Cover
Cover | 6 Months Ended |
Jun. 30, 2020shares | |
Cover [Abstract] | |
Entity Registrant Name | EMPIRE PETROLEUM CORP |
Entity Central Index Key | 0000887396 |
Document Type | 10-Q |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Small Business | true |
Entity Shell Company | false |
Entity Emerging Growth Company | false |
Entity Current Reporting Status | Yes |
Document Period End Date | Jun. 30, 2020 |
Entity Filer Category | Non-accelerated Filer |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2020 |
Entity Common Stock Shares Outstanding | 21,392,277 |
Document Quarterly Report | true |
Document Transition Report | false |
Entity Interactive Data Current | Yes |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 285,813 | $ 0 |
Accounts Receivable | 928,152 | 982,814 |
Unrealized Gain on Derivative Instruments | 850,674 | 0 |
Inventory | 567,478 | 476,305 |
Prepaids | 83,247 | 129,541 |
Total Current Assets | 2,715,364 | 1,588,660 |
Property and equipment: | ||
Oil and Natural Gas Properties, Successful Efforts | 24,702,866 | 12,660,457 |
Less: Accumulated Depreciation, Depletion and Impairment | (4,918,808) | (3,365,340) |
Oil and natural gas properties, successful efforts, net | 19,784,058 | 9,295,117 |
Other Property and Equipment, net of $3,399 and $1,830 Accumulated Depreciation, respectively | 11,056 | 12,626 |
Total Property and Equipment, net | 19,795,114 | 9,307,743 |
Utility and other deposits | 487,811 | 118,177 |
Acquisition deposit, net of allowance of $725,000 and $-0-, respectively (see Note 4) | 125,000 | 0 |
Total Assets | 23,123,289 | 11,014,580 |
Current Liabilities: | ||
Accounts Payable | 1,040,036 | 1,025,585 |
Accrued Expenses | 2,356,024 | 1,103,916 |
Unrealized Loss on Derivative Instruments | 0 | 11,861 |
Current Portion of Long-term Notes Payable | 8,731,494 | 96,704 |
Total Current Liabilities | 12,127,554 | 2,238,066 |
Long Term Portion of Unrealized Loss on Derivative Instruments | 11,529 | 211,771 |
Long-Term Notes Payable | 160,700 | 7,715,118 |
Contingent Payments (see Note 5) | 985,820 | 0 |
Asset Retirement Obligations | 15,652,761 | 5,788,280 |
Total Liabilities | 28,938,364 | 15,953,235 |
Stockholders' Deficit: | ||
Common Stock - $.001 Par Value 150,000,000 Shares Authorized, 21,392,277 and 20,367,277 Shares Issued and Outstanding, Respectively | 21,392 | 20,367 |
Additional Paid-in Capital | 19,331,651 | 18,823,926 |
Accumulated Deficit | (25,168,118) | (23,782,948) |
Total Stockholders' Deficit | (5,815,075) | (4,938,655) |
Total Liabilities and Stockholders' Deficit | $ 23,123,289 | $ 11,014,580 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Other property and equipment, accumulated depreciation | $ 3,399 | $ 1,830 |
Acquisition deposit, net of allowance | $ 725,000 | $ 0 |
Stockholders' deficit: | ||
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 150,000,000 | 150,000,000 |
Common stock shares issued | 21,392,277 | 20,367,277 |
Common stock shares outstanding | 21,392,277 | 20,367,277 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue: | ||||
Oil and Gas Sales | $ 994,529 | $ 1,996,758 | $ 2,308,929 | $ 2,320,968 |
Net realized and unrealized Gain (Loss) on Derivatives | (402,374) | 500,728 | 2,106,671 | 432,369 |
Total Revenue | 592,155 | 2,497,486 | 4,415,600 | 2,753,337 |
Costs and Expenses: | ||||
Operating | 723,535 | 1,241,384 | 2,189,490 | 1,393,871 |
Taxes - Production | 60,569 | 129,824 | 144,528 | 149,473 |
Depletion, Depreciation & Amortization | 486,568 | 862,120 | 754,585 | 880,206 |
Impairment of Oil and Natural Gas Properties | 0 | 0 | 800,452 | 0 |
Accretion of Asset Retirement Obligation | 257,043 | 63,228 | 355,997 | 69,827 |
General and Administrative | 1,914,406 | 2,044,022 | 2,443,390 | 2,656,611 |
Total Cost and Expenses | 3,442,121 | 4,340,578 | 6,688,442 | 5,149,988 |
Operating Loss | (2,849,966) | (1,843,092) | (2,272,842) | (2,396,651) |
Other Income and (Expense): | ||||
Gain on Sale of Assets | 0 | 0 | 1,143,760 | 0 |
Interest Expense | (123,219) | (162,968) | (256,088) | (196,911) |
Net Loss | $ (2,973,185) | $ (2,006,060) | $ (1,385,170) | $ (2,593,562) |
Net Loss per Common Share, Basic & Diluted | $ (0.14) | $ (0.10) | $ (0.07) | $ (0.14) |
Weighted Average Number of Common Shares Outstanding Basic & Diluted | 21,392,277 | 19,358,110 | 21,222,387 | 18,587,304 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED) - USD ($) | Total | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] |
Balance, shares at Dec. 31, 2018 | 17,345,609 | |||
Balance, amount at Dec. 31, 2018 | $ (150,183) | $ 17,345 | $ 16,960,818 | $ (17,128,346) |
Net Loss | (587,502) | $ 0 | 0 | (587,502) |
Shares, Options, Warrants and Conversion Features Issued, shares | 1,446,668 | |||
Shares, Options, Warrants and Conversion Features Issued, amount | 217,000 | $ 1,447 | 215,553 | 0 |
Balance, shares at Mar. 31, 2019 | 18,792,277 | |||
Balance, amount at Mar. 31, 2019 | (520,685) | $ 18,792 | 17,176,371 | (17,715,848) |
Balance, shares at Dec. 31, 2018 | 17,345,609 | |||
Balance, amount at Dec. 31, 2018 | (150,183) | $ 17,345 | 16,960,818 | (17,128,346) |
Net Loss | (2,593,562) | |||
Balance, shares at Jun. 30, 2019 | 19,867,277 | |||
Balance, amount at Jun. 30, 2019 | (927,615) | $ 19,867 | 18,774,426 | (19,721,908) |
Balance, shares at Mar. 31, 2019 | 18,792,277 | |||
Balance, amount at Mar. 31, 2019 | (520,685) | $ 18,792 | 17,176,371 | (17,715,848) |
Net Loss | (2,006,060) | $ 0 | 0 | (2,006,060) |
Shares, Options, Warrants and Conversion Features Issued, shares | 1,075,000 | |||
Shares, Options, Warrants and Conversion Features Issued, amount | 1,599,130 | $ 1,075 | 1,598,055 | 0 |
Balance, shares at Jun. 30, 2019 | 19,867,277 | |||
Balance, amount at Jun. 30, 2019 | (927,615) | $ 19,867 | 18,774,426 | (19,721,908) |
Balance, shares at Dec. 31, 2019 | 20,367,277 | |||
Balance, amount at Dec. 31, 2019 | (4,938,655) | $ 20,367 | 18,823,926 | (23,782,948) |
Net Income | 1,588,015 | $ 0 | 0 | 1,588,015 |
Shares, Options, Warrants and Conversion Features Issued, shares | 1,025,000 | |||
Shares, Options, Warrants and Conversion Features Issued, amount | 102,500 | $ 1,025 | 101,475 | 0 |
Balance, shares at Mar. 31, 2020 | 21,392,277 | |||
Balance, amount at Mar. 31, 2020 | (3,248,140) | $ 21,392 | 18,925,401 | (22,194,933) |
Balance, shares at Dec. 31, 2019 | 20,367,277 | |||
Balance, amount at Dec. 31, 2019 | (4,938,655) | $ 20,367 | 18,823,926 | (23,782,948) |
Net Loss | (1,385,170) | |||
Balance, shares at Jun. 30, 2020 | 21,392,277 | |||
Balance, amount at Jun. 30, 2020 | (5,815,075) | $ 21,392 | 19,331,651 | (25,168,118) |
Balance, shares at Mar. 31, 2020 | 21,392,277 | |||
Balance, amount at Mar. 31, 2020 | (3,248,140) | $ 21,392 | 18,925,401 | (22,194,933) |
Net Loss | (2,973,185) | 0 | 0 | (2,973,185) |
Shares, Options, Warrants and Conversion Features Issued | 406,250 | $ 0 | 406,250 | 0 |
Balance, shares at Jun. 30, 2020 | 21,392,277 | |||
