Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2024 | May 09, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2024 | |
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 $.001 par value | |
Trading Symbol | EP | |
Security Exchange Name | NYSEAMER | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 30,380,906 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Current Assets: | ||
Cash | $ 3,491,465 | $ 7,792,508 |
Accounts Receivable | 7,290,007 | 8,354,636 |
Derivative Instruments | 406,806 | |
Inventory | 1,797,342 | 1,433,454 |
Prepaids | 1,250,672 | 757,500 |
Total Current Assets | 13,829,486 | 18,744,904 |
Property and Equipment: | ||
Oil and Natural Gas Properties, Successful Efforts | 107,020,654 | 93,509,803 |
Less: Accumulated Depreciation, Depletion and Impairment | (24,427,923) | (22,996,805) |
Total Oil and Gas Properties, Net | 82,592,731 | 70,512,998 |
Other Property and Equipment, Net | 1,729,316 | 1,883,211 |
Total Property and Equipment, Net | 84,322,047 | 72,396,209 |
Other Noncurrent Assets | 1,931,161 | 1,474,503 |
Total Assets | 100,082,694 | 92,615,616 |
Current Liabilities: | ||
Accounts Payable | 17,194,236 | 16,437,219 |
Accrued Expenses | 7,436,586 | 7,075,302 |
Derivative Instruments | 440,644 | |
Current Portion of Lease Liability | 430,273 | 432,822 |
Current Portion of Note Payable - Related Party (Note 8) | 1,060,004 | 1,060,004 |
Current Portion of Long-Term Debt | 486,483 | 44,225 |
Total Current Liabilities | 27,048,226 | 25,049,572 |
Long-Term Debt | 8,533,693 | 4,596,775 |
Long-Term Note Payable - Related Party (Note 8) | 2,970,000 | |
Long Term Lease Liability | 441,748 | 544,382 |
Derivative Instruments (Note 8) | 1,292,000 | |
Asset Retirement Obligations | 28,105,761 | 27,468,427 |
Total Liabilities | 68,391,428 | 57,659,156 |
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, 25,623,674 and 25,503,530 Shares Issued and Outstanding, Respectively | 85,145 | 85,025 |
Additional Paid-in Capital | 100,200,135 | 99,490,253 |
Accumulated Deficit | (68,594,014) | (64,618,818) |
Total Stockholders' Equity | 31,691,266 | 34,956,460 |
Total Liabilities and Stockholders' Equity | $ 100,082,694 | $ 92,615,616 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2024 | Dec. 31, 2023 |
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, issued | 6 | 6 |
Preferred stock, outstanding | 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, outstanding | 25,623,674 | 25,503,530 |
Common stock, issued | 25,623,674 | 25,503,530 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Revenue: | ||
Oil Sales | $ 9,441,964 | $ 8,938,715 |
Gas Sales | 377,130 | 656,035 |
NGL Sales | 416,211 | 504,954 |
Total Product Revenues | 10,235,305 | 10,099,704 |
Other | 10,086 | 19,364 |
Loss on Derivatives | (858,150) | (66,823) |
Total Revenue | 9,387,241 | 10,052,245 |
Costs and Expenses: | ||
Lease Operating Expense | 7,387,423 | 6,520,163 |
Production and Ad Valorem Taxes | 833,447 | 758,114 |
Depletion, Depreciation & Amortization | 1,490,130 | 622,489 |
Accretion of Asset Retirement Obligation | 485,349 | 401,275 |
General and Administrative Expense: | ||
General and Administrative Expense | 2,879,037 | 3,023,279 |
Stock-Based Compensation | 710,002 | 949,639 |
Total General and Administrative Expense | 3,589,039 | 3,972,918 |
Total Costs and Expenses | 13,785,388 | 12,274,959 |
Operating Income (Loss) | (4,398,147) | (2,222,714) |
Other Income and (Expense): | ||
Interest Expense | (315,049) | (237,299) |
Other Income (Expense) (Note 8) | 738,000 | 422 |
Income (Loss) Before Income Taxes | (3,975,196) | (2,459,591) |
Income Tax (Provision) Benefit | ||
Net Income (Loss) | $ (3,975,196) | $ (2,459,591) |
Net Income (Loss) per Common Share: | ||
Basic | $ (0.15) | $ (0.11) |
Diluted | $ (0.15) | $ (0.11) |
Weighted Average Number of Common Shares Outstanding: | ||
Basic | 25,688,427 | 22,096,796 |
Diluted | 25,688,427 | 22,096,796 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock [Member] | Preferred Stock [Member] | Additional Paid-in Capital [Member] | AOCI Attributable to Parent [Member] | Total |
Beginning balance, value at Dec. 31, 2022 | $ 81,615 | $ 75,303,479 | $ (52,149,213) | $ 23,235,881 | |
Beginning balance (in shares) at Dec. 31, 2022 | 22,093,503 | 6 | |||
Net Loss | (2,459,591) | (2,459,591) | |||
Stock-Based Compensation | $ 11 | 949,628 | 949,639 | ||
Stock-Based Compensation (in shares) | 11,089 | ||||
Impact of Former CEO settlement | (2,126,131) | (2,126,131) | |||
Ending balance, value at Mar. 31, 2023 | $ 81,626 | 74,126,976 | (54,608,804) | 19,599,798 | |
Ending balance (in shares) at Mar. 31, 2023 | 22,104,592 | 6 | |||
Beginning balance, value at Dec. 31, 2023 | $ 85,025 | 99,490,253 | (64,618,818) | 34,956,460 | |
Beginning balance (in shares) at Dec. 31, 2023 | 25,503,530 | 6 | |||
Net Loss | (3,975,196) | (3,975,196) | |||
Stock-Based Compensation | $ 120 | 709,882 | 710,002 | ||
Stock-Based Compensation (in shares) | 120,144 | ||||
Ending balance, value at Mar. 31, 2024 | $ 85,145 | $ 100,200,135 | $ (68,594,014) | $ 31,691,266 | |
Ending balance (in shares) at Mar. 31, 2024 | 25,623,674 | 6 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | ||
Cash Flows From Operating Activities: | |||
Net Income (Loss) | $ (3,975,196) | $ (2,459,591) | |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities: | |||
Stock-Based Compensation | 710,002 | 949,639 | |
Amortization of Right of Use Assets | 135,733 | 76,225 | |
Depreciation, Depletion and Amortization | 1,490,130 | 622,489 | |
Accretion of Asset Retirement Obligation | 485,349 | 401,275 | |
Loss on Commodity Derivatives | 858,150 | 66,823 | |
Settlement on or Purchases of Commodity Derivative Instruments | (10,700) | (41,187) | |
Gain on Financial Derivatives | (738,000) | ||
Change in Operating Assets and Liabilities: | |||
Accounts Receivable | 1,064,629 | (849,909) | |
Inventory, Oil in Tanks | (363,888) | (420,859) | |
Prepaids, Current | (2,398) | 89,812 | |
Accounts Payable | 4,339,024 | (213,611) | |
Accrued Expenses | 361,284 | (110,053) | |
Other Long-Term Assets and Liabilities | (446,430) | (3,177,767) | |
Net Cash Provided By (Used In) Operating Activities | 3,907,689 | (5,066,714) | |
