What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-14 · 51 added, 85 removed, 101 unchanged (57% of the section changed)

13 unchanged sentences

Concentration

The Company’s producing properties and oil and natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana, and Texas.

A majority of the Company’s producing properties and oil and natural gas reserves are located within three areas of the United States.

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 Company also sells a large portion of its oil and natural gas production to a few customers, which increases the risk of temporary sales interruption or a lower price for production if one of these purchasers were lost.

The Company sells a large portion of its oil and natural gas production to a few customers.

As a result of this concentration, we are exposed to the impact of our sales if one of these customers fails to meet their obligations or ceases its relationship with the Company.

The loss in revenues may result in a disruption in the Company’s cash flows limiting the ability to meet its obligations or investing in capital projects.

The effect of inflation on the Company has generally been to increase its cost of operations, general and administrative costs and direct costs associated with oil and natural gas production.

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We re-evaluate our estimates and assumptions at least on a quarterly basis and periodically update the estimates used in the preparation of the financial statements based on management’s latest assessment of the current and projected business and general economic environment.

There have been no significant changes to Empire’s critical accounting estimates during the nine months ended September 30, 2025.

There have been no significant changes to Empire’s critical accounting estimates during the three months ended March 31, 2026.

LIQUIDITY AND CAPITAL RESOURCES

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Although Empire expects that its sources of funding will be adequate to fund its liquidity requirements, no assurance can be given that such funding sources will be adequate to meet Empire’s future needs.

As noted below, our working capital is negative as of September 30, 2025, which is primarily the result of a lower cash balance due to capital spending as part of our Starbuck Drilling Program, return-to-production efforts in Texas and a decrease in production due to operational challenges with five wells in North Dakota during the first quarter of 2025.

As of September 30, 2025, we had approximately $4.6 million in cash on hand and approximately $3.3 million available under our Credit Facility;

however, the Company’s available borrowing capacity under the Credit Facility continues to decrease due to a monthly reduction to the borrowing capacity under the Credit Facility (see Note 8).

Empire also entered into a promissory note and a convertible note with Phil Mulacek for up to a total aggregate available principal amount of $8.0 million, of which up to $2.0 million is still available to Empire at the discretion of Mr.

Mulacek per the terms of the respective agreements.

The Company also issued a warrant certificate to Mr.

Mulacek (see Note 8).

Finally, the Company completed a subscription rights offering in August 2025 which raised approximately $2.5 million of gross proceeds.

A portion of these proceeds were used to settle the outstanding balance of the promissory note with Mr.

As noted below, our working capital is negative as of March 31, 2026, which is primarily the result of previous and unforeseen operational costs resulting in lower production as well as a depressed commodity pricing environment during the majority of the first quarter of 2026.

As of March 31, 2026, we had approximately $8.8 million in cash on hand, primarily from the rights offering in February 2026, and approximately $2.7 million available under our Credit Facility;

however, the Company’s available borrowing capacity under the Credit Facility continues to decrease due to a monthly reduction to the borrowing capacity under the Credit Facility.

Empire also has access to an additional $2.0 million from a convertible note issued in September 2025 with Mr.

however, it may only be borrowed at Mr.

Mulacek’s discretion and per the terms of the agreement.

Mulacek also holds a warrant certificate issued in connection with the convertible note issued in September 2025.

Finally, the Company received gross proceeds of $10.0 million from a rights offering in March 2026 and the potential of up to an additional $7.5 million less agency fees from an at-the-market offering pursuant to the sales agreement entered into subsequent to the quarter end.

Despite these transactions, the Company will require additional funds to satisfy the payables discussed above which are greater than estimated cash flow from operations over the next 12 months.

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Empire expects to continue to incur costs related to drilling activities in core areas as well as future oil and natural gas acquisitions in core areas.

During the first nine months of 2025, Empire incurred approximately $4.2 million of total additions to oil and natural gas properties, primarily related to the drilling program in the Starbuck field of North Dakota and return-to-production efforts in Texas.

During the first three months of 2026, Empire incurred approximately $1.9 million of total additions to oil and natural gas properties, primarily related to the gas development program in Texas.

It is expected that Empire will use a combination of debt or equity issuances, cash on hand, and cash flows from operations to fund capital programs, ongoing operations, and any potential acquisitions.

Hedging Positions

We generally do not enter into derivative financial instruments for speculative or trading purposes.

