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Empire Petroleum Announces Results for Fourth Quarter and Full Year 2022

~ Strategic Efforts Drive Full Year 2022 Increase of 46% in Net Production and 27% in Year-End Proved Reserves ~

Empire Petroleum (NYSE American: EP) (“Empire” or the “Company”), today announced operational and financial results for the fourth quarter and full year of 2022, including year-end 2022 proved reserves.

KEY 2022 AND RECENT HIGHLIGHTS

  • Increased full year net sales volumes by 46% to 2,163 barrels of oil equivalent per day (“Boe/d”) (61% oil, 20% natural gas liquids (“NGLs”) and 19% natural gas) from 1,479 Boe/d (62% oil, 19% NGLs, and 19% natural gas) for full year 2021;
  • Higher net sales volumes and pricing drove a 95% increase in revenue to $52.9 million for full year 2022 that resulted in net income of $7.1 million, or $0.30 per diluted share, and adjusted net income1 of $15.0 million, or $0.64 per diluted share;
    • Reported fourth quarter revenue of $10.7 million, a net loss of $2.3 million, or $0.10 per diluted share, and adjusted net income of $0.1 million;
  • Increased adjusted EBITDA1 by more than three times to $19.1 million for full year 2022;
    • Recorded fourth quarter 2022 adjusted EBITDA of $1.3 million;
  • Ended 2022 in a strong financial position with $12.2 million of liquidity (including $11.9 million of cash) and working capital of $5.1 million;
    • Reduced debt 16% from $8.6 million at year-end 2021 to $7.2 million at year-end 2022, which represents less than three percent of current market capitalization;
  • Grew year-end 2022 proved reserves by 27% to 13.2 million barrels of oil equivalent (“MMBoe”), and increased the standardized measure of SEC proved reserves discounted at 10% by 57% to $147.7 million from $93.9 million at year-end 2021;
    • Benefitted from positive revisions of previous quantity estimates of 2.2 MMBoe due primarily to the inclusion of NGLs in New Mexico, extensions and discoveries of 0.7 MMBoe, and acquisitions of 0.7 MMBoe. Partially offsetting the additions was 0.8 MMBoe of production;
    • All of Empire’s year-end 2022 proved reserves were classified as proved developed producing;
  • Continued to make significant progress on the Empire-operated Starbuck Field Pilot Project Program (the “Starbuck Program”) in North Dakota, including beginning the waterflood conformance phase, re-perforating and stimulating productive intervals to ensure maximum hydrocarbon recovery, successful execution of seven sidetracks, and final completion of certain surface facility upgrades that began in 2021;
    • Completed a pilot drilling program on four wells in the fourth quarter of 2022, with three of the four wells completed and placed on production during the first quarter of 2023;
    • Initial field production has increased from 3,000 barrels of oil per month to 7,000 barrels of oil per month and the Company anticipates further production increases in 2023;
    • Empire owns a 96% working interest and 82.6% net revenue interest in the Starbuck Program; and
  • Completed and placed on production four new non-operated Bakken wells during the fourth quarter of 2022.

1 Adjusted Net Income, EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Information” section later in this release for more information including reconciliations to the most comparable GAAP measure.

MANAGEMENT COMMENTARY

Mike Morrisett, President and Chief Executive Officer of Empire, commented, “2022 was an outstanding year for Empire across the board, and I want to thank our workforce and business partners for their hard work and strong execution throughout the year. The result was increased levels of production, revenue, net income, adjusted net income and adjusted EBITDA. Supporting our efforts is a well-designed business plan that we will continue to utilize as we move further into growing our production organically to drive enhanced cash flow generation and further shareholder value.”

Mr. Morrisett concluded, “The assets we acquired over the past several years place us in a great position to launch our 2023 capital spending program, which is designed to strategically invest capital in our highest rate-of-return projects. We plan to primarily focus our initial capital investments on our asset base in North Dakota through a combination of activities, including drilling and completions, capital workovers, recompletions and related infrastructure. In support of these efforts, we are adding to the depth of our technical and operations teams through the hiring of experienced professionals with a proven history of success. I look forward to working closely with our expanded team as we execute our 2023 capital spending program and further build the business.”

FINANCIAL AND OPERATIONAL RESULTS FOR FOURTH QUARTER 2022

% Change

% Change

Q4 2022 vs.

Q4 2022 vs.