Balance, amount at Jun. 30, 2020 | $ (5,815,075) | $ 21,392 | $ 19,331,651 | $ (25,168,118) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash Flows From Operating Activities: | ||
Net Loss | $ (1,385,170) | $ (2,593,562) |
Adjustments to Reconcile Net Loss to Net Cash Provided by (used in) Operating Activities: | ||
Gain on Sales of Assets | $ (1,143,760) | $ 0 |
Value of warrants and options granted | 406,250 | 1,491,630 |
Amortization of Warrant Value and Conversion Feature on Convertible Notes | $ 0 | $ 2,998 |
Amortization of Loan Issue Costs | 29,172 | 14,486 |
Depreciation, Depletion and Amortization | 754,585 | 880,206 |
Impairment of Oil and Natural Gas Properties | 800,452 | 0 |
Accretion of Asset Retirement Obligation | 355,997 | 69,827 |
Allowance for loss relating to purchase deposit | 725,000 | 0 |
Change in Operating Assets and Liabilities: | ||
Accounts Receivable | 54,662 | (662,165) |
Unrealized Gain on Derivative Instruments | (1,062,775) | (334,155) |
Inventory | 56,124 | (33,703) |
Prepaids | 46,294 | (56,819) |
Utility and other deposits | 8,366 | 0 |
Accounts Payable | (6,005) | 121,794 |
Accrued Expenses | 66,521 | 1,154,074 |
Net Cash Provided by (used in) Operating Activities | (294,287) | 54,611 |
Cash Flows from Investing Activities: | ||
Acquisition of Oil and Natural Gas Properties | (506,000) | (5,706,531) |
Purchase of other fixed assets | 0 | (14,455) |
Proceeds From Sale of Oil and Natural Gas Properties | 1,160,400 | 0 |
Deposit for Purchase of Oil and Natural Gas Properties | (850,000) | 0 |
Net Cash Used in Investing Activities | (195,600) | (5,720,986) |
Cash Flows from Financing Activities: | ||
Proceeds from Debt Issued | 925,700 | 6,479,744 |
Principal Payments of Debt | (150,000) | (1,065,000) |
Proceeds from Stock and Warrant Issuance | 0 | 167,000 |
Net Cash Provided by Financing Activities | 775,700 | 5,581,744 |
Net Change in Cash | 285,813 | (84,631) |
Cash - Beginning of Period | 0 | 84,631 |
Cash - End of Period | 285,813 | 0 |
Supplemental Cash Flow Information: | ||
Cash Paid for Interest | 306,333 | 160,088 |
Non-cash Investing and Financing Activities: | ||
Non-cash Additions to Asset Retirement Obligations | 9,508,484 | 3,400,770 |
Common Stock Issued in Exchange for Outstanding Notes Payable | 102,500 | |
Purchases of oil and natural gas properties in accounts payable | 0 | 291,420 |
Purchases of oil and natural gas properties and deposits in accounts and notes payable, royalty suspense, and contingent payable to seller | $ 2,569,863 | $ 0 |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | The accompanying unaudited consolidated financial statements of Empire Petroleum Corporation ("Empire" or the "Company") have been prepared in accordance with United States generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, the results of operations, and the cash flows for the interim period are included. All adjustments are of a normal, recurring nature. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The information contained in this Form 10-Q should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2019 which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 30, 2020. The Company has incurred significant losses in recent years. The continuation of the Company as a going concern is dependent upon the ability of the Company to attain future profitable operations and/or additional debt or equity financing until profitable operations are achieved. These financial statements have been prepared on the basis of United States generally accepted accounting principles applicable to a company with continuing operations, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its obligations in the normal course of operations. Management believes the going concern assumption to be appropriate for these financial statements. If the going concern assumption were not appropriate for these financial statements, then adjustments might be necessary to adjust the carrying value of assets and liabilities and reported expenses. The Company’s impairment assessment of proved and unproved mineral properties is based on several factors including oil and gas spot market prices and estimated futures prices that existed at June 30, 2020. In In the event crude oil or natural gas prices remain low, there is the risk that, among other things: · the Company’s revenues, cash flows and profitability may decline substantially, which could also indirectly impact expected production by reducing the amount of funds available to acquire future mineral interests; · reserves relating to the Company’s proved properties may become uneconomic to produce resulting in impairment of proved properties; and · operators and other working interest owners are unable to execute their drilling and exploration programs resulting in lower production or inability to prove reserves on unproved properties The occurrence of certain of these events may have a material adverse effect on the Company's business, results of operations and financial condition. In early March 2020, there was a global outbreak of COVID-19 that continued into the second quarter and has resulted in changes in global supply and demand of certain mineral and energy products. These changes, including the magnitude and length of the economic downturn and any potential resulting direct and indirect negative impact to the Company cannot be determined, but they could have a prospective material impact to the Company’s acquisition and project development activities, and cash flows and liquidity. Reclassification of prior year presentation. The continuation of the Company is dependent upon the ability of the Company to raise capital and attain future profitable operations. The ultimate recoverability of the Company's investment in oil and natural gas interests is dependent upon the existence and discovery of economically recoverable oil and natural gas reserves, the ability of the Company to obtain necessary financing to further develop the interests, and the ability of the Company to attain future profitable production. As of June 30, 2020, the Company had $285,813 of cash and working capital deficit of $9,412,190, which includes the net balance of the Senior Revolver Loan Agreement of $8,397,253 which matures March 27, 2021. The Company has proved reserves which have been acquired within the last two years. The Company plans to continue to look for oil and natural gas investments and will use a combination of debt and equity financing to fund the acquisitions. The Company expects to also incur costs related to evaluating and acquiring oil and natural gas acquisitions for the foreseeable future. It is expected that management will attempt to raise additional capital for future investment and working capital opportunities. Compensation of Officers and Employees As of June 30, 2020, the Company had three employees. No independent Board members received compensation from the Company in the first six months of 2020 or 2019. For the six months ended June 30, 2020, the Company paid Mr. Morrisett and Mr. Pritchard $116,000 each for services rendered. For the six months ended June 30, 2019, the Company paid Mr. Morrisett $127,450 and Mr. Pritchard $131,450 for services rendered excluding the value of options. In addition, as of June 30, 2020 Mr. Pritchard has outstanding advances of $26,017. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of consolidation. Use of estimates in the preparation of financial statements. Interim financial statements. Certain disclosures have been condensed in or omitted from these consolidated financial statements. Accordingly, these condensed notes to the consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Inventory. Revenue recognition. Fair value measurements. Convertible debt - Oil and natural gas properties - The fair value of asset retirement obligations is included in proved oil and natural gas properties with a corresponding liability in the table above. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs. The inputs used to value oil and natural gas properties for impairments and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs. Financial instruments and other- |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2020 | |
PROPERTY AND EQUIPMENT | |
3. PROPERTY AND EQUIPMENT | In March 2019, the Company, through its subsidiary, Empire North Dakota, LLC, purchased oil and natural gas properties in Montana and North Dakota (See Note 7). On January 27, 2020, the Company, through its wholly owned subsidiary, Empire North Dakota, LLC, entered into a Bill of Sale and Assignment to purchase lease interests in approximately 4,936 acres in Montana for $500,000. On February 10, 2020, the Company, through its wholly owned subsidiary, Empire North Dakota, LLC, sold overriding royalty interests for leases it owned in Montana for $325,000 to a consultant of the Company. As of June 30, 2020 $200,000 of the sales price had been received with the balance pending completion of title work. On February 17, 2020 the Company, through its wholly owned subsidiary, Empire North Dakota, LLC, sold all of its interest in leases of approximately 337 acres in Montana for $1,010,400. On April 6, 2020 the Company, through its wholly owned subsidiary, Empire Texas, LLC, purchased oil and natural gas properties in Texas (see Note 5). During the six months ended June 30, 2020, NYMEX strip prices experienced significant volatility, resulting in a significant decrease in value of the Company’s economically recoverable proved oil and natural gas reserves. As such, the carrying amount of the Company’s proved oil and natural gas properties exceeded the expected undiscounted future net cash flows for certain leases, resulting in impairment charges against earnings of $800,452. These impairment charges are included in impairments of long-lived assets on the consolidated statement of operations for the six months ended June 30, 2020. The Company did not recognize an impairment of proved oil and natural gas properties during the six months ended June 30, 2019. The aggregate capitalized costs of oil and natural gas properties as of June 30, 2020, are as follows: Proved producing wells $ 5,284,041 Proved undeveloped 2,232,458 Lease, well and gathering equipment 1,705,092 Asset retirement obligation 14,988,534 Unproved leasehold costs 492,741 Gross capitalized costs 24,702,866 Less: accumulated depreciation, depletion and impairment (4,918,808 ) $ 19,784,058 Other property and equipment consists of office furniture and equipment. Oher property and equipment, at cost $ 14,456 Less: accumulated depreciation (3,400 ) Oher property and equipment, net $ 11,056 |
ACQUISITION OF OVINTIV OIL AND
ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2020 | |
ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES | |
4. ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES | On March 3, 2020 the Company, through its wholly owned subsidiary, Empire North Dakota, LLC, entered into a Purchase and Sale Agreement (“the Agreement”) with Ovintiv USA, Inc. and several related companies to purchase certain oil and natural gas properties in Montana and North Dakota comprising 26,600 net acres with 94 active wells. The purchase price is $8,500,000, subject to adjustments with an effective date of January 1, 2020 and a closing date of April 30, 2020. The Company has made an $850,000 deposit relating to the purchase which is recorded as a deposit on its balance sheet. Due to the COVID pandemic, and governmental state of emergency orders related thereto, the Company was unable to meet with and obtain financing to complete the purchase from its lenders. As of June 30, 2020 the Agreement has been terminated. The Company is currently in communication with the Seller for return of the deposit. The Company may not be successful in obtaining return of the entire deposit and has recorded an allowance of $725,000 based on its assessment of the negotiations. |
ACQUISITION OF PARDUS OIL AND N
ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2020 | |
ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES | |
5. ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES | On April 6, 2020 the Company, through its wholly owned subsidiary, Empire Texas, LLC, entered into a Purchase and Sale Agreement (“the Agreement”) with Pardus Oil & Gas, LLC and Pardus Oil & Gas Operating GP, LLC (collectively “the Seller”) to purchase certain oil and natural gas properties in Texas comprising 139 gross wells and approximately 30,000 net acres, 77.3 miles of gathering lines and pipelines and related facilities and equipment, and all general and limited partner interest in Pardus Oil & Gas Operating, LP. The purchase price included the assumption of certain obligations and a contingent payment not to exceed $2,000,000 reduced by certain revenue suspense amounts. The contingent payment is based on monthly oil production in excess of a specified level from the purchased properties and an average monthly realized oil price of $40 or more per barrel of oil through December 31, 2022. The transaction closed on April 7, 2020. The following table sets forth the Company's purchase price allocation: Fair Value of Assets Acquired Oil and natural gas properties $ 1,935,366 Inventory of oil in tanks 147,297 Deposits 378,000 Equipment and gathering lines 109,200 Asset retirement obligation asset 9,508,484 Total Assets Acquired $ 12,078,347 Fair Value of Liabilities Assumed Accounts payable, net $ 20,456 Note payable – current 378,000 Royalty suspense 1,185,587 Asset retirement obligations 9,508,484 Total liabilities assumed $ 11,092,527 Total consideration $ 985,820 The fair values of assets acquired and liabilities assumed were based on the following key inputs: Oil and natural gas properties The fair value of proved oil and natural gas properties was measured using valuation techniques that convert the future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average costs of capital. The Company utilized a combination of the New York Mercantile Exchange ("NYMEX") strip pricing and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties acquired. The fair value of asset retirement obligations totaled $9,508,484 and is included with a corresponding liability in the table above. