Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Mar. 25, 2024 | Jun. 30, 2023 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2023 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2023 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 001-16653 | ||
Entity Registrant Name | EMPIRE PETROLEUM CORPORATION | ||
Entity Central Index Key | 0000887396 | ||
Entity Tax Identification Number | 73-1238709 | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Address, Address Line One | 2200 S. Utica Place | ||
Entity Address, Address Line Two | Suite 150 | ||
Entity Address, City or Town | Tulsa | ||
Entity Address, State or Province | OK | ||
Entity Address, Postal Zip Code | 74114 | ||
City Area Code | 539 | ||
Local Phone Number | 444-8002 | ||
Title of 12(b) Security | Common Stock $.001 par value | ||
Trading Symbol | EP | ||
Security Exchange Name | NYSEAMER | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 112,628,653 | ||
Entity Common Stock, Shares Outstanding | 25,623,674 | ||
Document Financial Statement Error Correction [Flag] | false | ||
Auditor Firm ID | 248 | ||
Auditor Name | GRANT THORNTON LLP | ||
Auditor Location | Tulsa, Oklahoma |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Current Assets: | ||
Cash | $ 7,792,508 | $ 11,944,442 |
Accounts Receivable | 8,354,636 | 7,780,239 |
Derivative Instruments | 406,806 | 121,584 |
Inventory | 1,433,454 | 1,840,274 |
Prepaids | 757,500 | 1,048,434 |
Total Current Assets | 18,744,904 | 22,734,973 |
Property and Equipment: | ||
Oil and Natural Gas Properties, Successful Efforts | 93,509,803 | 63,986,339 |
Less: Accumulated Depreciation, Depletion and Impairment | (22,996,805) | (20,116,696) |
Total Oil and Gas Properties, Net | 70,512,998 | 43,869,643 |
Other Property and Equipment, Net | 1,883,211 | 1,441,529 |
Total Property and Equipment, Net | 72,396,209 | 45,311,172 |
Sinking Fund | 2,779,000 | |
Other Noncurrent Assets | 1,474,503 | 719,930 |
Total Assets | 92,615,616 | 71,545,075 |
Current Liabilities: | ||
Accounts Payable | 16,437,219 | 5,843,366 |
Accrued Expenses | 7,075,302 | 9,461,010 |
Current Portion of Lease Liability | 432,822 | 256,975 |
Current Portion of Note Payable - Related Party (Note 4 and 7) | 1,060,004 | |
Current Portion of Long-Term Debt | 44,225 | 2,059,309 |
Total Current Liabilities | 25,049,572 | 17,620,660 |
Long-Term Debt | 4,596,775 | 4,063,115 |
Long-Term Note Payable - Related Party (Note 4 and 7) | 1,076,987 | |
Long Term Lease Liability | 544,382 | 547,692 |
Asset Retirement Obligations | 27,468,427 | 25,000,740 |
Total Liabilities | 57,659,156 | 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, 25,503,530 and 22,093,503 Shares Issued and Outstanding, Respectively | 85,025 | 81,615 |
Additional Paid-in-Capital | 99,490,253 | 75,303,479 |
Accumulated Deficit | (64,618,818) | (52,149,213) |
Total Stockholders' Equity | 34,956,460 | 23,235,881 |
Total Liabilities and Stockholders' Equity | $ 92,615,616 | $ 71,545,075 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, outstanding | 6 | 6 |
Preferred stock, issued | 6 | 6 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 190,000,000 | 190,000,000 |
Common stock, issued | 25,503,530 | 22,093,503 |
Common stock, outstanding | 25,503,530 | 22,093,503 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Revenue: | ||
Oil Sales | $ 36,684,494 | $ 44,978,554 |
Gas Sales | 1,726,754 | 4,534,370 |
NGL Sales | 1,660,256 | 3,659,451 |
Total Product Revenues | 40,071,504 | 53,172,375 |
Other | 70,480 | 102,429 |
Gain (Loss) on Derivatives | (65,693) | (387,930) |
Total Revenue | 40,076,291 | 52,886,874 |
Costs and Expenses: | ||
Lease Operating Expense | 28,625,481 | 23,584,039 |
Production and Ad Valorem Taxes | 3,044,411 | 3,943,466 |
Depletion, Depreciation & Amortization | 3,096,533 | 1,949,191 |
Accretion of Asset Retirement Obligation | 1,756,022 | 1,357,906 |
Impairment | 936,620 | |
General and Administrative | 15,178,935 | 12,331,489 |
Total Cost and Expenses | 51,701,382 | 44,102,711 |
Operating Income (Loss) | (11,625,091) | 8,784,163 |
Other Income and (Expense): | ||
Interest Expense | (1,000,427) | (509,540) |
Other Income (Expense) | 23,721 | (981,595) |
Income (Loss) Before Taxes | (12,601,797) | 7,293,028 |
Income Tax (Provision) Benefit | 132,192 | (208,898) |
Net Income (Loss) | $ (12,469,605) | $ 7,084,130 |
Net Income (Loss) per Common Share: | ||
Basic | $ (0.55) | $ 0.34 |
Diluted | $ (0.55) | $ 0.30 |
Weighted Average Number of Common Shares Outstanding: | ||
Basic | 22,718,890 | 21,003,563 |
Diluted | 22,718,890 | 23,387,646 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Preferred Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balances, December 31, 2022 at Dec. 31, 2021 | $ 79,362 | $ 68,988,134 | $ (59,233,343) | $ 9,834,153 | |
Beginning balance (in shares) at Dec. 31, 2021 | 19,840,648 | ||||
Net Loss | 7,084,130 | 7,084,130 | |||
Issuance of Preferred Stock | 6 | 6 | |||
Issuance of Preferred Stock (in shares) | 6 | ||||
Stock-Based Compensation | $ 300 | 2,716,452 | 2,716,752 | ||
Stock-Based Compensation (in shares) | 299,695 | ||||
Warrants Exercised | $ 1,953 | 3,598,887 | 3,600,840 | ||
Warrants Exercised (in shares) | 1,953,160 | ||||
Balances, December 31, 2023 at Dec. 31, 2022 | $ 81,615 | 75,303,479 | (52,149,213) | 23,235,881 | |
Ending balance (in shares) at Dec. 31, 2022 | 22,093,503 | 6 | |||
Net Loss | (12,469,605) | (12,469,605) | |||
Stock-Based Compensation | $ 345 | 3,144,405 | 3,144,750 | ||
Stock-Based Compensation (in shares) | 345,350 | ||||
Warrants Exercised | $ 500 | 2,499,500 | 2,500,000 | ||
Warrants Exercised (in shares) | 500,000 | ||||
Impact of Former CEO Settlement | (2,126,131) | (2,126,131) | |||
Stock Issued for Purchase Option (See Note 3) | $ 67 | 600,990 | 601,057 | ||
Stock Issued for Purchase Option (in shares) | 67,000 | ||||
Issuance of Shares for Redemption of Notes | $ 1,264 | 10,108,048 | 10,109,312 | ||
Issuance of Shares for Redemption of Notes (in shares) | 1,263,664 | ||||
Issuance of Shares in Private Transaction | $ 1,234 | 9,959,962 | 9,961,196 | ||
Issuance of Shares in Private Transaction (in shares) | 1,234,013 | ||||
Balances, December 31, 2023 at Dec. 31, 2023 | $ 85,025 | $ 99,490,253 | $ (64,618,818) | $ 34,956,460 | |
Ending balance (in shares) at Dec. 31, 2023 | 25,503,530 | 6 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | ||
Cash Flows From Operating Activities: | |||
Net Income (Loss) | $ (12,469,605) | $ 7,084,130 | |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: | |||
Stock-Based Compensation | 3,144,750 | 2,716,752 | |
Amortization of Right of Use Assets | 423,689 | 263,847 | |
Depreciation, Depletion and Amortization | 3,096,533 | 1,949,191 | |
Accretion of Asset Retirement Obligation | 1,756,022 | 1,357,906 | |
Loss on Derivatives | 65,693 | 387,930 | |
Settlement on or Purchases of Derivative Instruments | (353,695) | (260,266) | |
Impairment | 936,620 | ||
Loss on XTO Final Settlement | 1,448,363 | ||
PIE-Related Expense (See Note 4) | 1,399,030 | ||
Change in Operating Assets and Liabilities: | |||
Accounts Receivable | (2,700,528) | (1,812,230) | |
Inventory, Oil in Tanks | (160,827) | (802,394) | |
Prepaids, Current | 745,648 | (369,312) | |
Other Long Term Assets and Liabilities | (1,103,607) | (387,292) | |
Accounts Payable | 751,355 | 526,682 | |
Accrued Expenses | (3,082,928) | 3,616,826 | |
Net Cash Provided By (Used In) Operating Activities | (9,887,500) | 18,055,783 | |
Cash Flows from Investing Activities: | |||
Acquisition of Oil and Natural Gas Properties | (2,094,419) | (2,702,613) | |
Capital Expenditures - Oil and Natural Gas Properties | [1] | (14,546,873) | (10,161,711) |
Purchase of Other Fixed Assets | (352,851) | (311,229) | |
Cash Paid for Right of Use Assets | (552,196) | (268,934) | |
Sinking Fund Deposit | 2,779,000 | 2,031,000 | |
Net Cash Used In Investing Activities | (14,767,339) | (11,413,487) | |
Cash Flows from Financing Activities: | |||
Proceeds from Debt Issued | 14,492,484 | ||
Principal Payments of Debt | (6,450,774) | (1,699,840) | |
Proceeds from Stock Issuance and Warrant Exercises | 12,461,195 | 3,390,115 | |
Net Cash Provided By Financing Activities | 20,502,905 | 1,690,275 | |
Net Change in Cash | (4,151,934) | 8,332,571 | |
Cash - Beginning of Period | 11,944,442 | 3,611,871 | |
Cash - End of Period | 7,792,508 | 11,944,442 | |
Supplemental Cash Flow Information: | |||
Cash Paid for Interest | $ 650,637 | $ 473,205 | |
[1]Incurred capital expenditures were $25,053,107 and $11,206,207 for the respective periods. The differences between incurred and cash capital expenditures is due to changes in related accounts payable. |
Organization and Basis of Prese
Organization and Basis of Presentation | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Note 1 - Organization and Basis of Presentation Empire Petroleum Corporation (the “Company”, collectively with its subsidiaries) is an independent energy company operator engaged in optimizing developed production by employing field management methods to maximize reserve recovery while minimizing costs. Empire operates the following wholly-owned subsidiaries in its areas of operations: • Empire New Mexico LLC (“Empire New Mexico”) ○ Empire New Mexico LLC d/b/a Green Tree New Mexico ○ Empire EMSU LLC ○ Empire EMSU-B LLC ○ Empire AGU LLC ○ Empire NM Assets LLC • Empire Rockies Region ○ Empire North Dakota LLC (“Empire North Dakota”) ○ Empire ND Acquisition LLC (“Empire NDA”) • Empire Texas (“Empire Texas”), consisting of the following entities: ○ Empire Texas LLC ○ Empire Texas Operating LLC ○ Empire Texas GP LLC ○ Pardus Oil & Gas Operating, LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC) • Empire Louisiana LLC (“Empire Louisiana”) Empire was incorporated in the State of Delaware in 1985. The consolidated financial statements of Empire Petroleum Corporation and subsidiaries include the accounts of the Company and its wholly-owned subsidiaries. Liquidity and Going Concern The Company determined that it was not in compliance with the current ratio covenant contained in its revolving line of credit agreement as of December 31, 2023 (see Note 7). Upon discovering this issue, we notified the lender to request a waiver. The noncompliance is due to a higher level of payables related to the capital spending program in North Dakota. On March 27, 2024, the Company obtained a compliance waiver from the lender for December 31, 2023. The Company will require funds to satisfy these payables related to the capital spending program which are greater than estimated cash flows from operations over the next 12 months. The Company intends and has announced a subscription rights offering (“Rights Offering”) to raise additional funds for the payables discussed above as well as the additional capital spending in 2024. In March 2024, the Company commenced a Rights Offering pursuant to which it intends to raise gross proceeds of up to approximately $25.0 million (see Note 18). As a result of a subsequent reduction in the subscription price per share, gross proceeds are now expected to be up to approximately $20.66 million. Phil Mulacek and Energy Evolution Master Fund, Ltd (“Energy Evolution”), both related parties of the Company (see Note 15) and our largest stockholders collectively holding 46% of the common shares outstanding, have indicated that they intend to participate in the Rights Offering and fully subscribe to the shares of Common Stock corresponding to their subscription rights. They have each also indicated that they intend to exercise their over-subscription rights to purchase their pro rata share of the underlying securities related to the Rights Offering that remain unsubscribed at the expiration date of the Rights Offering. The Rights Offering will not close until April 2024. As such, it is likely that the Company would not be in technical compliance with this same covenant as of March 31, 2024; however, in the opinion of the Company this would be cured within the allowable period under the Credit Facility at the close of the Rights Offering. Management has initiated plans that will allow the Company to remain in compliance with this covenant. The Company as stated above, has indications from existing stockholders for a majority portion of the Rights Offering. Management has considered these plans, including if they are within the control of the Company, in evaluating ASC 205-40, Presentation of Financial Statements-Going Concern |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts and balances of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Estimated quantities of crude oil, natural gas and natural gas liquids (“NGL”) reserves are the most significant of the Company’s estimates. All reserve data used in the preparation of the consolidated financial statements, as well as included in Supplemental Information of Oil and Natural Gas Producing Activities (Unaudited) Other items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances for deferred income tax assets, and valuation of derivative instruments. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions. Although management believes these estimates are reasonable, actual results may differ from estimates and assumptions of future events and these revisions could be material. Future production may vary materially from estimated oil and natural gas proved reserves. Actual future prices may vary significantly from price assumptions used for determining proved reserves and for financial reporting. Out of Period Adjustments In the third quarter of 2022, the Company identified and recorded an out-of-period adjustment related to the Joint Development Agreement discussed in Note 4. The impact of recording this adjustment reduced Utility and Other Deposits and increased Lease Operating Expense by approximately $ 1.3 million 797,000 Accounts Receivable Accounts receivable include estimated amounts due from crude oil, natural gas, and NGL purchasers and from non-operating working interest owners. Accrued revenue related to product sales from purchasers and operators are due under normal trade terms, generally requiring payment within 60 days of production. For receivables from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for credit losses account only after all collection attempts have been exhausted. The Company did not have an allowance for credit losses at either December 31, 2023 or 2022. The Company’s accounts receivable as of December 31, 2023 and 2022 are as follows: Schedule of account receivable 2023 2022 Oil, Gas and NGL Receivables $ 2,784,745 $ 3,060,341 Joint Interest Billings 5,444,331 2,057,719 Receivable from Former CEO (See Note 14) — 2,130,614 Other 125,560 531,565 Total Accounts Receivable $ 8,354,636 $ 7,780,239 Derivative Instruments The Company enters into hedge agreements to manage its exposure to oil and natural gas price fluctuations. The fair value of derivative contracts is recognized as an asset or liability on the Company’s consolidated balance sheets. Realized gain or loss is recognized as a component of revenue when the derivative contracts mature. For contracts which have not matured, an unrealized gain or loss is recorded based on the change in the fair value of the outstanding contracts. Inventory Inventory primarily consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value. Oil and Natural Gas and Other Properties The Company uses the successful efforts method of accounting for its oil and gas activities. Costs incurred are deferred until exploration and completion results are evaluated. At such time, costs of activities with economically recoverable reserves are capitalized as proven properties, and costs of unsuccessful or uneconomical activities are expensed. Capitalized drilling costs are reviewed periodically for impairment. Costs related to impaired prospects or unsuccessful exploratory drilling is charged to expense. Management's assessment of the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of such leaseholds impact the amount and timing of impairment provisions. An impairment expense could result if oil and gas prices decline in the future as it may not be economical to develop some of these unproved properties. Lease options are capitalized as unproved property acquisition costs and are reviewed for impairment if indicators exist that the carrying value of the lease option may not be recoverable. If the lease options become impaired, expire or are abandoned, the options will be expensed. If proved reserves are discovered after the options are exercised, these costs will be reclassified as proved property. Depreciation, depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depreciation, depletion and amortization computations prospectively. Other property and equipment is depreciated on the straight-line method. Segment Reporting Operating segments are components of an enterprise that engage in activities from which it may earn revenues and incur expenses and for which separate operational financial information is available and is regularly evaluated by management. Based on the Company’s organization and management, it has only one reportable operating segment, which is oil and natural gas exploration and production. Debt Issuance Costs Debt issuance fees, which are recorded at cost, net of amortization, are amortized over the life of the respective debt agreements utilizing the straight-line method. Unamortized debt issuance costs related to the Company’s credit facility are recorded in other noncurrent assets on the Company’s Consolidated Balance Sheet. Asset Retirement Obligations The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related oil and natural gas property asset. Subsequently, the asset retirement cost included in the carrying amount of the related asset is allocated to expense through depletion of the asset. Changes in the liability due to passage of time are recognized as an increase in the carrying amount of the liability through accretion expense. Based on certain factors, including commodity prices and costs, the Company may revise its previous estimates of the liability, which would also increase or decrease the related oil and natural gas property asset. Revenue Recognition The Company’s revenues are comprised solely of revenues from customers and include the sale of oil, natural gas and NGL. The Company believes that the disaggregation of revenue into these three major product types, as presented in the Consolidated Statements of Operations, appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on its single geographic region, the continental United States. Revenues are recognized at a point in time when production is sold to a purchaser at a determinable price, delivery has occurred, control has transferred and it is probable substantially all of the consideration will be collected. The Company fulfills its performance obligations under its customer contracts through delivery of oil, natural gas and NGL and revenues are recorded on a monthly basis. The Company receives payment from one to three months after delivery. Generally, each unit of product represents a separate performance obligation. The prices received for oil, natural gas and NGL sales under the Company’s contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing. As a result, r evenues from the sale of oil, natural gas and NGL will decrease if market prices decline. The sales of oil, natural gas and NGL, as presented on the Consolidated Statements of Operations, represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling oil, natural gas and NGL on behalf of royalty or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded. Variances between the Company’s estimated revenue and actual payment are recorded in the month the payment is received. Historically, these differences have been insignificant. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are recorded in Accounts Receivable in the Consolidated Balance Sheets. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are presented separately from such revenues in the Consolidated Statements of Operations. Oil Sales Oil production is transported from the wellhead to tank batteries or delivery points through flow-lines or gathering systems. Purchasers of the oil take delivery at the tank batteries and transport the oil by truck or at a pipeline delivery point and the Company collects a market price, net of pricing differentials. Revenue is recognized when control transfers to the purchaser at the net price received by the Company. Natural Gas and NGL Sales Under the Company’s natural gas sales arrangements, the purchaser takes control of wet gas at a delivery point near the wellhead or at the inlet of the purchaser’s processing facility. The purchaser gathers and processes the wet gas and remits proceeds to the Company for the resulting natural gas and NGL sales. Based on the nature of these arrangements, the processor is the agent and the purchaser is the Company’s customer, thus, the Company recognizes natural gas and NGL sales based on the net amount of proceeds received from the purchaser. Transaction Price Allocated to Remaining Performance Obligations Substantially all For the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Prior-Period Performance Obligations The Company records revenue in the month that product is delivered to the purchaser. Settlement statements for certain natural gas and NGL sales, however, may not be received for 30 to 90 days after the date the product is delivered, and as a result the Company is required to estimate the amount of product delivered to the purchaser and the price that will be received for the sale of the product. In these situations, the Company records the differences between its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. Any identified differences between the Company’s revenue estimates and actual revenue received have historically been insignificant. For the years ended December 31, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. Stock-Based Compensation The Company recognizes stock-based compensation expense associated with equity-based incentive awards consisting of stock options and restricted stock units. The Company accounts for forfeitures of equity-based incentive awards as they occur. Stock-based compensation expense related to equity-based awards is generally recognized as vesting occurs. See Note 10 for further discussion. Income Taxes The Company accounts for income taxes in accordance with the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established if management determines it is more likely than not that some portion of a deferred tax asset will not be realized. Per Share Amounts The Company calculates and discloses basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS"). The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted 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. 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. The three-level fair value hierarchy for disclosure of fair value measurements defined by ASC Topic 820 is as follows: Level 1 Level 2 Level 3 A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity. The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. There were no transfers between fair value hierarchy levels for the years ended December 31, 2023 and 2022. Impairment of 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. 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- Derivatives The fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions include measures of the Company’s nonperformance risk. These measurements were not material to the Consolidated Financial Statements. The fair value of the amount outstanding on our credit facility is equivalent to the carrying value due to the variable interest rate on such facility. Related Party Transactions Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Disclosures Recently Issued Accounting Pronouncements FASB periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements and concluded that the following new accounting standards are applicable: In June 2016, the FASB issued Accounting Standards Update ("ASU”) 2016-13, Financial Instruments – Credit Losses In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity |
Property
Property | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property | Note 3 – Property The capitalized costs of oil and natural gas properties as of December 31, 2023 and 2022 are as follows: 2023 2022 Proved Properties $ 75,346,623 $ 52,831,131 Unproved Properties 3,245,431 2,865,556 Work in process 14,917,749 8,289,652 Gross capitalized costs 93,509,803 63,986,339 Depreciation, Depletion, Amortization and Impairment (22,996,805 ) (20,116,696 ) Total Oil and Gas Properties, Net $ 70,512,998 $ 43,869,643 On August 9, 2023, the Company and a subsidiary of Energy Evolution Master Fund, Ltd. (“Energy Evolution”), a related party, collectively acquired additional working interests in certain of the Company’s New Mexico properties. The Company paid $ 2.1 million one-year 5 67,000 601,000 The Company has the right to extend the initial one-year Purchase Option period for two successive one-year periods by agreeing to issue an additional 42,000 shares of common stock prior to the end of the one-year period then in effect. The Company assesses its oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its estimated future net cash flows. The Company did not identify any impairments in 2023. In 2022, estimated future cash flows from the Company’s properties in Louisiana were less than the net book value. As a result, the Company recorded a $ 936,000 In April 2022, the Company purchased working interests of oil and natural gas properties primarily located in the Landa field in North Dakota and assumed the role of operator. The Company paid approximately $ 1.4 million 80 20 233,659 1.3 million Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years. The capitalized costs of other property and equipment as of December 31, 2023 and 2022 are as follows: 2023 2022 Other property and equipment, at cost $ 2,998,018 1,878,325 Less: accumulated depreciation (1,114,807 ) (436,796 ) Oher property and equipment, net $ 1,883,211 $ 1,441,529 |