Q4 2022

Q3 2022

Q3 2022

Q4 2021

Q4 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (Boe/d)

 

 

 

2,149

 

 

 

2,232

 

 

 

(4

%)

 

 

2,107

 

 

 

2

%

 

Net sales (Boe)

 

 

 

197,712

 

 

 

205,380

 

 

 

(4

%)

 

 

193,877

 

 

 

2

%

 

Realized price ($/Boe)

 

 

$

55.59

 

 

$

68.03

 

 

 

(18

%)

 

$

55.27

 

 

 

1

%

 

Revenue ($M)

 

 

$

10,728

 

 

$

14,038

 

 

 

(24

%)

 

$

10,722

 

 

 

0

%

 

Net (loss) income ($M)

 

 

$

(2,290)

 

 

$

216

 

 

 

n/a

 

$

(8,620)

 

 

 

n/a

Adjusted net income ($M)

 

 

$

150

 

 

$

3,747

 

 

 

(96

%)

 

$

(5)

 

 

 

n/a

 

 

Adjusted EBITDA ($M)

 

 

$

1,308

 

 

$

4,799

 

 

 

(73

%)

 

$

2,114

 

 

 

(38

%)

 

Net sales for the fourth quarter of 2022 were 2,149 Boe/d, including 1,322 barrels of oil per day; 425 barrels of NGLs per day, and 2,411 thousand cubic feet per day (“Mcf/d”), or 402 Boe/d, of natural gas. Contributing to the sequential decrease from the third quarter of 2022 was temporary downtime due to the impact of severe winter storms across the Company’s operations and shut-ins of production for Empire’s assets in the Rockies Region primarily associated with taking certain wells offline temporarily as the Company completed the execution of the Starbuck Program.

Empire reported $10.7 million of revenue for the fourth quarter of 2022 versus $14.0 million for the third quarter of 2022. Contributing to the decline was the aforementioned decrease in net sales volumes and lower realized pricing as compared to the third quarter.

Lease operating expenses for the fourth quarter of 2022 were $6.6 million compared to $7.8 million for the third quarter of 2022. Included in the third quarter was a $1.4 million non-cash write-off associated with the Company’s joint development agreement with Petroleum & Independent Exploration, LLC and related entities (“PIE”).

Production and ad valorem taxes for the fourth quarter of 2022 were $0.8 million versus $1.1 million for third quarter 2022. Primarily driving the sequential decrease was lower product revenues.

General and administrative expenses, excluding share-based compensation expense, was $2.7 million, or $13.65 per Boe, in the fourth quarter of 2022 versus $2.0 million, or $9.93 per Boe, for the third quarter of 2022.

Other income for the fourth quarter of 2022 was $0.3 million compared to other expense of $1.1 million in the third quarter of 2022. Included in the third quarter was a non-cash $1.4 million settlement related to the purchase of Empire’s New Mexico assets.

Empire recorded a net loss for the fourth quarter of $2.3 million, or $0.10 per diluted share, versus net income of $0.2 million, or $0.01 per diluted share, in the third quarter of 2022. Contributing to the sequential decrease was lower overall net sales volumes and realized pricing and a $0.9 million impairment recorded in the fourth quarter of 2022 associated with the Company’s Louisiana properties. In addition, included in third quarter net income was the previously discussed non-cash $1.4 million PIE write-off and non-cash $1.4 million settlement related to the purchase of the Company’s New Mexico assets.

The Company posted adjusted net income for the fourth quarter of 2022 of $0.1 million, or $0.01 per diluted share, versus adjusted net income of $3.7 million, or $0.16 per diluted share, in the third quarter of 2022, with the decrease substantially due to lower realized pricing and net sales during the fourth quarter.

Adjusted EBITDA was $1.3 million for the fourth quarter compared to $4.8 million in the third quarter of 2022, with the decrease substantially due to lower realized pricing and net sales during the fourth quarter.

CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY

For the twelve months ended December 31, 2022, the Company invested approximately $14 million in capital expenditures, including approximately $3 million related to acquisitions. Non-acquisition spending of approximate $11 million was primarily related to well enhancement projects in North Dakota and non-operated drilling.

Total liquidity at the end of the fourth quarter of 2022 was $12.2 million, including $11.9 million of cash and $0.3 million available on the Company’s Credit Facility. As of December 31, 2022, the Company had total debt of $7.2 million and working capital of $5.1 million, which was almost five times higher than its working capital position of $1.1 million at December 31, 2021. The Company reduced debt 16% from $8.6 million at year-end 2021 to $7.2 million at year-end 2022. Empire remains squarely focused on continuing to execute on its proven strategy to remain financially conservative as it evaluates additional opportunities to prudently invest in its current business and expand through targeted acquisitions that provide long-term value for its shareholders.

FINANCIAL AND OPERATIONAL RESULTS FOR FULL YEAR 2022

 

 

 

 

 

 

 

 

% Change

FY 2022 vs.

