What changed in this filing

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Item 9A. Controls and Procedures

2025-03-27 compared with 2024-03-28 · 1305 added, 1262 removed, 339 unchanged (88% of the section changed)

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report,

the Company carried out an evaluation under the supervision and participation of the Company’s Principal Executive Officer and Principal

Financial Officer, along with our management, of the effectiveness of the design and operation of the Company’s disclosure controls

and procedures as defined in Exchange Act Rule 13a-15(e).

Based on this evaluation, the Company’s Principal Executive Officer

and Principal Financial Officer concluded that the disclosure controls and procedures were effective, as of the end of the period covered

by this report, in ensuring the information required to be disclosed by the Company in the reports it files or submits under the Exchange

Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such

information is accumulated and communicated to management, including the Company’s Chief Executive Officer (principal executive

officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure.

Remediation of Material Weakness in Internal Control

over Financial Reporting

A material weakness is a deficiency, or combination

of deficiencies, in internal control over financial reporting such that there is a possibility that a material misstatement in our financial

statements will not be prevented or detected on a timely basis.

In 2021, a material weakness in internal control application was

discovered related to the internal controls over financial reporting, including disclosures around complex and non-routine transactions.

At December 31, 2022 and 2021, management believed the Company’s lack of sufficient accounting personnel with appropriate accounting

expertise to appropriately apply GAAP for complex and non-routine transactions and prepare associated financial statement disclosures

amounted to a material weakness in its internal control over financial reporting.

As of December 31, 2023, management has evaluated

the material weakness described above and believes that its design and implementation of internal control over financial reporting to

remediate the aforementioned material weakness and enhance the Company’s internal control environment has been achieved through

the strengthening of its accounting resources which to date has included the hiring of a Chief Accounting Officer in October 2021.

the first quarter of 2022, the Chief Accounting Officer engaged an outside company to undertake an internal controls review.

concluded in the third quarter of 2022.

Controls that would strengthen the Company’s internal control structure that were identified

during the course of the review were implemented in 2023.

The Company has continued to use the services of the outside company to assist

in its assessment of internal controls.

Additionally, in December 2022, we had a change in the Chief Accounting Officer although the former

Chief Accounting Officer continued to assist the Company on a part-time basis in the first half of 2023.

In addition to continuing to

enhance and refine control design, management added additional resources and focused efforts during 2023 to test the operational effectiveness

of the controls that were established.

In May 2023, we hired an additional accounting resource who serves as Controller.

Based on the foregoing remediation activities

and testing of controls, management concluded that the material weakness has been fully remediated.

Inherent Limitations on Effectiveness

The Company’s

discl osure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of

achieving their desired objectives.

AND PROCEDURES.

of Disclosure Controls and Procedures

of the end of the period covered by this report, the Company carried out an evaluation under the supervision and participation of the

Company’s Principal Executive Officer/Principal Financial Officer, along with our management, of the effectiveness of the design

and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).

Based on this

evaluation, the Company’s Principal Executive Officer/Principal Financial Officer concluded that the disclosure controls and procedures

were effective, as of the end of the period covered by this report, in ensuring the information required to be disclosed by the Company

in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified

in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s

Chief Executive Officer (Principal Executive Officer/Principal Financial Officer), to allow timely decisions regarding required disclosure.

Limitations on Effectiveness of Controls

Company’s disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance

of achieving their desired objectives.

Management recognizes that a control system, no matter how well designed and operated, can provide

6 unchanged sentences

to financial statement preparation and presentation .

Management's Report on Internal Control Over Financial

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting, as defined in Exchange

Report on Internal Control Over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange

Act Rule 13a-15(f).

The Company’s internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles.

Under the supervision and with the participation of

the Company’s management, including its Principal Executive Officer and Principal Financial Officer, the Company conducted an evaluation

of the effectiveness of its internal control over financial reporting based on the framework established by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated Framework.

Based on our evaluation under

that framework, our management concluded that our internal control over financial reporting is effective as of December 31, 2023.

Changes in Internal Control over Financial Reporting

While we continue to implement design enhancements

to our internal control procedures, we believe that, other than the changes described above regarding the ongoing remediation efforts,

there were no changes to our internal control over financial reporting which were identified in connection with the evaluation required

by Rules 13a-15(d) or 15d-15(d) under the Exchange Act during the fourth quarter of 2023 that have materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of Registered Public Accounting

This report does not contain an attestation report

of our independent registered public accounting firm related to internal control over financial reporting because the rules for smaller

reporting companies provide an exemption from the attestation requirement.

The Company’s internal control over financial reporting is designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles.

the supervision and with the participation of the Company’s management, including its Principal Executive Officer/Principal Financial

Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework

established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as set forth in Internal Control

- Integrated Framework.

Based on our evaluation under that framework, our management concluded that our internal control over financial

reporting is effective as of December 31, 2024.

in Internal Control over Financial Reporting

we continue to implement design enhancements to our internal control procedures, we believe that, there were no changes to our

internal control over financial reporting which were identified in connection with the evaluation required by

Rules 13a-15(d) or 15d-15(d) under the Exchange Act during the fourth quarter of 2024 that have

materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Registered Public Accounting Firm

report does not contain an attestation report of our independent registered public accounting firm related to internal control over financial

reporting because the rules for smaller reporting companies provide an exemption from the attestation requirement.

OTHER INFORMATION .

The Company was not informed by any of its directors

or Section 16 officers of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading

arrangement,” as those terms are defined in Item 408 of Regulation S-K, during the fourth quarter of 2023.

Company was not informed by any of its directors or Section 16 officers of the adoption or termination of a “Rule 10b5-1 trading

arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K, during

the fourth quarter of 2024.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE

OFFICERS AND CORPORATE GOVERNANCE.

The information called for by this Item 10 is incorporated

herein by reference to our definitive Proxy Statement for 2024 annual meeting of stockholders (“2024 Proxy Statement”) to

be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

EXECUTIVE COMPENSATION.

The information called for by this Item 11 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information called for by this Item 12 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

information called for by this Item 10 is incorporated herein by reference to our definitive Proxy Statement for 2025 annual meeting

of stockholders (“2025 Proxy Statement”) to be filed with the SEC no later than 120 days following the fiscal year ended

December 31, 2024.

COMPENSATION.

information called for by this Item 11 is incorporated herein by reference to our 2025 Proxy Statement to be filed with the SEC no later

than 120 days following the fiscal year ended December 31, 2024.

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

information called for by this Item 12 is incorporated herein by reference to our 2025 Proxy Statement to be filed with the SEC no later

than 120 days following the fiscal year ended December 31, 2024.

RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information called for by this Item 13 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information called for by this Item 14 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

information called for by this Item 13 is incorporated herein by reference to our 2025 Proxy Statement to be filed with the SEC no later

than 120 days following the fiscal year ended December 31, 2024.

ACCOUNTANT FEES AND SERVICES.

information called for by this Item 14 is incorporated herein by reference to our 2025 Proxy Statement to be filed with the SEC no later

than 120 days following the fiscal year ended December 31, 2024.

AND FINANCIAL STATEMENT SCHEDULES.

(1) Financial Statements

The financial statements under this item are included

in Item 8 of Part II of this Annual Report on Form 10-K.

(1) Financial

financial statements under this item are included in Item 8 of Part II of this Annual Report on Form 10-K.

(2) Schedules

4 unchanged sentences

Description of the Common Stock of Empire Petroleum Corporation (incorporated herein by reference to Exhibit 4.1 to the Company’s Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

Senior Secured Convertible Note due December 31, 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Form 8-K dated May 14, 2021, which was filed on May 20, 2021).

Common Share Warrant Certificate No.

2 unchanged sentences

Form of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K dated April 3, 2019, which was filed on April 9, 2019).

Senior Revolver Loan Agreement dated as of September 20, 2018 by and between Empire Louisiana, LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated September 20, 2018 filed on September 25, 2018).

First Amendment to Senior Revolver Loan Agreement, dated as of March 27, 2019, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 27, 2019, which was filed on April 2, 2019).

Loan Agreement dated as of August 6, 2020, by and between Empire Texas LLC and Petroleum Independent & Exploration LLC (incorporated herein by reference to Exhibit 10.6 to the Company's Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Second Amendment to Senior Revolver Loan Agreement, dated as of June 30, 2020, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September 30, 2020, which was filed on October 6, 2020).

Third Amendment to Senior Revolver Loan Agreement, dated as of December 31, 2020, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 10, 2021, which was filed on March 15, 2021).

Form of Securities Purchase Agreement entered into by and between Empire Petroleum Corporation and investors (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 30, 2021, which was filed on April 1, 2021).

Form of Common Share Warrant Certificate issued by Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated March 30, 2021, which was filed on April 1, 2021).

Fourth Amendment to Senior Revolver Loan Agreement, dated as of July 7, 2021, by and between Empire Louisiana LLC, Empire North Dakota LLC, and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated July 30, 2021, which was filed on August 4, 2021).

Employment Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Thomas W.

Pritchard (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated August 18, 2021, which was filed on August 24, 2021).

Employment Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Michael R.

2 unchanged sentences

(incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September 29, 2021, which was filed on October 5, 2021).

Pledge and Security Agreement dated as of September 29, 2021, made by Empire Petroleum Corporation in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated September 29, 2021, which was filed on October 5, 2021).

Common Share Warrant Certificate dated as of September 30, 2021 issued by Empire Petroleum Corporation in favor of Energy Evolution Master Fund, Ltd.

1 unchanged sentence

Empire Petroleum Corporation 2021 Stock and Incentive Compensation Plan (incorporated herein by reference to the Company’s Information Statement on Schedule 14C filed August 31, 2021).

Conversion Notice and Note Amendment dated as December 30, 2021 (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated December 30, 2021, which was filed on January 6, 2022).

Form of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.24 to the Company’s Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

2 unchanged sentences

Empire Petroleum Corporation 2022 Stock and Incentive Compensation Plan (incorporated herein by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed on July 27, 2022).

Employment Agreement dated as of September 13, 2022, by and between Empire Petroleum Corporation and Eugene J.

Sweeney (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated September 13, 2022, which was filed on September 19, 2022).

Empire Petroleum Corporation 2023 Stock and Incentive Compensation Plan (incorporated herein by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed on May 1, 2023).

20 unchanged sentences

(incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated February 16, 2024, which was filed on February 21, 2024).

Empire Petroleum Corporation 2024 Stock and Incentive Compensation Plan (incorporated herein by reference to Annex A to the Company’s Proxy Statement on Schedule 14A, filed on April 29, 2024).

Note Repayment and Loan Termination Agreement dated as of July 31, 2024, by and among Petroleum Independent & Exploration, LLC, Empire Texas LLC and Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated July 31, 2024, which was filed on August 6, 2024).

First Amendment to Revolver Loan Agreement dated as of November 18, 2024, by and between Empire North Dakota LLC and Empire ND Acquisition LLC, as borrowers, and Equity Bank, as lender (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated November 18, 2024, which was filed on November 22, 2024).

Petroleum Corporation Insider Trading Policy (submitted herewith).

of Empire Petroleum Corporation (submitted herewith).

Consent of Grant Thornton LLP (submitted herewith).

Consent of Cawley, Gillespie & Associates, Inc.

of Grant Thornton LLP (submitted herewith).

of Cawley, Gillespie & Associates, Inc.

(submitted herewith).

Rule 13a – 14(a)/15d – 14(a) Certification of Michael R.

Morrisett, Chief Executive Officer (submitted herewith).

Rule 13a – 14(a)/15d – 14(a) Certification of Stephen L.

Faulkner, Jr., Chief Financial Officer (submitted herewith).

Section 1350 Certification of Michael R.

13a – 14(a)/15d – 14(a) Certification of Michael R.

Morrisett, Chief Executive Officer

(submitted herewith).

13a – 14(a)/15d – 14(a) Certification of Michael R.

Morrisett, Principal Financial Officer

(submitted herewith).

1350 Certification of Michael R.

Morrisett, Chief Executive Officer (submitted herewith).

Section 1350 Certification of Stephen L.

Faulkner, Jr., Chief Financial Officer (submitted herewith).

Empire Petroleum Corporation Policy for the Recovery of Erroneously Awarded Compensation (submitted herewith).

Cawley, Gillespie & Associates, Inc.

1350 Certification of Michael R.

Morrisett, Principal Financial Officer (submitted herewith).

Petroleum Corporation Policy for the Recovery of Erroneously Awarded Compensation (incorporated herein

by reference to Exhibit 97 to the Company's Form 10-K for the fiscal year ended December 31, 2023,

which was filed on March 28, 2024).

Gillespie & Associates, Inc.

Summary Report (submitted herewith).

1 unchanged sentence

Interactive Data File (embedded within Inline XBRL document).

*Indicates a management contract or compensatory plan or arrangement identified

under the requirements of Item 15 of Form 10-K.

FORM 10-K SUMMARY.

Pursuant to the requirements of Section 13 or 15(d)

of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto

duly authorized.

Empire Petroleum Corporation

a management contract or compensatory plan or arrangement identified under the requirements of Item 15 of Form 10-K.

10-K SUMMARY.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

Petroleum Corporation

March 27, 2025

/s/ Michael R.

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange

Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates

/s/ Michael R.

Director, President and Chief Executive Officer

March 28, 2024

(Principal Executive Officer)

/s/ Stephen L.

Faulkner, Jr.

Chief Financial Officer and Chief Accounting Officer

March 28, 2024

FAULKNER, JR.

(Principal Financial Officer and Principal Accounting Officer)

Director and Chairman of the Board

March 28, 2024

/s/ Andrew L.

March 28, 2024

/s/ Benjamin J.

March 28, 2024

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm – Grant Thornton LLP (PCAOB ID Number 248 )

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

President and Chief Executive Officer

Executive Officer and Principal Financial Officer)

Accounting Officer

Accounting Officer)

and Chairman of the Board

PETROLEUM CORPORATION

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm – Grant Thornton LLP (PCAOB ID Number 248 )

Balance Sheets as of December 31, 2024 and 2023

3 unchanged sentences

to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

Board of Directors and Shareholders

Empire Petroleum Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets

of Empire Petroleum Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023

and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of

the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the

“financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each

of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the

United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to

be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of

its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over

financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over

financial reporting.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

of Directors and Stockholders

Petroleum Corporation

on the financial statements

have audited the accompanying consolidated balance sheets of Empire Petroleum Corporation (a Delaware corporation) and subsidiaries (the

“Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’

equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and

its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted

in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising

from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined there are no critical audit matters .

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2022.

Tulsa, Oklahoma

March 28, 2024

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

audit matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

GRANT THORNTON LLP

have served as the Company’s auditor since 2022.