Cash Flows From Investing Activities: | |||
Additions to Oil and Natural Gas Properties | [1] | (16,940,873) | (2,210,004) |
Purchase of Other Fixed Assets | (31,023) | (27,170) | |
Cash Paid for Right of Use Assets | (125,238) | (86,545) | |
Sinking Fund Deposit | 2,779,000 | ||
Net Cash Provided By (Used In) Investing Activities | (17,097,134) | 455,281 | |
Cash Flows From Financing Activities: | |||
Borrowings on Credit Facility | 3,950,000 | ||
Proceeds from Promissory Note - Related Party (Note 8) | 5,000,000 | ||
Principal Payments of Debt | (61,598) | (569,136) | |
Net Cash Provided By (Used In) Financing Activities | 8,888,402 | (569,136) | |
Net Change in Cash | (4,301,043) | (5,180,569) | |
Cash - Beginning of Period | 7,792,508 | 11,944,442 | |
Cash - End of Period | 3,491,465 | 6,763,873 | |
Supplemental Cash Flow Information: | |||
Cash Paid for Interest | $ 179,893 | $ 136,761 | |
[1]Incurred capital expenditures were $13,358,866 and $2,210,004 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 | 3 Months Ended |
Mar. 31, 2024 | |
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”) o Empire New Mexico LLC d/b/a Green Tree New Mexico o Empire EMSU LLC o Empire EMSU-B LLC o Empire AGU LLC o Empire NM Assets LLC ● Empire Rockies Region o Empire North Dakota LLC (“Empire North Dakota”) o Empire North Dakota Acquisition LLC (“Empire NDA”) ● Empire Texas (“Empire Texas”), consisting of the following entities: o Empire Texas LLC o Empire Texas Operating LLC o Empire Texas GP LLC o 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. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, the results of operations, and the cash flows for the interim period are included. All adjustments are of a normal, recurring nature. Certain amounts in prior periods have been reclassified to conform to current presentation. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The information contained in this Form 10-Q should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2023 which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2024. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Significant Accounting Policies During the three months ended March 31, 2024, the Company added one significant accounting policy and estimate relating to convertible debt and derivative liability. Besides this, there have been no material changes to significant accounting policies and estimates from the information provided in the Form 10-K for the year ended December 31, 2023. Convertible Debt and Derivative Liability In connection with the Company’s issuance of a Promissory Note (the “Note”) in the first quarter of 2024, the Company bifurcated the embedded conversion option, and recorded the embedded conversion option as a long-term derivative liability in accordance with FASB ASC 815, Derivatives and Hedging. The convertible debt and the derivative liability associated with the Note are presented on the Condensed Consolidated Balance Sheets as the Long-Term Note Payable – Related Party and long-term Derivative Instruments. The convertible debt is carried at amortized cost. The derivative liability will be remeasured at each reporting period using a binomial lattice model with changes in fair value recorded in the Condensed Consolidated Statements of Operations in Other Income (Expense). See Note 8 for further details. Fair Value Measurements The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement , 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 a degree 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 period ended March 31, 2024. 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 Condensed Consolidated Financial Statements. Assets and Liabilities Measured at Fair Value on a Recurring Basis - Fair Value on a Nonrecurring Basis The Company applies the provisions of fair value measurement on a non-recurring basis to its non-financial assets and liabilities, including oil and gas properties and asset retirement obligations. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments if events or changes in certain circumstances indicate that adjustments may be necessary. No triggering events that require assessment of such items were observed during the three months ended March 31, 2024. 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 Concentrations of Credit Risk The Company’s accounts receivable are primarily receivables from oil and natural gas purchasers and joint interest owners. The purchasers of the Company’s oil and natural gas production consist primarily of independent marketers, major oil and natural gas companies and gas pipeline companies. Historically, the Company has not experienced any significant losses from uncollectible accounts from its oil and natural gas purchasers. The Company operates a substantial portion of its oil and natural gas properties. As the operator of a property, the Company makes full payments for costs associated with the property and seeks reimbursement from the other working interest owners in the property for their share of those costs. Joint operating agreements govern the operations of an oil or natural gas well and, in most instances, provide for offsetting of amounts payable or receivable between the Company and its joint interest owners. The Company’s joint interest partners consist primarily of independent oil and natural gas producers. If the oil and natural gas exploration and production industry in general was adversely affected, the ability of the Company’s joint interest partners to reimburse the Company could be adversely affected. Recently Adopted Accounting Standards The 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 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 | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