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs. The total consideration consists of a contingent payment to the seller which is due based on monthly production of oil and natural gas through December 31, 2022 and a monthly average price of $40 or higher per barrel. The inputs used to value oil and natural gas properties and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs. Financial instruments and other The fair values determined for accounts payable - trade were equivalent to the carrying value due to their short-term nature. Accounts payable - trade includes $20,456 of liabilities primarily related to well activity prior to close. |
ACQUISITION OF WARHORSE OIL AND
ACQUISITION OF WARHORSE OIL AND NATURAL GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2020 | |
ACQUISITION OF WARHORSE OIL AND NATURAL GAS PROPERTIES | |
6. ACQUISITION OF WARHORSE OIL AND NATURAL GAS PROPERTIES | On June 10, 2019, the Company received a process verbal and related sheriff's deed dated as of May 29, 2019 (the "Sheriff's Deed") pertaining to two wells in St. Landry Parish purchased from Business First Bancshares, Inc. d/b/a Business First Bank ("Business First"). Pursuant to the Sheriff's Deed, the Company acquired certain oil and natural gas properties located in St. Landry Parish, Louisiana, including operated working interest in two producing wells. The Company purchased Business First's position as the superior lienholder and seizing creditor of such oil and natural gas properties, which were owned by Warhorse Oil & Gas, LLC, for $450,000 plus $16,993 sheriff fees. The payment was paid from loan proceeds under the loan agreement with CrossFirst Bank (see Note 9). The Company treated the acquisition as an asset purchase. An amount equal to $73,968 was allocated to lease and well equipment and $378,110 was allocated to producing properties. An asset retirement obligation of $19,732 was recorded in conjunction with the purchase. |
ACQUISITION OF ENERGYQUEST II A
ACQUISITION OF ENERGYQUEST II ASSETS | 6 Months Ended |
Jun. 30, 2020 | |
ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES | |
7. ACQUISITION OF ENERGYQUEST II ASSETS | On March 28, 2019, the Company purchased oil producing properties from EnergyQuest II, LLC ("EnergyQuest") for a purchase price of $5,600,000. The effective date of the transaction was January 1, 2019. After certain adjustments related to the effective date, the total proceeds paid to EnergyQuest were $5,646,126. Such proceeds were paid from borrowing on notes payable and sales of unregistered securities of the Company. The following table sets forth the Company's purchase price allocation: Fair Value of Assets Acquired Accounts receivable $ 1,308,748 Inventory of oil in tanks 438,321 Oil properties 10,878,429 Total Assets Acquired $ 12,625,498 Fair Value of Liabilities Assumed Accounts payable – trade $ 1,861,433 Asset retirement obligations 5,117,939 Total liabilities assumed $ 6,979,372 Total consideration paid $ 5,646,126 The fair values of assets acquired and liabilities assumed were based on the following key inputs: Oil and natural gas properties The fair value of proved oil and natural gas properties was measured using valuation techniques that convert the future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average costs of capital. The Company utilized a combination of the New York Mercantile Exchange ("NYMEX") strip pricing and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties acquired. The fair value of asset retirement obligations totaled $5,117,939 and is included in proved oil and natural gas properties with a corresponding liability in the table above. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs. The inputs used to value oil and natural gas properties and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs. Financial instruments and other The fair values determined for accounts receivable and accounts payable - trade were equivalent to the carrying value due to their short-term nature. Accounts payable - trade includes $1,861,433 of liabilities primarily related to well activity prior to close. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2020 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
8. DERIVATIVE FINANCIAL INSTRUMENTS | The Company uses derivative financial instruments to manage its exposure to commodity price fluctuations. Commodity derivative instruments are used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells. The Company’s derivative financial instruments consist of oil and natural gas swaps. The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its consolidated statements of operations as they occur. Unrealized gains and losses related to the swap contracts are recognized and recorded as an asset or liability on the Company’s balance sheet. The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the three and six months ended June 30, 2020 and 2019: Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Gain (loss) on derivatives: Oil derivatives $ (402,374 ) $ 492,548 $ 2,106,671 $ 424,952 Natural gas derivatives — 8,180 — 7,417 Total $ (402,374 ) $ 500,728 $ 2,106,671 $ 432,369 The following represents the Company’s net cash receipts from derivatives for the three and six months ended June 30, 2020 and 2019: Three months ended June 30, Nine months ended June 30, 2020 2019 2020 2019 Net cash received from payments on derivatives Oil derivatives $ 510,609 $ 74,154 $ 1,043,894 $ 93,503 Natural gas derivatives 4,305 — 4,711 Total $ 510,609 $ 78,459 $ 1,043,894 $ 98,214 The following table sets forth the Company’s outstanding derivative contracts at June 30, 2020. The Company has no outstanding natural gas derivatives. All of the Company’s derivatives are expected to settle by October 2021: 1 st 2 nd 3 rd 4 th 2020 Oil Swaps: Volume (MBbl) — — 16.02 15.78 Price per Bbl — — $ 58.39 $ 55.18 2021 Oil Swaps: Volume (MBbl) 15.26 15.18 5.20 — Price per Bbl $ 49.40 $ 50.87 $ 38.25 — |
NOTES PAYABLE
NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
NOTES PAYABLE | |