PETROLEUM CORPORATION

BALANCE SHEETS

As of December 31,

12 unchanged sentences

Other Noncurrent Assets

$ 123,868,471

LIABILITIES AND STOCKHOLDERS' EQUITY

3 unchanged sentences

Current Portion of Lease Liability

Current Portion of Note Payable - Related Party (Note 4 and 7)

Current Portion of Note Payable - Related Party (Note 7)

Current Portion of Long-Term Debt

1 unchanged sentence

Long-Term Debt

Long-Term Note Payable - Related Party (Note 4 and 7)

Long Term Lease Liability

3 unchanged sentences

Stockholders' Equity:

Series A Preferred Stock - $ .001 Par

Value, 10,000,000 Shares

Authorized, 6 and 6 Shares

Issued and Outstanding, Respectively

Series A Preferred Stock - $ 0.001 Par Value, 10,000,000 Shares Authorized,

6 and 6 Shares Issued and Outstanding, Respectively

Common Stock - $ 0.001 Par Value 190,000,000 Shares Authorized,

6 unchanged sentences

Total Liabilities and Stockholders' Equity

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,

$ 123,868,471

accompanying notes are an integral part of these consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF OPERATIONS

For the Years Ended December 31,

Total Product Revenues

Gain (Loss) on Derivatives

Loss on Derivatives

Total Revenue

5 unchanged sentences

General and Administrative:

General and Administrative

Stock-Based Compensation

Total General and Administrative

Total Cost and Expenses

Operating Income (Loss)

Operating Loss

( 13,665,457 )

( 11,625,091 )

Other Income and (Expense):

1 unchanged sentence

( 1,515,269 )

( 1,000,427 )

Other Income (Expense)

Income (Loss) Before Taxes

( 1,017,263 )

Income Tax (Provision) Benefit

Net Income (Loss)

Loss Before Taxes

( 16,197,989 )

Net Income (Loss) per Common Share:

( 12,601,797 )

Income Tax Benefit

$ ( 16,197,989 )

$ ( 12,469,605 )

Net Loss per Common Share:

Weighted Average Number of Common Shares Outstanding:

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

Years Ended December 31, 2023 and 2022

accompanying notes are an integral part of these consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Preferred Stock

1 unchanged sentence

Accumulated Deficit

Balances, December 31, 2021

$ ( 59,233,343 )

Issuance of Preferred Stock

Stock-Based Compensation

Warrants Exercised

Balances, December 31, 2022

Balances as of December 31, 2022

$ ( 52,149,213 )

4 unchanged sentences

( 2,126,131 )

Stock Issued for Purchase Option (See Note 3)

Stock Issued for Purchase Option (Note 3)

Warrants Exercised

2 unchanged sentences

Stock-Based Compensation

Balances, December 31, 2023

Balances as of December 31, 2023

$ ( 64,618,818 )

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

( 16,197,989 )

Rights Offerings (Note 9)

Partial Conversion of Option to Purchase (Note 3)

Warrants Exercised

Conversion of Related-Party Note (Note 7)

Stock-Based Compensation

Balances as of December 31, 2024

$ 143,488,803

$ ( 80,816,807 )

accompanying notes are an integral part of these consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

Cash Flows From Operating Activities:

Net Income (Loss)

$ ( 16,197,989 )

Adjustments to Reconcile Net Income (Loss) to Net Cash

Provided By Operating Activities:

$ ( 12,469,605 )

Adjustments to Reconcile Net Loss to Net Cash

Provided By (Used In) Operating Activities:

Stock-Based Compensation

2 unchanged sentences

Accretion of Asset Retirement Obligation

Loss on Derivatives

Loss on Commodity Derivatives

Settlement on or Purchases of Derivative Instruments

Loss on XTO Final Settlement

PIE-Related Expense (See Note 4)

Loss on Financial Derivatives (See Note 7)

Amortization of Debt Discount on Convertible Notes

Loss on Extinguishment of Debt

Change in Operating Assets and Liabilities:

1 unchanged sentence

( 2,700,528 )

( 1,812,230 )

Inventory, Oil in Tanks

5 unchanged sentences

( 1,063,023 )

( 1,103,607 )

Net Cash Provided By (Used In) Operating Activities

3 unchanged sentences

( 2,094,419 )

( 2,702,613 )

Capital Expenditures - Oil and Natural Gas Properties (a)

Capital Expenditures - Oil and Natural Gas

Properties (1)

( 53,219,169 )

7 unchanged sentences

Cash Flows From Financing Activities:

Proceeds from Debt Issued

Borrowings on Credit Facility

Proceeds from Promissory Note - Related Party (Note 7)

Proceeds from Rights Offerings, net of transaction costs (Note 9)

Principal Payments of Debt

( 6,450,774 )

( 1,699,840 )

Proceeds from Stock Issuance and Warrant Exercises

2 unchanged sentences

( 5,541,044 )

( 4,151,934 )

Cash - Beginning of Period

2 unchanged sentences

Cash Paid for Interest

(a) Incurred capital expenditures were $25,053,107 and $11,206,207 for the respective periods.

The differences

between incurred and cash capital expenditures is due to changes in related accounts payable.

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

New Mexico LLC (“Empire New Mexico”)

(1) Incurred capital

expenditures were $42,214,332 and $25,053,107 for the respective periods.

The differences between incurred and cash capital expenditures

is due to changes in related accounts payable.

accompanying notes are an integral part of these consolidated financial statements.

PETROLEUM CORPORATION

TO CONSOLIDATED FINANCIAL STATEMENTS

1 - Organization and Basis of Presentation

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.

operates the following wholly-owned subsidiaries in its areas of operations:

New Mexico LLC (“Empire New Mexico”), consisting of the following entities:

New Mexico LLC d/b/a Green Tree New Mexico

3 unchanged sentences

○ Empire NM Assets LLC

Rockies Region

● Empire North Dakota (“Empire North Dakota”), consisting of the following entities:

North Dakota LLC (“Empire North Dakota”)

4 unchanged sentences

Louisiana LLC (“Empire Louisiana”)

Empire was incorporated in the State of Delaware in

The consolidated financial statements of Empire Petroleum Corporation and subsidiaries include the accounts of the Company and its

wholly-owned subsidiaries.

Liquidity and Going Concern

Company determined that it was not in compliance with the current ratio covenant contained in its revolving line of credit agreement

as of December 31, 2023 (see Note 7).

Upon discovering this issue, we notified the lender to request a waiver.

The noncompliance

is due to a higher level of payables related to the capital spending program in North Dakota.

On March 27, 2024, the Company obtained

a compliance waiver from the lender for December 31, 2023.

The Company will require funds to satisfy these payables related to

the capital spending program which are greater than estimated cash flows from operations over the next 12 months.

Company intends and has announced a subscription rights offering (“Rights Offering”) to raise additional funds for the

payables discussed above as well as the additional capital spending in 2024.

In March 2024, the Company commenced a Rights Offering

pursuant to which it intends to raise gross proceeds of up to approximately $25.0 million (see Note 18).

As a result of a subsequent

reduction in the subscription price per share, gross proceeds are now expected to be up to approximately $20.66 million.

Mulacek and Energy Evolution Master Fund, Ltd (“Energy Evolution”), both related parties of the Company (see Note 15)

and our largest stockholders collectively holding 46% of the common shares outstanding, have indicated that they intend to

participate in the Rights Offering and fully subscribe to the shares of Common Stock corresponding to their subscription rights.

They have each also indicated that they intend to exercise their over-subscription rights to purchase their pro rata share of the

underlying securities related to the Rights Offering that remain unsubscribed at the expiration date of the Rights Offering.

Rights Offering will not close until April 2024.

As such, it is likely that the Company would not be in technical compliance with

this same covenant as of March 31, 2024;

however, in the opinion of the Company this would be cured within the allowable period

under the Credit Facility at the close of the Rights Offering.

has initiated plans that will allow the Company to remain in compliance with this covenant.

The Company as stated above, has indications

from existing stockholders for a majority portion of the Rights Offering.

Management has considered these plans, including if

they are within the control of the Company, in evaluating ASC 205-40, Presentation of Financial Statements-Going Concern .

Management believes the above actions are sufficient to allow the Company to meet its obligations as they become due for a period

of at least 12 months from the issuance of these financial statements.

Management believes that the Rights Offering is probable

and this has alleviated the substantial doubt regarding the Company’s ability to continue as a going concern.

Note 2 – Summary of Significant Accounting

Principles of Consolidation

The consolidated financial statements include the

accounts and balances of the Company and have been prepared in accordance with accounting principles generally accepted in the United

States (“GAAP”).

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 terms "Company,” "we,” "us,”

"our,” and similar terms refer to Empire Petroleum Corporation and its subsidiaries.

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.

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

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.

These additional funds may be raised through related party warrants or a related party note payable that may or may not

have conversion rights into shares of common stock of Empire.

Management has considered these plans in evaluating FASB ASC 205-40, Presentation

of Financial Statements - Going Concern .

Management believes the above actions are sufficient to allow Empire to meet its obligations

as they become due within one year after the date the financial statements are issued.

Management believes that its plans, and support

from the existing related-party stockholders discussed above, is probable and has alleviated the substantial doubt regarding Empire’s

ability to continue as a going concern.

2 – Summary of Significant Accounting Policies

of Consolidation

consolidated financial statements include the accounts and balances of the Company and have been prepared in accordance with US GAAP.

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying

preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the

amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

Estimated quantities of crude oil, natural gas and

natural gas liquids (“NGL”) reserves are the most significant of the Company’s estimates.

All reserve data used in the

preparation of the consolidated financial statements, as well as included in Supplemental Information of Oil and Natural Gas Producing

Activities (Unaudited) , are based on estimates.

Reservoir engineering is a subjective process of estimating underground accumulations

of crude oil, natural gas and NGL.

There are numerous uncertainties inherent in estimating quantities of proved crude oil, natural gas

and NGL reserves.

The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological

interpretation and judgment.

As a result, reserve estimates may be different from the quantities of crude oil, natural gas and NGLs that

are ultimately recovered.

Other items subject to estimates and assumptions

include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances

for deferred income tax assets, and valuation of derivative instruments.

Management evaluates estimates and assumptions on an ongoing

basis using historical experience and other factors, including the current economic and commodity price environment.

The volatility of

commodity prices results in increased uncertainty inherent in such estimates and assumptions.

Although management believes these estimates

are reasonable, actual results may differ from estimates and assumptions of future events and these revisions could be material.

production may vary materially from estimated oil and natural gas proved reserves.

Actual future prices may vary significantly from price

assumptions used for determining proved reserves and for financial reporting.

Out of Period Adjustments

In the third quarter of 2022, the Company identified

and recorded an out-of-period adjustment related to the Joint Development Agreement discussed in Note 4.

The impact of recording this

adjustment reduced Utility and Other Deposits and increased Lease Operating Expense by approximately $ 1.3 million of which $ 797,000 related

to prior periods.

The impact of this adjustment was immaterial to the prior period financial statements and thus corrected in the current

Accounts Receivable

Accounts receivable include estimated amounts

due from crude oil, natural gas, and NGL purchasers and from non-operating working interest owners.

Accrued revenue related to product

sales from purchasers and operators are due under normal trade terms, generally requiring payment within 60 days of production.

For receivables

from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment

of joint interest billings.

Receivables are considered past due if full payment is not received by the contractual due date.

accounts are generally written off against the allowance for credit losses account only after all collection attempts have been exhausted.

quantities of crude oil, natural gas and NGLs reserves are the most significant of the Company’s estimates.

All reserve data used

in the preparation of the consolidated financial statements, including depletion estimates, and information included in Note 19 - Supplemental

Information of Oil and Natural Gas Producing Activities (Unaudited), are based on estimates.

Reservoir engineering is a subjective process

of estimating underground accumulations of crude oil, natural gas and NGLs.

There are numerous uncertainties inherent in estimating quantities

of proved crude oil, natural gas and NGLs reserves.

The accuracy of any reserve estimate is a function of the quality of available data

and of engineering and geological interpretation and judgment.

As a result, reserve estimates may be different from the quantities of

crude oil, natural gas and NGLs that are ultimately recovered.

items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset

retirement obligations, valuation allowances for deferred income tax assets, and valuation of derivative instruments.

Management evaluates

estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity

price environment.

The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions.

management believes these estimates are reasonable, actual results may differ from estimates and assumptions of future events and these

revisions could be material.

Future production may vary materially from estimated oil and natural gas proved reserves.

Actual future

prices may vary significantly from price assumptions used for determining proved reserves and for financial reporting.

of Period Adjustments

the third quarter of 2022, the Company identified and recorded an out-of-period adjustment related to the joint development agreement

(“JDA”) discussed in Note 7.

In 2023, the impact of recording this adjustment reduced other noncurrent assets and increased

lease operating expense by approximately $1.3 million of which $0.8 million related to prior to 2023.

The impact of the adjustment was

immaterial to the prior period financial statements and thus corrected in 2023.

No adjustments were made in 2024.

receivable include estimated amounts due from crude oil, natural gas, and NGLs purchasers and from non-operating working interest owners.

Accrued revenue related to product sales from purchasers and operators are due under normal trade terms, generally requiring payment

within 60 days of production.

For receivables from joint interest owners, the Company generally has the ability to withhold future revenue

disbursements to recover any non-payment of joint interest billings.

are stated at amounts due, net of an allowance for credit losses, if necessary and are considered past due if full payment is not received

by the contractual due date.

The Company estimates uncollectible amounts based on the length of time that the accounts receivable has

been outstanding, historical collection experience and current and future economic and market conditions, if failure to collect is expected

Past due accounts are generally written off against the allowance for credit losses account only after all collection attempts

have been exhausted.

The Company did not have an allowance for credit losses at either December 31, 2024 or 2023.

The Company’s accounts receivable as

of December 31, 2023 and 2022 are as follows:

Company’s accounts receivable are as follows:

Schedule of account receivable

Oil, Gas and NGL Receivables

As of December 31,

Oil, Gas and NGLs receivables

Joint interest billings

Receivable from Former CEO (See Note 14)

Joint interest billings - related party

Total Accounts receivable

Derivative Instruments

The Company enters into hedge agreements to manage

its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts is recognized as an asset or liability

on the Company’s consolidated balance sheets.

Realized gain or loss is recognized as a component of revenue when the derivative

contracts mature.

For contracts which have not matured, an unrealized gain or loss is recorded based on the change in the fair value of

the outstanding contracts.

Inventory primarily consists of oil in tanks which

has not been delivered and is valued at the lower of cost or net realizable value.

Oil and Natural Gas and Other Properties

The Company uses the successful efforts method of

accounting for its oil and gas activities.

Costs incurred are deferred until exploration and completion results are evaluated.

time, costs of activities with economically recoverable reserves are capitalized as proven properties, and costs of unsuccessful or uneconomical

activities are expensed.

Capitalized drilling costs are reviewed periodically

for impairment.

Costs related to impaired prospects or unsuccessful exploratory drilling is charged to expense.

Management's assessment

of the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of such leaseholds

impact the amount and timing of impairment provisions.

An impairment expense could result if oil and gas prices decline in the future

as it may not be economical to develop some of these unproved properties.

Lease options are capitalized as unproved property

acquisition costs and are reviewed for impairment if indicators exist that the carrying value of the lease option may not be recoverable.

If the lease options become impaired, expire or are abandoned, the options will be expensed.

If proved reserves are discovered after

the options are exercised, these costs will be reclassified as proved property.

Depreciation, depletion and amortization of producing properties

is computed on the units-of-production method on a property-by-property basis.

The units-of-production method is based primarily on estimates

of proved reserve quantities.

Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve

quantities will be revised in the near term.