Joint Development and Shared Se
Joint Development and Shared Services Agreements | 12 Months Ended |
Dec. 31, 2023 | |
Joint Development And Shared Services Agreements | |
Joint Development and Shared Services Agreements | Note 4 – Joint Development and Shared Services Agreements On August 6, 2020 the Company, through its wholly owned subsidiary, Empire Texas, entered into a joint development agreement (the “JDA”) with Petroleum & Independent Exploration, LLC and related entities (“PIE”), a related party, dated August 1, 2020. Under the terms of the JDA, PIE will perform recompletion or workover on specified mutually agreed upon wells (“Workover Wells”) owned by Empire Texas. To fund the work, PIE entered into a term loan agreement with Empire Texas dated August 1, 2020, whereby PIE will loan up to $ 2,000,000 6 August 7, 2024 1,100,000 As part of the JDA, Empire Texas will assign to PIE a combined 85% working and revenue interest in the Workover Wells; an assignment was completed in October 2020 for the initial three Workover Wells. Of the assigned interest, 70% working and revenue interest will be used to repay the obligations under the term loan agreement. Once the term loan is repaid, PIE will reassign a 35% working and revenue interest to Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest (See Note 7). In the third quarter of 2022, a $ 1.4 The Company has also entered into a Shared Services Agreement with PIE effective August 1, 2023 that includes access to administrative, engineering and support services as well as building and insurance services. The agreement provides that the Company will reimburse PIE for the out-of-pocket or actual costs incurred by PIE in providing such services to the Company. |
Asset Retirement Obligations
Asset Retirement Obligations | 12 Months Ended |
Dec. 31, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Note 5 – Asset Retirement Obligations The Company’s asset retirement obligations represent the estimated present value of the estimated cash flows the Company will incur to plug, abandon and remediate its producing properties at the end of their productive lives, in accordance with applicable state laws. Market risk premiums associated with asset retirement obligations are estimated to represent a component of the Company’s credit-adjusted risk-free rate that is utilized in the calculations of asset retirement obligations. The Company’s asset retirement obligation transactions during the years ended December 31, 2023 and 2022 are summarized in the table below. For the Year Ended December 31, 2023 2022 Asset retirement obligations, beginning of period $ 25,000,740 $ 20,640,599 Liabilities assumed in acquisitions 72,000 502,539 Revisions 2,303,938 2,660,653 Liabilities settled (964,274 ) (160,957 ) Accretion expense 1,756,023 1,357,906 Asset retirement obligation, end of period $ 28,168,427 $ 25,000,740 Less current portion included in Accrued Expenses 700,000 — Asset retirement obligation, long-term $ 27,468,427 $ 25,000,740 The revisions in 2023 primarily reflect cost revision estimates to wells in New Mexico based on 2023 plugging activity. The revisions in 2022 primarily relate to the identification of nonproducing wells, including injection wells and temporarily abandoned wells in New Mexico. |
Commodity Derivative Financial
Commodity Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2023 | |
Investments, All Other Investments [Abstract] | |
Commodity Derivative Financial Instruments | Note 6 – Commodity 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 does not enter into derivative financial instruments for speculative or trading purposes. The Company’s derivative financial instruments consist of swaps and put options. 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. These contracts are recognized and recorded at fair value as an asset or liability on the Company’s Consolidated Balance Sheets. The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022: For the Year Ended December 31, 2023 2022 Gain (loss) on derivatives: Oil derivatives $ (65,693 ) $ (387,930 ) The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2023 and 2022: For the Year Ended December 31, 2023 2022 Oil derivatives $ (353,695 ) $ (260,266 ) The following table sets forth the Company’s outstanding derivative contracts at December 31, 2023: 1st Quarter 2024 2nd Quarter 2024 3rd Quarter 2024 4th Quarter 2024 2024 WTI Fixed-Price Swaps: Quarterly volume (MBbls) 38.00 30.00 30.00 30.00 Weighted-average fixed price (Bbl) $ 74.01 $ 72.15 $ 77.02 $ 75.57 |
Debt and Note Payable - Related
Debt and Note Payable - Related Party | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Debt and Note Payable - Related Party | Note 7 – Debt and Note Payable - Related Party The following table represents the Company’s outstanding debt. As of December 31, 2023 2022 Equity Bank Credit Facility $ 4,492,484 $ — CrossFirst Senior Revolver Loan Agreement — 5,869,500 Note Payable – Related Party 1,060,004 1,076,987 Equipment and vehicle notes, 0.00 9.00 900 1,400 148,516 252,924 Total Debt 5,701,004 7,199,411 Less: Current Maturities (44,225 ) (2,059,309 ) Less: Note Payable – Related Party (1,060,004 ) (1,076,987 ) Long-Term Debt $ 4,596,775 $ 4,063,115 On December 29, 2023, Empire North Dakota and Empire NDA ("Borrowers”), entered into a Revolver Loan Agreement with Equity Bank (the "Credit Facility”). Pursuant to the Credit Facility (a) the initial revolver commitment amount is $10,000,000; (b) the maximum revolver commitment amount is $15,000,000; (c) commencing on January 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is reduced by $150,000; (d) commencing on March 31, 2024, there are scheduled semiannual collateral borrowing base redeterminations each year on March 31 and September 30; (e) the final maturity date is December 29, 2026; (f) outstanding borrowings bear interest at a rate equal to the prime rate of interest plus 1.50%, and in no event lower than 8.50%; (g) a quarterly commitment fee is based on the unused portion of the commitments; and (h) Borrowers have the right to prepay loans under the Credit Facility at any time without a prepayment penalty. The Credit Facility is guaranteed by the Company. Borrowers entered into a security agreement, pursuant to which the obligations under the Credit Facility are secured by liens on substantially all of the assets of Borrowers. Furthermore, the obligations under the Credit Facility are secured by a continuing, first priority mortgage lien, pledge of and security interest in not less than 80% of Borrowers’ producing oil, gas and other leasehold and mineral interests, including without limitation, those situated in the States of North Dakota and Montana. The Credit Facility requires Borrowers to, commencing as of the fiscal quarter ended December 31, 2023, maintain (a) a current ratio of 1.0 to 1.0 or more and (b) a ratio of funded debt to EBITDAX, calculated quarterly and annually based on a trailing twelve-month basis, of no more than 3.50 to 1.00. At December 31, 2023, the Borrowers were not in compliance with the current ratio, however, a waiver was obtained from the lender. The Company is in compliance with the other covenants as of December 31, 2023. On July 7, 2021, the Company entered into the Fourth Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank ("CrossFirst”) as further amended by Letter Agreements in conjunction with redetermination dates (the “Amended Agreement”). The maximum amount that could be advanced under the Amended Agreement was $ 20,000,000 August 9, 2023 5,180,000 On September 19, 2023, each of Phil Mulacek, a member of the Company’s Board of Dierctors, and Energy Evolution made a bridge loan to Empire North Dakota in the amount of $ 5.0 Note Payable - Related Party In August 2020, concurrent with the JDA with PIE, a related party, the Company entered into a term loan agreement dated August 1, 2020, whereby PIE will loan up to $ 2,000,000 6 In addition, the Company assigned 85% working and revenue interest to PIE in the designated wells which will be applied to repayment of the loan. As of December 31, 2023, $1,060,004 has been advanced from the PIE loan. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2023 | |
Leases | |
Leases | Note 8 – Leases As a lessee, the Company leases its corporate office headquarters in Tulsa, Oklahoma and one field office. The leases expire between 2024 and 2028. The corporate office has an option to renew for an additional five-year term. The option to renew the lease is generally not considered reasonably certain to be exercised. Therefore, the period covered by such optional period is not included in the determination of the term of the lease and the lease payments during these periods are similarly excluded from the calculation of right-of-use lease asset and lease liability balances. The Company also leases vehicles primarily for use by our field operations. These vehicle leases typically have a three-year life. The Company recognizes right-of use lease expense on a straight-line basis, except for certain variable expenses that are recognized when the variability is resolved, typically during the period in which they are paid. Variable right-of-use lease payments typically include charges for property taxes, insurance, and variable payments related to non-lease components, including common area maintenance. Right of use lease expense was approximately $ 424,000 267,000 404,000 268,000 Supplemental balance sheet information related to the right of use leases is as follows: Schedule of right of use leases As of December 31, 2023 2022 Net operating lease asset (included in Other Property and Equipment) $ 1,077,031 $ 776,219 Current portion of lease liability $ 432,822 $ 256,975 Long-term lease liability 544,382 547,692 Total right of use lease liabilities $ 977,204 $ 804,667 The weighted average remaining term for the Company’s right of use leases is 2.28 8.56 Maturities of lease liabilities as of December 31, 2023 are as follows: 2024 $ 498,654 2025 430,631 2026 136,545 2027 12,400 2028 — Thereafter — Total lease payments 1,078,230 Less imputed interest (101,026 ) Total lease obligation $ 977,204 |
Equity
Equity | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
Equity | Note 9 – Equity Pursuant to the Company’s Amended and Restated Certificate of Incorporation (“Charter”), effective as of March 4, 2022, the total number of shares of all classes of stock that the Company has the authority to issue is 200,000,000, consisting of 190,000,000 0.001 10,000,000 0.001 Preferred Stock Preferred stock may be issued from time to time in one or more series at the direction of the Company’s Board of Directors and the directors also have the ability to fix dividend rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of redemption and other rights, preferences, privileges and restrictions as determined by the Company’s Board of Directors, subject to certain limitations set forth in the Charter. Series A Voting Preferred Stock On March 8, 2022, the Company formalized the issuance of preferred stock as was required under the terms of the Company's May 2021 financing agreements with Energy Evolution and issued six shares of Series A Voting Preferred Stock. The Series A Voting Preferred Stock was issued in connection with the strategic investment in the Company by Energy Evolution. For so long as the Series A Voting Preferred Stock is outstanding, the Company’s Board of Directors will consist of six directors. Three of the directors are designated as the Series A Directors and the three other directors (each, a “common director”) are elected by the holders of common stock and/or any preferred stock (other than the Series A Voting Preferred Stock) granted the right to vote on the common directors. Any Series A Director may be removed with or without cause but only by the affirmative vote of the holders of a majority of the Series A Voting Preferred Stock voting separately and as a single class. The holders of the Series A Voting Preferred Stock have the exclusive right, voting separately and as a single class, to vote on the election, removal and/or replacement of the Series A Directors. Holders of common stock or other preferred stock do not have the right to vote on the Series A Directors. The approval of the holders of the Series A Voting Preferred Stock, voting separately and as a single class, is required to authorize any resolution or other action to issue or modify the number, voting rights or any other rights, privileges, benefits, or characteristics of the Series A Voting Preferred Stock, including without limitation, any action to modify the number, structure and/or composition of the Company’s current Board of Directors. The Series A Voting Preferred Stock is held by Phil Mulacek, Chairman of the Board of Directors of the Company and one of the principals of Energy Evolution, as Energy Evolution’s designee (the “Initial Holder”). The Series A Voting Preferred Stock may be transferred only to certain controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights of the Series