 Weighted Average Number of Common Shares Outstanding: Basic 22,727,639 22,105,704 21,651,383 22,320,207 20,654,294 Diluted 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 (1) Presentation for the three and nine months ended September 30, 2022 reflects reclassification of gathering and processing costs from lease operating expense, which is consistent with the presentation of results for the first three quarters of 2023 EMPIRE PETROLEUM CORPORATION Condensed Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Production Volumes: Oil (Bbl) 120,177 128,413 123,804 368,847 361,226 Natural gas (Mcf) 195,908 211,293 231,522 638,419 653,829 Natural gas liquids (Bbl) 35,568 30,678 42,989 106,002 121,658 Total (Boe) 188,396 194,306 205,380 581,251 591,855 Average daily equivalent sales (Boe/d) 2,048 2,135 2,232 2,129 2,168 Average Price per Unit: Oil ($/Bbl) $ 78.98 $ 71.24 $ 92.90 $ 74.77 $ 97.58 Natural gas ($/Mcf) $ 2.10 $ 1.18 $ 6.59 $ 2.06 $ 5.71 Natural gas liquids ($/Bbl) $ 11.57 $ 11.81 $ 21.99 $ 12.06 $ 26.32 Total ($/Boe) $ 54.75 $ 50.22 $ 68.03 $ 51.91 $ 71.27 Operating Costs and Expenses per Boe: Lease operating expense $ 37.42 $ 36.54 $ 37.74 $ 35.56 $ 28.69 Production and ad valorem taxes $ 4.21 $ 3.71 $ 5.42 $ 3.91 $ 5.32 Depreciation, depletion, amortization and accretion $ 6.36 $ 5.75 $ 4.30 $ 5.74 $ 4.12 General & administrative expense: General & administrative expense $ 13.70 $ 9.75 $ 9.93 $ 12.90 $ 11.68 Stock-based compensation $ 0.84 $ 6.08 $ 3.94 $ 3.94 $ 2.83 Total general & administrative expense $ 14.54 $ 15.83 $ 13.88 $ 16.84 $ 14.51 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2023 2022 ASSETS Current Assets: Cash $ 11,034,834 $ 11,944,442 Accounts Receivable 7,226,146 7,780,239 Derivative Instruments - 121,584 Inventory - Oil in Tanks 1,564,684 1,840,274 Prepaids 591,732 1,048,434 Total Current Assets 20,417,396 22,734,973 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 74,620,878 63,986,339 Less: Accumulated Depreciation, Depletion and Impairment (22,014,050 ) (20,116,696 ) Total Oil and Gas Properties, Net 52,606,828 43,869,643 Other Property and Equipment, Net 1,867,911 1,441,529 Total Property and Equipment, Net 54,474,739 45,311,172 Sinking Fund - 2,779,000 Utility and Other Deposits 1,374,771 719,930 TOTAL ASSETS $ 76,266,906 $ 71,545,075 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 6,051,027 $ 5,843,366 Accrued Expenses 5,726,117 9,461,010 Derivative Instruments 1,053,606 - Current Portion of Lease Liability 424,819 256,975 Term Note Payable - Related Party 1,060,004 - Current Portion of Long-Term Debt 4,549,585 2,059,309 Total Current Liabilities 18,865,158 17,620,660 Long-Term Debt 116,507 4,063,115 Bridge Loans - Related Parties 10,000,000 - Term Note Payable - Related Party - 1,076,987 Lease Liability 654,524 547,692 Derivative Instruments 59,949 - Asset Retirement Obligations 27,742,852 25,000,740 Total Liabilities 57,438,990 48,309,194 Stockholders' Equity: Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 6 Shares Issued and Outstanding, Respectively - - Common Stock - $.001 Par Value, 190,000,000 Shares Authorized, 22,892,280 and 22,093,503 Shares Issued and Outstanding, Respectively 82,414 81,615 Additional Paid-in Capital 78,566,843 75,303,479 Accumulated Deficit (59,821,341 ) (52,149,213 ) Total Stockholders' Equity 18,827,916 23,235,881 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,266,906 $ 71,545,075 EMPIRE PETROLEUM CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Cash Flows From Operating Activities: Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: Stock Compensation and Issuances 158,792 1,180,806 809,636 2,289,237 1,672,823 Amortization of Right of Use Assets 124,171 87,560 44,627 287,956 135,234 Depreciation, Depletion and Amortization 727,943 711,042 539,543 2,061,474 1,429,788 Accretion of Asset Retirement Obligation 470,505 405,361 342,619 1,277,141 1,009,107 (Gain) Loss on Derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,914 ) (87,042 ) (244,805 ) Loss on XTO Final Settlement - - 