Business Overview: Empire Petroleum Corporation (NYSE American: EP)

Executive Summary: Empire Petroleum Corporation is a small independent energy company pursuing a stated strategy of "unlocking value in developed assets" rather than high-risk exploration. Through four wholly-owned regional subsidiaries, Empire operates mature, long-lived oil and natural gas properties in New Mexico, North Dakota, Texas, and Louisiana, generating revenue by selling crude oil, natural gas, and NGLs at market-based prices. Growth is driven by low-cost well optimization, enhanced oil recovery, and selective proved-developed-producing (PDP) acquisitions rather than wildcat drilling, positioning Empire as a disciplined, low-decline-rate consolidator of legacy fields.

1. Core Business Model & How They Work

Empire's model is to acquire or already hold interests in mature, well-characterized oil and gas fields with established production histories and low decline rates, then apply targeted workovers, enhanced recovery techniques, and operational efficiencies to extend and improve production economics. The company sells its crude oil, natural gas, and NGLs into regional markets at the wellhead or via trucking/pipeline, with no firm long-term delivery commitments, giving it flexibility to sell to the best available purchaser.

  Mature, developed oil & gas fields
  NM (Lea County) | ND/MT (Starbuck Field) | TX (Fort Trinidad) | LA
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                  v
  Regional operating subsidiaries:
  Empire New Mexico | Empire North Dakota |
  Empire Texas | Empire Louisiana
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  Well optimization, workovers, enhanced oil
  recovery (e.g., Upper Charles formation wells),
  saltwater disposal system upgrades
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                  v
  Produced oil, natural gas, NGLs
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                  v
  Sold at market-based prices (lease-level, via
  truck or pipeline; no firm delivery commitments)
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                  v
  Revenue --> reinvested in further optimization
  and bolt-on PDP acquisitions in predictable,
  low-decline fields

Rather than betting on exploration success, Empire's growth algorithm is: (1) cost-effectively optimize existing wells, (2) lower unit operating costs to improve margin, (3) acquire additional PDP assets in fields with historically low decline rates, and (4) prioritize assets that create operating synergies with its existing footprint.

2. Business Segments

Empire operates as a single operating segment — oil and natural gas exploration, development, and production — executed through four geographically distinct, wholly-owned subsidiaries (New Mexico, North Dakota, Texas, Louisiana). There is no separate financial segment reporting by region or commodity.

3. Product Portfolio

Empire's outputs are the commodities produced across its four asset areas:

• Crude oil — the largest single revenue component (524,646 barrels in 2025), sold at market-based pricing adjusted for quality differentials.
• Natural gas — 860,599 Mcf produced in 2025, sold primarily at the lease location.
• NGLs — 150,224 barrels produced in 2025.

Key fields/assets by subsidiary:

• Empire New Mexico — ~709 gross (525 net) wells on ~48,000 gross acres in Lea County, primarily Grayburg/San Andres formations, plus secondary Queen-Seven Rivers-Yates, Devonian, Abo, Blinebry, Tubb, and Drinkard zones, and 18 royalty interest wells.
• Empire North Dakota — ~243 gross (118 net) wells on ~24,200 gross acres including the Starbuck Field, with a 2024 enhanced oil recovery program adding 13 Upper Charles formation wells and ongoing appraisal drilling for new target zones.
• Empire Texas — 118 gross (105 net) wells on ~43,000 gross acres at the Fort Trinidad Field (East Texas Basin), spanning eight productive formations with 49 miles of gathering infrastructure; a 2025 initiative targeted return-to-production via saltwater disposal system upgrades.
• Empire Louisiana — 7 gross (5 net) wells across Miocene, Frio, Cockfield, and Wilcox formations.

4. Competitive Landscape

Empire describes its operating environment as "highly competitive," ranging from small independent producers up to major integrated oil companies, many of which possess substantially greater financial, technical, and personnel resources. This disadvantages Empire in bidding for acquisition targets, securing oilfield equipment and services, and attracting skilled personnel during periods of industry-wide activity increases. On the sales side, Empire's revenue is concentrated — three customers accounted for 66% of combined 2025 revenue — though management believes alternative purchasers are available in its operating regions, limiting the practical impact of losing any single buyer.

5. Strategic Strengths & Risks

Strengths

• Diversified across four distinct geographic asset bases (New Mexico, North Dakota, Texas, Louisiana) and numerous producing formations, reducing single-field concentration risk relative to a pure single-asset peer.
• Disciplined "developed assets" strategy focuses capital on lower-risk workovers and enhanced recovery rather than exploration, aiming for more predictable returns.
• Outsourced accounting, HR, and other non-core functions keep the fixed cost base and headcount (61 full-time employees) lean relative to asset footprint.
• Active enhanced-oil-recovery and infrastructure investment (Starbuck Field EOR, Fort Trinidad saltwater disposal upgrades) demonstrates an operational playbook for extending the life of mature assets.

Risks

• Customer concentration: three customers represented 66% of 2025 revenue.
• No firm delivery commitments for oil or gas sales, leaving realized pricing and offtake fully exposed to local market and differential conditions.
• Significant competition from much larger, better-capitalized companies for acquisitions, services, and personnel.
• Full exposure to commodity price volatility with production costs of $30.83/BOE (excluding workovers), G&A of $16.40/BOE, and D&D of $15.56/BOE in 2025 — a fairly thin, price-sensitive margin structure.
• Mature-field operations carry ongoing risk of mechanical failure, water handling/disposal issues, and the need for continual reinvestment simply to maintain (not grow) production.
• Small scale relative to the broader E&P universe limits access to capital and ability to absorb commodity downturns.

6. Financial Overview

For fiscal year 2025, Empire produced 818,303 barrels of oil equivalent in total, comprising 524,646 barrels of oil, 860,599 Mcf of natural gas, and 150,224 barrels of NGLs. Average per-unit costs for 2025 were $30.83/BOE in production costs (excluding workovers), $16.40/BOE in general and administrative expenses, and $15.56/BOE in depreciation and depletion. The company maintained 61 full-time employees as of December 31, 2025, relying on outsourcing for most non-core administrative functions to keep overhead low relative to its multi-state asset base.

7. Summary Conclusion

Empire Petroleum is a small, geographically diversified independent producer executing a disciplined, low-risk strategy of optimizing mature, developed oil and gas assets rather than chasing exploration upside. The approach offers more predictable (if modest) returns and spreads risk across four distinct basins, but Empire remains a sub-scale commodity producer with thin per-unit margins, meaningful customer concentration, and no structural cost or pricing advantage over larger, better-capitalized competitors. It is best understood as a conservatively run, asset-optimization play rather than a business with any durable competitive moat.