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Debt Including Debt with Related Parties | 9 Months Ended
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Sep. 30, 2023
Debt Disclosure [Abstract] |
Debt Including Debt with Related Parties | Note 8 – Debt Including Debt with Related Parties The following table represents the Company’s outstanding debt as of September 30, 2023 and December 31, 2022: Schedule of outstanding debts
|  | As of September 30, 2023 |  |  | As of December 31, 2022 |
Senior Revolver Loan Agreement |  | $ | 4,369,500 |  |  | $ | 5,869,500 |
Term Note Payable – Related Party |  |  | 1,060,004 |  |  |  | 1,076,987 |
Bridge Loans – Related Parties |  |  | 10,000,000 |  |  |  | — |
Equipment and vehicle notes, 0% to 9.0% interest rates, due in 2025 to 2027 with monthly payments ranging from $400 to $1,400 per month |  |  | 160,178 |  |  |  | 252,924 |
Note Payable to insurance provider, bears 5.78% interest, matures January 2024, monthly payments |  |  | 136,414 |  |  |  | — |
Total debt |  |  | 15,726,096 |  |  |  | 7,199,411 |
Less: Current maturities (Excluding Related Parties) |  |  | (4,549,585 | ) |  |  | (2,059,309 | )
Less: Related Parties |  |  | (10,000,000 | ) |  |  | (1,076,987 | )
Less: Related Parties – Current Maturities |  |  | (1,060,004 | ) |  |  | — |
Long-Term debt |  | $ | 116,507 |  |  | $ | 4,063,115 |
Senior Revolver Loan Agreement On July 7, 2021, the Company entered into the Fourth Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank (“CrossFirst”) as further amended by Letter Agreements in conjunction with redetermination dates (“the Amended Agreement” or “Credit Facility”). The maximum amount that can be advanced under the Amended Agreement is $20,000,000 and the existing commitment amount following an August 9, 2023 amendment agreement is $5,180,000 which is reduced by $500,000 per calendar quarter and includes interest at Wall Street Journal Prime plus 150 basis points (10.00% as of September 30, 2023). The Amended Agreement, which originally matured on May 26, 2024, has been extended to August 23, 2024 through the August 9, 2023 amendment. Collateral for the loan is a lien on all of the assets of Empire Louisiana and Empire North Dakota, wholly owned subsidiaries of the Company, and a first priority mortgage lien, pledge of and security interest in not less than 80% of Empire Louisiana’s and Empire North Dakota’s producing oil, gas and other leasehold and mineral interests. The Amended Agreement requires the Company maintain commodity derivatives at certain thresholds based on projected production and, beginning March 31, 2021, to maintain certain covenants including an EBITDAX to interest expense of at least 3:1 and funded debt to EBITDAX of 4:1 on a trailing twelve-month basis. Beginning with the quarter ended September 30, 2023, the funded debt to EBITDAX is a maximum of 3:1 on a trailing twelve-month basis and an additional covenant of a 1:1 current ratio. As a result of the August 23, 2024 maturity date, the total outstanding balance is reflected as current. The Company was in compliance with the loan covenants at September 30, 2023. Term Note – Related Party In August 2020, the Company, through its wholly owned subsidiary, Empire Texas, entered into a joint development agreement (the “JDA”) with Petroleum & Independent Exploration, LLC and related entities (“PIE”), a related party (See Note 14), dated August 1, 2020. Under the terms of the JDA, PIE will perform recompletion or workover on specified mutually agreed upon wells (“Workover Wells”) owned by Empire Texas. Concurrent with the JDA with PIE, a related party, the Company entered into a term loan agreement dated August 1, 2020, whereby PIE will loan up to $2,000,000, at an interest rate of 6% per annum, maturing August 7, 2024 unless terminated earlier by PIE. The loan proceeds were used for recompletion or workover of certain designated wells. As part of the JDA, Empire Texas will assign to PIE a combined 85% working and revenue interest in the Workover Wells. Of the assigned interest, 70% working and revenue interest will be used to repay the obligations under the term loan agreement. Once the term loan is repaid, PIE will reassign a 35% working and revenue interest to Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest. To the extent the cash flows from the revenue interest are insufficient to repay the obligations under the term loan, the Company remains required to repay