What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-14 · 88 added, 42 removed, 110 unchanged (54% of the section changed)

7 unchanged sentences

Empire undertakes no duty to update any of the forward-looking statements in this Form 10-Q.

Our primary business is the optimization and development of oil and gas interests.

Our primary business is the optimization and development of oil and gas properties.

We have incurred losses from operations in 2026 and 2025.

26 unchanged sentences

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 three months ended March 31, 2026.

There have been no significant changes to Empire’s critical accounting estimates during the six months ended June 30, 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 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;

As noted below, our working capital is negative as of June 30, 2026, which is primarily the result of previous and unforeseen operational costs and lower production.

As of June 30, 2026, we had approximately $3.1 million in cash on hand and approximately $2.0 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.

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

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.

Mulacek and Energy Evolution, both related parties of Empire and our largest two stockholders, have indicated that they will, and have the ability to, provide sufficient support to sustain the operating, investing, and financing activities of Empire, as necessary.

Energy Evolution and PIE, both related parties of Empire, have indicated that they will, and have the ability to, provide sufficient support to sustain the operating, investing, and financing activities of Empire, as necessary.

Management continues to seek additional sources of capital via the debt or equity markets to improve liquidity going forward.

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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 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.

During the first six months of 2026, Empire incurred approximately $4.0 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.

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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.

As of June 30, 2026, our remaining outstanding derivative financial instruments account for 58,000 Bbls at a blended price of $69.89 to help minimize expected pricing volatility and to strengthen forward cash flow visibility.

Any additional derivative financial instruments Empire may enter into or 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 $4.2 million was primarily driven by a higher cash balance from the Company’s rights offering in March 2026.

The change of approximately $0.2 million was primarily driven by a higher cash balance partially offset by the related party accounts payable further described in Note 13 – Related Party Transactions.

(in thousands)

2 unchanged sentences

Working Capital

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(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 consistent with general market pricing trends.

Cash used in operating activities increased period over period primarily due to lower production volumes.

Investing Activities

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.

Investing activities are primarily related to approximately $3.6 million of additions to oil and natural gas properties during the first six months of 2026 from the Company’s gas development program in Texas compared to $3.2 million of additions in the prior year’s first six months associated with various projects in Texas and North Dakota.

Financing Activities

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.

Financing activities in the first six 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.

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Capital Expenditures

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.

For the six months ended June 30, 2026, Empire incurred approximately $4.0 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 months ended March 31, 2026 and 2025.

The following table sets forth a summary of Empire’s production and operating data for the three and six months ended June 30, 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 March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Production and Operating Data:

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Total General and administrative

(1) Average Oil Price per Unit excluding the effect of net settlements received (paid) for the three and six months ended June 30, 2026 were $94.72 and $80.12, respectively.

There are no impacts for the three and six months ended June 30, 2025 as there were no open commodity derivatives during the respective periods.

(2) Average Total Price per Unit excluding the effect of net settlements received (paid) for the three and six months ended June 30, 2026 were $66.86 and $56.04, respectively.

There are no impacts for the three and six months ended June 30, 2025 as there were no open commodity derivatives during the respective periods.

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 March 31, 2026 and 2025

Three Months Ended June 30, 2026 and 2025

Results of Operations

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

The following table reflects Empire’s summary operating information for the three months ended June 30, 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 March 31,

For the Three Months Ended June 30,

(in thousands)

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Non-Cash Interest Expense

Loss on Derivatives

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 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.

Total product revenues for the three months ended June 30, 2026 increased compared to the prior year primarily due to a higher realized oil price per barrel from general market pricing trends partially offset by lower production volumes year over year.

Net oil sales volumes were approximately 116,000 Bbls for the three months ended June 30, 2026, a decrease over the same period in the prior year primarily due to natural decline and certain wells within North Dakota being down for our steam unit performance enhancement projects which began in the second quarter of 2026.

Realized oil prices for the three months ended June 30, 2026, were $58.26 per barrel, while realized prices for the same period in the prior year were $58.92 per barrel, a decrease of approximately 1% including the impact of the Company’s hedging contracts.

The average oil price per barrel excluding the effect of net settlements received (paid) for the three months ended June 30, 2026, was $94.72.

There were no impacts to prior period pricing due to no open hedging contracts during the period.

Realized natural gas prices for the three months ended June 30, 2026, were ($4.22) per Mcf, while realized prices for the same period in the prior year were $0.93 per Mcf.

This is primarily due to the depressed natural gas prices in the second quarter of 2026 in New Mexico leading to below zero prices as deductions exceeded the natural gas prices.

Realized NGLs prices for the three months ended June 30, 2026, were $21.08 per barrel, while realized prices for the same period in the prior year were $13.33 per barrel, an increase of approximately 58% driven by an increase in overall market prices year over year.