FY 2022

FY 2021

FY 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (Boe/d)

 

 

 

2,163

 

 

 

1,479

 

 

 

46

%

Net sales (Boe)

 

 

 

789,568

 

 

 

539,797

 

 

 

46

%

Realized price ($/Boe)

 

 

$

67.34

 

 

$

50.95

 

 

 

32

%

Revenue ($M)

 

 

$

52,887

 

 

$

27,092

 

 

 

95

%

Net income (loss) ($M)

 

 

$

7,084

 

 

$

(18,615

)

 

 

n/a

Adjusted net income ($M)

 

 

$

14,982

 

 

$

(6,696

)

 

 

n/a

 

Adjusted EBITDA ($M)

 

 

$

19,062

 

 

$

5,758

 

 

 

231

%

Net sales for the full year of 2022 were 2,163 Boe/d, including 1,323 barrels of oil per day; 440 barrels of NGLs per day; and 2,399 Mcf/d, or 400 Boe/d, of natural gas. Primarily contributing to the 46% increase from 2021 was a full year impact of the Company’s New Mexico properties acquired in May 2021.

Empire reported $52.9 million of revenue for full year 2022 – a 95% increase from $27.1 million for full year 2021. Contributing to the year-over-year growth was the aforementioned net sales volumes growth of 46% and a 32% increase in realized pricing on a Boe basis.

Lease operating expense of $23.6 million and production and ad valorem taxes of $3.9 million were higher for full year 2022 as result of the Company’s New Mexico assets acquired in May 2021. Also contributing to increased year-over-year costs was spending associated with workover and lease operating activities in 2022 to support Empire’s recompletion and sidetrack well drilling activity in North Dakota.

General and administrative expenses, excluding share-based compensation, was $9.6 million, or $12.18 per Boe, for full year 2022 versus $7.0 million, or $12.89 per Boe, for full year 2021.

Interest expense for full year 2022 was $0.5 million compared to $8.6 million for 2021. Included in 2021 was approximately $7.0 million related to interest and amortization of debt issuance costs for convertible notes issued in 2021 that were fully converted prior to December 31, 2021.

Empire posted net income for full year 2022 of $7.1 million, or $0.30 per diluted share, versus a net loss of $18.6 million, or $1.27 per share, for full year 2021. The Company generated adjusted income for full year 2022 of $15.0 million, or $0.64 per diluted share, versus an adjusted net loss of $6.7 million, or $0.46 per share, for 2021.

Adjusted EBITDA grew to $19.1 million for full year 2022 from $5.8 million for 2021.

YEAR-END 2022 PROVED RESERVES

The Company’s year-end 2022 SEC proved reserves were 13.2 MMBoe compared to 10.4 MMBoe at year-end 2021 – a 27% increase year-over-year. Empire recorded reserve additions of 2.2 MMBoe for revisions of previous estimates, 0.7 MMBoe for acquisitions, and 0.7 MMBoe for extensions, discoveries and improved recovery. Partially offsetting the overall increase was 0.8 MMBoe of production.

Year-end 2022 SEC proved reserves were comprised of approximately 67% crude oil, 17% natural gas liquids, and 16% natural gas. At year end, 100% of 2022 proved reserves were classified as proved developed.

 

Oil (MMBbls)

Gas (MMcf)

NGLs (a)

MBOE

Balance, December 31, 2020

3,661

 

971

 

 

3,823

 

Acquisition of Reserves

5,634

 

10,533

 

 

7,390

 

Revisions

(617

)

251

 

 

(576

)

Extensions

150

 

51

 

 

159

 

Divestiture of Reserves

(47

)

27

 

 

(42

)

Production

(333

)

(625

)

 

(437

)

Balance, December 31, 2021

8,448

 

11,208

 

87

 

10,404

 

Acquisition of Reserves

650

 

205

 

61

 

745

 

Revisions

(350

)

1,834

 

2,248

 

2,203

 

Extensions

561

 

566

 

27

 

682

 

Production

(483

)

(876

)

(161

)

(790

)

Balance, December 31, 2022

8,826

 

12,937

 

2,262

 

13,244

 

 

(a) The Company did not present NGLs separately in 2021.