A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”) holding together at least 3,000,000 shares of the Company’s outstanding common stock. The Series A Voting Preferred Stock is not entitled to receive any dividends or distributions of cash or other property except in the event of any liquidation, dissolution or winding up of the Company’s affairs. In such event, before any amount is paid to the holders of the Company’s common stock but after any amount is paid to the holders of the Company’s senior securities, the holders of the Series A Voting Preferred Stock will be entitled to receive an amount per share equal to $1.00. Except as discussed above or as otherwise set forth in the certificate of designation of the Series A Voting Preferred Stock, the holders of the Series A Voting Preferred Stock have no voting rights. The Series A Voting Preferred Stock is not redeemable at the Company’s election or the election of any holder, except the Company may elect to redeem the Series A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in the event that: · any or all shares of Series A Voting Preferred Stock are held by anyone other than the Initial Holder or a Permitted Transferee; or · the Series A Holders together hold less than 3,000,000 The Series A Voting Preferred Stock is not convertible into common stock or any other security. Common Stock On August 27, 2021 the Company’s Board of Directors approved a one-for-four reverse stock split such that every holder of the Company’s common stock would receive one share of common stock for every four shares owned. The reverse stock split was effective as of 6:00 p.m. Eastern Time on March 7, 2022, immediately prior to the Company’s listing of its common stock on the NYSE American. All share amounts have retrospectively been stated at post-reverse split amounts and pricing. The holders of shares of common stock are entitled to one vote per share for all matters on which common stockholders are authorized to vote on. Examples of matters that common stockholders are entitled to vote on include, but are not limited to, election of three of the six directors and other common voting situations afforded to common stockholders. During February and March 2021, the Company issued to a group of accredited investors 2,248,464 2,248,464 2.00 December 31, 2022 3,147,850 180 .14 2,350,407 1,782,347 In September and October 2022, a former director of the Company exercised warrants granted in November 2017 to purchase 475,000 1.00 In connection with the purchase of XTO assets, the Company issued a Senior Secured Convertible Note due December 31, 2021, in the aggregate principal amount $ 16,250,000 Empire issued to Energy Evolution (i) 375,000 shares of common stock along with (ii) a warrant certificate to purchase up to 750,000 common stock, conversion feature, and warrants was $ 10,125,177 Under the Amended Secured Notes, among other terms the Company issued a warrant certificate to purchase up to 500,000 shares of common stock at an exercise price of $5.00 per Warrant Share until December 31, 2023. In July 2023, Energy Evolution exercised its remaining warrants for 500,000 shares of common stock for $5.00 per share. The Company received $2.5 million related to this transaction. See Note 15 for information regarding Bridge Loans issued from two related parties that were subsequently converted to our common shares and additional shares purchased with cash by those same parties. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock Based Compensation | Note 10 – Stock Based Compensation On April 3, 2019, the Board of Directors of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the “2019 Stock Option Plan”). The total number of shares of common stock that may be issued pursuant to stock options under the 2019 Stock Option Plan was 2,500,000 750,000 750,000 700,000 436,935 Stock-based compensation expense for restricted stock units and stock options is included in General and Administrative expense in the Consolidated Statements of Operations and is recorded with a corresponding increase in Additional Paid-in Capital within the Consolidated Balance Sheets. Restricted Stock Units Each RSU represents the contingent right to receive one share of common stock. The holders of outstanding RSUs do not receive dividends or have voting rights prior to vesting and settlement. The Company determines the fair value of granted RSUs based on the market price of the common stock on the date of the grant. Compensation expense for granted RSUs is recognized on a straight-line basis over the vesting and is net of forfeitures, as incurred. RSUs are generally granted with 12-month, 13-month, or 3 year service periods. Total value assigned to the RSUs granted in 2023 based on grant date price approximated $ 1,837,000 2,271,000 1,227,000 1,230,000 The following summary reflects nonvested restricted stock unit activity and related information: Weighted Average Shares Fair Value (a) Outstanding, December 31, 2021 — $ — Granted 224,288 15.42 Vested — — Outstanding, December 31, 2022 224,288 $ 15.42 Granted 180,430 10.33 Vested (145,700 ) 16.20 Forfeited (54,201 ) 14.57 Outstanding, December 31, 2023 204,817 $ 10.61 _______ (a) Shares are valued at the grant-date market price. 2023 Weighted Average grant date fair value of restricted stock units granted during the year, per share $ 10.33 Total fair value of restricted stock units vested during the year $ 2,286,464 Stock Options Each stock option award provides the opportunity in the future to purchase Empire common shares at the market price of our common stock on the date the award is granted (the strike price). The options generally become exercisable in equal amounts over a three-year vesting period or over one-year for options awarded to the Board of Directors of the Company. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through recording stock-based compensation expense. The stock-based compensation expense is based on the estimated fair value of the awards expected to vest, and that amount is amortized as compensation expense on a straight-line basis over the respective vesting period and is net of forfeitures, as incurred. The estimated fair value of an option is calculated using a Black-Scholes option valuation model with the following assumption inputs: dividend yield, expected annual volatility, risk free interest rate and an expected life of the option. The following table summarizes the weighted average fair value and assumptions for 2023 and 2022. 2023 2022 Weighted average grant-date fair value of stock options $ 4.52 $ 4.55 Stock Options Valuation Assumptions: Risk-free interest rate 3.9 1.6 Dividend yield 0.0 0.0 Expected volatility 64.9 56.0 Expected option life (in years) 2.88 2.99 Other pricing model inputs: Weighted average grant-date market prices of Empire stock (strike price) $ 10.07 $ 11.80 For the year ended December 31, 2023 and 2022, approximately $ 874,000 1,458,000 1,546,000 The following summary reflects stock option activity and related information: Weighted Average Options Exercise Price Outstanding, December 31, 2021 2,440,700 $ 2.19 Granted 249,000 11.80 Exercised (310,000 ) 1.34 Outstanding, December 31, 2022 2,379,700 $ 3.31 Granted 533,000 10.07 Exercised (355,000 ) 1.35 Forfeited (492,319 ) 5.42 Outstanding, December 31, 2023 2,065,381 $ 4.89 The following table summarizes information about stock options outstanding as of December 31, 2023: Range of Options Weighted Average Weighted Options Weighted Exercise Outstanding Remaining Average Exercisable Average Prices at 12/31/23 Contractual Life Exercise Price at 12/31/23 Exercise Price $ 1.32 12.36 2,065,381 4.94 years $4.89 1,605,210 $3.09 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 12 – Income Taxes The current and deferred income tax provision for the years ended December 31, 2023 and 2022 were comprised of the following: 2023 2022 Current $ (132,192 ) $ 208,898 Deferred — — Income tax provision $ (132,192 ) $ 208,898 In the event that an entity has an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended ( “IRC”)), an entity’s federal net operating loss carryforwards (“NOLs”) generated prior to an ownership change would be subject to annual limitations, which could defer or eliminate the Company’s ability to utilize these tax losses against future taxable income. Generally, an “ownership change” occurs if one or more stockholders, each of whom owns 5% or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50% over the lowest percentage of stock owned by those stockholders at any time during the preceding three-year period. A full Section 382 analysis was prepared in 2023 and it was determined that our NOLs were subject to limitations under IRC Section 382. The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change. At December 31, 2023, the Company had approximately $ 24.3 million 23 million 1.3 million Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities. The Company’s net tax position as of December 31, 2023 and 2022 is as follows: 2023 2022 Deferred tax assets: Loss carry-forwards $ 6,269,503 $ 4,789,586 Right of use assets — 7,341 Stock option grants 2,022,184 1,369,105 Asset retirement obligation 7,433,670 6,616,407 Other 526,873 436,477 Total deferred tax assets 16,252,230 13,218,916 Deferred tax liabilities: Oil and Gas Properties (7,327,620 ) (5,552,159 ) Other property and equipment (123,915 ) (171,650 ) Derivatives (104,956 ) (31,369 ) Lease liabilities (25,133 ) — Other — (69,688 ) Total deferred tax liabilities (7,581,624 ) (5,824,866 ) Net deferred tax asset before valuation allowance 8,670,606 7,394,050 Valuation allowance (8,670,606 ) (7,394,050 ) Net deferred taxes $ — $ — Utilization of the Company’s loss carryforwards is dependent on realizing taxable income. The Company’s recorded valuation allowances of $ 8.7 million 7.4 million Reconciliations of the tax provision (benefit) computed at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows: 2023 2022 $ % $ % Provision (benefit) at statutory rate (2,646,378 ) 21.0 1,531,536 21.0 State Taxes (net of federal impact) (598,191 ) 4.7 350,632 4.9 Nondeductible Expenses 31,037 -0.2 21,052 0.3 Return to Accrual (72,448 ) 0.6 (2,135,704 ) -29.3 NOLs Expected to Expire Unused Due to Section 382 Limitation 1,877,230 -14.9 — 0.0 Valuation Allowance 1,276,558 -10.1 441,382 6.1 Income tax provision (benefit) (132,192 ) 1.0 208,898 2.9 The Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken would more likely than not be sustained by examination. Therefore, at December 31, 2023, the Company has not established any reserves for, nor recorded any unrecognized benefits related to uncertain tax positions. The Company’s only taxing jurisdiction is the United States (federal and state). The Company’s tax years 2020 to present remain open for federal examination. Additionally, tax years 2003 through 2019 remain subject to examination for the purpose of determining the amount of federal NOL and other carryforwards. The number of years open for state tax audits varies, depending on the state, but is generally from three to five years. |
Earnings (Loss) per Share
Earnings (Loss) per Share | 12 Months Ended |
Dec. 31, 2023 | |
Net Income (Loss) per Common Share: | |
Earnings (Loss) per Share | Note 13 – Earnings (Loss) per Share 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. In addition, approximately 348,000 The following table summarizes the calculation of income (loss) per share. 2023 2022 Net Income (Loss) $ (12,469,605 ) $ 7,084,130 Basic Weighted-Average Shares 22,718,890 21,003,563 Effect of Dilutive Securities: Restricted Stock Units and Stock Options (a) — 2,384,083 Diluted Weighted-Average Shares 22,718,890 23,387,646 Income (Loss) per Common Share Basic $ (0.55 ) $ 0.34 Diluted $ (0.55 ) $ 0.30 (a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period. (a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period. |
Executive Separations
Executive Separations | 12 Months Ended |
Dec. 31, 2023 | |
Executive Separations | |
