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Debt and Note Payable - Related Party
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Debt and Note Payable - Related Party

Note 7 – Debt and Note Payable - Related Party

 

The following table represents the Company’s outstanding debt.

 

   As of December 31, 
   2023   2022 
         
Equity Bank Credit Facility  $4,492,484   $— 
           
CrossFirst Senior Revolver Loan Agreement   —    5,869,500 
           
Note Payable – Related Party   1,060,004    1,076,987 
           
Equipment and vehicle notes, 0.00% to 9.00% interest rates, due in 2025  to 2028 with monthly payments ranging from $900 to $1,400 per month   148,516    252,924 
           
Total Debt   5,701,004    7,199,411 
Less: Current Maturities   (44,225)   (2,059,309)
Less: Note Payable – Related Party   (1,060,004)   (1,076,987)
Long-Term Debt  $4,596,775   $4,063,115 

 

 

On December 29, 2023, Empire North Dakota and Empire NDA ("Borrowers”), entered into a Revolver Loan Agreement with Equity Bank (the "Credit Facility”). Pursuant to the Credit Facility (a) the initial revolver commitment amount is $10,000,000; (b) the maximum revolver commitment amount is $15,000,000; (c) commencing on January 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is reduced by $150,000; (d) commencing on March 31, 2024, there are scheduled semiannual collateral borrowing base redeterminations each year on March 31 and September 30; (e) the final maturity date is December 29, 2026; (f) outstanding borrowings bear interest at a rate equal to the prime rate of interest plus 1.50%, and in no event lower than 8.50%; (g) a quarterly commitment fee is based on the unused portion of the commitments; and (h) Borrowers have the right to prepay loans under the Credit Facility at any time without a prepayment penalty.

 

The Credit Facility is guaranteed by the Company. Borrowers entered into a security agreement, pursuant to which the obligations under the Credit Facility are secured by liens on substantially all of the assets of Borrowers. Furthermore, the obligations under the Credit Facility are secured by a continuing, first priority mortgage lien, pledge of and security interest in not less than 80% of Borrowers’ producing oil, gas and other leasehold and mineral interests, including without limitation, those situated in the States of North Dakota and Montana.

 

The Credit Facility requires Borrowers to, commencing as of the fiscal quarter ended December 31, 2023, maintain (a) a current ratio of 1.0 to 1.0 or more and (b) a ratio of funded debt to EBITDAX, calculated quarterly and annually based on a trailing twelve-month basis, of no more than 3.50 to 1.00. At December 31, 2023, the Borrowers were not in compliance with the current ratio, however, a waiver was obtained from the lender. The Company is in compliance with the other covenants as of December 31, 2023.

 

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”). The maximum amount that could be advanced under the Amended Agreement was $20,000,000 and the commitment amount following an August 9, 2023 amendment agreement was $5,180,000. The Amended Agreement was subsequently retired with proceeds from the new Credit Facility discussed above.

 

On September 19, 2023, each of Phil Mulacek, a member of the Company’s Board of Dierctors, and Energy Evolution made a bridge loan to Empire North Dakota in the amount of $5.0 million (collectively, the "Bridge Loans”). These Bridge Loans were subsequently converted to our common shares. Mr. Mulacek and Energy Evolution are each a related party of the Company. See Note 15 for additional information regarding these Bridge Loans and the subsequent conversion to our common shares.

 

Note Payable - Related Party

 

In August 2020, 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 will be used for recompletion or workover of certain designated wells. In addition, the Company assigned 85% working and revenue interest to PIE in the designated wells which will be applied to repayment of the loan. As of December 31, 2023, $1,060,004 has been advanced from the PIE loan.