Lease Operating Expense and Production Taxes

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.

Lease operating expense was lower for the three months ended June 30, 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 primarily in New Mexico.

Workover expenses were approximately $0.7 million for the three months ended June 30, 2026, compared to approximately $0.5 million for the same period in 2025

Production and ad valorem taxes were higher for the three months ended June 30, 2026, compared to the same period in 2025 as a result of the higher product revenues discussed above.

Depreciation, Depletion, Amortization and Accretion

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.

The decrease in DD&A for the three months ended June 30, 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, 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.

General and administrative expense, excluding stock-based compensation, decreased slightly for the three months ended June 30, 2026, compared to the same period in 2025 primarily due to a decrease in employee costs resulting from lower headcount in 2026 partially offset by additional professional fees and rent expense.

Stock-based Compensation

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

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

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

1 unchanged sentence

Interest Expense

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.

Interest expense slightly decreased for the three months ended June 30, 2026, compared to the same period in 2025 due to a lower average outstanding balance and interest rate on the Company’s Credit Facility offset by additional equipment and vehicle notes.

Loss on Derivatives

The $1.6 million loss on derivatives for the three months ended June 30, 2026, is primarily due to higher market prices relative to our outstanding commodity derivative positions.

Six Months Ended June 30, 2026 and 2025

Results of Operations

The following table reflects Empire’s summary operating information for the six months ended June 30, 2026 and 2025.

For the Six Months Ended June 30,

(in thousands)

Total Product Revenues

Lease Operating Expense

Production and Ad Valorem Taxes

Depreciation, Depletion, Amortization and Accretion

General and Administrative (excluding stock-based compensation)

Stock-Based Compensation

Cash-Based Interest Expense

Non-Cash Interest Expense

Loss on Derivatives

Operating Loss

Total product revenues for the six months ended June 30, 2026, increased compared to the prior year primarily due to a higher realized oil price per barrel from general market pricing trends partially offset by lower production volumes year over year.

Net oil sales volumes were approximately 229,000 Bbls for the six months ended June 30, 2026, a decrease of approximately 11% 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 six months ended June 30, 2026, were $61.57 per barrel, while realized prices for the same period in the prior year were $62.84 per barrel, a decrease of approximately 2% including the impact of the Company’s hedging contracts.

The average realized oil price per barrel excluding the effect of net settlements received (paid) for the six months ended June 30, 2026, was $80.12.

There were no impacts to prior period pricing due to no open hedging contracts during the period.

Realized natural gas prices for the six months ended June 30, 2026, were $(0.94) per Mcf, while realized prices for the same period in the prior year were $1.76 per Mcf.

This is primarily due to the depressed natural gas prices in the second quarter of 2026 in New Mexico leading to below zero prices as deductions exceeded the natural gas prices.

Realized NGLs prices for the six months ended June 30, 2026, were $17.35 per barrel, while realized prices for the same period in the prior year were $12.98 per barrel, an increase of approximately 34% driven by an increase in overall market prices year over year.

Lease Operating Expense and Production Taxes

Lease operating expense was lower for the six months ended June 30, 2026, compared to the same period in 2025 primarily due to lower overall production and efforts by the Company to reduce overall operating costs The decrease was partially offset by an increase in workover expense period over period.

Workover expenses were approximately $1.3 million for the six months ended June 30, 2026, compared to approximately $0.9 million for the same period in 2025.

The higher workover expense in 2026 was primarily in North Dakota from the Company’s steam unit performance enhancements and general projects in New Mexico.

Production and ad valorem taxes were slightly lower for the six months ended June 30, 2026, compared to the same period in 2025 primarily due to prior period adjustments during the period.

Depreciation, Depletion, Amortization and Accretion

The decrease in DD&A for the six months ended June 30, 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 also 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, decreased for the six months ended June 30, 2026, compared to the same period in 2025 primarily due to a decrease in employee costs resulting from a lower headcount in 2026.

Stock-based Compensation

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

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 2026 and beyond to attract and retain talented personnel and compensate Board members and consultants.

Interest Expense

Cash-based interest expense increased for the six months ended June 30, 2026, compared to the same period in 2025 primarily due to additional equipment and vehicle notes partially offset by a lower average outstanding balance and interest rate on the Company’s Credit Facility.

Additionally, the Company’s non-cash-based interest expense was higher for the six months ended June 30, 2026, due to the remaining unamortized discount related to the September Note being fully amortized upon full repayment during the first quarter of 2026.

Loss on Derivatives

The $4.2 million loss on derivatives for the six months ended June 30, 2026, is primarily due to higher market prices relative to our outstanding commodity derivative positions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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