Changes in estimated reserve quantities are applied to depreciation, depletion and amortization

computations prospectively.

Other property and equipment is depreciated on the straight-line method.

Segment Reporting

Operating segments are components of an enterprise

that engage in activities from which it may earn revenues and incur expenses and for which separate operational financial information

is available and is regularly evaluated by management.

Based on the Company’s organization and management, it has only one reportable

operating segment, which is oil and natural gas exploration and production.

Debt Issuance Costs

Debt issuance fees, which are recorded at cost, net

of amortization, are amortized over the life of the respective debt agreements utilizing the straight-line method.

Unamortized debt issuance

costs related to the Company’s credit facility are recorded in other noncurrent assets on the Company’s Consolidated Balance

Asset Retirement Obligations

The Company records the fair value of a liability

for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related

oil and natural gas property asset.

Subsequently, the asset retirement cost included in the carrying amount of the related asset is allocated

to expense through depletion of the asset.

Changes in the liability due to passage of time are recognized as an increase in the carrying

amount of the liability through accretion expense.

Based on certain factors, including commodity prices and costs, the Company may revise

its previous estimates of the liability, which would also increase or decrease the related oil and natural gas property asset.

Revenue Recognition

The Company’s revenues are comprised solely

of revenues from customers and include the sale of oil, natural gas and NGL.

The Company believes that the disaggregation of revenue

into these three major product types, as presented in the Consolidated Statements of Operations, appropriately depicts how the nature,

amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on its single geographic region, the

continental United States.

Revenues are recognized at a point in time when production is sold to a purchaser at a determinable price,

delivery has occurred, control has transferred and it is probable substantially all of the consideration will be collected.

fulfills its performance obligations under its customer contracts through delivery of oil, natural gas and NGL and revenues are recorded

on a monthly basis.

Concentrations

of Credit Risk

Empire’s accounts receivable are primarily receivables from oil and natural gas purchasers and joint interest owners.

natural gas purchasers 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.

operates a substantial portion of its oil and natural gas properties.

As the operator of a property we make full payments for costs associated

with the property and seek reimbursement from the other working interest owners in the property for their share of those costs.

operating agreements govern the operations of an oil or natural gas well and, in most instances, provide for the offsetting of amounts

payable or receivable between the Company and its joint interest owners.

Our joint interest partners consist primarily of independent

oil and natural gas producers.

If the oil and natural gas exploration and production industry in general were adversely affected, the

ability of the joint interest partners to reimburse Empire could be adversely affected.

Debt and Derivative Instruments

the year ended December 31, 2024, Empire added the following significant accounting policy and estimate relating to convertible debt

and derivative liability.

connection with Empire’s issuance of a promissory note in the first quarter of 2024, Empire bifurcated the embedded conversion

option and recorded the embedded conversion option as a long-term derivative liability in Empire’s consolidated balance sheets

in accordance with FASB ASC 815, Derivatives and Hedging .

The convertible debt and the derivative liability associated with the

promissory note were presented on the consolidated balance sheets as the long-term note payable – related party and long-term derivative

The convertible debt was carried at amortized cost.

The derivative liability was remeasured at each reporting period using

a binomial lattice model with changes in fair value recorded in the consolidated statements of operations in other income (expense).

The conversion option related to the promissory note was exercised in the second quarter of 2024.

See Note 7 for further details.

Company enters into hedge agreements to manage its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts

is recognized as an asset or liability on the Company’s consolidated balance sheets.

Realized gain or loss is recognized as a component

of revenue when the derivative contracts mature.

For contracts which have not matured, an unrealized gain or loss is recorded based on

the change in the fair value of the outstanding contracts.

primarily consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value.

Company’s right-of-use operating lease assets and lease liabilities are primarily for leased vehicles for field operations and

office spaces.

Some of these lease agreements include variable payments for non-lease components such as common area maintenance.

and Natural Gas and Other Properties

Company uses the successful efforts method of accounting for its oil and gas activities.

Costs incurred are deferred until exploration

and completion results are evaluated.

At such time, costs of activities with economically recoverable reserves are capitalized as proven

properties, and costs of unsuccessful or uneconomical activities are expensed.

drilling costs are reviewed periodically for impairment.

Costs related to impaired prospects or unsuccessful exploratory drilling are

charged to expense.

Management's assessment of the results of exploration activities, commodity price outlooks, planned future sales

or expiration of all or a portion of such leaseholds impact the amount and timing of impairment provisions.

An impairment expense could

result if oil and gas prices decline in the future as it may not be economical to develop some of these unproved properties.

options are capitalized as unproved property acquisition costs and are reviewed for impairment if indicators exist that the carrying

value of the lease option may not be recoverable.

If the lease options become impaired, expire or are abandoned, the options will

If proved reserves are discovered after the options are exercised, these costs will be reclassified as proved property.

and amortization of producing properties is computed on the units-of-production method on a property-by-property basis.

The units-of-production

method is based primarily on estimates of proved reserve quantities.

Due to uncertainties inherent in this estimation process, it is

at least reasonably possible that reserve quantities will be revised in the near term.

Changes in estimated reserve quantities are applied

to depletion and amortization computations prospectively.

Other property

and equipment is depreciated on the straight-line method.

Company operates as one operating segment and one reportable segment which is engaged in the exploration, development, and production of oil, gas, and NGLs in New

Mexico, North Dakota, Montana, Texas, and Louisiana, from which all of its revenues are derived and expenses incurred.

All financial

results are reviewed by the Chief Executive Officer (“CEO”), the Company’s Chief Operating Decision Maker (“CODM”),

on a consolidated basis to evaluate performance of the Company.

The single segment constitutes all of the consolidated entity and the

accompanying consolidated financial statements and the notes to the accompanying consolidated financial statements are representative

of such amounts.

Refer to Note 18 for further discussion.

Issuance Costs

issuance fees, which are recorded at cost, net of amortization, are amortized over the life of the respective debt agreements utilizing

the straight-line method.

We had approximately $0.2 million and $0.1 million of unamortized debt issuance costs as of year-end December

31, 2024 and 2023, respectively.

Unamortized debt issuance costs related to the Company’s credit facility are recorded in other

noncurrent assets on the Company’s consolidated balance sheets.

Retirement Obligations

Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding

increase in the carrying amount of the related oil and natural gas property asset.

Subsequently, the asset retirement cost included in

the carrying amount of the related asset is allocated to expense through depletion of the asset.

Changes in the liability due to passage

of time are recognized as an increase in the carrying amount of the liability through accretion expense.

Based on certain factors, including

commodity prices and costs, the Company may revise its previous estimates of the liability, which would also increase or decrease the

related oil and natural gas property asset.

Company’s revenues are comprised solely of revenues from customers and include the sale of oil, natural gas and NGLs.

believes that the disaggregation of revenue into these three major product types, as presented in the consolidated statements of operations,

appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based

on its single geographic region, the continental United States.

Revenues are recognized at a point in time when production is sold to

a purchaser at a determinable price, delivery has occurred, control has transferred and it is probable substantially all of the consideration

will be collected.

The Company fulfills its performance obligations under its customer contracts through delivery of oil, natural gas

and NGLs and revenues are recorded on a monthly basis.

The Company receives payment from one to three months after delivery.

Generally, each unit of product represents

a separate performance obligation.

The prices received for oil, natural gas and NGL sales under the Company’s contracts are generally

derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing.

As a result, r evenues from the sale of oil, natural gas and

NGL will decrease if market prices decline.

The sales of oil, natural gas and NGL, as presented on the Consolidated Statements of Operations,

represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others.

When selling oil, natural

gas and NGL on behalf of royalty or working interest owners, the Company is acting as an agent and thus reports the revenue on a net

actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information

not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded.

Variances between

the Company’s estimated revenue and actual payment are recorded in the month the payment is received.

Historically, these differences

have been insignificant.

each unit of product represents a separate performance obligation.

The prices received for oil, natural gas and NGLs sales under the

Company’s contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation,

fractionation and processing.

As a result, revenues from the sale of oil, natural gas and NGLs will decrease if market prices decline.

The sales of oil, natural gas and NGLs, as presented on the consolidated statements of operations, represent the Company’s share

of revenues net of royalties and excluding revenue interests owned by others.

When selling oil, natural gas and NGLs on behalf of royalty

or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

To the extent actual volumes

and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from

third parties, the expected sales volumes and prices for those properties are estimated and recorded.

Variances between the Company’s

estimated revenue and actual payment are recorded in the month the payment is received.

Historically, these differences have been insignificant.

the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts

due from customers are recorded in Accounts Receivable in the Consolidated Balance Sheets.

due from customers are recorded in accounts receivable on the consolidated balance sheets.

Taxes assessed by governmental authorities

on oil, natural gas and NGL sales are presented separately from such revenues in the Consolidated Statements of Operations.

Oil production is transported from the wellhead to

tank batteries or delivery points through flow-lines or gathering systems.

Purchasers of the oil take delivery at the tank batteries and

transport the oil by truck or at a pipeline delivery point and the Company collects a market price, net of pricing differentials.

is recognized when control transfers to the purchaser at the net price received by the Company.

Natural Gas and NGL Sales

Under the Company’s natural gas sales arrangements,

the purchaser takes control of wet gas at a delivery point near the wellhead or at the inlet of the purchaser’s processing facility.

The purchaser gathers and processes the wet gas and remits proceeds to the Company for the resulting natural gas and NGL sales.

on the nature of these arrangements, the processor is the agent and the purchaser is the Company’s customer, thus, the Company recognizes

natural gas and NGL sales based on the net amount of proceeds received from the purchaser.

Transaction Price Allocated to Remaining Performance

Substantially all

of the Company’s product sales are short-term in nature with a contract term of one year or less.

For these contracts, the Company

has utilized the practical expedient in ASC 606 which exempts the Company from the requirements to disclose the transaction price allocated

to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one

year or less.

For the Company’s product sales that have a

contract term greater than one year, the Company has utilized the practical expedient in ASC 606 which states the Company is not required

to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to

a wholly unsatisfied performance obligation.

Under these contracts, each unit of product generally represents a separate performance obligation;

therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations

is not required.

Prior-Period Performance Obligations

The Company records revenue in the month that product

is delivered to the purchaser.

Settlement statements for certain natural gas and NGL sales, however, may not be received for 30 to 90

days after the date the product is delivered, and as a result the Company is required to estimate the amount of product delivered to the

purchaser and the price that will be received for the sale of the product.

In these situations, the Company records the differences between

its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser.

Any identified

differences between the Company’s revenue estimates and actual revenue received have historically been insignificant.

For the years

ended December 31, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting

periods was not material.

Stock-Based Compensation

The Company recognizes stock-based compensation

expense associated with equity-based incentive awards consisting of stock options and restricted stock units.

The Company accounts for

forfeitures of equity-based incentive awards as they occur.

Stock-based compensation expense related to equity-based awards is generally

recognized as vesting occurs.

on oil, natural gas and NGLs sales are presented separately from such revenues in the consolidated statements of operations.

production is transported from the wellhead to tank batteries or delivery points through flow-lines or gathering systems.

of the oil take delivery at the tank batteries and transport the oil by truck or at a pipeline delivery point and the Company collects

a market price, net of pricing differentials.

Revenue is recognized when control transfers to the purchaser at the net price received

by the Company.

Gas and NGLs Sales

the Company’s natural gas sales arrangements, the purchaser takes control of wet gas at a delivery point near the wellhead or at

the inlet of the purchaser’s processing facility.

The purchaser gathers and processes the wet gas and remits proceeds to the Company

for the resulting natural gas and NGLs sales.

Based on the nature of these arrangements, the purchaser

is the Company’s processor, thus, the Company recognizes natural gas and NGLs sales based on the net amount of proceeds received

from the purchaser.

Price Allocated to Remaining Performance Obligations

Substantially

all of the Company’s product sales are short-term

in nature with a contract term of one year or less.

For these contracts, the Company has utilized the practical expedient in ASU 2024,

Revenue from Contracts with Customers (“Topic 606”) which exempts the Company from the requirements to disclose the

transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original

expected duration of one year or less.

the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient in

Topic 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if

the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Under these contracts, each unit of

product generally represents a separate performance obligation;

therefore, future volumes are wholly unsatisfied, and disclosure of the

transaction price allocated to remaining performance obligations is not required.

Performance Obligations

Company records revenue in the month that product is delivered to the purchaser.

Settlement statements for certain natural gas and NGLs

sales, however, may not be received for 30 to 90 days after the date the product is delivered, and as a result the Company is required

to estimate the amount of product delivered to the purchaser and the price that will be received for the sale of the product.

situations, the Company records the differences between its estimates and the actual amounts received for product sales in the month

that payment is received from the purchaser.

Any identified differences between the Company’s revenue estimates and actual revenue

received have historically been insignificant.

For the years ended December 31, 2024 and 2023, revenue recognized in the reporting period

related to performance obligations satisfied in prior reporting periods was not material.

Company recognizes stock-based compensation expense associated with equity-based incentive awards consisting of stock options and restricted

The Company accounts for forfeitures of equity-based incentive awards as they occur.

Stock-based compensation expense related

to equity-based awards is generally recognized as vesting occurs.

See Note 10 for further discussion.

The Company accounts for income taxes in accordance

with the asset and liability method of accounting for income taxes.

Under the asset and liability method, deferred tax assets and

liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts

of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary

differences are expected to be recovered or settled.

A valuation allowance is established if management determines it is more likely than

not that some portion of a deferred tax asset will not be realized.

Per Share Amounts

The Company calculates and discloses basic earnings

per share ("Basic EPS") and diluted earnings per share ("Diluted EPS").

The computation of basic earnings per share

is computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the

Diluted EPS gives effect to all dilutive potential

common shares outstanding during the period.

The computation of Diluted EPS does not assume conversion, exercise or contingent exercise

of securities that would have an anti-dilutive effect on losses.

As a result, if there is a loss from continuing operations, Diluted

EPS is computed in the same manner as Basic EPS.

Fair Value Measurements

The Financial Accounting Standards Board ("FASB")

fair value measurement standards define fair value, establish a consistent framework for measuring fair value and establish a fair value

hierarchy based on the observability of inputs used to measure fair value.

The three-level fair value hierarchy for

disclosure of fair value measurements defined by ASC Topic 820 is as follows:

Level 1 – Unadjusted, quoted

prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

An active market

is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information

on an ongoing basis.

Level 2 – Inputs, other than

quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market

data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 – Prices or valuations

that require unobservable inputs that are both significant to the fair value measurement and unobservable.

Valuation under Level 3 generally

involves a significant degree of judgment from management.

A financial instrument’s level within

the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Where available,

fair value is based on observable market prices or parameters or derived from such prices or parameters.

Where observable prices or inputs

are not available, valuation models are applied.

These valuation techniques involve some level of management estimation and judgment,

the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity.

reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no

longer justifies classification in the original level.

There were no transfers between fair value hierarchy levels for the years ended

December 31, 2023 and 2022.

Impairment of oil and natural gas properties -

The fair value of proved and unproved oil and natural gas properties was measured using valuation techniques that convert the future

cash flows to a single discounted amount.