9. NOTES PAYABLE | In February 2019, the Company entered into five unsecured promissory note agreements with accredited investors totaling $90,000. The notes were due May 1, 2019, and accrued interest at 8%. One of the notes, in the amount of $15,000 was issued to Michael R. Morrisett, the Company's President. These notes and the related interest were paid in May 2019. On September 20, 2018 the Company entered into a Senior Revolver Loan Agreement (“the Agreement”) with CrossFirst Bank (“CrossFirst”). The Agreement was amended March 27, 2019 (the “Amended Agreement”). The Amended Agreement commitment amount is $9,000,000 which is reduced by $150,000 per calendar quarter ($8,400,000 at June 30, 2020) and the maximum amount that can be advanced under the Agreement is $20,000,000 and includes interest at Wall Street Journal Prime plus 150 basis points (4.75% as of June 30, 2020). The Agreement matures on March 27, 2021. Collateral for the loan is a lien on all of the assets of the Company’s wholly owned subsidiaries, Empire Louisiana and Empire North Dakota, and a first priority mortgage lien, pledge of and security interest in not less than 80% of Empire Louisiana’s and Empire North Dakota’s producing oil, gas and other leasehold and mineral interests. The Agreement requires Empire Louisiana, beginning December 31, 2018 to maintain certain covenants including an EBITDAX to interest expense of at least 3:1 and funded debt to EBITDAX of 4:1 on a trailing twelve month basis. The Company is not in compliance with the funded debt to EBITDAX covenant of the Agreement at June 30, 2020. As of June 30, 2020, the Company has an outstanding loan balance of $8,397,253 under the Agreement. In January 2020 three of the Senior Unsecured Promissory Note investors exercised the conversion feature and converted their $102,500 notes for 1,025,000 shares of the Company's common stock. All of the Senior Unsecured Promissory Notes have been converted to common stock of the Company as of March 31, 2020. On April 1, 2020, in conjunction with the purchase of assets from Pardus Oil & Gas, LLC (see Note 5), the Company entered into a unsecured promissory note agreement with the seller in the amount of $378,000. The note is payable in one installment on April 1, 2021 and bears interest at the one-year LIBOR rate (1% as of June 30, 2020). On May 5, 2020, the Company, through its wholly owned subsidiary, Pardus Oil & Gas Operating, LP, received an SBA Payroll Protection Plan (“PPP”) loan for $160,700. The loan matures on May 5, 2022 and has an interest rate of 1%. There are no payments due until November 5, 2020 at which time the payment amount will be determined based on the portion of the loan which has not been forgiven under criteria established by the SBA, using an eighteen-month amortization. The Company expects that the majority of the loan amount will be forgiven based on currently published guidelines of the United States Small Business Administration. |
EQUITY
EQUITY | 6 Months Ended |
Jun. 30, 2020 | |
EQUITY | |
10. EQUITY | Diluted Earnings per Share ("EPS") gives effect to all dilutive potential common shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses. As a result, if there is a loss from continuing operations, Diluted EPS is computed in the same manner as Basic EPS. At March 31, 2020 and 2019, the Company had 5,004,167 and 4,167 respectively, options outstanding that were not included in the calculation of earnings per share for the periods then ended. Such financial instruments may become dilutive and would then need to be included in future calculations of Diluted EPS. At June 30, 2020 and 2019, the outstanding options were considered anti-dilutive since the strike prices were above the market price and since the Company has incurred losses year to date. In March 2019, 1,446,668 outstanding $0.15 warrants were converted to shares of common stock of the Company. Proceeds received from the conversion was $217,000 including $50,000 of notes payable conversion by Mr. Kamin, a board member. During May 2019, the Company issued warrants to purchase 300,000 shares of its common stock for $0.17 per share which expire on December 31, 2021 to a former employee for business assistance provided. The value allocated to the warrants was the fair value determined using the Black-Scholes option valuation with the following assumptions: no dividend yield, expected annual volatility of 217%, risk free interest rate of 1.92% and an expected useful life of 31 months. The fair value of the warrants of $58,380 was recorded as compensation expense and allocated to Paid in Capital. On April 3, 2019, the Board of Directors of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the "Stock Option Plan"). The total number of shares of common stock that may be issued pursuant to stock options under the Stock Option Plan is 10,000,000. Further, on April 3, 2019 the Company granted Mr. Pritchard and Mr. Morrissett each, options to purchase 2,500,000 shares of common stock of the Company at an exercise price of $0.33 per share. The options vest in three installments with 1,250,000 vesting immediately and 625,000 vesting each in April 2020 and April 2021. All of the options expire in April, 2029. The value allocated to the vested options was the fair value determined using the Black-Scholes option valuation with the following assumptions: no dividend yield, expected annual volatility of 213%, risk free interest rate of 2.32% and an expected useful life of 5.375 years. The fair value of the vested options of $812,500 was recorded as compensation expense and allocated to Paid in Capital in 2019. In 2020, the fair value of the options which vested in April 2020 of $406,250 was recorded as compensation expense and allocated to Paid in Capital. The fair of the remaining unvested options is $406,250 as of June 30, 2020. On April 3, 2019 the Board of Directors of the Company amended certain warrant certificates which had been issued to Mr. Kamin covering 3,000,000 warrants to purchase common stock of the Company. The original warrants expired on December 31, 2021 and had exercise prices of $0.15 and $0.25 for 500,000 and 2,500,000 shares, respectively. The warrants were extended to expire on April 2, 2029. The value allocated to the warrants was the fair value determined using the Black-Scholes option valuation with the following assumptions: no dividend yield, expected annual volatility of 213%, risk free interest rate of 2.32% and an expected useful life of 5 years. The fair value of the warrants of $620,750 was recorded as compensation expense and allocated to Paid in Capital. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2020 | |
SUBSEQUENT EVENTS | |