Property | Note 3 – Property The Company follows the successful efforts method of accounting for its oil and natural gas activities. Under this method, costs to acquire oil and natural gas properties and costs incurred to drill and equip development and exploratory wells are deferred until exploration and completion results are evaluated. Exploration drilling costs are expensed if recoverable reserves are not found. Upon sale or retirement of oil and natural gas properties, the costs and related accumulated depreciation, depletion and amortization are eliminated from the accounts and the resulting gain or loss is recognized. Costs incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred. Depletion is calculated on a units-of-production basis at the field level based on total proved developed reserves. Proved oil and natural gas properties are reviewed for impairment at least annually, or as indicators of impairment arise. There have been no indicators of impairment during the three months ended March 31, 2024. Aggregate capitalized costs of oil and natural gas properties are as follows: March 31, 2024 December 31, 2023 Proved properties $ 92,634,087 $ 75,346,623 Unproved properties 3,708,264 3,245,431 Work in process 10,678,303 14,917,749 Gross capitalized costs 107,020,654 93,509,803 Depreciation, depletion, amortization and impairment (24,427,923 ) (22,996,805 ) Total oil and gas properties, net $ 82,592,731 $ 70,512,998 Depletion and amortization expense related to oil and gas properties for the three months ended March 31, 2024 and 2023 was approximately $ 1,431,000 563,000 The Company completed four wells in North Dakota related to our Starbuck Drilling program during the first quarter of 2024. Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years. Schedule of other property plant and equipment March 31, 2024 December 31, 2023 Other property and equipment, at cost $ 3,029,041 $ 2,998,018 Less: Accumulated depreciation (1,299,725 ) (1,114,807 ) Other property and equipment, net $ 1,729,316 $ 1,883,211 Depreciation expense related to other property and equipment for the three months ended March 31, 2024 and 2023 was approximately $ 59,000 |
Asset Retirement Obligations
Asset Retirement Obligations | 3 Months Ended |
Mar. 31, 2024 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Note 4 - 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 activity is as follows: For the Three Months Ended March 31, 2024 2023 Asset retirement obligations, beginning of period $ 28,168,427 $ 25,000,740 Additions 151,985 — Liabilities settled — (190,375 ) Revisions — (68,809 ) Accretion expense 485,349 401,275 Asset retirement obligation, end of period $ 28,805,761 $ 25,142,831 Less current portion included in Accrued Expenses 700,000 — Asset retirement obligation, long-term $ 28,105,761 $ 25,142,831 The additions in 2024 primarily relate to the completion of four wells in our North Dakota Starbuck Drilling Program during the quarter. |
Commodity Derivative Financial
Commodity Derivative Financial Instruments | 3 Months Ended |
Mar. 31, 2024 | |
Investments, All Other Investments [Abstract] | |
Commodity Derivative Financial Instruments | Note 5 – 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 in such a way that would qualify for hedge accounting. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its consolidated statements of operations as they occur. Unrealized gains and losses related to the contracts are recognized and recorded as changes to the derivative asset or liability on the Company’s consolidated balance sheets. The following table summarizes the net realized and unrealized losses reported in earnings related to the commodity derivative instruments for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Loss on Derivatives: Oil derivatives (a) $ (858,150 ) $ (66,823 ) ________ (a) Includes $847,450 and $25,636 of unrealized derivative losses for the respective periods. The following represents the Company’s net settlements related to derivatives for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Oil derivatives $ (10,700 ) $ (41,187 ) The following table sets forth the Company’s outstanding derivative contracts at March 31, 2024: 2nd Quarter 2024 3rd Quarter 2024 4th Quarter 2024 WTI Fixed-Price Swaps: Quarterly volume (MBbls) 30.00 30.00 30.00 Weighted-average fixed price (Bbl) $ 72.15 $ 77.02 $ 75.57 |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Mar. 31, 2024 | |
Following Table Represents Companys Accounts Receivable As Of March 31 2024 And December 31 2023 | |
Accounts Receivable | Note 6 – Accounts Receivable The following table represents the Company’s accounts receivable as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Oil, Gas and NGL Receivables $ 3,227,706 $ 2,784,745 Joint Interest Billings 4,026,259 5,444,331 Other 36,042 125,560 Total Accounts Receivable $ 7,290,007 $ 8,354,636 |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2024 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 7 – Accrued Expenses The following table represents the Company’s accrued expenses as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Accrued and suspended third-party revenue $ 4,459,055 $ 4,049,984 Accrued salaries and payroll taxes 1,032,523 1,059,295 Accrued production taxes 774,359 829,226 Other 1,170,649 1,136,797 $ 7,436,586 $ 7,075,302 |
Debt Including Debt with Relate
Debt Including Debt with Related Parties | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Debt Including Debt with Related Parties | Note 8 – Debt Including Debt with Related Parties The following table represents the Company’s outstanding debt as of March 31, 2024 and December 31, 2023: As of March 31, 2024 As of December 31, 2023 Equity Bank Credit Facility $ 8,442,484 $ 4,492,484 Promissory Note – Related Party 2,970,000 — Note Payable – Related Party 1,060,004 1,060,004 Equipment and vehicle notes, 0.00% to 9.00% interest rates, due in 2025 to 2028 with monthly payments ranging from $900 to $1,400 per month 135,995 148,516 Note Payable to insurance provider, bears 7.29% interest, matures January 2025, monthly payments of principal and interest of $51,067 441,697 — Total Debt 13,050,180 5,701,004 Less: Current Maturities (486,483 ) (44,225 ) Less: Promissory Note – Related Party (2,970,000 ) — Less: Note Payable – Related Party (1,060,004 ) (1,060,004 ) Long-Term debt $ 8,533,693 $ 4,596,775 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 March 31, 2024, the Borrowers were technically not in compliance with the current ratio