Significant inputs to the valuation of proved and unproved oil and natural gas properties include

estimates of:

(i) recoverable reserves;

(ii) production rates;

(iii) future operating and development costs;

(iv) future commodity prices;

and (v) a market-based weighted average costs of capital.

The Company utilized a combination of the New York Mercantile Exchange ("NYMEX")

strip pricing and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves

and other risk characteristics.

For significant acquisitions, management utilized the assistance of a third-party valuation expert to

estimate the value of the oil and natural gas properties acquired.

The fair value of asset retirement obligations

is included in proved oil and natural gas properties with a corresponding liability.

The fair value was determined based on a discounted

cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated

with the incurrence of these costs.

The inputs used to value oil and natural gas

properties for impairments and asset retirement obligations require significant judgment and estimates made by management and represent

Level 3 inputs.

Financial instruments and other- The

fair values determined for accounts receivable, accrued expenses and other current liabilities were equivalent to the carrying value due

to their short-term nature and generally represent Level 2 fair values.

Derivatives – Derivative financial

instruments are carried at fair value and measured on a recurring basis.

The Company’s commodity price hedges are valued based on

discounted future cash flow models that are primarily based on published forward commodity price curves;

thus, these inputs are designated

as Level 2 within the valuation hierarchy.

The fair values of derivative instruments in

asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions

include measures of the Company’s nonperformance risk.

These measurements were not material to the Consolidated Financial Statements.

The fair value of the amount outstanding on

our credit facility is equivalent to the carrying value due to the variable interest rate on such facility.

Related Party Transactions

Transactions between related parties are considered

to be related party transactions even though they may not be given accounting recognition.

FASB ASC 850, Related Party Disclosures (“FASB

ASC 850”) requires that transactions with related parties that would have influence in decision making shall be disclosed so that

users of the financial statements can evaluate their significance.

Related party transactions typically occur within the context of the

following relationships:

Company accounts for income taxes in accordance with the asset and liability method of accounting for income taxes.

Under the asset

and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences

between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss

and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the

taxable income in the years in which those temporary differences are expected to be recovered or settled.

A valuation allowance is established

if management determines it is more likely than not that some portion of a deferred tax asset will not be realized.

Interest and penalties,

if any, related to accrued liabilities for potential tax assessments are included in income tax benefit (expense) on the consolidated

statements of operations.

Share Amounts

Company calculates and discloses basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS").

The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average

number of outstanding common shares during the period.

EPS gives effect to all dilutive potential common shares outstanding during the period.

The computation of Diluted EPS does not assume

conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

As a result, if there

is a loss from continuing operations, Diluted EPS is computed in the same manner as Basic EPS.

Value Measurements

FASB ASC 820, Fair Value Measurement (“Topic 820”) standards define fair value, establish a consistent framework for

measuring fair value and establish a fair value hierarchy based on the observability of inputs used to measure fair value.

three-level fair value hierarchy for disclosure of fair value measurements defined by Topic 820 is as follows:

1 – Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets

or liabilities.

An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency

and volume to provide pricing information on an ongoing basis.

2 – Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability

through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

3 – Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable.

Valuation under Level 3 generally involves a significant degree of judgment from management.

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

Where observable prices or inputs are not available, valuation models are applied.

These valuation techniques involve some

level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market

and the instrument’s complexity.

The Company reflects transfers between the three levels at the beginning of the reporting period

in which the availability of observable inputs no longer justifies classification in the original level.

There were no transfers between

fair value hierarchy levels for the years ended December 31, 2024 and 2023.

Party Transactions

between related parties are considered to be related party transactions even though they may not be given accounting recognition.

ASC 850, Related Party Disclosures (“Topic 850”) requires that transactions with related parties that would

have influence in decision making shall be disclosed so that users of the financial statements can evaluate their significance.

party transactions typically occur within the context of the following relationships:

affiliates of the entity;

entities for which investments in their equity securities is typically accounted for

under the equity method by the investing entity;

entities for which investments

in their equity securities is typically accounted for under the equity method by the investing entity;

trusts for the benefit of employees;

principal owners of the entity and members of their

immediate families;

principal owners of the entity and members of their immediate families;

management of the entity and members of their immediate families;

and other parties that can significantly influence

the management or operating policies of the transacting parties and can significantly influence the other to an extent that one or more

of the transacting parties might be prevented from fully pursuing its own separate interests.

Recently Issued Accounting Pronouncements

FASB periodically issues new accounting standards

in a continuing effort to improve standards of financial accounting and reporting.

The Company has reviewed the recently issued pronouncements

and concluded that the following new accounting standards are applicable:

In June 2016, the FASB issued Accounting Standards

Update ("ASU”) 2016-13, Financial Instruments – Credit Losses .

This ASU, as further amended, affects trade

receivables, financial assets and certain other instruments that are not measured through net income.

This ASU will replace the currently

required incurred loss approach with an expected loss model for instruments measured at amortized cost and is effective for financial

statements issued for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

of this ASU on January 1, 2023 by the Company did not have a material impact on the Company’s consolidated financial statements

since the Company does not have a history of material credit losses.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt

with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The amendments in this ASU affect entities

that issue convertible instruments and/or contracts in an entity’s own equity.

The amendments in this ASU primarily affect convertible

instruments issued with beneficial conversion features or cash conversion features because the accounting models for those specific features

However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements of

For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features

that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives

scope exception related to certain requirements of the settlement assessment.

Also affected is the assessment of whether an embedded conversion

feature in a convertible instrument qualifies for the derivatives scope exception.

Additionally, the amendments in this ASU affect the

diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments.

The amendments in this

ASU are effective for public business entities, excluding entities eligible to be smaller reporting companies, for fiscal years beginning

after December 15, 2021, including interim periods within those fiscal years.

For all other entities, the amendments are effective for

fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Board specified that an entity

should adopt the guidance as of the beginning of its annual fiscal year.

The Board decided to allow entities to adopt the guidance through

either a modified retrospective method of transition or a fully retrospective method of transition.

The Company is analyzing the effect

that adoption will have but does not currently expect a material impact as a result of adopting these standards.

Note 3 – Property

The capitalized costs of oil and natural gas properties

as of December 31, 2023 and 2022 are as follows:

and other parties that can significantly influence the management or operating policies of the transacting parties and can significantly

influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate

Issued Accounting Pronouncements

FASB periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting.

The Company has reviewed the recently issued pronouncements and concluded that the following new accounting standards are applicable:

June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses .

This ASU, as further amended, affects

trade receivables, financial assets and certain other instruments that are not measured through net income.

This ASU will replace the

currently required incurred loss approach with an expected loss model for instruments measured at amortized cost and is effective for

financial statements issued for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The adoption of this ASU on January 1, 2023, by the Company did not have a material impact on the Company’s consolidated financial

statements as the Company does not have a history of credit losses.

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:

Accounting for Convertible Instruments and Contracts in an Entity’s

Own Equity (“Subtopic 815-40”).

The amendments in this ASU affect entities that issue convertible instruments and/or

contracts in an entity’s own equity.

The amendments in this ASU primarily affect convertible instruments issued with beneficial

conversion features or cash conversion features because the accounting models for those specific features are removed.

However, all entities

that issue convertible instruments are affected by the amendments to the disclosure requirements of this ASU.

For contracts in an entity’s

own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives

under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain

requirements of the settlement assessment.

Also affected is the assessment of whether an embedded conversion feature in a convertible

instrument qualifies for the derivatives scope exception.

Additionally, the amendments in this ASU affect the diluted EPS calculation

for instruments that may

be settled in cash or shares and for convertible instruments.

The amendments in this ASU are effective for public business entities,

excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim

periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15,

2023, including interim periods within those fiscal years.

The Board specified that an entity should adopt the guidance as of the beginning

of its annual fiscal year.

The Company adopted this standard on January 1, 2024 through a modified retrospective method of transition

and determined it did not impact the prior period financials.

The adoption also did not have a material impact on our current period

consolidated financial statements.

November 2023, FASB issued ASU 2023-07, Segment Reporting (“Topic 280”).

This update requires that a public entity,

including entities with a single reportable segment, disclose significant segment expenses that are regularly provided to the chief operating

decision maker, as well as other segment items that are included in the calculation of segment profit or loss.

A public entity will also

be required to disclose all annual disclosures about a reportable segment's profit or loss currently required by Topic 280 in interim

Although a public entity is permitted to disclose multiple measures of a segment's profit or loss, at least one of the reported

segment profit or loss measures should be consistent with the measurement principles used in measuring the corresponding amounts of the

public entity's consolidated financial statements.

Further, a public entity must disclose the title and position of the CODM as well

as how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within

fiscal years beginning after December 15, 2024.

December 2023, FASB, issued ASU 2023-09, Income Taxes:

Improvements to Income Tax Disclosures (“Topic 740”).

in Topic 740 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation

and income taxes paid disaggregated by jurisdiction.

The standard is effective for public companies for fiscal years beginning after

December 15, 2024 with early adoption permitted and should be applied prospectively.

The Company is currently evaluating the impact of

this standard on its consolidated financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation

Disclosures (“Subtopic 220-40”), which expands disclosures around a public entity’s costs and expenses of specific

items (i.e., employee compensation, DD&A), requires the inclusion of amounts that are required to be disclosed under US GAAP in the

same disclosure as other disaggregation requirements, requires qualitative descriptions of amounts remaining in expense captions that

are not separately disaggregated quantitatively, and requires disclosure of total selling expenses, and in annual periods, the definition

of selling expenses.

The amendment does not change or remove existing disclosure requirements.

The amendment is effective for fiscal

years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027.

Early adoption is permitted,

and the amendment can be adopted prospectively or retrospectively to any or all periods presented in the financial statements.

is currently assessing the impact of adopting this standard which is expected to only affect financial statement disclosures.

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 depletion and amortization are eliminated from the accounts and the resulting

gain or loss is recognized.

incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred.

is calculated on a unit-of-production basis at the field level based on total proved developed reserves.

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 years ended December 31, 2024 and 2023.

aggregate capitalized costs of oil and natural gas properties are as follows:

As of December 31,

Proved properties

$ 134,239,227

Unproved properties

1 unchanged sentence

Gross capitalized costs

Depreciation, Depletion, Amortization and Impairment

Accumulated depletion, amortization and impairment

( 31,974,184 )

1 unchanged sentence

Total Oil and gas properties, net

August 9, 2023, the Company and a subsidiary of Energy Evolution Master Fund, Ltd.

(“Energy Evolution”), a related

party, collectively acquired additional working interests in certain of the Company’s New Mexico properties.

The Company paid

$ 2.1 million in cash and acquired 10% of the total acquired working interests in the transaction.

The subsidiary of Energy Evolution

acquired the other 90% of the acquired working interest ("EEF Interest”).

The Company has a one-year option to acquire

the EEF Interest for $ 5 million, subject to adjustments ("Purchase Option”).

In exchange for the Purchase Option, the

Company issued 67,000 shares of common stock valued at approximately $ 601,000 and reflected in Other Noncurrent Assets.

has the right to extend the initial one-year Purchase Option period for two successive one-year periods by agreeing to issue an

additional 42,000 shares of common stock prior to the end of the one-year period then in effect.

The Purchase Option may be

exercised by the Company at any time during the one-year period then in effect by sending written notice to Energy Evolution prior

to the expiration of such one-year period.

Company assesses its oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its estimated

future net cash flows.

The Company did not identify any impairments in 2023.

In 2022, estimated future cash flows from the Company’s

properties in Louisiana were less than the net book value.

As a result, the Company recorded a $ 936,000 impairment expense in 2022.

In April 2022, the Company purchased working interests

of oil and natural gas properties primarily located in the Landa field in North Dakota and assumed the role of operator.

$ 108,701,215

amortization expense related to oil and gas properties for the years ended December 31, 2024 and 2023, was approximately $ 9.0 million

and $ 2.8 million , respectively.

has completed 13 wells in North Dakota related to our Starbuck Drilling Program during the year ended December 31, 2024.

August 9, 2023, the Company and a subsidiary of Energy Evolution, a related party,

collectively acquired additional working interests in certain of the Company’s New Mexico properties.

The Company paid $ 2.1

approximately $ 1.4 million for eight producing properties, two properties with behind-pipe reserves, and related lease and well equipment.

The Company allocated 80 % of the acquisition cost to leasehold costs and the remaining 20 % to related lease and well equipment.

asset retirement obligations were assumed of $ 233,659 .

The acquisition was accounted for as an asset acquisition.

The Company purchased

additional oil and gas properties in 2022 totaling $ 1.3 million .

Other property and equipment consists of operating

lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years.

The capitalized costs of other property

and equipment as of December 31, 2023 and 2022 are as follows:

million in cash and acquired 10% of the

total acquired working interests in the transaction.

The subsidiary of Energy Evolution acquired the other 90% of the acquired

working interest ("EEF Interest”).

The Company has a one-year option

to acquire the EEF Interest for $ 5.0 million, subject to adjustments ("Purchase Option”).

In exchange for the

Purchase Option, the Company issued 67,000 shares of common stock valued at approximately $ 0.6 million and reflected in other

noncurrent assets.

The Company has the right to extend the initial one-year Purchase Option period for two successive one-year

periods by agreeing to issue an additional 42,000 shares of common stock prior to the end of the one-year period then in effect.

Purchase Option may be exercised by the Company at any time during the one-year period then in effect by sending a written notice to

Energy Evolution prior to the expiration of such one-year period.

April 9, 2024, Empire partially exercised the Purchase Option to acquire additional working interests in certain of Empire New Mexico’s

properties from Energy Evolution, a related party.

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.

Pursuant to the remaining unexercised portion of the Purchase Option, Empire had the right to extend the initial

one-year Purchase Option period for two successive one-year periods by agreeing to issue additional shares of common stock prior to the

end of the one-year period then in effect.

August 8, 2024, Empire successfully extended the Purchase Option with the issuance of 16,800 shares of common stock to Energy Evolution,

and as such, Empire has 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.

Option expires on August 9, 2026.

property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to

The capitalized costs of other property and equipment are as follows:

Schedule of other property plant and equipment

As of December 31,

Other property and equipment, at cost

1 unchanged sentence

( 1,912,716 )

Oher property and equipment, net

Note 4 – Joint Development and Shared Services Agreements

On August 6, 2020 the Company, through its wholly

owned subsidiary, Empire Texas, entered into a joint development agreement (the “JDA”) with Petroleum & Independent Exploration,

LLC and related entities (“PIE”), a related party, dated August 1, 2020.

Under the terms of the JDA, PIE will perform recompletion

or workover on specified mutually agreed upon wells (“Workover Wells”) owned by Empire Texas.

To fund the work, PIE entered

into a term loan agreement with Empire Texas dated August 1, 2020, whereby PIE will loan up to $ 2,000,000 , at an interest rate of 6 % per

annum, maturing August 7, 2024 unless terminated earlier by PIE.

Proceeds of the loan will be used for recompletion or workover of the

Workover Wells.

As of December 31, 2023 and 2022 approximately $ 1,100,000 was outstanding on this loan and is included in Current Portion

of Note Payable – Related Party and Long-Term Note Payable – Related Party on the Consolidated Balance Sheet, respectively.

