EP

MKT CAP $127.6MP/E —DIV YIELD —FCF YIELD —REV TTM $31.1M −20.8%NET INCOME −$71.3MNET DEBT $12.1M52W 2.10 – 3.77SEC XBRL · TTM TO Invalid Date

How EP rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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We have incurred losses from operations in 2025 and 2024.
Inflation The effect of inflation on the Company has generally been to increase its cost of operations and direct costs associated with oil and natural gas production.
Liquidity and Going Concern The Company has a revolving line of credit agreement (Note 7) with Equity Bank which requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis.
As of December 31, 2025, the Company was in compliance with all required covenants and projected to be in compliance with all debt covenants over the next 12 months.
However, the Company carried a negative working capital of approximately $ 16.2 million as of December 31, 2025.
Working capital decreased by approximately $ 7.2 million from prior year primarily due to the overall pricing environment reducing operating cash flows, capital spend on various projects within Texas and North Dakota resulting in increased payables as operating cash flows decline, and lower overall production from redrilling and operational activity resulting in certain wells being down for a period of time during the period.
Additionally, the Company’s debt obligations continue to increase with various related parties as discussed below.
To meet its obligations, the Company increased its revolver commitment to $ 20.0 million in November 2024 which had approximately $ 2.5 million remaining unused commitment as of December 31, 2025; however, the revolver commitment is reduced monthly by $ 0.25 million commencing on December 31, 2024 (Note 7), limiting future access to capital.
Further, the Company entered into a promissory note and a convertible note with Phil Mulacek in June 2025 and September 2025, respectively.
Each respective note provided up to $ 4.0 million of available borrowing capacity.
As of December 31, 2025 , the promissory note had fully expired and the convertible note had $ 2.0 million outstanding.
The Company may borrow up to an additional $ 2.0 million of the convertible note’s available principal at the discretion of Mr.
Mulacek, per the terms of the agreement (Note 7).
Mulacek in connection with the convertible note (Note 7).
Further, a subscription rights offering was completed in August 2025, which raised approximately $ 2.5 million of gross proceeds (Note 9).
A portion of these proceeds were used to settle $ 2.0 million of the outstanding balance of the promissory note with Mr.
Mulacek, per the terms of the note, during the third quarter.
In February 2026, the Company entered into a convertible note with Mr.
Mulacek for $ 3.0 million to be used towards full settlement of the convertible note in September 2025 and general working capital needs.
In March 2026, this note was fully converted to common shares (Note 7).
An additional subscription rights offering was also announced and expected to raise gross proceeds of up to $ 10.0 million (Note 9).
While these transactions provide additional funding towards the Company’s obligations, the Company expects to have negative working capital for the next 12 months and future expected operating cash flows do not sufficiently meet the Company’s obligations.
Given the negative working capital and insufficient expected operating cash flow there is substantial doubt about the Company’s ability to continue as a going concern. Empire has committed financial support from Phil Mulacek who owns approximately 24.5% of our common stock outstanding as of December 31, 2025, and Energy Evolution, our largest stockholder, who owns approximately 30.8% of our common stock outstanding as of December 31, 2025.
Both are related parties of the Company (Note 13).
Mulacek and Energy Evolution are willing and able to provide these additional funds for Empire to continue to meet its obligations over the next 12 months.
Recent Developments The following is a brief listing of developments during the year ended December 31, 2025.
Additional information including subsequent events may be found elsewhere in this report.
On May 1, 2025, the Company extended its option to purchase certain New Mexico interests from Energy Evolution to allow for payment for such extension to be made in cash in lieu the issuance of the 16,800 shares of common stock.
The Company made a cash payment to Energy Evolution on September 30, 2025 to extend the purchase option for an additional year (Note 3).
On June 17, 2025, the Company issued a promissory note in the aggregate principal amount of $4.0 million to Mr.
Mulacek who immediately advanced $2.0 million under the note.
The Company may request in writing that Mr.
Mulacek advance up to another $2.0 million to the Company from time to time during the period beginning 45 days and ending 90 days after June 17, 2025.
The note accrues interest at 5.5% and may be repaid without penalty or premium prior to the maturity date of June 17, 2027.
Per the terms of the note, in the event that the Company closes a sale of its equity, the Company shall promptly, but in no event later than five business days after receipt of the proceeds, repay the lesser of (a) the initial $2.0 million advanced (including any interest or fees thereon) or (b) the amount of the equity sale to Mr.
In the event the Company receives proceeds from the sale of any of its equity after an initial equity sale repayment and any subsequent advance, the Company shall use such proceeds to promptly repay such subsequent advance, and all accrued and unpaid interest thereon, to Mr.
In August 2025, Empire completed an equity sale further described in Note 9 and repaid the outstanding note balance and all accrued and unpaid interest (Note 7).
On June 18, 2025, the Company entered into the second amendment to the revolver loan agreement with Equity Bank.
The amendment added Empire Texas Development LLC as a third borrower and extends the obligation security by liens on substantially all of the assets of Empire Texas Development LLC (Note 7).
In August 2025, Empire completed a subscription rights offering which raised gross proceeds of $2.5 million.