11. SUBSEQUENT EVENTS | On August 6, 2020 the Company, through its wholly owned subsidiary, Empire Texas, LLC, entered into a joint development agreement (the “Agreement”) with Petroleum & Independent Exploration, LLC and related entities (“PIE”) dated August 1, 2020. Under the terms of the Agreement, PIE will perform recompletion and workover on specified wells owned by Empire. To fund the work, PIE entered into a term loan agreement with Empire dated August 1, 2020, whereby PIE will loan up to $2,000,000, at an interest rate of 6% per annum, maturing August 7, 2024 unless terminated earlier by PIE. On August 7, 2020, $150,000 was advanced to Empire from the loan. As part of the Agreement, Empire will assign to PIE a combined 85% working and revenue interest in the affected wells. Of the assigned interest, 70% will be used to repay the obligations under the term loan agreement. Once the term loan is repaid, PIE will assign a 35% working and revenue interest to Empire and retain a 50% working and revenue interest. In addition, PIE and Empire entered into a Securities Purchase Agreement (“Securities Agreement”) whereby PIE has agreed to purchase for $525,000 (a) 3,500,000 shares of Empire common stock, (b) warrants to purchase 2,625,000 shares of Empire common stock at an exercise price of $0.20 per share, (c) warrants to purchase 1,800,000 shares of Empire common stock at an exercise price of $0.25 per share, (d) warrants to purchase 8,136,518 shares of Empire common stock at an exercise price of $0.10 per share, and (e) warrants to purchase up to 11,066,667 shares of Empire common stock at an exercise price of $0.141 per share. PIE is obligated to exercise the $0.20 warrants within 45 days of when 3 month trailing average production from the Empire Texas properties have increased by 20% over the trailing 3 month trailing average production as of July 2020. PIE can only exercise the $0.25 warrants once all existing non-PIE outstanding warrants to purchase Empire common stock have been exercised or lapsed. For the $0.141 warrants, PIE may initially acquire 7,533,333 shares of Empire common stock, however the amount may be increased if any existing non-PIE warrants are exercised prior to December 31, 2020. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of consolidation | The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Empire Louisiana, LLC ("Empire Louisiana"), Empire North Dakota, LLC ("Empire North Dakota"), and Empire Texas, LLC (“Empire Texas”). All material intercompany balances and transactions have been eliminated. |
Use of estimates in the preparation of financial statements | Preparation of financial statements in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Depletion of oil and natural gas properties is determined using estimates of proved oil and natural gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and natural gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, commodity price outlooks and prevailing market rates of other sources of income and costs. Other significant estimates include, but are not limited to, asset retirement obligations, fair value of assets purchased in acquisitions, and taxes. |
Interim financial statements | The accompanying consolidated financial statements of the Company have not been audited by the Company's independent registered public accounting firm. In preparing the accompanying consolidated financial statements, management has made certain estimates and assumptions that affect reported amounts in the consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain disclosures have been condensed in or omitted from these consolidated financial statements. Accordingly, these condensed notes to the consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. |
Inventory | Inventory consists of oil in tanks which has not been delivered and is valued at the contract price to the buyer and pipe which has not yet been put into production. |
Revenue recognition | The Company recognizes revenues from the sales of oil and natural gas to its customers and presents them aggregated on the Company's consolidated statements of operations. The Company enters into contracts with customers to sell its oil and natural gas production. Revenue on these contracts is recognized in accordance with the five-step revenue recognition model prescribed in ASC 606. Specifically, revenue is recognized when the Company's performance obligations under these contracts are satisfied, which generally occurs with the transfer of control of the oil and natural gas to the purchaser. Control is generally considered transferred when the following criteria are met: (i) transfer of physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature of the products sold, revenue is recognized at a point in time based on the amount of consideration the Company expects to receive in accordance with the price specified in the contract. Consideration under the oil and natural gas marketing contracts is typically received from the purchaser one to two months after production. At June 30, 2020, the Company had receivables related to contracts with customers of approximately $590,000. |
Fair value measurements | The Financial Accounting Standards Board ("FASB") fair value measurement standards define fair value, establish a consistent framework for measuring fair value and establish a fair value hierarchy based on the observability of inputs used to measure fair value. Convertible debt - Oil and natural gas properties - The fair value of asset retirement obligations is included in proved oil and natural gas properties with a corresponding liability in the table above. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs. The inputs used to value oil and natural gas properties for impairments and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs. Financial instruments and other- |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | Oher property and equipment, at cost $ 14,456 Less: accumulated depreciation (3,400 ) Oher property and equipment, net $ 11,056 |
Schedule of capitalized costs of oil and natural gas properties | Proved producing wells $ 5,284,041 Proved undeveloped 2,232,458 Lease, well and gathering equipment 1,705,092 Asset retirement obligation 14,988,534 Unproved leasehold costs 492,741 Gross capitalized costs 24,702,866 Less: accumulated depreciation, depletion and impairment (4,918,808 ) $ 19,784,058 |
ACQUISITION OF PARDUS OIL AND_2
ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of fair value of assets | Fair Value of Assets Acquired Accounts receivable $ 1,308,748 Inventory of oil in tanks 438,321 Oil properties 10,878,429 Total Assets Acquired $ 12,625,498 Fair Value of Liabilities Assumed Accounts payable – trade $ 1,861,433 Asset retirement obligations 5,117,939 Total liabilities assumed $ 6,979,372 Total consideration paid $ 5,646,126 |
ACQUISITION OF ENERGYQUEST II_2
ACQUISITION OF ENERGYQUEST II ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES | |
Schedule of purchase price allocation | Fair Value of Assets Acquired Accounts receivable $ 1,308,748 Inventory of oil in tanks 438,321 Oil properties 10,878,429 Total Assets Acquired $ 12,625,498 Fair Value of Liabilities Assumed Accounts payable – trade $ 1,861,433 Asset retirement obligations 5,117,939 Total liabilities assumed $ 6,979,372 Total consideration paid $ 5,646,126 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of gain loss on derivatives | Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Gain (loss) on derivatives: Oil derivatives $ (402,374 ) $ 492,548 $ 2,106,671 $ 424,952 Natural gas derivatives — 8,180 — 7,417 Total $ (402,374 ) $ 500,728 $ 2,106,671 $ 432,369 |