As part of the JDA, Empire Texas will assign to PIE a combined 85% working and revenue interest in the Workover Wells;

an assignment was

completed in October 2020 for the initial three Workover Wells.

Of the assigned interest, 70% working and revenue interest will be used

to repay the obligations under the term loan agreement.

Once the term loan is repaid, PIE will reassign a 35% working and revenue interest

to Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest (See Note 7).

To the extent the cash flows

from the revenue interest are insufficient to repay the obligations under the term loan, the Company remains required to repay the obligation.

In the third quarter of 2022, a $ 1.4 million long-term asset that had previously been recorded as

an offset to the note payable was expensed to workovers within Lease Operating Expense on the Consolidated Statements of Operations.

The Company has also entered into a Shared Services

Agreement with PIE effective August 1, 2023 that includes access to administrative, engineering and support services as well as building

and insurance services.

The agreement provides that the Company will reimburse PIE for the out-of-pocket or actual costs incurred by

PIE in providing such services to the Company.

Note 5 – Asset Retirement Obligations

The Company’s asset retirement obligations represent

the estimated present value of the estimated cash flows the Company will incur to plug, abandon and remediate its producing properties

at the end of their productive lives, in accordance with applicable state laws.

Market risk premiums associated with asset retirement

obligations are estimated to represent a component of the Company’s credit-adjusted risk-free rate that is utilized in the calculations

of asset retirement obligations.

The Company’s asset retirement obligation transactions during the

years ended December 31, 2023 and 2022 are summarized in the table below.

For the Year Ended December 31,

( 1,114,807 )

Other property and equipment, net

expense related to other property and equipment for the years ended December 31, 2024 and 2023, was approximately $ 0.3 million and $ 0.2

million, respectively.

4 - Asset Retirement Obligations

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.

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.

Company’s asset retirement obligation activities are summarized in the following table:

For the Years Ended December 31,

Asset retirement obligations, beginning of period

Liabilities assumed in acquisitions

Liabilities incurred from drilling activity and assumed in acquisitions

Liabilities settled

1 unchanged sentence

Asset retirement obligation, end of period

Less current portion included in Accrued Expenses

current portion included in Accrued expenses

Asset retirement obligation, long-term

The revisions in 2023 primarily reflect cost revision

estimates to wells in New Mexico based on 2023 plugging activity.

The revisions in 2022 primarily relate to the identification of nonproducing

wells, including injection wells and temporarily abandoned wells in New Mexico.

Note 6 – Commodity Derivative Financial Instruments

The Company uses derivative financial instruments

to manage its exposure to commodity price fluctuations.

Commodity derivative instruments are used to reduce the effect of volatility of

price changes on the oil and natural gas the Company produces and sells.

The Company does not enter into derivative financial instruments

for speculative or trading purposes.

The Company’s derivative financial instruments consist of swaps and put options.

The Company does not designate its derivative instruments

to qualify for hedge accounting.

Accordingly, the Company reflects changes in the fair value of its derivative instruments in its Consolidated

Statements of Operations as they occur.

These contracts are recognized and recorded at fair value as an asset or liability on the Company’s

Consolidated Balance Sheets.

The following table summarizes the net realized and

unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022:

For the Year Ended December 31,

Gain (loss) on derivatives:

Oil derivatives

The liabilities incurred from drilling activity in 2024 primarily relate to the completion of new wells

as part of Empire’s North Dakota Starbuck Drilling Program.

The liabilities assumed in acquisitions in 2024 relate to additional

working interest acquired in New Mexico.

5 – Commodity Derivative Financial Instruments

Company has used derivative financial instruments to manage its exposure to commodity price fluctuations in the past.

Commodity derivative

instruments have been 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 instrument activity has consisted of swaps and put options.

Company does not designate its derivative instruments to qualify for hedge accounting.

Accordingly, the Company reflects changes in the

fair value of its derivative instruments in its consolidated statements of operations as they occur.

These contracts are recognized and

recorded at fair value as an asset or liability on the Company’s consolidated balance sheets.

Cash receipts or payments upon settlement

of swaps and put options are reflected in the operating activities section of its consolidated statements of cash flows.

following table summarizes the net realized and unrealized amounts reported in earnings related to the oil derivative instruments:

For the Years Ended December 31,

Gain (loss) on derivatives, realized

$ ( 353,695 )

The following represents the Company’s net cash receipts from (payments

on) derivatives for the years ended December, 2023 and 2022:

For the Year Ended December 31,

Oil derivatives

Gain (loss) on derivatives, unrealized

Loss on derivatives, net

$ ( 388,886 )

following table represents the Company’s net cash receipts from (payments on) derivatives:

For the Years Ended December 31,

Cash receipts from (payments on) on oil derivatives, net

$ ( 353,695 )

The following table sets forth the Company’s outstanding derivative

contracts at December 31, 2023:

1st Quarter 2024

2nd Quarter 2024

3rd Quarter 2024

4th Quarter 2024

WTI Fixed-Price Swaps:

Quarterly volume (MBbls)

Weighted-average fixed price (Bbl)

7 – Debt and Note Payable - Related Party

The following table represents the Company’s

outstanding debt.

Company did not have any open commodity derivative positions as of December 31, 2024.

6 – Accrued Expenses

following table represents the Company’s accrued expenses:

As of December 31,

Accrued and suspended third-party revenue

Accrued salaries and payroll taxes

Accrued production taxes

Asset retirement obligation - current

Total Accrued Expenses

7 – Debt Including Debt with Related Parties

following table represents the Company’s outstanding debt:

As of December 31,

Equity Bank Credit Facility

CrossFirst Senior Revolver Loan Agreement

Note Payable – Related Party

1 unchanged sentence

Current Maturities

( 2,059,309 )

Note Payable – Related Party

( 1,060,004 )

( 1,076,987 )

Long-Term Debt

On December 29, 2023, Empire North Dakota and Empire

NDA ("Borrowers”), entered into a Revolver Loan Agreement with Equity Bank (the "Credit Facility”).

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;

Weighted-average interest rate of 8.32%

July 7, 2021, the Company entered into the Fourth Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank ("CrossFirst”)

as further amended by Letter Agreements in conjunction with redetermination dates (the “Amended Agreement”).

amount that could be advanced under the Amended Agreement was $ 20.0 million and the commitment amount following an August 9,

2023 , amendment agreement was approximately $ 5.2 million.

The Amended Agreement was subsequently retired with proceeds from the

new revolver loan agreement discussed below.

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 $10.0 million;

the maximum revolver commitment amount is $15.0 million;

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

The Credit Facility is guaranteed by the Company.

Borrowers entered into a security agreement, pursuant to which the obligations under the Credit Facility are secured by liens on substantially

all of the assets of Borrowers.

Furthermore, the obligations under the Credit Facility are secured by a continuing, first priority mortgage

lien, pledge of and security interest in not less than 80% of Borrowers’ producing oil, gas and other leasehold and mineral interests,

including without limitation, those situated in the States of North Dakota and Montana.

The Credit Facility requires Borrowers to, commencing

as of the fiscal quarter ended December 31, 2023, maintain (a) a current ratio of 1.0 to 1.0 or more and (b) a ratio of funded debt to

EBITDAX, calculated quarterly and annually based on a trailing twelve-month basis, of no more than 3.50 to 1.00.

At December 31, 2023,

the Borrowers were not in compliance with the current ratio, however, a waiver was obtained from the lender.

The Company is in compliance

with the other covenants as of December 31, 2023.

On July 7, 2021, the Company entered into the Fourth

Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank ("CrossFirst”) as further amended by Letter Agreements

in conjunction with redetermination dates (the “Amended Agreement”).

The maximum amount that could be advanced under the Amended

Agreement was $ 20,000,000 and the commitment amount following an August 9, 2023 amendment agreement was $ 5,180,000 .

Amended Agreement was subsequently retired with proceeds from the new Credit Facility discussed above.

On September 19, 2023, each of Phil Mulacek, a member

of the Company’s Board of Dierctors, and Energy Evolution made a bridge loan to Empire North Dakota in the amount of $ 5.0 million (collectively,

the "Bridge Loans”).

These Bridge Loans were subsequently converted to our common shares.

(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.

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.

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 (as defined in the Credit Facility), calculated quarterly and annually

based on a trailing twelve-month basis, of no more than 3.50 to 1.00.

At December 31, 2024, the Borrowers were in compliance with

all required covenants under the Credit Facility.

November 18, 2024, the Company entered into the First Amendment.

Pursuant to the First Amendment (a) the maximum revolver commitment

amount is $20.0 million;

and (b) commencing on December 31, 2024, and occurring on the last day of each calendar month thereafter, the

revolver commitment amount is reduced by $250,000.

September 19, 2023, each of Phil Mulacek, a member of the Company’s Board of Directors, and Energy Evolution made a bridge loan

to Empire North Dakota in the amount of $ 5.0 million (collectively, the "Bridge Loans”).

These Bridge Loans were

subsequently converted to our common shares through entering into subsequent Securities Purchase Agreements.

Mulacek and Energy Evolution

are each a related party of the Company.

See Note 15 for additional information regarding these Bridge Loans and the subsequent conversion

to our common shares.

Note Payable - Related Party

In August 2020, concurrent with the JDA with PIE,

a related party, the Company entered into a term loan agreement dated August 1, 2020, whereby PIE will loan up to $ 2,000,000 , at an interest

rate of 6 % per annum, maturing August 7, 2024, unless terminated earlier by PIE.

The loan proceeds will be used for recompletion or workover

of certain designated wells.

In addition, the Company assigned 85% working and revenue interest to PIE in the designated wells which will

be applied to repayment of the loan.

As of December 31, 2023, $1,060,004 has been advanced from the PIE loan.

Note 8 – Leases

As a lessee, the Company leases its corporate office

headquarters in Tulsa, Oklahoma and one field office.

The leases expire between 2024 and 2028.

The corporate office has an option to renew

for an additional five-year term.

The option to renew the lease is generally not considered reasonably certain to be exercised.

the period covered by such optional period is not included in the determination of the term of the lease and the lease payments during

these periods are similarly excluded from the calculation of right-of-use lease asset and lease liability balances.

The Company also leases vehicles primarily for use

by our field operations.

See Note 14 for additional information regarding the Securities Purchase Agreements and the

subsequent conversion to our common shares.

Note - Related Party

February 16, 2024, Empire issued a promissory note in the aggregate principal amount of $ 5.0 million (the "Note”) to Energy

Energy Evolution advanced Empire $ 5.0 million under the Note.

The proceeds of the Note were used by Empire to fund, in part,

its ongoing oil and gas drilling program and for working capital purposes.

Note matures on February 15, 2026, (the "Maturity Date”) and accrues interest at the rate of 7 % per annum.

After the Maturity

Date, any principal balance of the Note remaining unpaid accrues interest at the rate of 9 % per annum.

At the option of Energy Evolution,

interest payments will be paid either in cash or in shares of common stock of Empire on each of the following dates (or if any such 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

(iv) December 31, 2024;

(v) March 31, 2025;

(vi) June 30, 2025;

(vii) September 30, 2025;

(viii) December 31, 2025;

the Maturity Date.

All or any portion of the outstanding principal amount of the Note may be converted into shares of common stock of

Empire 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 Empire, 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 Empire

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 Empire 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 Empire in the manner set forth in the Note (where the Interest Payment Date is the date of prepayment).

determined that an embedded conversion feature included in the 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 approximately $1.3 million as of March 31, 2024, and was determined using a binomial lattice model using certain assumptions

and inputs discussed in Note 17.

Accordingly, Empire recognized a gain on the fair value adjustment of the derivative liability in the

amount of approximately $0.7 million in other income (expense) in the consolidated statements of operations for the year ended December

The conversion option was exercised by Energy Evolution on May 24, 2024, in exchange for 800,000 shares of common stock of

the Company under the terms of the Note and the fair value of the derivative was revalued as of that date resulting in a loss of $1.7

million in 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.

Payable - Related Party

August 2020, Empire, through its wholly-owned subsidiary, Empire Texas, entered into a 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 performed

recompletion or workover on specified mutually agreed upon wells owned by Empire Texas.

Concurrent with the JDA with PIE, Empire entered

into a term loan agreement dated August 1, 2020, whereby PIE will loan up to $ 2.0 million, at an interest rate of 6% per annum, maturing

August 6, 2024, unless terminated earlier by PIE.

The loan proceeds were used for recompletion or workover of certain designated wells.

In addition, Empire assigned 85% working and revenue interest to PIE in the designated wells which will be applied to repayment of the

July 31, 2024, PIE, Empire Texas, and Empire entered into a note repayment and loan termination agreement providing for the payment

in full of the remaining outstanding amount of the approximate $ 1.1 million PIE loan and extending the loan maturity date to December

31, 2024, unless terminated earlier by PIE.

As payment in full, Empire issued PIE 205,427 shares of common stock of Empire following

the approval of a supplemental listing application by the NYSE American stock exchange in the third quarter of 2024.

a lessee, the Company leases its corporate office headquarters in Tulsa, Oklahoma, and one field office.

The leases expire between 2025

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.

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 $ 424,000

and $ 267,000 for the years ended December 31, 2023 and 2022, respectively.

Cash paid for right of use lease was approximately $ 404,000

and $ 268,000 for the same period.

Supplemental balance sheet information related to the right of use leases

is as follows:

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.

lease expense was approximately $ 0.5 million and $ 0.4 million for the years ended December 31, 2024 and 2023, respectively.

for right-of-use lease was approximately $ 0.5 million and $ 0.4 million for the same period.

balance sheet information related to the right of use leases is as follows:

Schedule of right of use leases

4 unchanged sentences

Total right-of-use lease liabilities

The weighted average remaining term for the Company’s

right of use leases is 2.28

The weighted average discount rate was 8.56 %

Maturities of lease liabilities as of December 31, 2023 are as follows:

weighted average remaining term for the Company’s right of use leases is 1.4 years.

The weighted average discount rate is 8.26 %

of lease liabilities as of December 31, 2024, are as follows:

Total lease payments

Less imputed interest

imputed interest

Total lease obligation

Note 9 – Equity

Pursuant to the Company’s Amended and

Restated Certificate of Incorporation (“Charter”), effective as of March 4, 2022, the total number of shares of all classes

of stock that the Company has the authority to issue is 200,000,000, consisting of 190,000,000 shares of common stock, par value $ 0.001

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 shares of common stock, par value $ 0.001

per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

Preferred Stock

Preferred stock may be issued from time to time

in one or more series at the direction of the Company’s Board of Directors and the directors also have the ability to fix dividend

rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of redemption and other rights, preferences,

privileges and restrictions as determined by the Company’s Board of Directors, subject to certain limitations set forth in the Charter.

stock may be issued from time to time in one or more series at the direction of the Company’s Board of Directors and the directors

also have the ability to fix dividend rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of

redemption and other rights, preferences, privileges and restrictions as determined by the Company’s Board of Directors, subject

to certain limitations set forth in the Charter.

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

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.

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.

A Voting Preferred Stock is held by Phil Mulacek, Chairman of the Board of Directors of the Company and one of the principals of Energy

Evolution, as Energy Evolution’s designee (the “Initial Holder”).

The Series A Voting Preferred Stock may be transferred

only to certain controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights of the Series

A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”)

holding together at least 3,000,000 shares of the Company’s outstanding common stock.