We entered into certain oil commodity derivative positions for the remaining three quarters of 2026 at a blended price of $73.83 for total production of approximately 340,000 Bbls.

These positions account for the majority of our current level of production for the remainder of 2026 to help minimize expected pricing volatility and to strengthen forward cash flow visibility.

Anticipated production increases from our ongoing development projects will further strengthen Empire’s cash flows from operations.

Working Capital

Working capital is presented in the table below.

The change of approximately $0.3 million was primarily driven by a higher cash balance substantially offset by an increase in accrued expenses.

September 30,

The change of approximately $4.2 million was primarily driven by a higher cash balance from the Company’s rights offering in March 2026.

(in thousands)

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Working Capital

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands)

4 unchanged sentences

Operating Activities

Operating activities decreased period over period primarily due to a decrease in production period over period and lower realized commodity prices during 2025 consistent with general market pricing trends.

Operating activities decreased period over period primarily due to a decrease in production period over period and lower realized commodity prices consistent with general market pricing trends.

Investing Activities

Investing activities are primarily related to approximately $3.6 million of cash additions to oil and natural gas properties during the first nine months of 2025 compared to approximately $48.8 million of cash additions to oil and natural gas properties during the first nine months of 2024 associated with the Starbuck Drilling Program in North Dakota with the decline period over period due to the Company nearing completion of this project.

A majority of the cash additions for 2025 relate to the Company’s return-to-production efforts in Texas.

Investing activities are primarily related to approximately $1.2 million of cash additions to oil and natural gas properties during the first three months of 2026 as a result of the Company’s gas development program in Texas compared to approximately $2.7 million of cash additions to oil and natural gas properties during the first three months of 2025 associated with various projects in Texas and North Dakota.

Financing Activities

Financing activities include $4.0 million and $5.0 million in 2025 and 2024, respectively, from promissory notes issued to Empire by various related parties offset by a $2.0 million repayment in 2025 (see Note 8).

Empire had borrowings of approximately $3.0 million and $4.0 million on its Credit Facility during the same respective periods.

Additionally, the Company completed its August Rights Offering in 2025 and its April Rights Offering in 2024 along with warrants to Energy Evolution that were exercised in the third quarter of 2024 (see Note 10).

Financing activities in the first three months of 2026 include both a $2.0 million repayment and a $3.0 million borrowing on respective related party notes with Mr.

We also completed a rights offering in March 2026 for net proceeds of approximately $9.9 million.

In addition, we paid $1.0 million of the outstanding balance of our revolving credit facility in the first quarter of 2026.

Capital Resources

Capital Expenditures

For the nine months ended September 30, 2025, Empire incurred approximately $4.2 million of total additions to oil and natural gas properties which is primarily from finalizing drilling and completions activity related to our Starbuck Drilling Program in North Dakota and continued return-to-production efforts in Texas.

For the three months ended March 31, 2026, Empire incurred approximately $1.9 million of total additions to oil and natural gas properties which is primarily from the Company’s gas development program in Texas.

Production and Operating Data

The following table sets forth a summary of Empire’s production and operating data for the three and nine months ended September 30, 2025 and 2024.

The following table sets forth a summary of Empire’s production and operating data for the three months ended March 31, 2026 and 2025.

Because of normal production declines, increased or decreased production due to future acquisitions, divestitures, development, and fluctuations in commodity prices, the historical information presented below should not be interpreted as being indicative of future results.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Production and Operating Data:

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Depreciation, depletion, amortization and accretion

General & administrative (excluding stock-based compensation)

General and administrative (excluding stock-based compensation)

Stock-based compensation

Total General & administrative

(1) Excludes the effect of net cash receipts from (payments on) derivatives.

Total General and administrative

Bbl – One stock tank barrel, of 42 U.S.

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Natural gas equivalents are determined under the relative energy content method by using the ratio of 6.0 Mcf of natural gas to 1.0 Bbl of oil or condensate.

Three Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

Results of Operations

The following table reflects Empire’s summary operating information for the three months ended September 30, 2025 and 2024.

The following table reflects Empire’s summary operating information for the three months ended March 31, 2026 and 2025.

Because of normal production declines, increased or decreased drilling activity and the effects of acquisitions, the historical information presented below should not be interpreted as indicative of future results.