Schedule of net cash receipts from derivatives | Three months ended June 30, Nine months ended June 30, 2020 2019 2020 2019 Net cash received from payments on derivatives Oil derivatives $ 510,609 $ 74,154 $ 1,043,894 $ 93,503 Natural gas derivatives 4,305 — 4,711 Total $ 510,609 $ 78,459 $ 1,043,894 $ 98,214 |
Schedule of notional amounts of outstanding derivative | 1 st 2 nd 3 rd 4 th 2020 Oil Swaps: Volume (MBbl) — — 16.02 15.78 Price per Bbl — — $ 58.39 $ 55.18 2021 Oil Swaps: Volume (MBbl) 15.26 15.18 5.20 — Price per Bbl $ 49.40 $ 50.87 $ 38.25 — |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Cash | $ 285,813 | $ 285,813 | $ 0 | ||
Impairment of oil and natural gas properties | $ 0 | $ 0 | 800,452 | $ 0 | |
Outstanding advances | 26,017 | ||||
Working capital | (9,412,190) | ||||
Other deposits | $ 118,177 | ||||
Morrisett [Member] | |||||
Officers and employees compensation | 116,000 | 127,450 | |||
Pritchard [Member] | |||||
Officers and employees compensation | 116,000 | $ 131,450 | |||
Revolver Loan Agreement [Member] | |||||
Working capital | $ (8,397,253) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 6 Months Ended |
Jun. 30, 2020USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Receivables from contracts | $ 590,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Asset retirement obligation | $ 15,652,761 | $ 5,788,280 |
Oil And Natural Gas [Member] | ||
Proved producing wells | 5,284,041 | |
Proved undeveloped | 2,232,458 | |
Lease and well equipment | 1,705,092 | |
Asset retirement obligation | 14,988,534 | |
Unproved leasehold costs | 492,741 | |
Gross capitalized costs | 24,702,866 | |
Less: accumulated depreciation, depletion and impairment | (4,918,808) | |
Net Capitalized costs | $ 19,784,058 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details 1) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
PROPERTY AND EQUIPMENT | ||
Other property and equipment, at cost | $ 14,456 | |
Less: accumulated depreciation | (3,400) | |
Oher property and equipment, net | $ 11,056 | $ 12,626 |
PROPERTY AND EQUIPMENT (Detai_3
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | 6 Months Ended | |||
Feb. 10, 2020 | Jan. 27, 2020 | Feb. 17, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Impairment of oil and natural gas properties | $ 0 | $ 0 | $ 800,452 | $ 0 | |||
Consultant [Member] | |||||||
Proceeds from sale of lease interest | $ 200,000 | ||||||
Sale of lease interest | $ 325,000 | $ 1,010,400 | |||||
Montana [Member] | |||||||
Payment for lease interests | $ 500,000 |
ACQUISITION OF OVINTIV OIL AN_2
ACQUISITION OF OVINTIV OIL AND NATURAL GAS PROPERTIES (Details Narrative) - USD ($) | Mar. 03, 2020 | Jun. 30, 2020 |
Deposits | $ 850,000 | |
Return of deposits | $ 725,000 | |
Ovintiv [Member] | ||
Business acquisation purchase price | $ 8,500,000 | |
Business acquisation effective date | Jan. 1, 2020 | |
Business acquisation closing date | Apr. 30, 2020 |
ACQUISITION OF PARDUS OIL AND_3
ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Accounts payable, net | $ 1,040,036 | $ 1,025,585 |
Note payable - current | 8,731,494 | 96,704 |
Asset retirement obligations | 15,652,761 | 5,788,280 |
Inventory of oil in tanks | 567,478 | $ 476,305 |
Fair Value of Assets Acquired [Member] | ||
Asset retirement obligations | 9,508,484 | |
Oil and natural gas properties | 1,935,366 | |
Inventory of oil in tanks | 147,297 | |
Deposits | 378,000 | |
Equipment and gathering lines | 109,200 | |
Total Assets Acquired | 12,078,347 | |
Fair Value of Liability Assumed [Member] | ||
Accounts payable, net | 20,456 | |
Note payable - current | 378,000 | |
Royalty suspense | 1,185,587 | |
Asset retirement obligations | 9,508,484 | |
Total liabilities assumed | 11,092,527 | |
Total consideration | $ 985,820 |
ACQUISITION OF PARDUS OIL AND_4
ACQUISITION OF PARDUS OIL AND NATURAL GAS PROPERTIES (Details Narrative) - USD ($) | Apr. 06, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
Accounts payable | $ 20,456 | ||
Asset retirement obligations | 15,652,761 | $ 5,788,280 | |
Purchase and Sale Agreement [Member] | |||
Asset retirement obligations | $ 9,508,484 | ||
Description of asset acquired | Purchase certain oil and natural gas properties in Texas comprising 139 gross wells and approximately 30,000 net acres, 77.3 miles of gathering lines and pipelines and related facilities and equipment, and all general and limited partner interest in Pardus Oil & Gas Operating, LP. The purchase price included the assumption of certain obligations and a contingent payment not to exceed $2,000,000 reduced by certain revenue suspense amounts. The contingent payment is based on monthly oil production in excess of a specified level from the purchased properties and an average monthly realized oil price of $40 or more per barrel of oil through December 31, 2022 | ||
December 2022 [Member] | |||
Average price per barrel | $ 40 |
ACQUISITION OF WARHORSE OIL A_2
ACQUISITION OF WARHORSE OIL AND NATURAL GAS PROPERTIES (Details Narrative) | Jun. 10, 2019USD ($) |
Producing Properties [Member] | |
Purchase price | $ 378,110 |
Warhorse Acquisition [Member] | |
Purchase price | 450,000 |
Asset retirement obligations | 19,732 |
Sheriff fees | 16,993 |
Lease and well equipment [Member] | |
Purchase price | $ 73,968 |
ACQUISITION OF ENERGYQUEST II_3
ACQUISITION OF ENERGYQUEST II ASSETS (Details) - Energy Quest [Member] | Mar. 28, 2019USD ($) |
Fair Value of liabilities Assumed | |
Accounts payable - trade | $ 1,861,433 |
Asset retirement obligations | 5,117,939 |
Total liabilities assumed | 6,979,372 |
Total consideration paid | 5,646,126 |
Fair Value of Assets Acquired | |
Accounts Receivable | 1,308,748 |
Inventory of oil in tanks | 438,321 |
Oil properties | 10,878,429 |
Total Assets Acquired | $ 12,625,498 |
ACQUISITION OF ENERGYQUEST II_4
ACQUISITION OF ENERGYQUEST II ASSETS (Details Narrative) - Energy Quest [Member] | 1 Months Ended |
Mar. 28, 2019USD ($) | |
Business acquisation purchase price | $ 5,600,000 |
Business acquisation effective date | Jan. 1, 2019 |
Asset retirement obligations | $ 5,117,939 |
Accounts payable - trade | 1,861,433 |
Total consideration paid | $ 5,646,126 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Gain (loss) on derivatives | $ (402,374) | $ 500,728 | $ 2,106,671 | $ 432,369 |
Oil derivatives [Member] | ||||
Gain (loss) on derivatives | (402,374) | 492,548 | 2,106,671 | 424,952 |
Natural gas derivatives [Member] | ||||
Gain (loss) on derivatives | $ 0 | $ 8,180 | $ 0 | $ 7,417 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Net cash receipts from (payments on) derivatives: | $ 510,609 | $ 78,459 | $ 1,043,894 | $ 98,214 |