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Gone since FY2024

We have incurred losses from operations in 2024 and 2023.
Inflation The effect of inflation on the Company has generally been to increase its cost of operations, general and administrative costs and direct costs associated with oil and natural gas production.
Liquidity and Going Concern The Company has a revolving line of credit agreement with Equity Bank which requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis.
As of December 31, 2024, the Company was in compliance with all required covenants and projected to be in compliance with all debt covenants over the next 12 months.
However, the Company was in default of its covenants in the third quarter of 2024 but obtained a waiver on November 12, 2024, to alleviate all prior defaults.
The Company carried a negative working capital of approximately $8.9 million as of December 31, 2024, an overall decline of approximately $2.6 million from the previous year.
Cash on hand also declined approximately $5.5 million during the same period.
The overall decline in working capital and cash is primarily driven by the Starbuck Drilling Program in North Dakota which incurred substantial capital spend.
Additionally, the Company initiated a return-to-production program in Texas which incurred additional unforeseen operational costs.
The additional production from these projects did not fully offset the costs incurred and contributed to the overall negative financial trend.
To meet its obligations, the Company increased its revolver commitment to $20.0 million in November 2024 and had two rights offerings in April and November of 2024 which raised approximately $30.5 million of capital, net of transaction costs, to help fund the capital spend projects.
Additionally, as a result of increasing its revolver commitment, the Company had approximately $8.7 million remaining unused commitment as of December 31, 2024, which can be used for future obligations.
However, the revolver commitment is reduced monthly by $0.25 million commencing on December 31, 2024 (See Note 7), limiting future access to capital.
While these debt and equity transactions provided additional funding towards these projects and other obligations, the Company still carried approximately $8.9 million of negative working capital at period end and future expected operating cash flows do not sufficiently meet the Company’s obligations for the next 12 months.
Empire has committed financial support from Phil Mulacek who owns approximately 21.2% of our common stock outstanding as of December 31, 2024, and Energy Evolution, our largest stockholder who owns approximately 31.9% of our common stock outstanding as of December 31, 2024.
Both are related parties of the Company (see Note 14).
Mulacek and Energy Evolution are willing and able to provide these additional funds, if required, for Empire to continue to meet its obligations over the next 12 months.
Recent Developments Empire has completed 13 wells in North Dakota related to our Starbuck Drilling Program during the year ended December 31, 2024.
On February 16, 2024, Empire issued a Promissory Note to Energy Evolution, a related party.
Energy Evolution advanced Empire $5.0 million.
On May 24, 2024, Energy Evolution elected to convert the Note to shares of common stock of Empire and received 800,000 shares under the terms of the Promissory Note.
In April 2024, the Company completed a subscription rights offering (the "April Rights Offering”) which raised gross proceeds of approximately $20.7 million.
On April 9, 2024, Empire partially exercised a purchase option originally issued on August 9, 2023, (the "Purchase Option”) to acquire additional working interests in certain of Empire’s New Mexico properties from Energy Evolution.
The additional assets acquired represent approximately 60% of the total assets collectively acquired by Empire and Energy Evolution in the third quarter of 2023 (the "Option Assets”).
As consideration, upon closing of the partial exercise of the Purchase Option, Empire issued Energy Evolution 600,000 shares of common stock of Empire based on an agreed upon price of $ 5.00 per share for an aggregate agreed upon value of $ 3.0 million which was 60% of the purchase price of $ 5.0 million under the Purchase Option.