For the Three Months Ended September 30,

For the Three Months Ended March 31,

(in thousands)

2 unchanged sentences

Production and Ad Valorem Taxes

Depreciation, Depletion, Amortization & Accretion

General and Administrative (excluding stock-based compensation)

Stock-Based Compensation

Cash-Based Interest Expense

Non-Cash Interest Expense (Income)

Operating Loss

A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change that is greater than 200.

Revenues for the three months ended September 30, 2025 decreased compared to the prior year primarily due to lower average oil and NGL realized pricing.

Net oil sales volumes were approximately 144,000 Bbls for the three months ended September 30, 2025, a slight decrease over the same period in the prior year primarily due to natural decline offset by redrilling efforts in North Dakota as previously discussed.

Realized oil prices for the three months ended September 30, 2025, were $61.00 per barrel, while realized prices for the same period in the prior year were $71.48 per barrel, a decrease of approximately 15% due to a general decline in overall market prices.

Realized natural gas prices for the three months ended September 30, 2025, were $0.94 per Mcf, while realized prices for the same period in the prior year were $0.04 per Mcf.

This is primarily due to the depressed natural gas prices in the third quarter of 2024 in New Mexico leading to below zero prices as deductions exceeded the natural gas prices.

Realized NGLs prices for the three months ended September 30, 2025, were $9.25 per barrel, while realized prices for the same period in the prior year were $13.85 per barrel, a decrease of approximately 33% driven by a general decline in overall market prices.

Lease Operating Expense and Production Taxes

Lease operating expense was lower for the three months ended September 30, 2025, compared to the same period in 2024 primarily due to lower workover costs.

Lease operating expense includes approximately $0.4 million of workover expense for the three months ended September 30, 2025, compared to approximately $1.4 million for the same period in 2024.

The higher workover expense in 2024 was primarily in New Mexico as Empire continued work in the region to enhance and maintain production.

Production taxes were lower for the three months ended September 30, 2025, compared to the same period in 2024 as a result of the lower product revenues discussed above.

Depreciation, Depletion, Amortization and Accretion

The increase in DD&A for the three months ended September 30, 2025, compared to the same period in 2024 is primarily due to the impact of the capitalized costs associated with the new drilling activity as part of our Starbuck Drilling Program in North Dakota, partially offset by lower production volumes period over period.

Accretion also increased slightly from prior period due to the new drilling activity and additional interest.

General and Administrative Expense (excluding stock-based compensation)

General and administrative expense, excluding stock-based compensation, decreased for the three months ended September 30, 2025, compared to the same period in 2024 primarily due to timing of board of director compensation and franchise taxes.

Stock-based Compensation

Stock-based compensation decreased period over period due to a lower number of awards in third quarter 2025.

Empire utilizes stock-based compensation to compensate the Board, members of management, and retain talented personnel.

Empire anticipates stock-based compensation to continue to be utilized in 2025 and beyond to attract and retain talented personnel and compensate Board members and consultants.

Interest Expense

Interest expense increased for the three months ended September 30, 2025 compared to the same period in 2024 primarily due to a higher average outstanding balance on the Company’s Credit Facility and additional equipment and vehicle notes.

Nine Months Ended September 30, 2025 and 2024

Results of Operations

The following table reflects Empire’s summary operating information for the nine months ended September 30, 2025 and 2024.

For the Nine Months Ended September 30,

(in thousands)

Total Product Revenues

Lease Operating Expense

Production and Ad Valorem Taxes

Depreciation, Depletion, Amortization & Accretion

General and Administrative (excluding stock-based compensation)

4 unchanged sentences

A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change that is greater than 200.

Revenues for the nine months ended September 30, 2025, decreased compared to the prior year primarily due to lower average oil and NGL realized pricing and lower oil production volumes.

Net oil sales volumes were approximately 400,000 Bbls for the nine months ended September 30, 2025, a decrease of approximately 8% over the same period in the prior year primarily due to redrilling efforts in North Dakota.

Realized oil prices for the nine months ended September 30, 2025, were $62.17 per barrel, while realized prices for the same period in the prior year were $73.60 per barrel, a decrease of approximately 16% due to a general decline in overall market prices.

Realized natural gas prices for the nine months ended September 30, 2025, were $1.50 Mcf, while realized prices for the same period in the prior year were $0.38 per Mcf.

The increase is due to depressed natural gas prices in New Mexico leading to below zero prices as deductions exceeded the natural gas prices.