covenant, however, the noncompliance was resolved within the applicable cure period in accordance with the Credit Facility agreement following the completion of a subscription rights offering on April 10, 2024 in which the Company received approximately $20.66 million in cash (see Note 10). The Company is in compliance with the other covenants as of March 31, 2024. Promissory Note – Related Party On February 16, 2024, the Company issued a Promissory Note in the aggregate principal amount of $ 5,000,000 5,000,000 The Note matures on February 15, 2026 (the "Maturity Date”) and accrues interest at the rate of 7 9 date is not a business day, the next following business day) (each an "Interest Payment Date”), except upon the occurrence of an Event of Default, in which case interest will accrue and be paid in cash on demand: (i) March 31, 2024; (ii) June 30, 2024; (iii) September 30, 2024; (iv) December 31, 2024; (v) March 31, 2025; (vi) June 30, 2025; (vii) September 30, 2025; (viii) December 31, 2025; and (ix) the Maturity Date. 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). Accrued interest on the principal amount converted will be due on the applicable date of conversion in cash or, at the option of Energy Evolution, by issuance of shares of common stock of the Company in the manner set forth in the Note (where the date of conversion is the relevant Interest Payment Date”). The Conversion Price is subject to customary adjustments. The Note may be prepaid at any time or from time to time without the consent of Energy Evolution and without penalty or premium, provided that the Company provides Energy Evolution with at least five business days prior written notice, each principal payment is made in cash and all accrued interest is paid in cash, or at the option of Energy Evolution, the accrued interest may be paid by issuance of shares of common stock of the Company in the manner set forth in the Note (where the Interest Payment Date is the date of prepayment). The Company determined that an embedded conversion feature included in the Promissory Note required bifurcation from the host contract that is recognized as a separate derivative liability carried at fair value. The estimated fair value of the derivative liability, which represents a Level 3 valuation, was $1,292,000 as of March 31, 2024 and was determined using a binomial lattice model using certain assumptions and inputs discussed in Note 2. Accordingly, the Company has recognized a gain on the fair value adjustment of the derivative liability in the amount of approximately $738,000 in Other Income (Expense) in the Condensed Consolidated Statements of Operations for the quarter ended March 31, 2024. All of the other embedded features of the Note were clearly and closely related to the debt host and did not require bifurcation as a derivative liability. Note Payable – Related Party In August 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 (see Note 14), 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. Concurrent with the JDA with PIE, 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 March 31, 2024, $1,060,004 has been advanced from the PIE loan. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2024 | |
Leases | |
Leases | Note 9 - 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 used in 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 $ 136,000 77,600 125,000 78,400 Supplemental balance sheet information related to the right-of-use leases is as follows: Schedule of right of use leases March 31, 2024 December 31, 2023 Net operating lease asset (included in Other Property and Equipment) $ 958,648 $ 1,077,031 Current portion of lease liability $ 430,273 $ 432,822 Long-term lease liability 441,748 544,382 Total right-of-use lease liabilities $ 872,021 $ 977,204 The weighted-average remaining term for the Company’s right-of-use leases is 2.1 8.51 Maturities of lease liabilities are as follows as of March 31, 2024: Year 1 $ 486,584 Year 2 376,628 Year 3 86,680 Year 4 3,100 Year 5 — Total lease payments 952,992 Less imputed interest (80,971 ) Total lease obligation $ 872,021 |
Equity
Equity | 3 Months Ended |
Mar. 31, 2024 | |
Equity [Abstract] | |
Equity | Note 10 – 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 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 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 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. 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. Earnings Per Share The computation of diluted shares outstanding for the three months ended March 31, 2024 excluded 1,460,589 2,348,009 |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Note 11 – Stock-Based Compensation The Company recognizes stock-based compensation expense associated with granted stock options and restricted stock units (RSUs). The Company accounts for forfeitures of equity-based incentive awards as they occur. Stock-based compensation expense related to time-based restricted stock units is based on the price of the common stock on the grant date and recognized as vesting occurs. For options, the fair value is determined using the Black-Scholes option valuation assumptions on dividend yield, expected annual volatility, risk-free interest rate and an expected useful life. Stock-based compensation is recorded with a corresponding increase in Additional Paid-in Capital within the Condensed Consolidated Balance Sheets. The following summary reflects nonvested restricted stock unit activity and related information for the three months ended March 31, 2024. Schedule of non vested restricted stock unit activity Weighted Average RSUs Fair Value (a) Outstanding, December 31, 2023 204,817 $ 10.61 Granted — — Vested (45,515 ) 11.75 Forfeited (22,500 ) 11.05 Outstanding, March 31, 2024 136,802 $ 10.16 (a) Shares are valued at the grant-date market price. The following summary reflects stock option activity and related information: Weighted Average Options Exercise Price Outstanding, December 31, 2023 2,065,381 $ 4.89 Granted — — Exercised (119,100 ) 1.32 Cancelled — — Outstanding, March 31, 2024 1,946,281 $ 5.10 The following table summarizes information about stock options outstanding as of March 31, 2024. Schedule of summarizes information about stock options outstanding Range of Options Weighted Average Weighted Options Weighted Exercise Outstanding Remaining Average Exercisable Average Prices at 3/31/24 Contractual Life Exercise Price at 3/31/24 Exercise Price $ 1.32 12.36 1,946,281 4.67 $5.10 1,486,110 $3.23 |