the obligation. Bridge Loans - Related Parties On September 19, 2023, each of Phil Mulacek, an individual and board member, and Energy Evolution Master Fund, Ltd., a Cayman Islands exempted company (each, an “Investor” and collectively, the “Investors”), made a bridge loan to Empire North Dakota in the amount of $5.0 million (collectively, the “Bridge Loans”). The Investors are each a related party of the Company. See Note 14 for a description of material transactions between the Company and the Investors. The proceeds of the Bridge Loans in the aggregate amount of $10.0 million will be primarily used by Empire North Dakota for the development of oil and gas properties leased and operated by Empire North Dakota (the “North Dakota Properties”). The Company has issued to each Investor its unconditional guarantee of the obligations of Empire North Dakota under the Bridge Loans (collectively, the “Company Guarantees”). The Bridge Loans, as amended subsequent to September 30, 2023, mature December 31, 2024 (the “Maturity Date”) and accrue interest at the rate of 7% per annum. After the Maturity Date, any principal balance of the Bridge Loans remaining unpaid accrue interest at the rate of 9% per annum. Interest will be paid quarterly, beginning November 16, 2023 in common shares of the Company based on the average VWAP for the five trading days preceding the interest date. Empire North Dakota paid to each Investor an origination fee in cash of $50,000 or 1.0 percent of the principal amount of its Bridge Loan. The Bridge Loans may be prepaid at any time or from time to time. The Bridge Loans rank pari passu with all other notes similar to the Bridge Loans now or hereafter issued, but are junior to all existing or hereafter created secured debt (as defined in the Bridge Loans) of Empire North Dakota established pursuant to the Credit Facility. The Bridge Loans are senior in all respects to all hereafter created unsecured debt of Empire North Dakota. The Bridge Loans provide that Empire North Dakota will not, directly or indirectly, enter into, create, incur, assume or suffer to exist any unsecured Debt of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, that is senior in any respect to Empire North Dakota’s obligations under the Bridge Loans. On September 19, 2023, Empire Louisiana, Empire North Dakota and CrossFirst entered into that certain Letter Agreement amending the Credit Facility to, among other things: (1) exclude the Bridge Loans from the definition of Funded Debt (as defined in the Credit Facility); (2) allow the indebtedness evidenced by the Bridge Loans; (3) provide for CrossFirst’s consent to the Bridge Loans; and (4) require that the proceeds of the Bridge Loans be deposited into a segregated account with CrossFirst (the “Segregated Account”) and that such proceeds only be used primarily in connection with the development of the North Dakota Properties. In connection with entering into the Letter Agreement, the Company ratified, confirmed and continued its Amended and Restated Guaranty Agreement dated as of March 27, 2019 in favor of CrossFirst, pursuant to which the Company unconditionally guaranteed the obligations of Empire Louisiana and Empire North Dakota under the Credit Facility. On September 19, 2023, the Investors and Empire North Dakota entered into a Subordination Agreement in favor of CrossFirst (the “Subordination Agreement”), pursuant to which the Investors subordinated (a) the repayment of the Bridge Loans to the payment of the indebtedness of Empire Louisiana and Empire North Dakota to CrossFirst under the Credit Facility (the “Lender Obligations”) and (b) any lien and security interests securing the Bridge Loans to the lien and security interests of CrossFirst securing the Lender Obligations. Notwithstanding the foregoing, the Investors have the right, so long as there is no default or event of default under the Credit Facility, to receive regularly scheduled interest payments at the non-default rate and repayments of principal under the Bridge Loans. Under the Subordination Agreement, (a) the Company Guarantees are also subordinated to the Lender Obligations and (b) the Investors and Empire North Dakota agreed to the Segregated Account and that the proceeds of the Bridge Loans will primarily be used in connection with the development of the North Dakota Properties.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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