The Series A Voting Preferred

Stock is not entitled to receive any dividends or distributions of cash or other property except in the event of any liquidation, dissolution

or winding up of the Company’s affairs.

In such event, before any amount is paid to the holders of the Company’s common stock

but after any amount is paid to the holders of the Company’s senior securities, the holders of the Series A Voting Preferred Stock

will be entitled to receive an amount per share equal to $1.00.

Except as discussed above

or as otherwise set forth in the certificate of designation of the Series A Voting Preferred Stock, the holders of the Series A Voting

Preferred Stock have no voting rights.

The Series A Voting Preferred

Stock is not redeemable at the Company’s election or the election of any holder, except the Company may elect to redeem the Series

A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in the event that:

· any or all shares of Series A Voting Preferred Stock are held by anyone

other than the Initial Holder or a Permitted Transferee;

· the Series A Holders together hold less than 3,000,000 shares of the Company’s

outstanding common stock.

The Series A Voting Preferred

Stock is not convertible into common stock or any other security.

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.

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.

Series A Voting Preferred Stock was issued in connection with the strategic investment in the Company by Energy Evolution.

as the Series A Voting Preferred Stock is outstanding, the Company’s Board of Directors will consist of six directors.

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

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.

Series A Voting Preferred Stock is held by Phil Mulacek, Chairman of the Board of Directors of the Company and one of the principals

of Energy Evolution, as Energy Evolution’s designee (the “Initial Holder”).

The Series A Voting Preferred Stock may

be transferred only to certain controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights

of the Series A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series

A Holders”) holding together at least 3,000,000 shares of the Company’s outstanding common stock.

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.

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.

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:

or all shares of Series A Voting Preferred Stock are held by anyone other than the Initial

Holder or a Permitted Transferee;

Series A Holders together hold less than 3,000,000 shares of the Company’s outstanding

common stock.

Series A Voting Preferred Stock is not convertible into common stock or any other security.

August 27, 2021, the Company’s Board of Directors approved a one-for-four reverse stock split such that every holder of the Company’s

common stock would receive one share of common stock for every four shares owned.

The reverse stock split was effective as of 6:00 p.m.

Eastern Time on March 7, 2022, immediately prior

to the Company’s listing of its common stock on the NYSE American.

All share amounts have retrospectively been stated at post-reverse

split amounts and pricing.

The holders of shares of common stock are entitled

to one vote per share for all matters on which common stockholders are authorized to vote on.

Examples of matters that common stockholders

are entitled to vote on include, but are not limited to, election of three of the six directors and other common voting situations afforded

to common stockholders.

During February and March 2021, the Company issued

to a group of accredited investors 2,248,464 shares of its common stock and warrants to purchase 2,248,464 shares of its common stock

for $ 2.00 per share which expires on December 31, 2022 with that day being accelerated should certain performance criteria be met.

from the sale were $ 3,147,850 .

The value allocated to the warrants was the fair value determined using the Black-Scholes option valuation

with the following assumptions:

no dividend yield, expected annual volatility of 180 %, risk free interest rate of .14 % and an expected

useful life of 21 months.

The fair value of the warrants of $ 2,350,407 was allocated to Additional Paid-in-Capital.

The performance criteria

triggering early maturity occurred in April 2022, accelerating the warrant maturity date to July 2022.

During the nine months ended September

30, 2022, 1,782,347 shares of common stock were issued as a result of warrant exercises.

As of July 10, 2022, all such warrants were fully

In September and October 2022, a former director of

the Company exercised warrants granted in November 2017 to purchase 475,000 shares of common stock for $ 1.00 per share.

In connection with the purchase of XTO assets, the

Company issued a Senior Secured Convertible Note due December 31, 2021, in the aggregate principal amount $ 16,250,000 (the “Secured

Convertible Note”) to Energy Evolution, a related party.

As partial consideration for the issuance of the Secured Convertible Note,

Empire issued to Energy Evolution (i) 375,000 shares of common stock along with (ii) a warrant certificate to purchase up to 750,000 shares

of common stock at an exercise price of $4.00 per Warrant Share until May 14, 2022.

Under the warrant certificate, the exercise price

is subject to customary downward adjustments.

The value allocated to the

common stock, conversion

feature, and warrants was $ 10,125,177 .

In September 2021, the Company and Energy Evolution entered into a Loan Modification Agreement

(the “Amended Secured Notes”).

Under the Amended Secured Notes, among other terms the Company issued a warrant certificate

to purchase up to 500,000 shares of common stock at an exercise price of $5.00 per Warrant Share until December 31, 2023.

In July 2023,

Energy Evolution exercised its remaining warrants for 500,000 shares of common stock for $5.00 per share.

The Company received $2.5 million

related to this transaction.

See Note 15 for information regarding Bridge Loans

issued from two related parties that were subsequently converted to our common shares and additional shares purchased with cash by those

same parties.

Note 10 – Stock Based Compensation

On April 3, 2019, the Board of Directors of the Company adopted the Empire

Petroleum Corporation 2019 Stock Option Plan (the “2019 Stock Option Plan”).

The total number of shares of common stock that

may be issued pursuant to stock options under the 2019 Stock Option Plan was 2,500,000 .

On August 27, 2021, the Board of Directors of

the Company adopted the Company’s 2021 Stock and Incentive Compensation Plan (the “2021 Incentive Plan”) which was

subsequently approved by stockholders of the Company.

As a result of such approval, no further awards will be made under the 2019 Incentive

The total number of shares of common stock that could be issued pursuant to the 2021 Incentive Plan is 750,000 .

On August 26, 2022,

the stockholders of the Company approved the Company’s 2022 Stock and Incentive Compensation Plan (the “2022 Incentive Plan”)

which reserves 750,000 shares of the Company’s common stock for issuance thereunder.

As a result of such approval, no further awards

will be made under the 2021 Incentive Plan.

On June 9, 2023, the stockholders of the Company approved the Company’s 2023 Stock

and Incentive Compensation Plan (the “2023 Incentive Plan”) which reserves 700,000 shares of the Company’s common stock

for issuance thereunder.

Eastern Time on March 7, 2022, immediately prior to the Company’s listing of its common stock on the NYSE American.

All share amounts

have retrospectively been stated at post-reverse split amounts and pricing.

holders of shares of common stock are entitled to one vote per share for all matters on which common stockholders are authorized to vote

Examples of matters that common stockholders are entitled to vote on include, but are not limited to, the election of three of the

six directors and other common voting situations afforded to common stockholders.

July 2023, Energy Evolution exercised its remaining warrants under a Loan Modification Agreement between the Company and Energy Evolution

entered into in September 2021 for 500,000 shares of common stock for $5.00 per share.

The Company received $2.5 million related to this

April 2024, Empire completed a subscription rights offering (the "April Rights Offering”) which raised gross proceeds of

$ 20.7 million.

Empire distributed at no charge to holders of its common stock, as of the close of business on March 7, 2024 (the

record date for the April Rights Offering), one subscription right for each share of common stock held.

Each subscription right

entitled the holder to purchase 0.161 shares of common stock at a subscription price of $ 5.00 per share per one whole share of

common stock.

The subscription rights were non-transferable and not listed for trading on any stock exchange or market.

May 31, 2024, Empire issued Energy Evolution a warrant certificate granting them the right to purchase 128,800 shares of common stock

of Empire at $5.00 per share.

On June 28, 2024, Energy Evolution exercised the warrants and received 128,800 shares in exchange for approximately

$0.6 million.

November 2024, Empire completed a subscription rights offering (the "November Rights Offering”) which raised gross proceeds

of $ 10.0 million.

Empire distributed at no charge to holders of its common stock, as of the close of business on September 30, 2024 (the

record date for the November Rights Offering), one subscription right for each share of common stock held.

Each subscription right entitled

the holder to purchase 0.063 shares of common stock at a subscription price of $ 5.05 per share per one whole share of common stock.

subscription rights were non-transferable and not listed for trading on any stock exchange or market.

Note 14 for information regarding other transactions where shares of common stock of the Company were issued.

10 – Stock Based Compensation

recognizes stock-based compensation expense associated with granted stock options and restricted stock units ("RSUs”).

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 expense for restricted stock units and stock options is included in general

and administrative expense in the consolidated statements of operations and is recorded with a corresponding increase in additional paid-in

capital within the consolidated balance sheets.

April 3, 2019, the Board of Directors of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the “2019

Stock Option Plan”).

The total number of shares of common stock that may be issued pursuant to stock options under the 2019 Stock

Option Plan was 2,500,000 .

On August 27, 2021, the Board of Directors of the Company adopted the Company’s 2021 Stock and Incentive

Compensation Plan (the “2021 Incentive Plan”) which was subsequently approved by stockholders of the Company.

of such approval, no further awards will be made under the 2019 Incentive Plan.

The total number of shares of common stock that could

be issued pursuant to the 2021 Incentive Plan is 750,000 .

On August 26, 2022, the stockholders of the Company approved the Company’s

2022 Stock and Incentive Compensation Plan (the “2022 Incentive Plan”) which reserves 750,000 shares of the Company’s

common stock for issuance thereunder.

As a result of such approval, no further awards will be made under the 2021 Incentive Plan.

The 2023 Incentive

Plan authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted

stock units, performance shares, performance units and other stock-based awards (restricted stock awards, restricted stock units, performance

shares and performance units are collectively referred to as restricted stock units for purposes of this note).

At December 31, 2023,

436,935 shares of our common stock were available for future grants.

Stock-based compensation expense

for restricted stock units and stock options is included in General and Administrative expense in the Consolidated Statements of Operations

and is recorded with a corresponding increase in Additional Paid-in Capital within the Consolidated Balance Sheets.

Restricted Stock Units

Each RSU represents the contingent right to receive

one share of common stock.

The holders of outstanding RSUs do not receive dividends or have voting rights prior to vesting and settlement.

The Company determines the fair value of granted RSUs based on the market price of the common stock on the date of the grant.

expense for granted RSUs is recognized on a straight-line basis over the vesting and is net of forfeitures, as incurred.

RSUs are generally granted with

12-month, 13-month, or 3 year service periods.

Total value assigned to the RSUs granted in 2023 based on grant date price approximated

$ 1,837,000 .

For the year ended December 31, 2023 and 2022, approximately $ 2,271,000 and $ 1,227,000 of compensation expense related to

RSUs was recognized.

At December 31, 2023, approximately $ 1,230,000 of unrecognized compensation expense remained and will be recognized

on a straight-line basis depending on the service period of each grant.

The following summary reflects nonvested restricted

stock unit activity and related information:

June 9, 2023, the stockholders of the Company approved the Company’s 2023 Stock and Incentive Compensation Plan (the “2023

Incentive Plan”) which reserves 700,000 shares of the Company’s common stock for issuance thereunder.

As a result of such

approval, no further awards will be made under the 2022 Incentive Plan.

On June 14, 2024, the Board of Directors adopted the Company’s

2024 Stock and Incentive Compensation Plan (the “2024 Incentive Plan”) which reserves 700,000 shares of the Company’s

common stock for issuance thereunder.

As a result of such approval no further awards will be made under the 2023 Incentive Plan.

2024 Incentive Plan authorizes the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock

units, performance shares, performance units, cash-based awards and other stock-based awards (restricted stock awards, restricted stock

units, performance shares and performance units are collectively referred to as restricted stock units for purposes of this Note).

December 31, 2024, 528,165 shares of our common stock were available for future grants.

RSU represents the contingent right to receive one share of common stock.

The holders of outstanding RSUs do not receive dividends or

have voting rights prior to vesting and settlement.

The Company determines the fair value of granted RSUs based on the market price of

the common stock on the date of the grant.

Compensation expense for granted RSUs is recognized on a straight-line basis over the vesting

and is net of forfeitures, as incurred.

are generally granted with 12-month, 13-month, or 3-year service periods.

Total value assigned to the RSUs granted in 2024 based on grant

date price approximated $ 0.6 million.

For the years ended December 31, 2024 and 2023, approximately $ 0.9 million and $ 2.3 million of

compensation expense related to RSUs was recognized.

At December 31, 2024, approximately $ 0.7 million of unrecognized compensation expense

remained and will be recognized on a straight-line basis depending on the service period of each grant.

following summary reflects nonvested restricted stock unit activity and related information:

Weighted-Average

Fair Value (a)

Outstanding, December 31, 2022

1 unchanged sentence

Outstanding, December 31, 2024

(a) Shares are valued at the grant-date market price.

Weighted Average grant date fair value of restricted stock units granted during the year, per share

(1) Shares are valued at the grant-date market price.

Weighted-Average grant date fair value of restricted stock units

granted during the year, per share

Total fair value of restricted stock units vested during the year

Stock Options

Each stock option award provides the opportunity in

the future to purchase Empire common shares at the market price of our common stock on the date the award is granted (the strike price).

The options generally become exercisable in equal amounts over a three-year vesting period or over one-year for options awarded to the

Board of Directors of the Company.

Stock options have no financial statement effect on the date they are granted but rather are reflected

over time through recording stock-based compensation expense.

The stock-based compensation expense is based on the estimated fair value

of the awards expected to vest, and that amount is amortized as compensation expense on a straight-line basis over the respective vesting

period and is net of forfeitures, as incurred.

The estimated fair value of an option is calculated

using a Black-Scholes option valuation model with the following assumption inputs:

dividend yield, expected annual volatility, risk free

interest rate and an expected life of the option.

The following table summarizes the weighted average fair value and assumptions for 2023

stock option award provides the opportunity in the future to purchase Empire common shares at the market price of our common stock on

the date the award is granted (the strike price).

The options generally become exercisable in equal amounts over a three-year vesting

period or over one-year for options awarded to the Board of Directors of the Company;

however, certain options become exercisable only

if certain performance criteria are met.

Stock options have no financial statement effect on the date they are granted but rather are

reflected over time through recording stock-based compensation expense.

The stock-based compensation expense is based on the estimated

fair value of the awards expected to vest, and that amount is amortized as compensation expense on a straight-line basis over the respective

vesting period and is net of forfeitures, as incurred.

estimated fair value of an option is calculated using a Black-Scholes option valuation model with the following assumption inputs:

yield, expected annual volatility, risk free interest rate and an expected life of the option.

The following table summarizes the weighted-average

fair value and assumptions:

Weighted-average grant-date fair value of stock options

6 unchanged sentences

Weighted average grant-date market prices of Empire stock (strike price)

For the year ended December 31,

2023 and 2022, approximately $ 874,000 and $ 1,458,000 of compensation expense related to stock options was recognized.

At December 31,

2023, approximately $ 1,546,000 of unrecognized compensation expense remained and will be recognized on a straight-line basis depending

on the service period of each grant.

The following summary reflects stock option activity

and related information:

the years ended December 31, 2024 and 2023, approximately $ 1.1 million and $ 0.9 million of compensation expense related to stock options

was recognized.