Executive Separations | Note 14 – Executive Separations On March 16, 2023, Thomas W. Pritchard resigned as Chief Executive Officer and a director of the Company to pursue other opportunities. Although not required under Mr. Pritchard’s Employment Agreement with the Company, in recognition of Mr. Pritchard’s past service to the Company, the Company will pay Mr. Pritchard severance benefits in the amount of approximately $ 360,000 340,234 2.1 2.1 On March 17, 2023, the Board of Directors of the Company appointed Michael R. Morrisett to the position of Chief Executive Officer. Mr. Morrisett did not receive any additional compensation for assuming the role of Chief Executive Officer. In July 2023, the Company’s Chief Operating Officer separated from the Company and will receive severance of $ 145,000 576,000 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 15 – Related Party Transactions Energy Evolution is a related party of the Company as it beneficially owns approximately 26.6 19.3 The Company has a JDA with PIE to perform recompletion or workover on specified mutually agreed upon wells (See Note 4). As of December 31, 2023, the Company has incurred obligations of approximately $ 1.1 On November 29, 2023, the Company entered into a Securities Purchase Agreement with Phil Mulacek, which agreement was amended on December 1, 2023, pursuant to which Mr. Mulacek purchased from the Company (a) 609,013 shares of common stock of the Company for an aggregate purchase price of $5,000,000 (or $8.21 per share) in cash and (b) 631,832 shares of common stock of the Company for an aggregate purchase price of $5,054,658 (or $8.00 per share) which was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Mr. Mulacek. On November 29, 2023, the Company entered into a Securities Purchase Agreement with Energy Evolution pursuant to which Energy Evolution purchased 1,256,832 shares of common stock of the Company for an aggregate purchase price of $10,054,658 (or $8.00 per share), of which $2,000,000 was advanced in cash to the Company on November 22, 2023, $3,000,000 was paid in cash to the Company and $5,054,658 was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Energy Evolution. Accounts receivable on the Consolidated Balance Sheet includes approximately $ 895,000 452,000 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 16 – Commitments and Contingencies From time to time, the Company is subject to various legal proceedings arising in the ordinary course of business, including proceedings for which the Company may not have insurance coverage. While many of these matters involve inherent uncertainty, as of the date hereof, the Company does not currently believe that any such legal proceedings will have a material adverse effect on the Company’s business, financial position, results of operations or liquidity. The Company is subject to extensive federal, state, and local environmental laws and regulations. These laws, among other things, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Management believes no materially significant liabilities of this nature existed as of the balance sheet date. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2023 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Note 17 – Concentrations The Company’s producing properties and oil and natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana, and Texas. Because of the concentration, the Company is exposed to the impact of regional supply and demand factors, processing or transportation capacity constraints, severe weather events, water shortages, and government regulations specific to the geographic area. For the year ended December 31, 2023, the Company sold 70 68 The Company’s cash balances may at times exceed FDIC insurance limits. The Company maintains cash accounts at reputable financial institutions. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 18 – Subsequent Events Promissory Note On February 16, 2024, the Company issued a Promissory Note in the aggregate principal amount of $5,000,000 (the "Note”) to Energy Evolution. Energy Evolution has advanced the Company $5,000,000 under the Note. The Note matures on February 15, 2026 7 All or any portion of the outstanding principal amount of the Note may be converted into shares of common stock of the Company at a conversion price of $6.25 per share (the "Conversion Price”), at the option of Energy Evolution, at any time and from time to time. If the full principal amount of the Note is drawn and converted into shares of common stock of the Company, 800,000 shares would be issued (without giving effect to any interest that may be converted). Rights Offering In March 2024, the Company announced that it has commenced a subscription rights offering (“Rights Offering”) pursuant to which it intends to raise gross proceeds of up to approximately $25.0 million. The Company has distributed at no charge to holders of its common stock, as of the close of business on March 7, 2024 (the record date for the Rights Offering), one subscription right for each share of Common Stock held. Each subscription right initially entitled the holder to purchase 0.161 shares of Common Stock at a subscription price of $6.05 per share per one whole share of Common Stock. Phil Mulacek and Energy Evolution, both related parties of the Company (see Note 15) and our largest stockholders, have indicated that they intend to participate in the Rights Offering and fully subscribe to the shares of Common Stock corresponding to their subscription rights. They have each also indicated that they intend to fully exercise their over-subscription rights to purchase their pro rata share of the underlying securities related to the Rights Offering that remain unsubscribed at the Expiration Date. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts and balances of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Estimated quantities of crude oil, natural gas and natural gas liquids (“NGL”) reserves are the most significant of the Company’s estimates. All reserve data used in the preparation of the consolidated financial statements, as well as included in Supplemental Information of Oil and Natural Gas Producing Activities (Unaudited) Other items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances for deferred income tax assets, and valuation of derivative instruments. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions. Although management believes these estimates are reasonable, actual results may differ from estimates and assumptions of future events and these revisions could be material. Future production may vary materially from estimated oil and natural gas proved reserves. Actual future prices may vary significantly from price assumptions used for determining proved reserves and for financial reporting. |
Out of Period Adjustments | Out of Period Adjustments In the third quarter of 2022, the Company identified and recorded an out-of-period adjustment related to the Joint Development Agreement discussed in Note 4. The impact of recording this adjustment reduced Utility and Other Deposits and increased Lease Operating Expense by approximately $ 1.3 million 797,000 |
Accounts Receivable | Accounts Receivable Accounts receivable include estimated amounts due from crude oil, natural gas, and NGL purchasers and from non-operating working interest owners. Accrued revenue related to product sales from purchasers and operators are due under normal trade terms, generally requiring payment within 60 days of production. For receivables from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for credit losses account only after all collection attempts have been exhausted. The Company did not have an allowance for credit losses at either December 31, 2023 or 2022. The Company’s accounts receivable as of December 31, 2023 and 2022 are as follows: Schedule of account receivable 2023 2022 Oil, Gas and NGL Receivables $ 2,784,745 $ 3,060,341 Joint Interest Billings 5,444,331 2,057,719 Receivable from Former CEO (See Note 14) — 2,130,614 Other 125,560 531,565 Total Accounts Receivable $ 8,354,636 $ 7,780,239 |
Derivative Instruments | Derivative Instruments The Company enters into hedge agreements to manage its exposure to oil and natural gas price fluctuations. The fair value of derivative contracts is recognized as an asset or liability on the Company’s consolidated balance sheets. Realized gain or loss is recognized as a component of revenue when the derivative contracts mature. For contracts which have not matured, an unrealized gain or loss is recorded based on the change in the fair value of the outstanding contracts. |
Inventory | Inventory Inventory primarily consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value. |
Oil and Natural Gas and Other Properties | Oil and Natural Gas and Other Properties The Company uses the successful efforts method of accounting for its oil and gas activities. Costs incurred are deferred until exploration and completion results are evaluated. At such time, costs of activities with economically recoverable reserves are capitalized as proven properties, and costs of unsuccessful or uneconomical activities are expensed. Capitalized drilling costs are reviewed periodically for impairment. Costs related to impaired prospects or unsuccessful exploratory drilling is charged to expense. Management's assessment of the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of such leaseholds impact the amount and timing of impairment provisions. An impairment expense could result if oil and gas prices decline in the future as it may not be economical to develop some of these unproved properties. Lease options are capitalized as unproved property acquisition costs and are reviewed for impairment if indicators exist that the carrying value of the lease option may not be recoverable. If the lease options become impaired, expire or are abandoned, the options will be expensed. If proved reserves are discovered after the options are exercised, these costs will be reclassified as proved property. Depreciation, depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depreciation, depletion and amortization computations prospectively. Other property and equipment is depreciated on the straight-line method. |
Segment Reporting | Segment Reporting Operating segments are components of an enterprise that engage in activities from which it may earn revenues and incur expenses and for which separate operational financial information is available and is regularly evaluated by management. Based on the Company’s organization and management, it has only one reportable operating segment, which is oil and natural gas exploration and production. |
Debt Issuance Costs | Debt Issuance Costs Debt issuance fees, which are recorded at cost, net of amortization, are amortized over the life of the respective debt agreements utilizing the straight-line method. Unamortized debt issuance costs related to the Company’s credit facility are recorded in other noncurrent assets on the Company’s Consolidated Balance Sheet. |
Asset Retirement Obligations | Asset Retirement Obligations The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related oil and natural gas property asset. Subsequently, the asset retirement cost included in the carrying amount of the related asset is allocated to expense through depletion of the asset. Changes in the liability due to passage of time are recognized as an increase in the carrying amount of the liability through accretion expense. Based on certain factors, including commodity prices and costs, the Company may revise its previous estimates of the liability, which would also increase or decrease the related oil and natural gas property asset. |
Revenue Recognition | Revenue Recognition The Company’s revenues are comprised solely of revenues from customers and include the sale of oil, natural gas and NGL. The Company believes that the disaggregation of revenue into these three major product types, as presented in the Consolidated Statements of Operations, appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on its single geographic region, the continental United States. Revenues are recognized at a point in time when production is sold to a purchaser at a determinable price, delivery has occurred, control has transferred and it is probable substantially all of the consideration will be collected. The Company fulfills its performance obligations under its customer contracts through delivery of oil, natural gas and NGL and revenues are recorded on a monthly basis. The Company receives payment from one to three months after delivery. Generally, each unit of product represents a separate performance obligation. The prices received for oil, natural gas and NGL sales under the Company’s contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing. As a result, r evenues from the sale of oil, natural gas and NGL will decrease if market prices decline. The sales of oil, natural gas and NGL, as presented on the Consolidated Statements of Operations, represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling oil, natural gas and NGL on behalf of royalty or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded. Variances between the Company’s estimated revenue and actual payment are recorded in the month the payment is received. Historically, these differences have been insignificant. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are recorded in Accounts Receivable in the Consolidated Balance Sheets. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are presented separately from such revenues in the Consolidated Statements of Operations. Oil Sales Oil production is transported from the wellhead to tank batteries or delivery points through flow-lines or gathering systems. Purchasers of the oil take delivery at the tank batteries and transport the oil by truck or at a pipeline delivery point and the Company collects a market price, net of pricing differentials. Revenue is recognized when control transfers to the purchaser at the net price received by the Company. Natural Gas and NGL Sales Under the Company’s natural gas sales arrangements, the purchaser takes control of wet gas at a delivery point near the wellhead or at the inlet of the purchaser’s processing facility. The purchaser gathers and processes the wet gas and remits proceeds to the Company for the resulting natural gas and NGL sales. Based on the nature of these arrangements, the processor is the agent and the purchaser is the Company’s customer, thus, the Company recognizes natural gas and NGL sales based on the net amount of proceeds received from the purchaser. Transaction Price Allocated to Remaining Performance Obligations Substantially all For the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Prior-Period Performance Obligations The Company records revenue in the month that product is delivered to the purchaser. Settlement statements for certain natural gas and NGL sales, however, may not be received for 30 to 90 days after the date the product is delivered, and as a result the Company is required to estimate the amount of product delivered to the purchaser and the price that will be received for the sale of the product. In these situations, the Company records the differences between its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. Any identified differences between the Company’s revenue estimates and actual revenue received have historically been insignificant. For the years ended December 31, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes stock-based compensation expense associated with equity-based incentive awards consisting of stock options and restricted stock units. The Company accounts for forfeitures of equity-based incentive awards as they occur. Stock-based compensation expense related to equity-based awards is generally recognized as vesting occurs. See Note 10 for further discussion. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established if management determines it is more likely than not that some portion of a deferred tax asset will not be realized. |