Executive Separations
Executive Separations | 3 Months Ended |
Mar. 31, 2024 | |
Executive Separations | |
Executive Separations | Note 12 – 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 appointed Michael R. Morrisett to the position of Chief Executive Officer. Mr. Morrisett did not |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 13 – Income Taxes For all periods presented, the Company’s effective tax rate is 0 Schedule of reconciliation of effective income tax rate For the Three Months Ended March 31, 2024 2023 $ % $ % Provision (benefit) at statutory rate (834,791) 21.0 (516,514) 21.0 State Taxes (net of federal impact) (190,937) 4.8 (118,333) 4.8 Nondeductible Expenses 6,401 -0.2 (2,460) 0.1 Stock Options Exercised (103,796) 2.6 — 0.0 Valuation Allowance 1,123,123 -28.3 637,307 -25.9 Income tax provision (benefit) — 0.0 — 0 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 14 – Related Party Transactions Energy Evolution is a related party of the Company as it beneficially owns approximately 26.6 approximately 30.1% of the Company’s outstanding shares. Additionally, a board member of Energy Evolution was appointed to the Company’s board in October 2021. This board member separately beneficially owns approximately 19.3 The Company has a JDA with PIE to perform completions or workovers on specified mutually agreed upon wells (see Note 8). As of March 31, 2024, the Company has incurred obligations of approximately $ 1.1 On February 16, 2024, the Company issued a Promissory Note in the aggregate principal amount of $5,000,000 (the "Note”) to Energy Evolution (see Note 8). As of March 31, 2024, Energy Evolution has advanced the Company $5,000,000 under the Note. Accounts receivable on the Condensed Consolidated Balance Sheet includes approximately $ 1,030,000 213,000 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 15 – 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. Agreed Compliance Order In January 2024, the Company deposited $1 million into an escrow account in accordance with an Agreed Compliance Order (“ACO”) with the New Mexico Oil Conservation Division (“OCD”) for compliance work on certain inactive wells in New Mexico. Under the terms of the ACO, the escrow funds will be returned to the Company at a rate of $10,000 for each well as the compliance work is completed. In February 2024, $550,000 of the escrow funds were returned to the Company following the completion of work on 55 wells. As of March 31, 2024, the remaining escrow balance of $450,000 is included in other noncurrent assets in the Condensed Consolidated Balance Sheet. In April 2024, we completed work on an additional 25 wells and expect to receive $250,000 from the escrow account in the second quarter of 2024. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies During the three months ended March 31, 2024, the Company added one significant accounting policy and estimate relating to convertible debt and derivative liability. Besides this, there have been no material changes to significant accounting policies and estimates from the information provided in the Form 10-K for the year ended December 31, 2023. |
Convertible Debt and Derivative Liability | Convertible Debt and Derivative Liability In connection with the Company’s issuance of a Promissory Note (the “Note”) in the first quarter of 2024, the Company bifurcated the embedded conversion option, and recorded the embedded conversion option as a long-term derivative liability in accordance with FASB ASC 815, Derivatives and Hedging. The convertible debt and the derivative liability associated with the Note are presented on the Condensed Consolidated Balance Sheets as the Long-Term Note Payable – Related Party and long-term Derivative Instruments. The convertible debt is carried at amortized cost. The derivative liability will be remeasured at each reporting period using a binomial lattice model with changes in fair value recorded in the Condensed Consolidated Statements of Operations in Other Income (Expense). See Note 8 for further details. |
Fair Value Measurements | Fair Value Measurements The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement , 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 a degree 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 period ended March 31, 2024. 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 Condensed Consolidated Financial Statements. Assets and Liabilities Measured at Fair Value on a Recurring Basis - |
Fair Value on a Nonrecurring Basis | Fair Value on a Nonrecurring Basis The Company applies the provisions of fair value measurement on a non-recurring basis to its non-financial assets and liabilities, including oil and gas properties and asset retirement obligations. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments if events or changes in certain circumstances indicate that adjustments may be necessary. No triggering events that require assessment of such items were observed during the three months ended March 31, 2024. |
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 |
Concentrations of Credit Risk | Concentrations of Credit Risk The Company’s accounts receivable are primarily receivables from oil and natural gas purchasers and joint interest owners. The purchasers of the Company’s oil and natural gas production consist primarily of independent marketers, major oil and natural gas companies and gas pipeline companies. Historically, the Company has not experienced any significant losses from uncollectible accounts from its oil and natural gas purchasers. The Company operates a substantial portion of its oil and natural gas properties. As the operator of a property, the Company makes full payments for costs associated with the property and seeks reimbursement from the other working interest owners in the property for their share of those costs. Joint operating agreements govern the operations of an oil or natural gas well and, in most instances, provide for offsetting of amounts payable or receivable between the Company and its joint interest owners. The Company’s joint interest partners consist primarily of independent oil and natural gas producers. If the oil and natural gas exploration and production industry in general was adversely affected, the ability of the Company’s joint interest partners to reimburse the Company could be adversely affected. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards The 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 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 (Tables)