Oil derivatives [Member] | ||||
Net cash receipts from (payments on) derivatives: | 510,609 | 74,154 | 1,043,894 | 93,503 |
Natural gas derivatives [Member] | ||||
Net cash receipts from (payments on) derivatives: | $ 0 | $ 4,305 | $ 0 | $ 4,711 |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS (Details 2) - Oil Swaps [Member] | Oct. 31, 2021$ / shares | Jun. 30, 2020$ / shares |
Second quarter [Member] | ||
Volume (Mbbl) | ||
Price per Bbl | $ 0 | |
Second quarter [Member] | Subsequent Event [Member] | ||
Volume (Mbbl) | 15.18 | |
Price per Bbl | $ 50.87 | |
Third quarter [Member] | ||
Volume (Mbbl) | 16.02 | |
Price per Bbl | $ 58.39 | |
Third quarter [Member] | Subsequent Event [Member] | ||
Volume (Mbbl) | 5.20 | |
Price per Bbl | $ 38.25 | |
Fourth quarter [Member] | ||
Volume (Mbbl) | 15.78 | |
Price per Bbl | $ 55.18 | |
Fourth quarter [Member] | Subsequent Event [Member] | ||
Volume (Mbbl) | ||
Price per Bbl | $ 0 | |
First quarter [Member] | ||
Volume (Mbbl) | ||
Price per Bbl | $ 0 | |
First quarter [Member] | Subsequent Event [Member] | ||
Volume (Mbbl) | 15.26 | |
Price per Bbl | $ 49.40 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 1 Months Ended | 6 Months Ended | |
Mar. 27, 2019 | Jun. 30, 2020 | Dec. 31, 2019 | |
Notes payable | $ 8,731,494 | $ 96,704 | |
Revolver Loan Agreement [Member] | |||
Reduction in commitment amount per quarter | $ 150,000 | ||
Revolver commitment amount | $ 9,000,000 | 8,400,000 | |
Outstanding loan | 8,397,253 | ||
Interest expense description | Agreement requires Empire Louisiana, beginning December 31, 2018 to maintain certain covenants including an EBITDAX to interest expense of at least 3:1 and funded debt to EBITDAX of 4:1 on a trailing twelve month basis. | ||
Maturity date | Mar. 27, 2021 | ||
Revolver Loan Agreement [Member] | Maximum [Member] | |||
Revolver commitment amount | $ 20,000,000 | ||
Interest rate | 4.75% | ||
February 2019 [Member] | Unsecured Note [Member] | Investors [Member] | |||
Maturity date | May 1, 2019 | ||
Interest rate | 8.00% | ||
Notes payable | $ 90,000 | ||
February 2019 [Member] | Unsecured Note [Member] | Morrisett [Member] | |||
Notes payable | 15,000 | ||
Pardus Oil & Gas Operating, LP [Member] | May 5, 2020 [Member] | |||
Promissory note | $ 160,700 | ||
Description of notes payable | The loan matures on May 5, 2022 and has an interest rate of 1%. There are no payments due until November 5, 2020 | ||
Pardus Oil & Gas, LLC [Member] | April 1, 2020 [Member] | |||
Promissory note | $ 378,000 | ||
Description of notes payable | The note is payable in one installment on April 1, 2021 and bears interest at the one-year LIBOR rate (1% as of June 30, 2020). |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Options outstanding excluded from calculation of earnings per share | 5,004,167 | 4,167 |
Shares, options, warrants and conversion features issued, Shares | 1,446,668 | |
Warrants exercise price | $ 0.15 | |
Shares, options, warrants and conversion features issued, Amount | $ 102,500 | |
Mr. Anthony Kamin [Member] | ||
Proceed from share conversion | 217,000 | |
Shares, options, warrants and conversion features issued, Amount | $ 50,000 | |
April 3, 2019 [Member] | Anthony Kamin [Member] | Warrant [Member] | ||
Expected volatility rate | 213.00% | |
Risk free interest rate | 2.32% | |
Expected useful life | 5 years | |
Additional paid in capital | $ 620,750 | |
Promissory note due date | Dec. 31, 2021 | |
Warrants issued to purchase common shares | 3,000,000 | |
Extended maturity date | Apr. 2, 2029 | |
April 3, 2019 [Member] | Anthony Kamin [Member] | Warrant [Member] | Exercise price one [Member] | ||
Share of Common Stock | $ 0.15 | |
Warrants issued to purchase common shares | 500,000 | |
April 3, 2019 [Member] | Anthony Kamin [Member] | Warrant [Member] | Exercise price two [Member] | ||
Share of Common Stock | $ 0.25 | |
Warrants issued to purchase common shares | 2,500,000 | |
During May 2019 [Member] | Warrant [Member] | ||
Expected volatility rate | 217.00% | |
Risk free interest rate | 1.92% | |
Expected useful life | 31 months | |
Additional paid in capital | $ 58,380 | |
Share of Common Stock | $ 0.17 | |
Promissory note due date | Dec. 31, 2021 | |
Warrants issued to purchase common shares | 300,000 | |
Stock Option Plan [Member] | April 3, 2019 [Member] | ||
Shares issuable | 10,000,000 | |
Stock options vested | 1,250,000 | |
Options expiry date | April, 2029 | |
Expected volatility rate | 213.00% | |
Risk free interest rate | 2.32% | |
Expected useful life | 5 years 4 months 15 days | |
Additional paid in capital | $ 812,500 | |
Fair of the remaining unvested options | 406,250 | |
Compensation expense | $ 406,250 | |
Stock Option Plan [Member] | April 3, 2019 [Member] | Pritchard [Member] | ||
Warrants exercise price | $ 0.33 | |
Stock options granted | 2,500,000 | |
Stock Option Plan [Member] | April 3, 2019 [Member] | Michael R. Morrisett [Member] | ||
Warrants exercise price | $ 0.33 | |
Stock options granted | 2,500,000 | |
Stock Option Plan [Member] | April 2020 [Member] | ||
Stock options vested | 625,000 | |
Stock Option Plan [Member] | April 2021 [Member] | ||
Stock options vested | 625,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Petroleum & Independent Exploration, LLC [Member] | 6 Months Ended |
Jun. 30, 2020USD ($)$ / sharesshares | |
Security Purchase Agreement [Member] | |
Description of security purchase agreement | PIE has agreed to purchase for $525,000 (a) 3,500,000 shares of Empire common stock, (b) warrants to purchase 2,625,000 shares of Empire common stock at an exercise price of $0.20 per share, (c) warrants to purchase 1,800,000 shares of Empire common stock at an exercise price of $0.25 per share, (d) warrants to purchase 8,136,518 shares of Empire common stock at an exercise price of $0.10 per share, and (e) warrants to purchase up to 11,066,667 shares of Empire common stock at an exercise price of $0.141 per share. PIE is obligated to exercise the $0.20 warrants within 45 days of when 3 month trailing average production from the Empire Texas properties have increased by 20% over the trailing 3 month trailing average production as of July 2020 |
Warrant exercise price | $ / shares | $ 0.25 |
Per share price | $ / shares | $ 0.141 |
Shares Acquired, shares | shares | 7,533,333 |
Joint Development Agreement [Member] | August 1, 2020 [Member] | Subsequent Event [Member] | |
Loan from related party | $ | $ 2,000,000 |
Rate of interest | 6.00% |
Maturity date | Aug. 7, 2024 |
Proceeds from loan | $ | $ 150,000 |
Description of working and revenue interest | combined 85% working and revenue interest in the affected wells. Of the assigned interest, 70% will be used to repay the obligations under the term loan agreement. Once the term loan is repaid, PIE will assign a 35% working and revenue interest to Empire and retain a 50% working and revenue interest. |