Realized NGLs prices for the nine months ended September 30, 2025, were $11.59 per barrel, while realized prices for the same period in the prior year were $13.87 per barrel, a decrease of approximately 16%.

Revenues for the three months ended March 31, 2026, decreased compared to the prior year primarily due to lower overall production in North Dakota and New Mexico and a lower realized price across all commodities.

Net oil sales volumes were approximately 112,000 Bbls for the three months ended March 31, 2026, a slight decrease over the same period in the prior year primarily due to natural decline and operational challenges in North Dakota and New Mexico.

Realized oil prices for the three months ended March 31, 2026, were $65.01 per barrel, while realized prices for the same period in the prior year were $67.28 per barrel, a decrease of approximately 3% due to a general decline in overall market prices during the early part of first quarter 2026.

Realized natural gas prices for the three months ended March 31, 2026, were $0.79 per Mcf, while realized prices for the same period in the prior year were $2.74 per Mcf.

This is primarily due to the depressed natural gas prices in the first quarter of 2026 specifically in New Mexico.

Realized NGLs prices for the three months ended March 31, 2026, were $11.18 per barrel, while realized prices for the same period in the prior year were $12.56 per barrel, a decrease of approximately 11% driven by a general decline in overall market prices.

Lease Operating Expense and Production Taxes

Lease operating expense was lower for the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to lower workover costs.

Lease operating expense includes approximately $1.2 million of workover expense for the nine months ended September 30, 2025, compared to approximately $5.3 million for the same period in 2024.

The higher workover expense in 2024 was primarily in New Mexico as Empire continued work in the region to enhance and maintain production.

Production taxes were lower for the nine months ended September 30, 2025, compared to the same period in 2024 as a result of the lower product revenues discussed above.

Lease operating expense was lower for the three months ended March 31, 2026, compared to the same period in 2025 primarily due to lower overall production and efforts by the Company to reduce overall operating costs.

This decrease was partially offset by an increase in workover expense period over period.

Workover expenses were approximately $0.6 million for the three months ended March 31, 2026, compared to approximately $0.4 million for the same period in 2025.

The higher workover expense in 2026 was primarily in Texas due to the Company’s ongoing gas development program.

Production taxes were lower for the three months ended March 31, 2026, compared to the same period in 2025 as a result of the lower product revenues discussed above.

Depreciation, Depletion, Amortization and Accretion

The higher DD&A for the nine months ended September 30, 2025, compared to the same period in 2024 is primarily due to the acquisition of additional working interest in New Mexico and the impact of the capitalized costs associated with the new drilling activity as part of our Starbuck Drilling Program in North Dakota, partially offset by lower production volumes period over period.

Accretion also increased slightly from prior period due to the new drilling activity and additional interest.

The decrease in DD&A for the three months ended March 31, 2026, compared to the same period in 2025 is primarily due to the impact of impairments in the fourth quarter of 2025 and lower production volumes period over period, partially offset by the additional interests acquired in New Mexico in first-quarter 2026.

Accretion increased slightly from prior period due to the additional interest acquired in New Mexico.

General and Administrative Expense (excluding stock-based compensation)

General and administrative expense, excluding stock-based compensation, increased for the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to an increase in salaries and benefits period over period associated with an increase in employee headcount offset by lower professional fees for the same period over period.

General and administrative expense, excluding stock-based compensation, decreased for the three months ended March 31, 2026, compared to the same period in 2025 primarily due to a decrease in employee costs resulting from lower headcount in 2026.

Stock-based Compensation

Stock-based compensation decreased period over period due to a lower number of awards in 2025.

Stock-based compensation decreased period over period due to a lower number of awards in first quarter 2026.

Empire utilizes stock-based compensation to compensate the Board, members of management, and retain talented personnel.

1 unchanged sentence

Interest Expense

Interest expense decreased for the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to certain non-cash interest expense in 2024 from the February Note further described in Note 8 partially offset by a higher average outstanding balance on the Company’s Credit Facility and additional equipment and vehicle notes.

Cash-based interest expense increased for the three months ended March 31, 2026, compared to the same period in 2025 primarily due to a higher average outstanding balance on the Company’s Credit Facility and additional equipment and vehicle notes.

Additionally, the Company’s non-cash-based interest expense was higher in 2026 due to the remaining unamortized discount related to the September Note being fully amortized upon full repayment during the quarter.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-Q

Item 2. Management’s Discussion and Analysis