Property (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
Aggregate capitalized costs of oil and natural gas properties are as follows: | Aggregate capitalized costs of oil and natural gas properties are as follows: March 31, 2024 December 31, 2023 Proved properties $ 92,634,087 $ 75,346,623 Unproved properties 3,708,264 3,245,431 Work in process 10,678,303 14,917,749 Gross capitalized costs 107,020,654 93,509,803 Depreciation, depletion, amortization and impairment (24,427,923 ) (22,996,805 ) Total oil and gas properties, net $ 82,592,731 $ 70,512,998 |
Schedule of other property plant and equipment | Schedule of other property plant and equipment March 31, 2024 December 31, 2023 Other property and equipment, at cost $ 3,029,041 $ 2,998,018 Less: Accumulated depreciation (1,299,725 ) (1,114,807 ) Other property and equipment, net $ 1,729,316 $ 1,883,211 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Asset Retirement Obligation Disclosure [Abstract] | |
The Company’s asset retirement obligation activity is as follows: | The Company’s asset retirement obligation activity is as follows: For the Three Months Ended March 31, 2024 2023 Asset retirement obligations, beginning of period $ 28,168,427 $ 25,000,740 Additions 151,985 — Liabilities settled — (190,375 ) Revisions — (68,809 ) Accretion expense 485,349 401,275 Asset retirement obligation, end of period $ 28,805,761 $ 25,142,831 Less current portion included in Accrued Expenses 700,000 — Asset retirement obligation, long-term $ 28,105,761 $ 25,142,831 |
Commodity Derivative Financia_2
Commodity Derivative Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Investments, All Other Investments [Abstract] | |
The following table summarizes the net realized and unrealized losses reported in earnings related to the commodity derivative instruments for the three months ended March 31, 2024 and 2023: | The following table summarizes the net realized and unrealized losses reported in earnings related to the commodity derivative instruments for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Loss on Derivatives: Oil derivatives (a) $ (858,150 ) $ (66,823 ) ________ (a) Includes $847,450 and $25,636 of unrealized derivative losses for the respective periods. |
The following represents the Company’s net settlements related to derivatives for the three months ended March 31, 2024 and 2023: | The following represents the Company’s net settlements related to derivatives for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Oil derivatives $ (10,700 ) $ (41,187 ) |
The following table sets forth the Company’s outstanding derivative contracts at March 31, 2024: | The following table sets forth the Company’s outstanding derivative contracts at March 31, 2024: 2nd Quarter 2024 3rd Quarter 2024 4th Quarter 2024 WTI Fixed-Price Swaps: Quarterly volume (MBbls) 30.00 30.00 30.00 Weighted-average fixed price (Bbl) $ 72.15 $ 77.02 $ 75.57 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Following Table Represents Companys Accounts Receivable As Of March 31 2024 And December 31 2023 | |
The following table represents the Company’s accounts receivable as of March 31, 2024 and December 31, 2023: | The following table represents the Company’s accounts receivable as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Oil, Gas and NGL Receivables $ 3,227,706 $ 2,784,745 Joint Interest Billings 4,026,259 5,444,331 Other 36,042 125,560 Total Accounts Receivable $ 7,290,007 $ 8,354,636 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Payables and Accruals [Abstract] | |
The following table represents the Company’s accrued expenses as of March 31, 2024 and December 31, 2023: | The following table represents the Company’s accrued expenses as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Accrued and suspended third-party revenue $ 4,459,055 $ 4,049,984 Accrued salaries and payroll taxes 1,032,523 1,059,295 Accrued production taxes 774,359 829,226 Other 1,170,649 1,136,797 $ 7,436,586 $ 7,075,302 |
Debt Including Debt with Rela_2
Debt Including Debt with Related Parties (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
The following table represents the Company’s outstanding debt as of March 31, 2024 and December 31, 2023: | The following table represents the Company’s outstanding debt as of March 31, 2024 and December 31, 2023: As of March 31, 2024 As of December 31, 2023 Equity Bank Credit Facility $ 8,442,484 $ 4,492,484 Promissory Note – Related Party 2,970,000 — Note Payable – Related Party 1,060,004 1,060,004 Equipment and vehicle notes, 0.00% to 9.00% interest rates, due in 2025 to 2028 with monthly payments ranging from $900 to $1,400 per month 135,995 148,516 Note Payable to insurance provider, bears 7.29% interest, matures January 2025, monthly payments of principal and interest of $51,067 441,697 — Total Debt 13,050,180 5,701,004 Less: Current Maturities (486,483 ) (44,225 ) Less: Promissory Note – Related Party (2,970,000 ) — Less: Note Payable – Related Party (1,060,004 ) (1,060,004 ) Long-Term debt $ 8,533,693 $ 4,596,775 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Leases | |
Schedule of right of use leases | Schedule of right of use leases March 31, 2024 December 31, 2023 Net operating lease asset (included in Other Property and Equipment) $ 958,648 $ 1,077,031 Current portion of lease liability $ 430,273 $ 432,822 Long-term lease liability 441,748 544,382 Total right-of-use lease liabilities $ 872,021 $ 977,204 |