At December 31, 2024, approximately $ 1.0 million of unrecognized compensation expense remained and will be recognized

on a straight-line basis depending on the service period of each grant.

following summary reflects stock option activity and related information:

Weighted-Average

3 unchanged sentences

Outstanding, December 31, 2024

The following table summarizes information about stock

options outstanding as of December 31, 2023:

Weighted Average

Contractual Life

Exercise Price

following table summarizes information about stock options as of December 31, 2024:

Schedule of summarizes information about stock options outstanding

Range of Exercise Price

$ 1.32 to $ 12.36

Note 12 – Income Taxes

The current and deferred income tax provision for

the years ended December 31, 2023 and 2022 were comprised of the following:

Weighted-Average Remaining Contractual Life

Options Outstanding

Options Exercisable

Options Outstanding Aggregate Intrinsic Value

Options Exercisable Aggregate Intrinsic Value

Weighted-Average Outstanding Price

Weighted-Average Exercise Price

11 – Income Taxes

following table represents the current and deferred income tax provisions:

For the Years Ended December 31,

$ ( 132,192 )

1 unchanged sentence

$ ( 132,192 )

event that an entity has an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as

amended ( “IRC”)), an entity’s federal net operating loss carryforwards (“NOLs”) generated prior

to an ownership change would be subject to annual limitations, which could defer or eliminate the Company’s ability to utilize

these tax losses against future taxable income.

Generally, an “ownership change” occurs if one or more stockholders,

each of whom owns 5% or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than

50% over the lowest percentage of stock owned by those stockholders at any time during the preceding three-year period.

Section 382 analysis was prepared in 2023 and it was determined that our NOLs were subject to limitations under IRC Section 382.

The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted

by a future IRC 382 ownership change.

Future transactions involving the Company's stock including those outside of the Company's

control could cause an IRC Section 382 ownership change resulting in a limitation on tax attributes currently not limited and

a more restrictive limitation on tax attributes currently subject to the previous IRC 382 limitation.

31, 2023, the Company had approximately $ 24.3 million of federal NOLs generated in prior years available to offset against future

taxable income, net of NOLs expected to expire unused due to IRC Section 382 limitations.

the event that an entity has an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended

(“IRC”), an entity’s federal net operating loss carryforwards (“NOLs”) generated prior to an ownership

change would be subject to annual limitations, which could defer or eliminate the Company’s ability to utilize these tax losses

against future taxable income.

Generally, an “ownership change” occurs if one or more stockholders, each of whom owns 5%

or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50% over the lowest percentage

of stock owned by those stockholders at any time during the preceding three-year period.

A full Section 382 analysis was prepared in

2024 and it was determined that our NOLs were subject to limitations under IRC Section 382.

The Company's ability to use NOLs and other

tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change.

Future transactions

involving the Company's stock including those outside of the Company's control could cause an IRC Section 382 ownership change resulting

in a limitation on tax attributes currently not limited and a more restrictive limitation on tax attributes currently subject to the

previous IRC 382 limitation.

December 31, 2024, the Company had approximately $ 35.8

million of federal NOLs generated in prior years available to offset against future taxable income, net of NOLs expected to expire

unused due to IRC Section 382 limitations.

Of the $35.8 million NOLs, approximately $ 35.4

million relate to periods after 2017 and have an indefinite life.

Additionally, $ 1.3 million will begin to expire between

2023-2037 if not used.

Approximately, $4.7 million of the NOLs were limited as of December 31, 2023 due to previous ownership

Deferred tax assets and liabilities are the result

of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities.

The Company’s

net tax position as of December 31, 2023 and 2022 is as follows:

Additionally, approximately $ 0.5

million will begin to expire between 2024-2037 if not used.

Approximately $2.4 million of the NOLs were limited as of December 31,

2024, due to previous ownership changes.

tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis

of assets and liabilities.

The Company’s net tax position is as follows:

As of December 31,

Deferred tax assets:

Loss carry-forwards

Right of use assets

Stock option grants

6 unchanged sentences

Other property and equipment

Financial Derivatives

Lease liabilities

7 unchanged sentences

Net deferred taxes

Utilization of the Company’s loss carryforwards

is dependent on realizing taxable income.

The Company’s recorded valuation allowances of $ 8.7 million and $ 7.4 million as of December

31, 2023 and 2022, respectively, are due to the uncertainty related to its ability to utilize some of its deferred income tax assets,

primarily consisting of net operating loss carryforwards prior to expiration or the limitation under Section 382 as discussed above.

Reconciliations of the tax provision (benefit) computed

at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows:

Provision (benefit) at statutory rate

of the Company’s loss carryforwards is dependent on realizing taxable income.

The Company’s recorded valuation allowances

of approximately $ 12.6 million and $ 8.7 million as of December 31, 2024 and 2023, respectively, are due to the uncertainty related to

its ability to utilize some of its deferred income tax assets, primarily consisting of net operating loss carryforwards prior to expiration

or the limitation under Section 382 as discussed above.

2024 and 2023, our effective tax rates were 0 %

and 1 %, respectively.

Other than the full year of 2022, Empire has generated net operating losses since inception, which would normally reflect

a tax benefit in the consolidated statements of operations and a deferred asset on the consolidated balance sheets.

However, because

of the current uncertainty as to Empire’s ability to achieve sustained profitability, a full valuation reserve has been

established that offsets the amount of any tax benefit available for each period presented in the consolidated statements of

following table presents a reconciliation of its income tax (benefit) provision and effective income tax rate to the U.S.

statutory income

Schedule of reconciliation of effective income tax rate

For the Years Ended December 31,

(Benefit) provision at statutory rate

$ ( 3,401,578 )

$ ( 2,646,378 )

State Taxes (net of federal impact)

1 unchanged sentence

Return to Accrual

( 2,135,704 )

Derivative Liability, Promissory Note Conversion

NOLs Expected to Expire Unused Due to Section 382 Limitation

Valuation Allowance

Income tax provision (benefit)

The Company has evaluated all tax positions for which

the statute of limitations remains open and believes that the material positions taken would more likely than not be sustained by examination.

Therefore, at December 31, 2023, the Company has not established any reserves for, nor recorded any unrecognized benefits related to uncertain

tax positions.

The Company’s only taxing jurisdiction

is the United States (federal and state).

The Company’s tax years 2020 to present remain open for federal examination.

Additionally,

tax years 2003 through 2019 remain subject to examination for the purpose of determining the amount of federal NOL and other carryforwards.

The number of years open for state tax audits varies, depending on the state, but is generally from three to five years.

Note 13 – Earnings (Loss) per Share

Diluted Earnings per Share (“EPS”) gives

effect to all dilutive potential common shares outstanding during the period.

The computation of Diluted EPS does not assume conversion,

exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

As a result, if there is a loss from

continuing operations, Diluted EPS is computed in the same manner as Basic EPS.

In addition, approximately 348,000 options were excluded

due to the option exercise price exceeding the weighted-average market price of our common shares.

The following table summarizes the calculation of

income (loss) per share.

Net Income (Loss)

Income tax (benefit) provision

$ ( 132,192 )

Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken

would more likely than not be sustained by examination.

Therefore, at December 31, 2024, the Company has not established any reserves

for, nor recorded any unrecognized benefits related to uncertain tax positions.

Company’s only taxing jurisdiction is the United States.

The Company’s tax years 2021 to present remain open for federal

Additionally, tax years 2004 through 2020 remain subject to examination for the purpose of determining the amount of federal

NOL and other carryforwards.

The number of years open for state tax audits varies, depending on the state, but is generally from three

to five years.

12 – Loss per Share

EPS gives effect to all dilutive potential common shares outstanding during the period.

The computation of Diluted EPS does not assume

conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

As a result, if there is

a loss from continuing operations, Diluted EPS is computed in the same manner as Basic EPS.

In addition, approximately 647,000 options

were excluded in the current period Diluted EPS computation due to the option exercise price exceeding the weighted-average market price

of our common shares.

following table summarizes the calculation of loss per share:

For the Years Ended December 31,

$ ( 16,197,989 )

$ ( 12,469,605 )

Basic Weighted-Average Shares

Effect of Dilutive Securities:

Restricted Stock Units and Stock Options (a)

Restricted Stock Units

and Stock Options (1)

Diluted Weighted-Average Shares

Income (Loss) per Common Share

(a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period.

Note 14 – Executive Separations

On March 16, 2023, Thomas W.

Pritchard resigned as

Chief Executive Officer and a director of the Company to pursue other opportunities.

Loss per Common Share

(1) At December 31,

2024 and 2023, respectively, the Company had approximately 981,314 and 1,361,200 RSUs and options that were excluded from the calculation

of net loss per share as their inclusion would be antidilutive due to a net loss for the period.

13 – Executive Management

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.

Employment Agreement with the Company, in recognition of Mr.

Pritchard’s past service to the Company, the Company will pay Mr.

severance benefits in the amount of approximately $ 360,000 , as set forth in Section 4.2 of his Employment Agreement, in one lump sum payment

within 30 days after March 23, 2023, rather than in monthly installments.

This was accrued as of March 31, 2023, and payment was made

in April 2023.

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 $ 0.4 million, as set forth

in Section 4.2 of his Employment Agreement, in one lump sum payment within 30 days after March 23, 2023, rather than in monthly installments.

This was accrued as of March 31, 2023, and payment was made in April 2023.

The Company also extended the period under which Mr.

Pritchard has the right to exercise his outstanding vested non-qualified

stock options from three months after the date of his termination of employment to September 16, 2024.

has the right to exercise his outstanding vested non-qualified stock options from three months after the date of his termination of employment

to September 16, 2024.

In addition, Mr.

has surrendered to the Company 340,234 RSUs and options as satisfaction for the $ 2.1 million receivable that primarily

resulted from incorrect withholdings associated with an April 2022 option exercise by Mr.

The Company also had a $ 2.1 million

liability recorded at December 31, 2022, related to withholding payables that were remitted in 2023.

On March 17, 2023, the Board of Directors of the Company

appointed Michael R.

Pritchard has surrendered to the Company 340,234 RSUs and options as satisfaction

for the $ 2.1 million receivable that primarily resulted from incorrect withholdings associated with an April 2022 option exercise

The Company also had a $ 2.1 million liability recorded at December 31, 2022, related to withholding payables that

were remitted in 2023.

March 17, 2023, the Board of Directors of the Company appointed Michael R.

Morrisett to the position of Chief Executive Officer.

Morrisett did not receive any additional compensation

for assuming the role of Chief Executive Officer.

In July 2023, the Company’s Chief Operating

Officer separated from the Company and will receive severance of $ 145,000 over six months.

Additionally, certain vested options were

forfeited resulting in the reversal of $ 576,000 of previously recorded stock-based compensation.

Note 15 – Related Party Transactions

Energy Evolution is a related party of the Company

as it beneficially owns approximately 26.6 % of the Company’s outstanding shares of common stock as of December 31, 2023.

Additionally,

a board member of Energy Evolution was appointed to the Company’s Board of Directors in October 2021.

This board member separately

beneficially owns approximately 19.3 % of the Company’s outstanding shares of common stock as of December 31, 2023.

This board member

also is a majority owner of PIE.

In October 2021 another Energy Evolution member was appointed to the Company’s Board of Directors.

The Company has a JDA with PIE to perform recompletion

or workover on specified mutually agreed upon wells (See Note 4).

As of December 31, 2023, the Company has incurred obligations of approximately

$ 1.1 million as a part of the JDA.

On November 29, 2023, the Company entered into

a Securities Purchase Agreement with Phil Mulacek, which agreement was amended on December 1, 2023, pursuant to which Mr.

Mulacek purchased

from the Company (a) 609,013 shares of common stock of the Company for an aggregate purchase price of $5,000,000 (or $8.21 per share)

in cash and (b) 631,832 shares of common stock of the Company for an aggregate purchase price of $5,054,658 (or $8.00 per share) which

was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain

Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire

North Dakota to Mr.

On November 29, 2023, the Company entered into

a Securities Purchase Agreement with Energy Evolution pursuant to which Energy Evolution purchased 1,256,832 shares of common stock of

the Company for an aggregate purchase price of $10,054,658 (or $8.00 per share), of which $2,000,000 was advanced in cash to the Company

on November 22, 2023, $3,000,000 was paid in cash to the Company and $5,054,658 was paid through cancellation and extinguishment

of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December

31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Energy Evolution.

Accounts receivable on the Consolidated Balance Sheet

includes approximately $ 895,000 receivable from Energy Evolution.

Accrued Expenses includes approximately $ 452,000 of revenue payable

to Energy Evolution.

Note 16 – Commitments and

Contingencies

From time to time, the Company is subject to

various legal proceedings arising in the ordinary course of business, including proceedings for which the Company may not have insurance

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.

Note 17 – Concentrations

The Company’s producing properties and oil and

natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana, and Texas.

Because of the concentration, the Company

is exposed to the impact of regional supply and demand factors, processing or transportation capacity constraints, severe weather events,

water shortages, and government regulations specific to the geographic area.

For the year ended December 31, 2023, the Company sold 70 % of its oil,

natural gas, and NGL to four customers.

For the year ended December 31, 2022, the Company sold 68 % of its oil and natural gas production

to four customers.

The loss of these purchasers could result in a temporary interruption in sales or a lower price for production.

The Company’s cash balances may at times exceed FDIC insurance limits.

The Company maintains cash accounts at reputable financial institutions.

Note 18 – Subsequent Events

Promissory Note

On February 16, 2024, the Company issued a Promissory Note in the

aggregate principal amount of $5,000,000 (the "Note”) to Energy Evolution.

Energy Evolution has advanced the Company $5,000,000

under the Note.

The proceeds of the Note will be used by the Company to fund, in part, its ongoing oil and gas drilling program and for

working capital purposes.

The Note matures on February 15, 2026 (the "Maturity Date”)

and accrues interest at the rate of 7 % per annum.

After the Maturity Date, any principal balance of the Note remaining unpaid accrues

interest at the rate of 9% per annum.

At the option of Energy Evolution, interest payments will be paid either in cash or in shares of

common stock of the Company on each of the following dates (or if any such 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

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

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, 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).

Rights Offering

In March 2024, the

Company announced that it has commenced a subscription rights offering (“Rights Offering”) pursuant to which it intends

to raise gross proceeds of up to approximately $25.0 million.

The Company has distributed at no charge to holders of its common

stock, as of the close of business on March 7, 2024 (the record date for

the Rights Offering), one subscription right for each share of Common Stock held.

Each subscription right initially entitled the holder to

purchase 0.161 shares of Common Stock at a subscription price of $6.05 per share per one whole share of Common

On March 28, 2024, the Company announced a reduction in the subscription price to $5.00 which

results in gross proceeds to the Company of up to approximately $20.66 million.

The subscription rights are

non-transferable, and will not be listed for trading on any stock exchange or market.

In addition, holders of subscription rights

who fully exercise their subscription rights are entitled to over-subscribe for additional shares of Common Stock, subject to

The Rights Offering is expected to expire at 5:00 p.m., Eastern Time, on April 10, 2024, subject to extension or earlier

Phil Mulacek and Energy Evolution, both related parties

of the Company (see Note 15) and our largest stockholders, have indicated that they intend to participate in the Rights Offering and fully

subscribe to the shares of Common Stock corresponding to their subscription rights.

They have each also indicated that they intend to

fully exercise their over-subscription rights to purchase their pro rata share of the underlying securities related to the Rights Offering

that remain unsubscribed at the Expiration Date.