The standardized measure of the Company’s reported SEC proved reserves, discounted at 10%, at year-end 2022 was $147.7 million, up 57% from $93.9 million at the end of 2021. As of December 31 for each year:

 

2022

2021

Future cash inflows

$

941,172,544

$

627,654,125

 

Future production costs

(509,154,924

)

 

(362,254,813

)

Future development costs

(55,901,780)

 

(33,021,749

)

Future income tax expense

(90,724,632

)

 

(30,614,383

 

Future net cash flows

285,391,208

 

201,763,180

 

10% annual discount for estimated timing of cash flows

(137,723,795

)

 

(107,911,087

)

Standardized measure

$

147,667,413

$

93,852,093

 

The 12-month average prices were adjusted to reflect applicable transportation and quality differentials on a well-by-well basis to arrive at realized sales prices used to estimate the properties' reserves. The prices for the properties' reserves were as follows:

 

2022

2021

Oil (BBl)

$

91.14

$

64.31

Natural gas (MMBtu)

$

4.23

$

7.34

*

* Pricing includes revenue received from NGL sales as well as natural gas.

Changes in the Standardized Measure of Discounted Future Net Cash Flows at 10% per annum are as follows as of December 31 for each year:

 

 

 

2022

 

 

2021

 

 

Beginning of year

 

$

93,852,093

 

 

20,770,080

 

 

Net change in prices and production costs

 

 

24,651,555

 

 

13,080,689

 

 

Net change in future development costs

 

 

(7,141,431

)

 

782,210

 

 

Oil and gas net revenue

 

 

(21,418,327

)

 

(10,587,395

)

 

Extensions

 

 

11,037,719

 

 

5,026,479

 

 

Acquisition of reserves

 

 

12,043,912

 

 

90,104,017

 

 

Divestiture of reserves

 

 

--

 

 

(318,813

)

 

Revisions of previous quantity estimates

 

 

46,871,217

 

 

(3,794,860

)

 

Net change in taxes

 

 

(32,133,473

)

 

(15,544,094

)

 

Accretion of discount

 

 

10,939,619

 

 

2,077,008

 

 

Changes in timing and other

 

 

8,964,529

 

 

7,743,228

 

 

End of year

 

$

147,667,413

 

 

93,852,093

 

 

UPDATED PRESENTATION AND ADDITIONAL MANAGEMENT COMMENTARY

In addition to an updated Company presentation, an audio recording of management’s additional comments related to its business and outlook will be posted on Wednesday, April 5 to the Company’s website under the Investors Relations section.

ABOUT EMPIRE PETROLEUM

Empire Petroleum Corporation is a publicly traded, Tulsa-based oil and gas company with current producing assets in Texas, Louisiana, North Dakota, Montana, and New Mexico. Management is focused on organic growth and targeted acquisitions of proved developed assets with synergies with its existing portfolio of wells. More information about Empire can be found at www.empirepetroleumcorp.com.

SAFE HARBOR STATEMENT

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company’s estimates, strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2022, and its other filings with the SEC. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and other risks and uncertainties related to the conduct of business by the Company. Other than as required by applicable securities laws, the Company does not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise.

EMPIRE PETROLEUM CORPORATION
Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31,

2022

2022

2021

2022

2021

Revenue:
Oil Sales

$

9,731,245

 

$

11,501,521

 

$

8,444,212

 

$

44,978,554

 

$

22,326,289

 

Gas Sales (1)

 

802,425

 

 

1,526,148

 

 

957,679

 

 

4,534,370

 

 

2,288,481

 

Natural Gas Liquids ("NGLs") Sales (1)

 

457,504

 

 

945,317

 

 

1,312,985

 

 

3,659,451

 

 

2,888,747

 

Total Product Revenues

 

10,991,174

 

 

13,972,986

 

 

10,714,876

 

 

53,172,375

 

 

27,503,517

 

Other

 

30,552

 

 

22,921

 

 

20,591

 

 

102,429

 

 

174,609

 

Gain (Loss) on Derivatives

 

(294,190

)

 

42,474

 

 

(13,961

)

 

(387,930

)

 

(586,181

)

Total Revenue

 

10,727,536

 

 

14,038,381

 

 

10,721,506

 

 

52,886,874

 

 

27,091,945

 

 
Costs and Expenses:
Lease Operating Expense

 

6,602,984

 

 

7,751,755

 

 

6,498,888

 

 

23,584,039

 

 

13,283,758

 

Production and Ad Valorem Taxes

 

792,141

 

 

1,112,246

 

 

835,964

 

 

3,943,466

 

 

2,102,772

 

Depletion, Depreciation & Amortization

 

519,403

 

 

539,543

 

 

476,868

 

 

1,949,191

 

 

2,502,275

 

Accretion of Asset Retirement Obligation

 

348,799

 

 

342,619

 

 

332,841

 

 

1,357,906

 

 

1,214,479

 

Impairment

 

936,620

 

 

-

 

 

-

 

 

936,620

 

 

-

 

General and Administrative

 

3,743,598

 

 

2,850,059

 

 

2,421,556

 

 

12,331,489

 

 

8,462,031

 

 
Total Cost and Expenses

 

12,943,545

 

 

12,596,222

 

 

10,566,117

 

 

44,102,711

 

 

27,565,315

 

 
Operating Income (Loss)

 

(2,216,009

)

 

1,442,159

 

 

155,389

 

 

8,784,163

 

 

(473,370

)

 
Other Income and (Expense):
Other Income (Expense)

 

297,165

 

 

(1,100,888

)

 

218,838

 

 

(981,595

)

 

409,225

 

Interest Expense

 

(161,777

)

 

(125,330

)

 

(1,227,586

)

 

(509,540

)

 

(8,600,699

)

Convertible Debt Modification Inducement Expense

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,276,813

)

Loss on Convertible Debt Redemption Option

 

-

 

 

-

 

 

(3,169,201

)

 

-

 

 

(3,169,201

)

Loss on Embedded Conversion Option

 

-

 

 

-

 

 

(4,597,035

)

 

-

 

 

(4,504,104

)

 
Income (Loss) before Taxes

 

(2,080,621

)

 

215,941

 

 

(8,619,595

)

 

7,293,028

 

 

(18,614,962

)

 
Income Tax (Provision) Benefit

 

(208,898

)

 

-

 

 

-

 

 

(208,898

)

 

-

 

 
Net Income (Loss)

$

(2,289,519

)

$

215,941

 

$

(8,619,595

)

$

7,084,130

 

$

(18,614,962

)

 
Net Income (Loss) per Common Share:
Basic

$

(0.10

)

$

0.01

 

$

(0.46

)

$

0.34

 

$

(1.27

)

Diluted

$

(0.10

)

$

0.01

 

$

(0.46

)

$

0.30

 

$

(1.27

)

Weighted Average Number of Common Shares Outstanding:
Basic

 

22,037,872

 

 

21,651,383

 

 

18,627,300

 

 

21,003,563

 

 

14,630,168

 

Diluted

 

22,037,872

 

 

24,065,485

 

 

18,627,300

 

 

23,387,646

 

 

14,630,168

 

 
(1) September 2022 and December 2021 amounts reflect reclassifications of gathering and processing costs from lease operating expense to conform to December 2022 presentation.
EMPIRE PETROLEUM CORPORATION
Condensed Operating Data
(Unaudited)
 

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

2022

2022

2021

2022

2021

 
Net Production Volumes:
Oil (Bbl)

 

121,592

 

123,804

 

112,378

 

482,818

 

333,158

Natural gas (Mcf)

 

221,818

 

231,522

 

242,874

 

875,647

 

622,474

Natural gas liquids (Bbl)

 

39,151

 

42,989

 

41,020

 

160,809

 

102,893

Total (Boe)

 

197,712

 

205,380

 

193,877

 

789,568

 

539,797

 
Average daily equivalent sales (Boe/d)

 

2,149

 

2,232

 

2,107

 

2,163

 

1,479

 
Average Price per Unit:
Oil ($/Bbl)

$

80.03

$

92.90

$

75.14

$

93.16

$

67.01

Natural gas ($/Mcf)

$

3.62

$

6.59

$

3.94

$

5.18

$

3.68

Natural gas liquids ($/Bbl)

$

11.69

$

21.99

$

32.01

$

22.76

$

28.08

Total ($/Boe)

$

55.59

$

68.03

$

55.27

$

67.34

$

50.95

 
Operating Costs and Expenses per Boe:
Lease operating expense

$

33.40

$

37.74

$

33.52

$

29.87

$

24.61

Production and ad valorem taxes

$

4.01

$

5.42

$

4.31

$

4.99

$

3.90

Depreciation, depletion, amortization and accretion

$

4.39

$

4.30

$

4.18

$

4.19

$

6.89

General & administrative (including share-based compensation)

$

18.93

$

13.88

$

12.49

$

15.62

$

15.68

General & administrative (excluding share-based compensation)

$

13.65

$

9.93

$

6.84

$

12.18

$

12.89

EMPIRE PETROLEUM CORPORATION
Condensed Consolidated Balance Sheets
   
  As of December 31,
 

2022

2021

   
ASSETS  
Current Assets:  
Cash  

$

11,944,442

 

$

3,611,871

 

Accounts Receivable  

 

7,780,239

 

 

7,733,905

 

Derivative Instruments  

 

121,584

 

 

55,242

 

Inventory - Oil in Tanks  

 

1,840,274

 

 

1,037,880

 

Prepaids  

 

1,048,434

 

 

679,122

 

Total Current Assets  

 

22,734,973

 

 

13,118,020

 

   
Property and Equipment:  
Oil and Natural Gas Properties, Successful Efforts  

 

63,986,339

 

 

46,914,326

 

Less: Accumulated Depreciation, Depletion and Impairment  

 

(20,116,696

)

 

(17,525,918

)

Total Oil and Gas Properties, Net  

 

43,869,643

 

 

29,388,408

 

Other Property and Equipment, Net  

 

1,441,529

 

 

1,288,611

 

Total Property and Equipment, Net  

 

45,311,172

 

 

30,677,019

 

   
Derivative Instruments - Long Term  

 

-

 

 

194,018

 

Sinking Fund  

 

2,779,000

 

 

4,810,000

 

Utility and Other Deposits  

 

719,930

 

 

1,290,594

 

   
TOTAL ASSETS  

$

71,545,075

 

$

50,089,651

 

   
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current Liabilities:  
Accounts Payable  

$

5,843,366

 

$

4,329,535

 

Accrued Expenses  

 

9,461,010

 

 

5,844,184

 

Current Portion of Lease Liability  

 

256,975

 

 

180,105

 

Current Portion of Long-Term Debt  

 

2,059,309

 

 

1,700,663

 

Total Current Liabilities  

 

17,620,660

 

 

12,054,487

 

   
Long-Term Debt  

 

4,063,115

 

 

6,117,091

 

Long-Term Note Payable - PIE  

 

1,076,987

 

 

797,010

 

Long Term Lease Liability  

 

547,692

 

 

646,311

 

Asset Retirement Obligations  

 

25,000,740

 

 

20,640,599

 

Total Liabilities  

 

48,309,194

 

 

40,255,498

 

   
Stockholders' Equity:  
Series A Preferred Stock - $.001 Par Value, 10,000,000 Shares Authorized, 6 and 0 Shares Issued and Outstanding, Respectively  

 

-

 

 

-

 

Common Stock - $.001 Par Value 190,000,000 Shares Authorized, 22,093,503 and 19,840,648 Shares Issued and Outstanding, Respectively  

 

81,615

 

 

79,362

 

Additional Paid-in Capital  

 

75,303,479

 

 

68,988,134

 

Accumulated Deficit  

 

(52,149,213

)

 

(59,233,343

)

Total Stockholders' Equity  

 

23,235,881

 

 

9,834,153

 

   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  

$

71,545,075

 

$

50,089,651

 

EMPIRE PETROLEUM CORPORATION
Condensed Consolidated Statements of Cash Flows
  (Unaudited)
  Three Months Ended Twelve Months Ended
  December 31, September 30, December 31, December 31,
 

2022

2022

2021

2022

2021

   
Cash Flows From Operating Activities:  
Net Income (Loss)  

$

(2,289,519

)

$

215,941

 

$

(8,619,595

)

$

7,084,130

 

$

(18,614,962

)

   
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities:  
Stock Compensation and Issuances  

 

1,043,929

 

 

809,641

 

 

1,095,970

 

 

2,716,752

 

 

1,502,220

 

Amortization of Right of Use Assets  

 

128,613

 

 

44,627

 

 

82,683

 

 

263,847

 

 

137,046

 

Depreciation, Depletion and Amortization  

 

519,403

 

 

539,543

 

 

476,868

 

 

1,949,191

 

 

2,502,275

 

Accretion of Asset Retirement Obligation  

 

348,799

 

 

342,619

 

 

332,841

 

 

1,357,906

 

 

1,214,479

 

Impairment  

 

936,620

 

 

-

 

 

-

 

 

936,620

 

 

-

 

Loss on Settlement of Asset Retirement Obligations  

 

-

 

 

-

 

 

-

 

 

181,386

 

 

-

 

Loss on XTO Final Settlement  

 

-

 

 

1,448,363

 

 

-

 

 

1,448,363

 

 

-

 

PIE-Related Expense  

 

-

 

 

1,399,030

 

 

-

 

 

1,399,030

 

 

-

 

Amortization of Loan Issue Costs  

 

-

 

 

-

 

 

-

 

 

-

 

 

14,587

 

Right to Buy Issuance Costs  

 

-

 

 

-

 

 

-

 

 

-

 

 

989,115

 

Loss on Embedded Conversion Option  

 

-

 

 

-

 

 

4,597,035

 

 

-

 

 

4,504,104

 

Amortization of Discount on Convertible Notes  

 

-

 

 

-

 

 

1,057,084

 

 

-

 

 

7,727,213

 

Loss on Extinguishemt of Debt  

 

-

 

 

-

 

 

3,169,201

 

 

-

 

 

3,169,201

 

Convertible Debt Modification Inducement Expense  

 

-

 

 

-

 

 

-

 

 

-

 

 

2,276,813

 

Stock Issued for Interest Expense Payment  

 

-

 

 

-

 

 

55,073

 

 

-

 

 

296,127

 

Forgiveness of Payroll Protection Plan Loan  

 

-

 

 

-

 

 

(106,850

)

 

-

 

 

(267,550

)

Change in Operating Assets and Liabilities:  
Accounts Receivable  

 

(2,116,239

)

 

1,417,093

 

 

(916,187

)

 

(1,812,230

)

 

(6,482,271

)

Derivative Instruments  

 

278,741

 

 

(126,400

)

 

(141,066

)

 

127,676

 

 

(255,009

)

Inventory, Oil in Tanks  

 

(234,917

)

 

(412,768

)

 

174,637

 

 

(802,394

)

 

(506,571

)

Prepaids, Current  

 

(323,950

)

 

(184,958

)

 

(20,299

)

 

(369,312

)

 

95,371

 

Other Long Term Assets and Liabilities  

 

(612,463

)

 

39,033

 

 

(481,737

)

 

(568,690

)

 

(488,544

)

Accounts Payable  

 

2,991,255

 

 

(1,459,997

)

 

(116,467

)

 

526,682

 

 

2,210,285

 

Accrued Expenses  

 

2,478,344

 

 

(208,689

)

 

1,900,700

 

 

3,616,826

 

 

3,146,353

 

Net Cash Provided By Operating Activities  

 

3,148,616

 

 

3,863,078

 

 

2,539,891

 

 

18,055,783

 

 

3,170,282

 

   
Cash Flows from Investing Activities:  
Acquisition of Oil and Natural Gas Properties  

 

(497,613

)

 

-

 

 

(1,675,726

)

 

(2,702,613

)

 

(19,545,505

)

Additions to Oil and Natural Gas Properties  

 

(8,658,811

)

 

(276,024

)

 

-

 

 

(10,161,711

)

 

-

 

Purchase of Other Fixed Assets  

 

(3,442

)

 

(189,179

)

 

287,802

 

 

(311,229

)

 

(220,769

)

Cash Paid for Right of Use Assets  

 

(133,690

)

 

(44,009

)

 

(140,604

)

 

(268,934

)

 

(140,604

)

Sinking Fund Deposit  

 

2,671,000

 

 

-

 

 

(480,000

)

 

2,031,000

 

 

(4,810,000

)

Net Cash Used In Investing Activities  

 

(6,622,556

)

 

(509,212

)

 

(2,008,528

)

 

(11,413,487

)

 

(24,716,878

)

   
Cash Flows from Financing Activities:  
Proceeds from Debt Issued  

 

-

 

 

-

 

 

(106,850

)

 

-

 

 

19,493,000

 

Principal Payments of Debt  

 

(315,673

)

 

(461,779

)

 

(347,246

)

 

(1,699,840

)

 

(5,893,984

)

Proceeds from Stock and Warrant Issuance  

 

-

 

 

-

 

 

240,245

 

 

-

 

 

11,294,906

 

Proceeds from Option and Warrant Exercise  

 

212

 

 

405,220

 

 

-

 

 

3,390,115

 

 

-

 

Paycheck Protection Program Loan Proceeds  

 

-

 

 

-

 

 

106,850

 

 

-

 

 

106,850

 

Net Cash Provided By (Used In) Financing Activities  

 

(315,461

)

 

(56,559

)

 

(107,001

)

 

1,690,275

 

 

25,000,772

 

   
Net Change in Cash  

 

(3,789,401

)

 

3,297,307

 

 

424,362

 

 

8,332,571

 

 

3,454,176

 

   
Cash - Beginning of Period  

 

15,733,842

 

 

12,436,535

 

 

3,187,509

 

 

3,611,871

 

 

157,695

 

   
Cash - End of Period  

$

11,944,441

 

$

15,733,842

 

$

3,611,871

 

$

11,944,442

 

$

3,611,871

 

Empire Petroleum Corporation

Non-GAAP Information

Certain financial information included in Empire’s financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures include “Adjusted Net Income (Loss)”, “EBITDA” and “Adjusted EBITDA”. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be reported by other companies.

Adjusted Net Income (Loss) is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.

