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Subsequent Events

12 Months Ended

Dec. 31, 2021

Subsequent Events [Abstract]

Subsequent Events

Note 16 – Subsequent Events

The Company uplisted from the OTCQB to the NYSE American effective March 8, 2022. Immediately prior to the listing, a reverse stock split of 1 for 4 occurred. All pricing and share amounts have been stated at post-reverse split amounts.

On February 28, 2022, the Company granted approximately 249,000 stock options under the 2021 Stock Option and Incentive plan to management and employees of the Company. These options vest in equal 1/3 increments over the course of three years and expire 3.5 years after the grant date and have a grant price of $11.80.

The Company named Eugene J. Sweeney as Chief Operating Officer in March 2022. Mr. Sweeney previously served as the Company’s Vice President of Operations from May 2021 to the date of his promotion.

EMPIRE PETROLEUM CORPORATION

Supplemental Information “Oil and Natural Gas Producing Activities (Unaudited)

December 31, 2021 and 2020

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

Capitalized costs include the cost of properties, equipment, and facilities for oil and natural gas producing activities. Capitalized costs for proved properties includes costs for oil and natural gas leaseholds where proved reserves have been identified and non-operated development wells and related equipment and facilities.

		Years Ended December 31,
		2021				2020

Proved acquisition costs		$	23,780,111			$	10,913,393
Revisions to abandonment costs			(1,547,640	)			(862,405	)
Development costs			1,970,410				—
Total additions		$	24,202,881			$	10,050,988

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 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 expenditures is required for recompletion. Below are the net quantities of net proved developed reserves of the Company’s properties:

		Oil (MMBbls)	Gas (MMcf)	MBOE
Balance, December 31, 2019		3,643	404	3,710
Acquisition of Reserves		580	1,092	762
Revisions		(397)	(385)	(461)
Production		(165)	(140)	(188)
Balance, December 31, 2020		3,661	971	3,823
Acquisition of Reserves		5,634	10,533	7,390
Revisions		(617)	251	(576)
Extensions		150	51	159
Divestiture of Reserves		(47)	27	(42)
Production		(333)	(625)	(437)
Total Reserves		8,449	11,208	10,317

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 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:

		December 31,
Description		2021				2020
Future cash inflows		$	627,654,125			$	121,959,450
Future production costs			(362,254,813	)			(55,350,840	)
Future development costs			(33,021,749	)			(1,682,210	)
Future income tax expense			(30,614,383	)			—
Future net cash flows			201,763,180				64,926,400
10% annual discount for estimated timing of cash flows			(107,911,087	)			(44,156,400	)
Standardized measure		$	93,852,093			$	20,770,000

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' reserves. The prices for the properties' reserves were as follows:

		2021				2020
Oil (BBl)		$	64.31			$	32.94
Natural gas (MMBtu)		$	7.34	*		$	1.41

*Pricing includes revenue received from NGL sales as well as natural gas.

Changes in the Standardized Measure of Discounted Future Net Cash Flows at 10% per annum are as follows:

December 31,

Description 2021 2020

Beginning of year $ 20,770,080 $ 37,301,920

Net change in prices and production costs 13,080,689 (18,386,232 )

Net change in future development costs 782,210 16,937,402

Oil & Gas net revenue (10,587,395 ) (2,164,496 )

Extensions 5,026,479 —

Acquisition of reserves 90,104,017 13,694,856

Divestiture of reserves (318,813 ) —

Revisions of previous quantity estimates (3,794,860 ) (4,348,703 )

Net change in taxes (15,544,094 ) —

Accretion of discount 2,077,008 5,099,678

Changes in timing and other (7,743,228 ) (27,364,345 )

End of year $ 93,852,093 $ 20,770,080

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.

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