EMPIRE PETROLEUM CORPORATION

Supplemental Information of Oil and Natural Gas

Producing Activities (Unaudited)

December 31, 2023 and 2022

The following reserve estimates present the Company's

estimate of the proven natural gas and oil reserves and net cash flow of the Company’s properties, in accordance with the guidelines

established by the Securities and Exchange Commission.

The Company emphasizes that reserve estimates are inherently imprecise and

that estimates of new discoveries are more imprecise than those of producing natural gas and oil properties.

Accordingly, the estimates

are expected to change as future information becomes available.

All the oil and natural gas reserves are located in Louisiana, New

Mexico, North Dakota, Montana and Texas.

Costs Incurred Related to Oil and Gas Activities

Costs incurred includes capitalized costs of properties, equipment, and

lease facilities for oil and natural gas producing activities.

Years Ended December 31,

Reserve Quantity Information

Proved oil and natural gas reserves are those

quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically

producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government

Proved developed reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment

and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

Proved undeveloped

reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively

major expenditures is required for recompletion.

The information below excludes proved undeveloped reserves.

Below are the net quantities

of net proved developed reserves of the Company’s properties:

Morrisett did not receive any additional compensation for assuming the role of Chief Executive Officer.

July 2023, the Company’s Chief Operating Officer separated from the Company and received a severance of approximately $ 0.1 million

over six months.

Additionally, certain vested options were forfeited resulting in the reversal of $ 0.6 million of previously recorded

stock-based compensation.

14 – Related Party Transactions

Evolution is a related party of the Company as it beneficially owns approximately 31.9 % of the Company’s outstanding shares of

common stock as of December 31, 2024.

In October 2021, a member of Energy Evolution and a board member of Energy Evolution were appointed

to the Company’s Board of Directors.

The board member of Energy Evolution separately beneficially owns approximately 21.2 % of the

Company’s outstanding shares of common stock as of December 31, 2024 and is also a majority owner of PIE.

July 2023, Energy Evolution exercised its warrants for 500,000 shares of common stock of the Company for $ 5.00 per share.

for additional information.

November 29, 2023, the Company converted its Bridge Loan (see Note 7) with Phil Mulacek into common shares through a Securities

Purchase Agreement which was amended on December 1, 2023, pursuant to which Mr.

Mulacek purchased from the Company (a) 609,013 shares

of common stock of the Company for an aggregate purchase price of $5.0 million (or $8.21 per share) in cash and (b) 631,832 shares of

common stock of the Company for an aggregate purchase price of $5.1 million (or $8.00 per share) which was paid through cancellation

and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain amended and restated promissory

note due December 31, 2024, in the original aggregate principal amount of $5.0 million issued by Empire North Dakota to Mr.

November 29, 2023, the Company converted its Bridge Loan (see Note 7) with Energy Evolution into common shares through a Securities

Purchase Agreement, pursuant to which Energy Evolution purchased 1,256,832 shares of common stock of the Company for an aggregate purchase

price of $10.1 million (or $8.00 per share), of which $2.0 million was advanced in cash to the Company on November 22, 2023, $3.0

million was paid in cash to the Company and $5.1 million was paid through cancellation and extinguishment of the outstanding principal

amount and all accrued interest thereon under that certain amended and restated promissory note due December 31, 2024, in the original

aggregate principal amount of $5.0 million issued by Empire North Dakota to Energy Evolution.

February 16, 2024, Empire issued the Note to Energy Evolution.

Energy Evolution advanced Empire $ 5.0 million under the Note in the first

quarter of 2024.

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 Note (see Note 7).

Company had a JDA with PIE to perform recompletion or workover on specified mutually agreed upon wells (See Note 7).

In the third quarter

of 2024, Empire issued PIE 205,427 shares of common stock of Empire as payment in full for this outstanding note balance of $ 1.1 million

(see Note 7).

connection with the JDA, the Company also entered into a shared services agreement with PIE effective August 1, 2023, that includes access

to administrative, engineering and support services as well as building and insurance services.

The agreement provides that the Company

will reimburse PIE for the out-of-pocket or actual costs incurred by PIE in providing such services to the Company.

elected to partially exercise a purchase option in the second quarter of 2024 and acquired 60% of certain New Mexico interests from Energy

See Note 3 for additional information.

June 28, 2024, Energy Evolution exercised its warrants of Empire and received 128,800 shares in exchange for approximately $ 0.6 million.

See Note 9 for additional information.

receivable on the consolidated balance sheet include approximately $ 0.4 million and $ 0.9 million receivable as of December 31, 2024 and

2023, respectively, from Energy Evolution.

Accrued expenses on the consolidated balance sheet include approximately $ 0.1 million and

$ 0.5 million of revenue payable as of December 31, 2024 and 2023, respectively, to Energy Evolution.

15 – Commitments and Contingencies

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.

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.

Compliance Order

January 2024, the Company deposited $ 1.0 million into an escrow account in accordance with an Agreed Compliance Order ("ACO”)

with the New Mexico Oil Conservation Division for compliance work on certain inactive wells in New Mexico.

terms of the ACO, the escrow funds will be returned to the Company at a rate of $ 0.01 million for each well as the compliance work is

As of June 30, 2024, all work had been completed, and the Company expects to receive the remaining outstanding escrow amount

of $ 0.2 million in 2025.

Mexico Trespass

December 2023, the Company initiated a legal action in the Fifth Judicial District Court, Lea County, New Mexico, against a

saltwater company for trespassing within one of the New Mexico water flood units.

This suit is currently being pursued by Empire;

ultimate outcome of the litigation cannot be determined at this time, and no amount has been recognized due to the uncertainty of

any conclusions that may arise as a result of such action.

16 – Concentrations

Company’s producing properties and oil and natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana,

Because of the concentration, the Company is exposed to the impact of regional supply and demand factors, processing or transportation

capacity constraints, severe weather events, water shortages, and government regulations specific to the geographic area.

the year ended December 31, 2024, the Company sold 78 % of its oil, natural gas, and NGLs to four customers.

For the year ended December

31, 2023, the Company sold 70 % of its oil and natural gas production to four customers.

No other purchaser accounted for more than 10%

of our total revenues during the respective periods.

The loss of these purchasers could result in a temporary interruption in sales or

a lower price for production.

Company’s cash balances may at times exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

maintains cash accounts at reputable financial institutions.

17 – Fair Value Measurements

following table provides the carrying value and fair value measurement information for certain financial assets and liabilities.

carrying values of cash, accounts receivable, inventory, accounts payable, accrued expenses, lease liabilities, and equipment and vehicle

notes included in the accompanying consolidated balance sheets approximated fair value at December 31, 2024 and December 31, 2023, as

applicable, and generally represent Level 2 fair values due to their short-term nature.

Therefore, such financial assets and liabilities

are not presented in the following table :

Fair Value Measurements Using:

December 31, 2024 assets (liabilities)

Derivative instruments

Debt - Credit Facility

( 11,088,647 )

Debt - Promissory Note, Related Party

December 31, 2023 assets (liabilities)

Derivative instruments

Debt - Credit Facility

( 4,492,484 )

Debt - Promissory Note, Related Party

( 1,060,004 )

( 1,055,790 )

following methods and assumptions were used to estimate the fair values in the table above and other fair value measurements.

– Derivative financial instruments are carried at fair value and measured on a recurring basis.

The Company’s commodity

price hedges are valued based on discounted future cash flow models that are primarily based on published forward commodity price curves.

fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of

derivative instruments in liability positions include measures of the Company’s nonperformance risk.

These measurements were not

material to the consolidated financial statements.

– The fair value of our Credit Facility variable rate debt approximates the carrying value as the underlying prime rate changes

based on prevailing market rates.

The fair value of the promissory note prior to when the conversion was triggered was determined using

a discounted cash flow model.

See below for discussion on the fair value determination of the promissory note once conversion occurred.

of oil and natural gas properties – The fair value of proved and unproved oil and natural gas properties was measured using

valuation techniques that convert the future cash flows to a single discounted amount.

Significant inputs to the valuation of proved

and unproved oil and natural gas properties include estimates of:

(i) recoverable reserves;

(ii) production rates;

(iii) future operating

and development costs;

(iv) future commodity prices;

and (v) a market-based weighted-average costs of capital.

The Company utilized a

combination of the New York Mercantile Exchange strip pricing and consensus pricing to value the reserves, then applied

various discount rates depending on the classification of reserves and other risk characteristics.

For significant acquisitions, management

utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties acquired.

Retirement Obligation – The fair value of AROs is included in proved oil and natural gas properties with a corresponding liability.

The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment

costs, discount rate, inflation rate and timing associated with the incurrence of these costs.

inputs used to value oil and natural gas properties for impairments and asset retirement obligations require significant judgment and

estimates made by management and represent Level 3 inputs.

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.

triggering events that require assessment of such items were observed during the years ended December 31, 2024 and 2023.

and Liabilities Measured at Fair Value on a Recurring Basis – In the determination of the fair value of the promissory note

including the embedded conversion feature, Empire uses a binomial lattice valuation model to value Level 3 derivative liabilities at

inception and on subsequent valuation dates.

This model incorporates transaction details such as Empire’s stock price, contractual

terms of the promissory note, and unobservable inputs classified as Level 3 including risk-free rate and expected volatility.

the subjective nature of these inputs, the fair value measurement could differ materially under alternative assumptions.

As of the conversion

option exercise date of May 24, 2024, these unobservable inputs were 5.0% and 46.9%, respectively.

18 – Segment Reporting

The Company’s operations are managed and reported to its CEO, the

Company’s CODM, on a consolidated basis.

The CEO uses consolidated net loss in assessing performance of capital spend projects to

allocate the appropriate resources to drive efficiencies and develop growth strategies.

Under the organizational and reporting structure,

the Company has one operating segment and one reportable segment.

CODM is provided with the following significant segment expenses within lease operating expense on the consolidated statements of

For the Years Ended December 31,

Production costs

Workover activity

Plugging and abandonment activity

Lease operating expense

segment items within consolidated net loss are all separately disclosed on the consolidated statements of operations.

Segment asset information

is not presented to and used by the CODM to allocate resources, assess performance or make strategic decisions.

19 – Supplemental Information of Oil and Natural Gas Producing Activities (Unaudited)

following reserve estimates present the Company's estimate of the proven natural gas and oil reserves and net cash flow of the Company’s

properties, in accordance with the guidelines established by the Securities and Exchange Commission.

The Company emphasizes that

reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing natural gas

and oil properties.

Accordingly, the estimates are expected to change as future information becomes available.

and natural gas reserves are located in Louisiana, New Mexico, North Dakota, Montana and Texas.

Incurred Related to Oil and Gas Activities

incurred include capitalized costs of properties, equipment, and lease facilities for oil and natural gas producing activities.

For the Years Ended December 31,

Total costs incurred

Quantity Information

oil and natural gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated

with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic

conditions, operating methods, and government regulations.

Proved developed reserves are proved reserves that can be expected to be recovered

through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor

compared to the cost of a new well.

Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells

on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The information below

excludes proved undeveloped reserves.

Below are the net quantities of net proved developed reserves of the Company’s properties:

of net quantities of net proved developed reserves

Balance, December 31, 2022

3 unchanged sentences

Balance, December 31, 2024

The 2023 acquisitions primarily relate to additional working interests

in certain of the Company’s New Mexico properties (See Note 3).

The 2022 acquisitions relate to small acquisition in our Rockies

and New Mexico regions.

The revisions in 2023 are primarily related to decreases in prices.

Standardized Measure of Discounted Future Net Cash Flows Relating

to Oil and Natural Gas Reserves

The standardized measure of discounted future

net cash flows relating to oil and natural gas reserves and associated changes in standard measure amounts were prepared in accordance

with the provision of Financial Accounting Standard Board ASC 932-235-555.

Future cash inflows were computed by applying average

prices of oil and natural gas for the last 12 months to estimated future production.

Future production and development costs were

computed by estimating the expenditures to be incurred in developing the oil and natural gas reserves at the end of the year, based on

yearend costs and assuming continuation of existing economic conditions.

Future net cash flows are discounted at the rate of 10% annually

to derive the standardized measure of discounted cash flows.

Actual future cash inflows may vary considerably, and the standardized

measure does not necessarily represent the fair value of the acquired properties' oil and natural gas reserves.

Standard measure

The acquisition of reserves for 2024 and 2023 primarily relate to additional

working interests in certain of the Company’s New Mexico properties (See Note 3) during the respective periods.

The revisions for

the respective periods primarily relate to changes in pricing and the extensions relate to increased volumes from our Starbuck Drilling

Measure of Discounted Future Net Cash Flows Relating to Oil and Natural Gas Reserves

standardized measure of discounted future net cash flows relating to oil and natural gas reserves and associated changes in standard

measure amounts were prepared in accordance with the provision of FASB ASC 932-235-555, Extracting Activities – Oil and Gas

(“Topic 932”).

Future cash inflows were computed by applying average prices of oil and natural gas for the last

12 months to estimated future production.

Future production and development costs were computed by estimating the expenditures

to be incurred in developing the oil and natural gas reserves at the end of the year, based on year-end costs and assuming continuation

of existing economic conditions.

Future net cash flows are discounted at the rate of 10% annually to derive the standardized measure

of discounted cash flows.

Actual future cash inflows may vary considerably, and the standardized measure does not necessarily represent

the fair value of the acquired properties' oil and natural gas reserves.

Standard measure amounts are:

of fair value of the acquired properties' oil and natural gas reserves standard measure amounts

As of December 31,

Future cash inflows

15 unchanged sentences

Standardized measure

$ 147,667,413

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'

The prices for the properties' reserves were as follows:

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.

T he prices for the properties' reserves were as follows:

Natural gas (MMBtu)

Changes in the Standardized Measure of Discounted

Future Net Cash Flows at 10% per annum are as follows:

in the Standardized Measure of Discounted Future Net Cash Flows at 10% per annum are as follows:

As of December 31,

Beginning of year

2 unchanged sentences

( 5,842,745 )

( 71,619,375 )

Net change in future development costs

1 unchanged sentence

( 9,381,470 )

( 6,256,366 )

Acquisition of reserves

2 unchanged sentences

Net change in taxes

(32,133,473 )

Accretion of discount

1 unchanged sentence

( 3,490,026 )

Estimates of economically recoverable natural

gas and oil reserves and of future net revenues are based upon a number of variable factors and assumptions, all of which are to some

degree subjective and may vary considerably from actual results.

Therefore, actual production, revenues, development and operating

expenditures may not occur as estimated.

The reserve data are estimates only, are subject to many uncertainties, and are based on

data gained from production histories and on assumptions as to geologic formations and other matters.

Actual quantities of natural

gas and oil may differ materially from the amounts estimated.

of economically recoverable natural gas and oil reserves and of future net revenues are based upon a number of variable factors and assumptions,

all of which are to some degree subjective and may vary considerably from actual results.

Therefore, actual production, revenues,

development and operating expenditures may not occur as estimated.

The reserve data are estimates only, are subject to many uncertainties,

and are based on data gained from production histories and on assumptions as to geologic formations and other matters.

Actual quantities

of natural gas and oil may differ materially from the amounts estimated.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures