Empire Petroleum reported a drop in second quarter revenue compared to a year earlier as the Tulsa-based company reported operational and financial results for the second quarter 2025. But company leaders expressed confidence in moving forward, declaring “this environment is temporary.”
With producing assets in New Mexico, North Dakota, Montana, Texas and Louisiana, Empire said total product revenue was $8.7 million, down from the $12.8 million in the second quarter of 2024, despite a 15% increase of net production volumes from the first quarter of 2025 to the second quarter.
Contributing to the decrease were lower oil sales volumes and lower realized oil and NGL prices. Realized oil and natural gas liquids prices decreased 23% and 14%, respectively, due to a general decline in overall market pricing.
Lease operating expenses in Q2-2025 decreased to $6.4 million versus $7.5 million in Q2-2024 primarily due to lower workover costs. Q2-2025 workover expense decreased to $0.5 million versus $1.6 million in Q2-2024. Higher workover expense in 2024 was primarily in New Mexico as Empire continued work in the region to enhance and maintain production.
Production and ad valorem taxes for Q2-2025 were $0.8 million versus $1.1 million in Q2-2024, as a result of lower product revenues.
SECOND QUARTER 2025 HIGHLIGHTS
- Produced Q2-2025 net production volumes of 2,357 barrels of oil equivalent per day (“Boe/d”), an increase of 15% compared to Q1-2025;
- Reported 1,493 barrels of oil per day (“Bbls/d”);
- Boe/d is comprised of 63% oil, 19% natural gas liquids (“NGLs”), and 18% natural gas;
- As part of Empire’s Enhanced Oil Recovery efforts in the Starbuck Drilling Program in North Dakota, modified wellhead installations are underway and expected to be completed in Q3-2025, with advanced fabrication work progressing toward completion by year-end;
- While certain rare alloys and specialized materials for the EOR process remain in fabrication, production has continued to improve and operations are showing increased consistency;
- Installation of the modified rare alloys for the EOR units is expected to be completed and fully operational in Q4-2025;
- Empire expects to finalize the patented design specifications for its hydrocarbon vaporization technology by the end of Q4-2025, with the system leveraging elevated temperatures and pressure changes to enhance recovery efficiency;
- Empire made significant progress in preparing for its inaugural drilling campaign in Texas, completing its first drilling pad and preparing multiple locations for entry as part of its development plan;
- The Company also advanced critical pre-drill activities during Q2-2025, including surface land work, rig evaluation, and the permitting process, laying the groundwork for horizontal development across multiple prospective pay zones identified in the region;
- Empire expects drilling operations to commence in Q4-2025;
- Launched a subscription rights offering with the intention to raise approximately $5.0 million in gross proceeds, including $2.5 million from the anticipated future exercise of the warrants issued as part of the Rights Offering, to provide shareholders the opportunity to increase their equity position;
- Each shareholder of record as of July 10, 2025, is entitled to purchase one unit at a subscription price equal to $0.07367 per unit, each unit consisting of 0.0139 shares of the Company’s common stock and one rights warrant to purchase 0.0136 shares of the Company’s common stock equal to $5.46 per whole share;
- Stockholders who fully exercise their subscription rights are entitled to oversubscribe for additional units, subject to availability and pro-rata allocation of units;
- As stated in previous filings, Phil E. Mulacek, Chairman of the Board and one of Empire’s largest shareholders, has expressed his intent to fully subscribe to the units available through his subscription rights and to fully exercise his over-subscription rights to purchase his pro-rata share of any remaining unsubscribed securities at the offering’s expiration;
- The Rights Offering is set to expire at 5:00 p.m., Eastern Time, on August 18, 2025, and proceeds are expected to be used for balance sheet optimization efforts and general corporate purposes;
- Reported Q2-2025 total product revenue of $8.7 million, a net loss of $5.1 million, or ($0.15) per diluted share, primarily driven by lower realized commodity prices, which included a 12% decrease in realized oil prices compared to Q1-2025 and a 23% decrease compared to Q2-2024;
- Despite a 15% increase in equivalent production compared to Q1-2025, the significant decline in realized commodity pricing drove lower financial results for the quarter;
- Adjusted EBITDA of ($1.2) million for Q2-2025.
2025 OUTLOOK
“While commodity prices were significantly under pressure (NYMEX oil prices down ~10% from Q1-2025 and down ~20% from Q2-2024) in the second quarter due to a mix of global market condition and seasonal factors, I believe this environment is temporary,” said Phil Mulacek, Chairman of the Board.
“Reported North American data shows that the oil well rig count is at post-COVID lows, compared to 2021 levels, while the hydraulic fracturing spread count is even lower at levels not seen since late 2020 through the end of 2021. These material market indicators should result in lower production going forward. Compounding this, U.S. production has already peaked and is approximately 250,000 barrels per day lower than the high earlier in 2025. This supports my strong belief that overall pricing is trending upward over the next four to six quarters. Over the next six to nine months, we anticipate a continued rebound that could increase our production levels. Empire is strategically positioned to benefit from this upswing with focused production increases. The Empire team continues to demonstrate disciplined planning and execution, placing the Company on a stronger path to lasting growth. My decision to fully subscribe and oversubscribe in the Rights Offering reflects my strong confidence in the Company’s long-term potential.”