Maturities of lease liabilities are as follows as of March 31, 2024: | Maturities of lease liabilities are as follows as of March 31, 2024: Year 1 $ 486,584 Year 2 376,628 Year 3 86,680 Year 4 3,100 Year 5 — Total lease payments 952,992 Less imputed interest (80,971 ) Total lease obligation $ 872,021 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of non vested restricted stock unit activity | Schedule of non vested restricted stock unit activity Weighted Average RSUs Fair Value (a) Outstanding, December 31, 2023 204,817 $ 10.61 Granted — — Vested (45,515 ) 11.75 Forfeited (22,500 ) 11.05 Outstanding, March 31, 2024 136,802 $ 10.16 (a) Shares are valued at the grant-date market price. |
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, 2023 2,065,381 $ 4.89 Granted — — Exercised (119,100 ) 1.32 Cancelled — — Outstanding, March 31, 2024 1,946,281 $ 5.10 |
Schedule of summarizes information about stock options outstanding | Schedule of summarizes information about stock options outstanding Range of Options Weighted Average Weighted Options Weighted Exercise Outstanding Remaining Average Exercisable Average Prices at 3/31/24 Contractual Life Exercise Price at 3/31/24 Exercise Price $ 1.32 12.36 1,946,281 4.67 $5.10 1,486,110 $3.23 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Schedule of reconciliation of effective income tax rate | Schedule of reconciliation of effective income tax rate For the Three Months Ended March 31, 2024 2023 $ % $ % Provision (benefit) at statutory rate (834,791) 21.0 (516,514) 21.0 State Taxes (net of federal impact) (190,937) 4.8 (118,333) 4.8 Nondeductible Expenses 6,401 -0.2 (2,460) 0.1 Stock Options Exercised (103,796) 2.6 — 0.0 Valuation Allowance 1,123,123 -28.3 637,307 -25.9 Income tax provision (benefit) — 0.0 — 0 |
Aggregate capitalized costs of
Aggregate capitalized costs of oil and natural gas properties are as follows: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Property, Plant and Equipment [Abstract] | ||
Proved properties | $ 92,634,087 | $ 75,346,623 |
Unproved Properties | 3,708,264 | 3,245,431 |
Work in process | 10,678,303 | 14,917,749 |
Gross capitalized costs | 107,020,654 | 93,509,803 |
Depreciation, Depletion, Amortization and Impairment | (24,427,923) | (22,996,805) |
Total Oil and Gas Properties, Net | $ 82,592,731 | $ 70,512,998 |
Schedule of other property plan
Schedule of other property plant and equipment (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Property, Plant and Equipment [Abstract] | ||
Other property and equipment, at cost | $ 3,029,041 | $ 2,998,018 |
Less: accumulated depreciation | (1,299,725) | (1,114,807) |
Other property and equipment, net | $ 1,729,316 | $ 1,883,211 |
Property (Details Narrative)
Property (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | ||
Depletion and amortization expense | $ 1,431,000 | $ 563,000 |
Depreciation expense | $ 59,000 | $ 59,000 |
The Company_s asset retirement
The Company’s asset retirement obligation activity is as follows: (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | ||
Asset retirement obligations, beginning of period | $ 28,168,427 | $ 25,000,740 |
Additions | 151,985 | |
Liabilities settled | (190,375) | |
Revisions | (68,809) | |
Accretion expense | 485,349 | 401,275 |
Asset retirement obligation, end of period | 28,805,761 | 25,142,831 |
Less current portion included in Accrued Expenses | 700,000 | |
Asset retirement obligation, long-term | $ 28,105,761 | $ 25,142,831 |
The following table summarizes
The following table summarizes the net realized and unrealized losses reported in earnings related to the commodity derivative instruments for the three months ended March 31, 2024 and 2023: (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | ||
Credit Derivatives [Line Items] | |||
Gain (loss) on derivatives | $ (858,150) | $ (66,823) | |
Oil Derivatives [Member] | |||
Credit Derivatives [Line Items] | |||
Gain (loss) on derivatives | [1] | $ (858,150) | $ (66,823) |
[1]Includes $847,450 and $25,636 of unrealized derivative losses for the respective periods. |
The following represents the Co
The following represents the Company’s net settlements related to derivatives for the three months ended March 31, 2024 and 2023: (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Investments, All Other Investments [Abstract] | ||
Net cash receipts from (payments on) derivatives | $ (10,700) | $ (41,187) |
The following table sets forth
The following table sets forth the Company’s outstanding derivative contracts at March 31, 2024: (Details) - Oil Swaps [Member] - Two Zero Two Four [Member] | Mar. 31, 2024 $ / shares |
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 accounts receivable as of March 31, 2024 and December 31, 2023: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Following Table Represents Companys Accounts Receivable As Of March 31 2024 And December 31 2023 | ||
Oil, Gas and NGL Receivables | $ 3,227,706 | $ 2,784,745 |
Joint Interest Billings | 4,026,259 | 5,444,331 |
Other | 36,042 | 125,560 |
Total Accounts Receivable | $ 7,290,007 | $ 8,354,636 |
The following table represent_2
The following table represents the Company’s accrued expenses as of March 31, 2024 and December 31, 2023: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Payables and Accruals [Abstract] | ||
Accrued and suspended third-party revenue | $ 4,459,055 | $ 4,049,984 |
Accrued salaries and payroll taxes | 1,032,523 | 1,059,295 |
Accrued production taxes | 774,359 | 829,226 |
Other | 1,170,649 | 1,136,797 |
Accrued Expenses | $ 7,436,586 | $ 7,075,302 |
The following table represent_3
The following table represents the Company’s outstanding debt as of March 31, 2024 and December 31, 2023: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | $ 13,050,180 | $ 5,701,004 |
Less: Current Maturities | (486,483) | (44,225) |
Note Payable Related Party | (2,970,000) | |
Note Payable Related Party | (1,060,004) | (1,060,004) |
Long Term Debt | 8,533,693 | 4,596,775 |
Equity Bank Credit Facility [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | 8,442,484 | 4,492,484 |
Promissory Note Related Party [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | 2,970,000 | |