Three Months Ended

 

Twelve Months Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

 
Net Income (Loss)

$

(2,289,519

)

$

215,941

 

$

(8,619,595

)

$

7,084,130

$

(18,614,962

)

 
Adjusted for:
Stock compensation and issuances

 

1,043,929

 

 

809,641

 

 

1,095,970

 

 

2,716,752

 

1,502,220

 

Unrealized (gain) loss on derivatives

 

278,741

 

 

(126,400

)

 

(141,066

)

 

127,676

 

(255,009

)

Write off of JDA note receivable

 

-

 

 

1,399,030

 

 

-

 

 

1,399,030

 

-

 

XTO final settlement - noncash

 

-

 

 

1,448,363

 

 

-

 

 

1,448,363

 

-

 

Impairment cost

 

936,620

 

 

-

 

 

-

 

 

936,620

 

-

 

Settlement and fees related to Texas sales tax audit

 

180,040

 

 

-

 

 

-

 

 

1,269,358

 

-

 

Convertible debt modification inducement expense

 

-

 

 

-

 

 

-

 

 

-

 

2,276,813

 

Loss on convertible debt redemption option

 

-

 

 

-

 

 

3,169,201

 

 

-

 

3,169,201

 

Loss on conversion option

 

-

 

 

-

 

 

4,597,035

 

 

-

 

4,504,104

 

Right to buy issuance costs

 

-

 

 

-

 

 

-

 

 

-

 

989,115

 

Forgiveness of PPP loan

 

-

 

 

-

 

 

(106,850

)

 

-

 

(267,550

)

 
Adjusted Net Income (Loss)

$

149,811

 

$

3,746,575

 

$

(5,305

)

$

14,981,929

$

(6,696,068

)

 
Diluted Weighted Average Shares Outstanding

 

24,436,817

 

 

24,065,485

 

 

18,627,300

 

 

23,387,646

 

14,630,168

 

 
Adjusted Net Income (Loss) Per Share

$

0.01

 

$

0.16

 

$

(0.00

)

$

0.64

$

(0.46

)

 

The Company defines Adjusted EBITDA as net income (loss) plus net interest expense, depreciation, depletion and amortization (“DD&A”), accretion, amortization of loan issuance costs, right of use assets and discount on convertible notes, income tax (benefit) expense, and other non-cash items.

Company management believes this presentation is relevant and useful because it helps investors understand Empire’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use.

Three Months Ended

 

Twelve Months Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

 
Net Income (Loss)

$

(2,289,519

)

$

215,941

 

$

(8,619,595

)

$

7,084,130

$

(18,614,962

)

 
Add Back:
Interest Expense

 

161,777

 

 

125,330

 

 

1,227,586

 

 

509,540

 

8,600,699

 

DD&A

 

519,403

 

 

539,543

 

 

476,868

 

 

1,949,191

 

2,502,275

 

Accretion

 

348,799

 

 

342,619

 

 

332,841

 

 

1,357,906

 

1,214,479

 

Impairment cost

 

936,620

 

 

-

 

 

-

 

 

936,620

 

-

 

Amortization of right of use assets

 

128,613

 

 

44,627

 

 

82,683

 

 

263,847

 

137,046

 

EBITDA

$

(194,307

)

$

1,268,060

 

$

(6,499,617

)

$

12,101,234

$

(6,160,463

)

 
Consideration of noncash items:
Stock compensation and issuances

 

1,043,929

 

 

809,641

 

 

1,095,970

 

 

2,716,752

 

1,502,220

 

Unrealized (gain) loss on derivatives

 

278,741

 

 

(126,400

)

 

(141,066

)

 

127,676

 

(255,009

)

Write off of JDA note receivable

 

-

 

 

1,399,030

 

 

-

 

 

1,399,030

 

-

 

XTO final settlement - noncash

 

-

 

 

1,448,363

 

 

-

 

 

1,448,363

 

-

 

Settlement and fees related to Texas sales tax audit

 

180,040

 

 

-

 

 

-

 

 

1,269,358

 

-

 

Convertible debt modification inducement expense

 

-

 

 

-

 

 

-

 

 

-

 

2,276,813

 

Loss on convertible debt redemption option

 

-

 

 

-

 

 

3,169,201

 

 

-

 

3,169,201

 

Loss on conversion option

 

-

 

 

-

 

 

4,597,035

 

 

-

 

4,504,104

 

Right to buy issuance costs

 

-

 

 

-

 

 

-

 

 

-

 

989,115

 

Forgiveness of PPP loan

 

-

 

 

-

 

 

(106,850

)

 

-

 

(267,550

)

 
Adjusted EBITDA

$

1,308,403

 

$

4,798,694

 

$

2,114,673

 

$

19,062,413

$

5,758,431

 

 

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