On August 8, 2024, Empire successfully extended the Purchase Option with the issuance of 16,800 shares of common stock to Energy Evolution to obtain the right to acquire the remaining Option Assets for an exercise price of $2.0 million subject to certain adjustments and payable in cash, unless the parties agree that some or all may be paid by issuance of common stock to Energy Evolution.
The Purchase Option expires on August 9, 2026.
On November 18, 2024, the Company entered into the First Amendment to the Credit Facility (the “First Amendment”) to increase the initial maximum revolver commitment to $20.0 million through December 29, 2026.
Production and Operating Data The following table sets forth a summary of our production and operating data: For the Years Ended December 31, 2024 2023 Production and operating data: Net sales volumes: Oil (Bbl) 581,159 487,869 Natural gas (Mcf) 916,955 854,274 Natural gas liquids (Bbl) 150,091 136,013 Total (Boe) 884,076 766,261 Average price per unit: Oil (1) $ 71.44 $ 75.19 Natural gas $ 0.37 $ 2.02 Natural gas liquids $ 14.21 $ 12.21 Total (Boe) $ 49.76 $ 52.29 Operating costs and expenses per Boe: Lease operating expense (excluding workovers) $ 24.46 $ 21.70 Workovers $ 6.71 $ 15.65 Total Lease operating expense $ 31.16 $ 37.36 Production and ad valorem taxes $ 4.26 $ 3.97 Depreciation, depletion, amortization and accretion $ 12.74 $ 6.33 General & administrative (excluding stock-based compensation) $ 14.23 $ 15.71 Stock-based compensation $ 2.44 $ 4.10 Total General & administrative $ 16.67 $ 19.81 (1) Excludes the effect of net cash receipts from (payments on) derivatives.
Results of Operations The following table reflects our summary of operating information.
Because of normal production declines, increased or decreased drilling activity and the effects of acquisitions, the historical information presented below should not be interpreted as indicative of future results.
For the Years Ended December 31, Percent 2024 2023 Change Oil revenues $ 41,515,661 $ 36,684,494 13% Natural gas revenues 343,503 1,726,754 -80% NGL revenues 2,132,666 1,660,256 28% Total product revenues 43,991,830 40,071,504 Lease operating expense 27,545,028 28,625,481 -4% Production and ad valorem taxes 3,770,078 3,044,411 24% Depreciation, depletion, amortization and accretion 11,263,010 4,852,555 132% General and administrative expense (excluding stock-based compensation) 12,581,859 12,034,185 5% Stock-based compensation 2,155,774 3,144,750 -31% Cash-based interest expense 894,282 650,637 37% Non-cash interest expense 620,987 349,790 78% Operating Loss (13,665,457 ) (11,625,091 ) 18% Net Loss (16,197,989 ) (12,469,605 ) 30% Revenues Revenues for 2024 increased compared to prior year primarily due to higher oil volumes in North Dakota due to our Starbuck Drilling Program partially offset by a slight overall decline in commodity prices.
Realized oil prices for 2024 were approximately $71.44 per barrel, while realized prices for the prior year were approximately $75.19 per barrel, a decrease in price of approximately 5%.
Oil volumes were higher by approximately 93,000 barrels or 19% primarily due to new wells completed in North Dakota during the third quarter of 2024 as well as the acquisition of additional working interest in New Mexico.
Realized natural gas prices for 2024 were approximately $0.37 per Mcf, while realized prices for the prior year were approximately $2.02 per Mcf, a decrease in price of approximately 82%.
This is primarily due to the depressed natural gas prices in the third quarter of 2024 in New Mexico.
Realized NGLs prices for 2024 were approximately $14.21 per barrel, while realized prices for the prior year were approximately $12.21 per barrel, an increase in price of approximately 16%.
Lease Operating Expense and Production Taxes Lease operating expense was lower in 2024 primarily due to lower workover activities partially offset by higher expenses related to an increase in production.
Lease operating expense includes approximately $5.9 million of total workover expense for 2024 as compared to approximately $12.0 million for 2023.
The higher workover expense in 2023 was primarily in New Mexico as Empire continued to work over wells in the region to enhance and maintain production.

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