Per Share Amounts | Per Share Amounts The Company calculates and discloses basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS"). The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted 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. |
Fair Value Measurements | 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. The three-level fair value hierarchy for disclosure of fair value measurements defined by ASC Topic 820 is as follows: Level 1 Level 2 Level 3 A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity. The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. There were no transfers between fair value hierarchy levels for the years ended December 31, 2023 and 2022. Impairment of 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. 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- Derivatives The fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions include measures of the Company’s nonperformance risk. These measurements were not material to the Consolidated Financial Statements. The fair value of the amount outstanding on our credit facility is equivalent to the carrying value due to the variable interest rate on such facility. |
Related Party Transactions | Related Party Transactions Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Disclosures |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements FASB periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements and concluded that the following new accounting standards are applicable: In June 2016, the FASB issued Accounting Standards Update ("ASU”) 2016-13, Financial Instruments – Credit Losses In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of account receivable | Schedule of account receivable 2023 2022 Oil, Gas and NGL Receivables $ 2,784,745 $ 3,060,341 Joint Interest Billings 5,444,331 2,057,719 Receivable from Former CEO (See Note 14) — 2,130,614 Other 125,560 531,565 Total Accounts Receivable $ 8,354,636 $ 7,780,239 |
Property (Tables)
Property (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
The capitalized costs of oil and natural gas properties as of December 31, 2023 and 2022 are as follows: | The capitalized costs of oil and natural gas properties as of December 31, 2023 and 2022 are as follows: 2023 2022 Proved Properties $ 75,346,623 $ 52,831,131 Unproved Properties 3,245,431 2,865,556 Work in process 14,917,749 8,289,652 Gross capitalized costs 93,509,803 63,986,339 Depreciation, Depletion, Amortization and Impairment (22,996,805 ) (20,116,696 ) Total Oil and Gas Properties, Net $ 70,512,998 $ 43,869,643 |
The capitalized costs of other property and equipment as of December 31, 2023 and 2022 are as follows: | Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years. The capitalized costs of other property and equipment as of December 31, 2023 and 2022 are as follows: 2023 2022 Other property and equipment, at cost $ 2,998,018 1,878,325 Less: accumulated depreciation (1,114,807 ) (436,796 ) Oher property and equipment, net $ 1,883,211 $ 1,441,529 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | |
The Company’s asset retirement obligation transactions during the years ended December 31, 2023 and 2022 are summarized in the table below. | The Company’s asset retirement obligation transactions during the years ended December 31, 2023 and 2022 are summarized in the table below. For the Year Ended December 31, 2023 2022 Asset retirement obligations, beginning of period $ 25,000,740 $ 20,640,599 Liabilities assumed in acquisitions 72,000 502,539 Revisions 2,303,938 2,660,653 Liabilities settled (964,274 ) (160,957 ) Accretion expense 1,756,023 1,357,906 Asset retirement obligation, end of period $ 28,168,427 $ 25,000,740 Less current portion included in Accrued Expenses 700,000 — Asset retirement obligation, long-term $ 27,468,427 $ 25,000,740 |
Commodity Derivative Financia_2
Commodity Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Investments, All Other Investments [Abstract] | |
The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022: | The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022: For the Year Ended December 31, 2023 2022 Gain (loss) on derivatives: Oil derivatives $ (65,693 ) $ (387,930 ) |
The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2023 and 2022: | The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2023 and 2022: For the Year Ended December 31, 2023 2022 Oil derivatives $ (353,695 ) $ (260,266 ) |
The following table sets forth the Company’s outstanding derivative contracts at December 31, 2023: | The following table sets forth the Company’s outstanding derivative contracts at December 31, 2023: 1st Quarter 2024 2nd Quarter 2024 3rd Quarter 2024 4th Quarter 2024 2024 WTI Fixed-Price Swaps: Quarterly volume (MBbls) 38.00 30.00 30.00 30.00 Weighted-average fixed price (Bbl) $ 74.01 $ 72.15 $ 77.02 $ 75.57 |
Debt and Note Payable - Relat_2
Debt and Note Payable - Related Party (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
The following table represents the Company’s outstanding debt. | The following table represents the Company’s outstanding debt. As of December 31, 2023 2022 Equity Bank Credit Facility $ 4,492,484 $ — CrossFirst Senior Revolver Loan Agreement — 5,869,500 Note Payable – Related Party 1,060,004 1,076,987 Equipment and vehicle notes, 0.00 9.00 900 1,400 148,516 252,924 Total Debt 5,701,004 7,199,411 Less: Current Maturities (44,225 ) (2,059,309 ) Less: Note Payable – Related Party (1,060,004 ) (1,076,987 ) Long-Term Debt $ 4,596,775 $ 4,063,115 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Leases | |
Schedule of right of use leases | Schedule of right of use leases As of December 31, 2023 2022 Net operating lease asset (included in Other Property and Equipment) $ 1,077,031 $ 776,219 Current portion of lease liability $ 432,822 $ 256,975 Long-term lease liability 544,382 547,692 Total right of use lease liabilities $ 977,204 $ 804,667 |
Maturities of lease liabilities as of December 31, 2023 are as follows: | Maturities of lease liabilities as of December 31, 2023 are as follows: 2024 $ 498,654 2025 430,631 2026 136,545 2027 12,400 2028 — Thereafter — Total lease payments 1,078,230 Less imputed interest (101,026 ) Total lease obligation $ 977,204 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
The following summary reflects nonvested restricted stock unit activity and related information: | The following summary reflects nonvested restricted stock unit activity and related information: Weighted Average Shares Fair Value (a) Outstanding, December 31, 2021 — $ — Granted 224,288 15.42 Vested — — Outstanding, December 31, 2022 224,288 $ 15.42 Granted 180,430 10.33 Vested (145,700 ) 16.20 Forfeited (54,201 ) 14.57 Outstanding, December 31, 2023 204,817 $ 10.61 _______ (a) Shares are valued at the grant-date market price. 2023 Weighted Average grant date fair value of restricted stock units granted during the year, per share $ 10.33 Total fair value of restricted stock units vested during the year $ 2,286,464 |
The following table summarizes the weighted average fair value and assumptions for 2023 and 2022. | The estimated fair value of an option is calculated using a Black-Scholes option valuation model with the following assumption inputs: dividend yield, expected annual volatility, risk free interest rate and an expected life of the option. The following table summarizes the weighted average fair value and assumptions for 2023 and 2022. 2023 2022 Weighted average grant-date fair value of stock options $ 4.52 $ 4.55 Stock Options Valuation Assumptions: Risk-free interest rate 3.9 1.6 Dividend yield 0.0 0.0 Expected volatility 64.9 56.0 Expected option life (in years) 2.88 2.99 Other pricing model inputs: Weighted average grant-date market prices of Empire stock (strike price) $ 10.07 $ 11.80 |
The following summary reflects stock option activity and related information: | The following summary reflects stock option activity and related information: Weighted Average Options Exercise Price Outstanding, December 31, 2021 2,440,700 $ 2.19 Granted 249,000 11.80 Exercised (310,000 ) 1.34 Outstanding, December 31, 2022 2,379,700 $ 3.31 Granted 533,000 10.07 Exercised (355,000 ) 1.35 Forfeited (492,319 ) 5.42 Outstanding, December 31, 2023 2,065,381 $ 4.89 |
The following table summarizes information about stock options outstanding as of December 31, 2023: | The following table summarizes information about stock options outstanding as of December 31, 2023: Range of Options Weighted Average Weighted Options Weighted Exercise Outstanding Remaining Average Exercisable Average Prices at 12/31/23 Contractual Life Exercise Price at 12/31/23 Exercise Price $ 1.32 12.36 2,065,381 4.94 years $4.89 1,605,210 $3.09 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
The current and deferred income tax provision for the years ended December 31, 2023 and 2022 were comprised of the following: | The current and deferred income tax provision for the years ended December 31, 2023 and 2022 were comprised of the following: 2023 2022 Current $ (132,192 ) $ 208,898 Deferred — — Income tax provision $ (132,192 ) $ 208,898 |
Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities. The Company’s net tax position as of December 31, 2023 and 2022 is as follows: | Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities. The Company’s net tax position as of December 31, 2023 and 2022 is as follows: 2023 2022 Deferred tax assets: Loss carry-forwards $ 6,269,503 $ 4,789,586 Right of use assets — 7,341 Stock option grants 2,022,184 1,369,105 Asset retirement obligation 7,433,670 6,616,407 Other 526,873 436,477 Total deferred tax assets 16,252,230 13,218,916 Deferred tax liabilities: Oil and Gas Properties (7,327,620 ) (5,552,159 ) Other property and equipment (123,915 ) (171,650 ) Derivatives (104,956 ) (31,369 ) Lease liabilities (25,133 ) — Other — (69,688 ) Total deferred tax liabilities (7,581,624 ) (5,824,866 ) Net deferred tax asset before valuation allowance 8,670,606 7,394,050 Valuation allowance (8,670,606 ) (7,394,050 ) Net deferred taxes $ — $ — |
Reconciliations of the tax provision (benefit) computed at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows: | Reconciliations of the tax provision (benefit) computed at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows: 2023 2022 $ % $ % Provision (benefit) at statutory rate (2,646,378 ) 21.0 1,531,536 21.0 State Taxes (net of federal impact) (598,191 ) 4.7 350,632 4.9 Nondeductible Expenses 31,037 -0.2 21,052 0.3 Return to Accrual (72,448 ) 0.6 (2,135,704 ) -29.3 NOLs Expected to Expire Unused Due to Section 382 Limitation 1,877,230 -14.9 — 0.0 Valuation Allowance 1,276,558 -10.1 441,382 6.1 Income tax provision (benefit) (132,192 ) 1.0 208,898 2.9 |
Earnings (Loss) per Share (Tabl
Earnings (Loss) per Share (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Net Income (Loss) per Common Share: | |