1,448,363 - 1,448,363 PIE-Related Expense - - 1,399,030 - 1,399,030 Change in Operating Assets and Liabilities: Accounts Receivable 467,151 (1,189,280 ) 1,417,093 (1,572,038 ) 304,009 Inventory, Oil in Tanks (26,255 ) 155,057 (412,768 ) (292,057 ) (567,477 ) Prepaids, Current 202,867 618,737 (184,958 ) 911,416 (45,362 ) Accounts Payable 1,892,377 (1,587,886 ) (1,459,997 ) 194,438 (2,464,573 ) Accrued Expenses (89,808 ) (464,538 ) (208,689 ) (3,732,113 ) 1,480,826 Other Long Term Assets and Liabilities (292,782 ) (436,523 ) 39,026 (942,916 ) (117,185 ) Net Cash Provided By Operating Activities 2,027,399 (2,917,916 ) 3,863,078 5,957,231 ) 14,907,166 Cash Flows from Investing Activities: Acquisition of Oil and Natural Gas Properties (1,424,419 ) (670,000 ) - (2,094,419 ) (2,205,000 ) Additions to Oil and Natural Gas Properties (2,468,688 ) (917,843 ) (276,024 ) (5,596,535 ) (1,502,900 ) Purchase of Other Fixed Assets (26,478 ) (125,866 ) (189,179 ) (179,514 ) (307,787 ) Cash Paid for Right of Use Assets (223,606 ) (117,560 ) (44,009 ) (427,711 ) (135,244 ) Sinking Fund Deposit - - - 2,779,000 (640,000 ) Net Cash Used In Investing Activities (4,143,191 ) (1,831,269 ) (509,212 ) (5,519,179 ) (4,790,931 ) Cash Flows from Financing Activities: Principal Payments of Debt (644,224 ) (719,838 ) (1,384,167 ) (1,933,198 ) (1,384,167 ) Proceeds from Bridge Loans and Related Parties 10,000,000 - 922,388 10,000,000 - Proceeds from Option and Warrant Exercises 2,500,000 - 405,220 2,500,000 3,389,903 Net Cash Provided By (Used In) Financing Activities 11,855,776 (719,838 ) (56,559 ) 10,566,802 2,005,736 Net Change in Cash 9,739,984 (5,469,023 ) 3,297,307 (909,608 ) 12,121,971 Cash - Beginning of Period 1,294,850 6,763,873 12,436,535 11,944,442 3,611,871 Cash - End of Period $ 11,034,834 $ 1,294,850 $ 15,733,842 $ 11,034,834 $ 15,733,842 Supplemental Cash Flow Information: Cash Paid for Interest $ 398,033 $ 292,022 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 (Loss)”, “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 (Loss) 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Adjusted for: (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted Net Income (Loss) $ (1,462,243 ) $ (2,398,252 ) $ 89,541 $ (5,919,630 ) $ 10,311,889 Diluted Weighted Average Shares Outstanding 22,727,639 22,105,704 24,065,485 22,320,207 22,778,836 Adjusted Net Income (Loss) Per Share $ (0.06 ) $ (0.11 ) $ - $ (0.27 ) $ 0.45 The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of right of use assets 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. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2023 2023 2022 2023 2022 Net Income (Loss) $ (2,747,628 ) $ (2,464,909 ) $ 215,941 $ (7,672,128 ) $ 9,373,648 Add Back: Interest Expense 249,796 184,887 125,330 671,982 347,763 DD&A 727,943 711,042 539,543 2,061,474 1,429,788 Accretion 470,505 405,361 342,619 1,277,141 1,009,107 Impairment cost - - - - - Amortization of right of use assets 124,171 87,560 44,627 287,956 135,234 Income Taxes (134,720 ) - - (134,720 ) - EBITDA $ (1,309,933 ) $ (1,076,059 ) $ 1,268,060 $ (3,508,295 ) $ 12,295,540 Consideration of noncash items: Stock compensation and issuances 158,792 1,180,806 809,641 2,289,237 1,672,829 (Gain) loss on derivatives 1,185,921 66,657 (42,474 ) 1,319,401 93,740 Settlement on or Purchases of Derivative Instruments (45,855 ) - (83,926 ) (87,042 ) (244,817 ) CEO severance (including employer taxes) - - - 374,820 - COO severance (including employer taxes) 145,319 - - 145,319 - Write-off of JDA Note Receivable - - 1,399,030 - 1,399,030 XTO Final Settlement - - 1,448,363 - 1,448,363 Settlement and fees related to Texas sales tax audit - - - - 1,089,318 Adjusted EBITDA $ 134,244 $ 171,404 $ 4,798,694 $ 533,440 $ 17,754,003 View source version on businesswire.com: https://www.businesswire.com/news/home/20231111368958/en/
Empire Petroleum Corporation: Mike Morrisett, President & CEO 539-444-8002 info@empirepetrocorp.com Investor Relations: Al Petrie Advisors Wes Harris, Partner 281-740-1334 wes@alpetrie.com
