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ACQUISITION OF CARDINAL ASSETS

9 Months Ended

Sep. 30, 2018

On August 28, 2018, the Company purchased oil producing properties from Cardinal Exploration and Production Company ("Cardinal") for a purchase price of $323,000. The effective date of the transaction is June 1, 2018. After certain adjustments related to the effective date, the total proceeds paid to Cardinal were $293,966. Such proceeds were paid from sales of unregistered securities of the Company.

The oil and gas properties purchased from Cardinal include four active operated wells in Louisiana, including one saltwater disposal well, currently producing approximately 35 barrels of oil equivalent (BOE) per day, and Empire's working interests in the wells are 100%.

The following table sets forth the Company's preliminary purchase price allocation:


Fair Value of Assets Acquired
Accounts Receivable		43,406
Oil Properties		356,868
Total Assets Acquired	$	400,274

Fair Value of liabilities Assumed
Accounts payable – trade		22,526
Asset retirement obligations		83,782
Total Liabilities Assumed	$	106,308

The fair values of assets acquired and liabilities assumed were based on the following key inputs:

Oil and natural gas properties

The fair value of proved 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 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. 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 totaled $83,782 and is included in proved oil and natural gas properties with a corresponding liability in the table above. 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 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 and accounts payable – trade were equivalent to the carrying value due to their short-term nature.

Accounts payable - trade includes approximately $22,526 of liabilities primarily related to well activity prior to close.