The following table summarizes the calculation of income (loss) per share. | The following table summarizes the calculation of income (loss) per share. 2023 2022 Net Income (Loss) $ (12,469,605 ) $ 7,084,130 Basic Weighted-Average Shares 22,718,890 21,003,563 Effect of Dilutive Securities: Restricted Stock Units and Stock Options (a) — 2,384,083 Diluted Weighted-Average Shares 22,718,890 23,387,646 Income (Loss) per Common Share Basic $ (0.55 ) $ 0.34 Diluted $ (0.55 ) $ 0.30 (a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period. (a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period. |
Schedule of account receivable
Schedule of account receivable (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Accounting Policies [Abstract] | ||
Oil, Gas and NGL Receivables | $ 2,784,745 | $ 3,060,341 |
Joint Interest Billings | 5,444,331 | 2,057,719 |
Receivable from Former CEO (See Note 14) | 2,130,614 | |
Other | 125,560 | 531,565 |
Total Accounts Receivable | $ 8,354,636 | $ 7,780,239 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Accounting Policies [Abstract] | ||
Lease operating expense | $ 1,300,000 | $ 797,000 |
The capitalized costs of oil an
The capitalized costs of oil and natural gas properties as of December 31, 2023 and 2022 are as follows: (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Abstract] | ||
Proved properties | $ 75,346,623 | $ 52,831,131 |
Unproved Properties | 3,245,431 | 2,865,556 |
Work in process | 14,917,749 | 8,289,652 |
Gross capitalized costs | 93,509,803 | 63,986,339 |
Depreciation, Depletion, Amortization and Impairment | (22,996,805) | (20,116,696) |
Total Oil and Gas Properties, Net | $ 70,512,998 | $ 43,869,643 |
The capitalized costs of other
The capitalized costs of other property and equipment as of December 31, 2023 and 2022 are as follows: (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Abstract] | ||
Other property and equipment, at cost | $ 2,998,018 | $ 1,878,325 |
Less: accumulated depreciation | (1,114,807) | (436,796) |
Other property and equipment, net | $ 1,883,211 | $ 1,441,529 |
Property (Details Narrative)
Property (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Aug. 09, 2023 | Aug. 09, 2023 | Apr. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2023 | |
Property, Plant and Equipment [Line Items] | |||||
Paid to acquire property | $ 2,100,000 | ||||
Common shares issue in exchange of purchase option | 67,000 | ||||
Value of shares issue in exchange of purchase option | $ 601,000 | ||||
Other description for acquisition | The Company has the right to extend the initial one-year Purchase Option period for two successive one-year periods by agreeing to issue an additional 42,000 shares of common stock prior to the end of the one-year period then in effect. | ||||
Impairment expense | $ 936,000 | ||||
Amount of acquisition | $ 1,400,000 | 1,300,000 | |||
Acquisition cost ratio | 80% | ||||
Asset retirement obligations | $ 233,659 | $ 25,000,740 | $ 27,468,427 | ||
Energy Evolution Master Fund Ltd [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property plant useful life in years | 1 year | 1 year | |||
Interest on adjustment | $ 5,000,000 | ||||
Wells and Related Equipment and Facilities [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Acquisition cost ratio | 20% |
Joint Development and Shared _2
Joint Development and Shared Services Agreements (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Joint Development And Shared Services Agreements | ||
Loan from related party | $ 2,000,000 | |
Interest rate | 6% | |
Maturity date | Aug. 07, 2024 | |
Proceeds from loan | $ 1,100,000 | $ 1,100,000 |
Description of working and revenue interest | As part of the JDA, Empire Texas will assign to PIE a combined 85% working and revenue interest in the Workover Wells; an assignment was completed in October 2020 for the initial three Workover Wells. Of the assigned interest, 70% working and revenue interest will be used to repay the obligations under the term loan agreement. Once the term loan is repaid, PIE will reassign a 35% working and revenue interest to Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest (See Note 7). | |
Lease operating expense | $ 1,400,000 |
The Company_s asset retirement
The Company’s asset retirement obligation transactions during the years ended December 31, 2023 and 2022 are summarized in the table below. (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Asset Retirement Obligation Disclosure [Abstract] | ||
Asset retirement obligations, beginning of period | $ 25,000,740 | $ 20,640,599 |
Liabilities assumed in acquisitions | 72,000 | 502,539 |
Revisions | 2,303,938 | 2,660,653 |
Liabilities settled | (964,274) | (160,957) |
Accretion expense | 1,756,023 | 1,357,906 |
Asset retirement obligation, end of period | 28,168,427 | 25,000,740 |
Less current portion included in Accrued Expenses | 700,000 | |
Asset retirement obligation, long-term | $ 27,468,427 | $ 25,000,740 |
The following table summarizes
The following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022: (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Credit Derivatives [Line Items] | ||
Gain (loss) on derivatives | $ (65,693) | $ (387,930) |
Oil Derivatives [Member] | ||
Credit Derivatives [Line Items] | ||
Gain (loss) on derivatives | $ (65,693) | $ (387,930) |
The following represents the Co
The following represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2023 and 2022: (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Investments, All Other Investments [Abstract] | ||
Net cash receipts from (payments on) derivatives | $ (353,695) | $ (260,266) |
The following table sets forth
The following table sets forth the Company’s outstanding derivative contracts at December 31, 2023: (Details) - Oil Swaps [Member] - Two Zero Two Three [Member] | Dec. 31, 2023 $ / shares |
First Quarter [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Quarterly volume (MBbls) | 38 |
Weighted-average fixed price (Bbl) | $ 74.01 |
Second Quarter [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Quarterly volume (MBbls) | 30 |
Weighted-average fixed price (Bbl) | $ 72.15 |
Third Quarter [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Quarterly volume (MBbls) | 30 |
Weighted-average fixed price (Bbl) | $ 77.02 |
Fourth Quarter [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Quarterly volume (MBbls) | 30 |
Weighted-average fixed price (Bbl) | $ 75.57 |
The following table represents
The following table represents the Company’s outstanding debt. (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Total Debt | $ 5,701,004 | $ 7,199,411 |
Less: Current Maturities | (44,225) | (2,059,309) |
Note Payable Related Party | (1,060,004) | (1,076,987) |
Long Term Debt | $ 4,596,775 | 4,063,115 |
Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Equipment and vehicle notes | 0% | |
Monthly payments | $ 900 | |
Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Equipment and vehicle notes | 9% | |
Monthly payments | $ 1,400 | |
Equity Bank Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Total Debt | 4,492,484 | |
Cross First Senior Revolver Loan Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Total Debt | 5,869,500 | |
Note Payable Related Party [Member] | ||
Debt Instrument [Line Items] | ||
Total Debt | 1,060,004 | 1,076,987 |
Various Vehicleand Equipment Loans [Member] | ||
Debt Instrument [Line Items] | ||
Total Debt | $ 148,516 | $ 252,924 |
Debt and Note Payable - Relat_3
Debt and Note Payable - Related Party (Details Narrative) - USD ($) | 12 Months Ended | |||||
Dec. 29, 2023 | Sep. 19, 2023 | Jul. 07, 2021 | Dec. 30, 2023 | Dec. 31, 2023 | Aug. 01, 2023 | |
Short-Term Debt [Line Items] | ||||||
Debt description | entered into a Revolver Loan Agreement with Equity Bank (the "Credit Facility”). Pursuant to the Credit Facility (a) the initial revolver commitment amount is $10,000,000; (b) the maximum revolver commitment amount is $15,000,000; (c) commencing on January 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is reduced by $150,000; (d) commencing on March 31, 2024, there are scheduled semiannual collateral borrowing base redeterminations each year on March 31 and September 30; (e) the final maturity date is December 29, 2026; (f) outstanding borrowings bear interest at a rate equal to the prime rate of interest plus 1.50%, and in no event lower than 8.50%; (g) a quarterly commitment fee is based on the unused portion of the commitments; and (h) Borrowers have the right to prepay loans under the Credit Facility at any time without a prepayment penalty. | |||||
Loan from related party | $ 2,000,000 | |||||
Bridge Loan [Member] | Energy Evolution Maste Fund [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Loan amount | $ 5,000,000 | |||||
Revolver Loan Agreement [Member] | Cross First Bank Loan [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Maximum agreement amount | $ 20,000,000 | |||||
maturity date | Aug. 09, 2023 | |||||
Revolver commitment amount | $ 5,180,000 | |||||
Joint Development Agreement [Member] | Petroleum and Independent Exploration L L C [Member] | August Six Two Thousand Twenty [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Loan from related party | $ 2,000,000 | |||||
Interest rate | 6% | |||||
Description of working and revenue interest | In addition, the Company assigned 85% working and revenue interest to PIE in the designated wells which will be applied to repayment of the loan. As of December 31, 2023, $1,060,004 has been advanced from the PIE loan. |
Schedule of right of use leases
Schedule of right of use leases (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Leases | ||
Net operating lease asset (included in Other Property and Equipment) | $ 1,077,031 | $ 776,219 |
Current portion of lease liability | 432,822 | 256,975 |
Long-term lease liability | 544,382 | 547,692 |
Total right of use lease liabilities | $ 977,204 | $ 804,667 |
Maturities of lease liabilities
Maturities of lease liabilities as of December 31, 2023 are as follows: (Details) | Dec. 31, 2023 USD ($) |
Leases | |
2024 | $ 498,654 |
2025 | 430,631 |
2026 | 136,545 |
2027 | 12,400 |
2028 | |
Thereafter | |
Total lease payments | 1,078,230 |
Less imputed interest | (101,026) |
Total lease obligation | $ 977,204 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Leases | ||
Right of use lease expense | $ 424,000 | $ 267,000 |
Cash paid for right of use leases | $ 404,000 | $ 268,000 |
Weighted average remaining term for right of use leases | 2 years 3 months 11 days | |
Weighted average discount rate | 8.56% |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | |
Class of Stock [Line Items] | |||
Common stock, authorized | 190,000,000 | 190,000,000 | |
Common stock par value | $ 0.001 | $ 0.001 | |
Preferred stock, authorized | 10,000,000 | 10,000,000 | |
Preferred stock, par value | $ 0.001 | $ 0.001 | |
Preferred stock voting rights | the voting rights of the Series A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”) holding together at least 3,000,000 shares of the Company’s outstanding common stock. | ||
Free interest rate | 0.14% | ||
Amended Secured Notes [Member] | |||
Class of Stock [Line Items] | |||
Description of partial considerations | Under the Amended Secured Notes, among other terms the Company issued a warrant certificate to purchase up to 500,000 shares of common stock at an exercise price of $5.00 per Warrant Share until December 31, 2023. In July 2023, Energy Evolution exercised its remaining warrants for 500,000 shares of common stock for $5.00 per share. The Company received $2.5 million related to this transaction. | ||
Warrant [Member] | |||
Class of Stock [Line Items] | |||
Warrants issued to purchase common shares | 750,000 | ||
Senior Secured Convertible Note Agreement [Member] | |||
Class of Stock [Line Items] | |||
DebtInstrumentFaceAmount | $ 16,250,000 | ||
Senior Secured Convertible Note Agreement [Member] | Enerry Evolution Master Fund Ltd [Member] | |||
Class of Stock [Line Items] | |||
Description of partial considerations | Empire issued to Energy Evolution (i) 375,000 shares of common stock along with (ii) a warrant certificate to purchase up to 750,000 shares of common stock at an exercise price of $4.00 per Warrant Share until May 14, 2022. Under the warrant certificate, the exercise price is subject to customary downward adjustments. | ||
Conversion feature alloted | $ 10,125,177 | ||
Common Stock [Member] | |||
Class of Stock [Line Items] | |||
Share-based Payment Arrangement, Option, Exercise Price Range, Shares Outstanding | 1,782,347 | ||
February and March Two Thousand Twenty One [Member] | |||
Class of Stock [Line Items] | |||
Warrants issued to purchase common shares | 2,248,464 | ||
Warrants to purchase | 2,248,464 | ||
Issued price per share | $ 2 | ||
Maturity date | Dec. 31, 2022 | ||
Stock Issued During Period, Value, Conversion of Units | $ 3,147,850 | ||
Risk free interest rate | 180% | ||
Proceeds from Contributed Capital | $ 2,350,407 | ||
September and October Two Thousand and Twenty Two [Member] | Warrant [Member] | |||
Class of Stock [Line Items] | |||
Warrants issued to purchase common shares | 475,000 | ||
Issued price per share | $ 1 | ||
Series A Preferred Stock [Member] | |||
Class of Stock [Line Items] | |||
Preferred stock voting rights | Series A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in the event that: | ||