Note Payable Related Party [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | 1,060,004 | 1,060,004 |
Various Vehicleand Equipment Loans [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | 135,995 | 148,516 |
Note Payable Insurance Provider Bears Interest Matures [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total Debt | $ 441,697 |
Debt Including Debt with Rela_3
Debt Including Debt with Related Parties (Details Narrative) - USD ($) | 3 Months Ended | ||||
Feb. 16, 2024 | Dec. 29, 2023 | Mar. 31, 2024 | Feb. 15, 2024 | 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. | ||||
August Six Two Thousand Twenty [Member] | Joint Development Agreement [Member] | Petroleum and Independent Exploration L L C [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 March 31, 2024, $1,060,004 has been advanced from the PIE loan. | ||||
Promissory Note [Member] | |||||
Short-Term Debt [Line Items] | |||||
Interest rate | 7% | ||||
Remaining unpaid accrues interest | 9% | ||||
Energy Evolution [Member] | Promissory Note [Member] | |||||
Short-Term Debt [Line Items] | |||||
Principal amount | $ 5,000,000 | ||||
Advances to affiliate | $ 5,000,000 |
Schedule of right of use leases
Schedule of right of use leases (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Leases | ||
Net operating lease asset (included in Other Property and Equipment) | $ 958,648 | $ 1,077,031 |
Current portion of lease liability | 430,273 | 432,822 |
Long-term lease liability | 441,748 | 544,382 |
Total right-of-use lease liabilities | $ 872,021 | $ 977,204 |
Maturities of lease liabilities
Maturities of lease liabilities are as follows as of March 31, 2024: (Details) | Mar. 31, 2024 USD ($) |
Leases | |
Year 1 | $ 486,584 |
Year 2 | 376,628 |
Year 3 | 86,680 |
Year 4 | 3,100 |
Year 5 | |
Total lease payments | 952,992 |
Less imputed interest | (80,971) |
Total lease obligation | $ 872,021 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Leases | ||
Right of use lease expense | $ 136,000 | $ 77,600 |
Cash paid for right of use leases | $ 125,000 | $ 78,400 |
Weighted average remaining term for right of use leases | 2 years 1 month 6 days | |
Weighted average discount rate | 8.51% |
Equity (Details Narrative)
Equity (Details Narrative) - $ / shares | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
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. | ||
Restricted Stock Units (RSUs) [Member] | |||
Class of Stock [Line Items] | |||
Anti dilutive shares | 1,460,589 | 2,348,009 | |
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 |
Schedule of non vested restrict
Schedule of non vested restricted stock unit activity (Details) - Restricted Stock Units (RSUs) [Member] | 3 Months Ended |
Mar. 31, 2024 $ / shares shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Restricted stock unit, outstanding beginning | shares | 204,817 |
Weighted average fair value, beginning | $ / shares | $ 10.61 |
Restricted stock unit, Granted | shares | |
Weighted average fair value, Granted | $ / shares | $ / shares | |
Restricted stock unit, Vested | shares | (45,515) |
Weighted average fair value, Vested | $ / shares | $ 11.75 |
Restricted stock unit, Forfeited | shares | (22,500) |
Weighted average fair value, Forfeited | $ / shares | $ 11.05 |
Restricted stock unit, outstanding Ending | shares | 136,802 |
Weighted average fair value, Ending | $ / shares | $ 10.16 |
The following summary reflects
The following summary reflects stock option activity and related information: (Details) - Options Held [Member] | 3 Months Ended |
Mar. 31, 2024 $ / shares shares | |
Offsetting Assets [Line Items] | |
Options outstanding, beginning | shares | 2,065,381 |
Weighted average exercise price, beginning | $ / shares | $ 4.89 |
Options outstanding, granted | shares | |
Weighted average exercise price, granted | $ / shares | |
Options outstanding, exercised | shares | (119,100) |
Weighted average exercise price, exercised | $ / shares | $ 1.32 |
Options outstanding, cancelled | shares | |
Weighted average exercise price, cancelled | $ / shares | |
Options outstanding, ending | shares | 1,946,281 |
Weighted average exercise price, ending | $ / shares | $ 5.10 |
Schedule of summarizes informat
Schedule of summarizes information about stock options outstanding (Details) - Options Held [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Offsetting Assets [Line Items] | ||
Range of exercise price, minimum | $ 1.32 | |
Range of exercise price, maximum | $ 12.36 | |
Options outstanding | 1,946,281 | 2,065,381 |
Weighted average remaining contractual life | 4 years 8 months 2 days | |
Weighted average exercise price | $ 5.10 | $ 4.89 |
Options exercisable | 1,486,110 | |
Weighted average exercise price, exercisable | $ 3.23 |
Executive Separations (Details
Executive Separations (Details Narrative) - Chief Executive Officer [Member] - USD ($) | Mar. 16, 2023 | Dec. 31, 2022 |
Severance benefits | $ 360,000 | |
Issuance of stock option shares | 340,234 | |
Options receivables value | $ 2,100,000 | |
Withholding liability payables | $ 2,100,000 |
Schedule of reconciliation of e
Schedule of reconciliation of effective income tax rate (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | ||
Provision (benefit) at statutory rate | $ (834,791) | $ (516,514) |
Provision (benefit) at statutory rate, percentage | 21% | 21% |
State Taxes (net of federal impact) | $ (190,937) | $ (118,333) |
State Taxes (net of federal impact), percentage | 4.80% | 4.80% |
Nondeductible Expenses | $ 6,401 | $ (2,460) |
Nondeductible Expenses, percentage | (0.20%) | 0.10% |
Return to Provision | $ (103,796) | |
Return to Provision, percentage | 2.60% | 0% |
Valuation Allowance | $ 1,123,123 | $ 637,307 |
Valuation Allowance, percentage | (28.30%) | (25.90%) |
Income tax provision (benefit) | ||
Income tax provision (benefit), percentage | 0% | 0% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 0% | 0% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Related Party Transaction [Line Items] | ||
Accounts receivable | $ (1,064,629) | $ 849,909 |
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 | $ 1,030,000 | |
Revenue payable | $ 213,000 |