Mike Morrisett, President and CEO, added, “We were pleased to restore and maintain production across key assets during the second quarter, particularly in North Dakota. However, lower-than-expected commodity pricing impacted revenue and margins, offsetting our operational gains. We remain focused on executing our development plans and maintaining cost discipline as we position the Company to capitalize on a potential pricing recovery.”
North Dakota – Williston Basin:
- Empire remains confident in the trajectory of its EOR program in the Starbuck region and expects to reach steady-state production levels by the end of Q4-2025, contingent on continued equipment reliability and seasonal operating stability; and
- With key infrastructure milestones nearing completion and EOR operations delivering steadily improving performance, the program is expected to support sustained production growth and improved asset performance over the long term.
New Mexico – Permian Basin:
- After four years of expenditures, Empire anticipates receiving a ruling from the New Mexico Oil Conservation Commission (“NMOCD”) in Q3-2025, regarding its applications to revoke four existing permits and deny five new applications for what the Company believes is the illegal disposal of wastewater into Eunice Monument South Unit’s (“EMSU”) Unitized Interval by the largest of the third-party Saltwater Disposal (“SWD”) operators;
- Pending the NMOCD’s decision, Empire plans to proceed with Motions to Revoke the existing permits granted to the remaining three SWD Companies disposing wastewater into the EMSU and Arrowhead Grayburg Unit (“AGU”) Unitized Interval, while concurrently advancing litigation for trespass and damages;
- While litigation has limited the scope of development activity in the affected areas, production from the EMSU and AGU units has increased in recent months, reflecting ongoing optimization efforts; and
- The Company expects final resolution of this matter to result in a meaningful reduction in operating expenses and contribute to improved financial performance going forward.
Texas – East Texas Basin:
- Empire remains on track to initiate drilling operations in Q4-2025, as part of its broader development strategy in the region;
- The upcoming program is designed to target multiple prospective pay zones identified during technical evaluation, with a focus on horizontal development opportunities that support long-term, capital-efficient production;
- The Company expects this activity to establish a foundation for scalable development throughout 2026 and beyond;
- As of the first week of August 2025, the first drilling pad has been completed, and the Company is actively securing materials, equipment, rigs, and other necessary resources to begin and conclude drilling operations on the initial wells in Q4-2025; and
- The production targets associated with these wells are expected to deliver the most significant impact to Empire’s portfolio to date.
- Net sales volumes for Q2-2025 were 2,357 Boe/d, including 1,493 barrels of oil per day; 430 barrels of NGLs per day, and 2,606 thousand cubic feet per day (“Mcf/d”) or 434 Boe/d of natural gas. Oil sales volumes decreased approximately 15% compared to Q2-2024 primarily due to redrilling efforts in North Dakota and natural decline.Empire reported Q2-2025 total product revenue of $8.7 million versus $12.8 million in Q2-2024. Contributing to the decrease were lower oil sales volumes and lower realized oil and NGL prices. Realized oil and natural gas liquids prices decreased 23% and 14%, respectively, due to a general decline in overall market pricing.Lease operating expenses in Q2-2025 decreased to $6.4 million versus $7.5 million in Q2-2024 primarily due to lower workover costs. Q2-2025 workover expense decreased to $0.5 million versus $1.6 million in Q2-2024. Higher workover expense in 2024 was primarily in New Mexico as Empire continued work in the region to enhance and maintain production.
Production and ad valorem taxes for Q2-2025 were $0.8 million versus $1.1 million in Q2-2024, as a result of lower product revenues.
Depreciation, Depletion, and Amortization (“DD&A”) and Accretion for Q2-2025 was $3.1 million versus $3.2 million for Q2-2024. The decrease in DD&A is primarily due to lower production volumes partially offset by the acquisition of additional working interest in New Mexico and the impact of the capitalized costs associated with the new drilling as part of Empire’s Starbuck Drilling Program in North Dakota. Accretion increased slightly due to the new drilling activity and acquisition of working interest in New Mexico.
General and administrative expenses, excluding share-based compensation expense, was $2.9 million, or $13.55 per Boe in Q1-2025 versus $2.4 million, or $9.80 per Boe in Q2-2024. The increase in expenses was primarily due to an increase in salaries and benefits associated with an increase in employee headcount.
Interest expense for Q2-2025 slightly decreased, compared to Q2-2024, primarily due to certain non-cash interest expense in Q2-2024 from the convertible promissory note partially offset by a higher average outstanding balance on the Company’s credit facility.
Empire recorded a net loss of $5.1 million in Q2-2025, or ($0.15) per diluted share, versus a Q2-2024 net loss of $4.4 million, or ($0.15) per diluted share.
Adjusted EBITDA was ($1.2) million for Q2-2025 compared to Adjusted EBITDA of $1.7 million in Q2-2024.
CAPITAL SPENDING, BALANCE SHEET & LIQUIDITY
For the six months ended June 30, 2025, Empire invested approximately $3.3 million in total capital expenditures, primarily from finalizing drilling and completions activity related to the Starbuck Drilling Program in North Dakota and continued return-to-production efforts in Texas.
As of June 30, 2025, Empire had approximately $2.3 million in cash on hand and approximately $4.0 million available on its credit facility. Empire is scheduled to complete a subscriptions rights offering in August 2025, which is expected to raise approximately $5.0 million of gross proceeds.