Number of share oustanding | 3,000,000 |
The following summary reflects
The following summary reflects nonvested restricted stock unit activity and related information: (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | ||
Share-Based Payment Arrangement [Abstract] | |||
Options outstanding, beginning | 224,288 | ||
Options outstanding, beginning | [1] | $ 15.42 | |
Granted | 180,430 | 224,288 | |
Granted | [1] | $ 10.33 | $ 15.42 |
Vested | 145,700 | ||
Vested | [1] | $ 16.20 | |
Vested | (145,700) | ||
Forfeited | (54,201) | ||
Forfeited | [1] | $ 14.57 | |
Options outstanding, ending | 204,817 | 224,288 | |
Options outstanding, ending | [1] | $ 10.61 | $ 15.42 |
Weighted Average grant date fair value of restricted stock units granted during the year, per share | $ 10.33 | ||
Total fair value of restricted stock units vested during the year | 2,286,464 | ||
[1]Shares are valued at the grant-date market price. |
The following table summarize_2
The following table summarizes the weighted average fair value and assumptions for 2023 and 2022. (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | ||
Offsetting Assets [Line Items] | |||
Weighted average grant-date fair value of stock options | [1] | $ 16.20 | |
Weighted average grant-date market prices of empire stock (strike price) | [1] | 10.33 | 15.42 |
Equity Option [Member] | |||
Offsetting Assets [Line Items] | |||
Weighted average grant-date fair value of stock options | $ 4.52 | $ 4.55 | |
Risk-free interest rate | 3.90% | 1.60% | |
Dividend yield | 0% | 0% | |
Expected volatility | 64.90% | 56% | |
Expected option life (in years) | 2 years 10 months 17 days | 2 years 11 months 26 days | |
Weighted average grant-date market prices of empire stock (strike price) | $ 10.07 | $ 11.80 | |
[1]Shares are valued at the grant-date market price. |
The following summary reflect_2
The following summary reflects stock option activity and related information: (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2021 | |
Share-Based Payment Arrangement [Abstract] | ||
Outstanding at beginning | 2,379,700 | 2,440,700 |
Weighted average exercise price beginning | $ 3.31 | $ 2.19 |
Granted | 533,000 | 249,000 |
Granted | $ 10.07 | $ 11.80 |
Exercised | (310,000) | |
Exercised | $ 1.34 | |
Exercised | (355,000) | |
Exercised | $ 1.35 | |
Forfeited | (492,319) | |
Forfeited | $ 5.42 | |
Outstanding at ending | 2,065,381 | |
Weighted average exercise price ending | $ 4.89 |
The following table summarize_3
The following table summarizes information about stock options outstanding as of December 31, 2023: (Details) | 12 Months Ended |
Dec. 31, 2023 $ / shares shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Outstanding at beginning | shares | 2,065,381 |
Options Outstanding Weighted Average Remaining Contractual Life | 4 years 11 months 8 days |
Options Exercisable Weighted Average Exercise Price | $ 4.89 |
Options Exercisable Ending | shares | 1,605,210 |
Options Exercisable Weighted Average Exercise Price Ending | $ 3.09 |
Minimum [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Options Outstanding Range of Exercise Prices | 1.32 |
Maximum [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Options Outstanding Range of Exercise Prices | $ 12.36 |
Stock Based Compensation (Detai
Stock Based Compensation (Details Narrative) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2023 | Dec. 31, 2022 | Aug. 26, 2023 | Aug. 26, 2022 | Aug. 27, 2021 | Apr. 03, 2019 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Unrecognised compensation expenses | $ 1,230,000 | |||||
Compensation expense related to stock options | 874,000 | $ 1,458,000 | ||||
Unrecognized compensation expense | 1,546,000 | |||||
Restricted Stock Units (RSUs) [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Fair value option grants | 1,837,000 | |||||
Share based payment arrangement, noncash expense | $ 2,271,000 | $ 1,227,000 | ||||
Common Stock [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Future grants | 436,935 | |||||
Empire Petroleum Corporation Stock Option Plan 2019 [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Common stock reserved under the plan | 2,500,000 | |||||
Empire Petroleum Corporation Stock Option Plan 2021 [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Common stock reserved under the plan | 750,000 | |||||
Incentive Plan2022 [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Common stock reserved under the plan | 750,000 | |||||
Incentive Plan2023 [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Common stock reserved under the plan | 700,000 |
The current and deferred income
The current and deferred income tax provision for the years ended December 31, 2023 and 2022 were comprised of the following: (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Income Tax Disclosure [Abstract] | ||
Current | $ (132,192) | $ 208,898 |
Deferred | ||
Income tax provision | $ (132,192) | $ 208,898 |
Deferred tax assets and liabili
Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities. The Company’s net tax position as of December 31, 2023 and 2022 is as follows: (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
Loss carry-forwards | $ 6,269,503 | $ 4,789,586 |
Right of use assets | 7,341 | |
Stock option grants | 2,022,184 | 1,369,105 |
Asset retirement obligation | 7,433,670 | 6,616,407 |
Other | 526,873 | 436,477 |
Total deferred tax assets | 16,252,230 | 13,218,916 |
Deferred tax liabilities: | ||
Oil and Gas Properties | (7,327,620) | (5,552,159) |
Other property and equipment | (123,915) | (171,650) |
Derivatives | (104,956) | (31,369) |
Lease liabilities | (25,133) | |
Other | (69,688) | |
Total deferred tax liabilities | (7,581,624) | (5,824,866) |
Net deferred tax asset before valuation allowance | 8,670,606 | 7,394,050 |
Valuation allowance | (8,670,606) | (7,394,050) |
Net deferred taxes |
Reconciliations of the tax prov
Reconciliations of the tax provision (benefit) computed at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows: (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Provision (benefit) at statutory rate | $ (2,646,378) | $ 1,531,536 |
Provision (benefit) at statutory rate, percentage | 21% | 21% |
State Taxes (net of federal impact) | $ (598,191) | $ 350,632 |
State Taxes (net of federal impact), percentage | 4.70% | 4.90% |
Nondeductible expenses | $ 31,037 | $ 21,052 |
Nondeductible Expenses, percentage | (0.20%) | 0.30% |
Return to Accrual | $ (72,448) | $ (2,135,704) |
Return to Accrual, percentage | 0.60% | (29.30%) |
NOLs Expected to Expire | $ 1,877,230 | |
NOLs Expected to Expire | (14.90%) | 0% |
Valuation Allowance | $ 1,276,558 | $ 441,382 |
Valuation Allowance, percentage | (10.10%) | 6.10% |
Income tax provision (benefit) | $ (132,192) | $ 208,898 |
Income tax provision (benefit), percentage | 1% | 2.90% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Other description | In the event that an entity has an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended ( “IRC”)), an entity’s federal net operating loss carryforwards (“NOLs”) generated prior to an ownership change would be subject to annual limitations, which could defer or eliminate the Company’s ability to utilize these tax losses against future taxable income. Generally, an “ownership change” occurs if one or more stockholders, each of whom owns 5% or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50% over the lowest percentage of stock owned by those stockholders at any time during the preceding three-year period. A full Section 382 analysis was prepared in 2023 and it was determined that our NOLs were subject to limitations under IRC Section 382. The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change. | |
Operating loss carryforward | $ 24,300,000 | |
Valuation allowances | 8,670,606 | $ 7,394,050 |
Plan 2017 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforward | 23,000,000 | |
Plan Expire Between 2023 to 2037 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforward | $ 1,300,000 |
The following table summarize_4
The following table summarizes the calculation of income (loss) per share. (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | ||
Net Income (Loss) | $ (12,469,605) | $ 7,084,130 | |
Basic Weighted-Average Shares | 22,718,890 | 21,003,563 | |
Effect of Dilutive Securities: | |||
Restricted Stock Units and Stock Options | [1] | 2,384,083 | |
Diluted Weighted-Average Shares | 22,718,890 | 23,387,646 | |
Basic | $ (0.55) | $ 0.34 | |
Diluted | $ (0.55) | $ 0.30 | |
Common Stock [Member] | |||
Net Income (Loss) | |||
Basic Weighted-Average Shares | 22,718,890 | 21,003,563 | |
Effect of Dilutive Securities: | |||
Diluted Weighted-Average Shares | 22,718,890 | 23,387,646 | |
[1]At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period. |
Earnings (Loss) per Share (Deta
Earnings (Loss) per Share (Details Narrative) | Dec. 31, 2023 shares |
Net Income (Loss) per Common Share: | |
Options outstanding that were not included in the calculation of earnings per share | 348,000 |
Executive Separations (Details
Executive Separations (Details Narrative) - USD ($) | 1 Months Ended | ||
Mar. 16, 2023 | Jul. 31, 2023 | Dec. 31, 2022 | |
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | |||
Severance benefits | $ 360,000 | ||
Issuance of stock option shares | 340,234 | ||
Severance receive by officer | $ 145,000 | ||
Vested options were forfeited | $ 576,000 | ||
Chief Executive Officer [Member] | |||
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | |||
Options receivables value | $ 2,100,000 | ||
Withholding liability payables | $ 2,100,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | ||
Nov. 29, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Related Party Transaction [Line Items] | |||
Description of securities purchase agreement | the Company entered into a Securities Purchase Agreement with Phil Mulacek, which agreement was amended on December 1, 2023, pursuant to which Mr. Mulacek purchased from the Company (a) 609,013 shares of common stock of the Company for an aggregate purchase price of $5,000,000 (or $8.21 per share) in cash and (b) 631,832 shares of common stock of the Company for an aggregate purchase price of $5,054,658 (or $8.00 per share) which was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Mr. Mulacek. | ||
Accounts receivable | $ 2,700,528 | $ 1,812,230 | |
Term Loan [Member] | |||
Related Party Transaction [Line Items] | |||
Total Debt | $ 1,100,000 | ||
Energy Evolution Master Fund Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Percentage of ownership | 26.60% | ||
Energy Evolution Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Percentage of ownership | 19.30% | ||
Accounts receivable | $ 895,000 | ||
Revenue payable | $ 452,000 | ||
Energy Evolution Maste Fund [Member] | |||
Related Party Transaction [Line Items] | |||
Description of securities purchase agreement | the Company entered into a Securities Purchase Agreement with Energy Evolution pursuant to which Energy Evolution purchased 1,256,832 shares of common stock of the Company for an aggregate purchase price of $10,054,658 (or $8.00 per share), of which $2,000,000 was advanced in cash to the Company on November 22, 2023, $3,000,000 was paid in cash to the Company and $5,054,658 was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Energy Evolution. |
Concentrations (Details Narrati
Concentrations (Details Narrative) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Risks and Uncertainties [Abstract] | ||
Concentrations credit risk percentage | 70% | 68% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] | Mar. 24, 2024 | Feb. 16, 2024 |
Subsequent Event [Line Items] | ||
Description of company issued a promissory note | the Company announced that it has commenced a subscription rights offering (“Rights Offering”) pursuant to which it intends to raise gross proceeds of up to approximately $25.0 million. The Company has distributed at no charge to holders of its common stock, as of the close of business on March 7, 2024 (the record date for the Rights Offering), one subscription right for each share of Common Stock held. Each subscription right initially entitled the holder to purchase 0.161 shares of Common Stock at a subscription price of $6.05 per share per one whole share of Common Stock. | the Company issued a Promissory Note in the aggregate principal amount of $5,000,000 (the "Note”) to Energy Evolution. Energy Evolution has advanced the Company $5,000,000 under the Note. |
Subsequent Event, Date | Feb. 15, 2026 | |
Investment Interest Rate | 7% | |
Common Stock [Member] | ||
Subsequent Event [Line Items] | ||
Conversion of stock description | All or any portion of the outstanding principal amount of the Note may be converted into shares of common stock of the Company at a conversion price of $6.25 per share (the "Conversion Price”), at the option of Energy Evolution, at any time and from time to time. If the full principal amount of the Note is drawn and converted into shares of common stock of the Company, 800,000 shares would be issued (without giving effect to any interest that may be converted). |