Empire Petroleum

EMPIRE PETROLEUM

EMPIRE PREPARES TO STRIKE BACK

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EMPIRE PETROLEUM

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PROFILE

PREPARES to strike back

As a Tulsa-based oil and gas company, Empire Petroleum oversees more than 1,000 wells across five US states, with the overriding aim to bring unproductive assets back to life.

Empire’s CEO, Tommy Pritchard, and President, Michael Morrisett, spoke to Andy Probert about the company’s ambitions to drive up production amid industry challenges.

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mpire Petroleum Corporation is a publicly-traded oil and gas company with current producing assets in Texas, Louisiana, North Dakota, Montana and New Mexico.

The management team, led by CEO Tommy Pritchard, and Company President, Michael Morrisett, is focused on targeted acquisitions of proven developed assets with synergies with its existing portfolio of wells.

“We look for assets where we can deploy rigorous methods that maximize reserve recovery, with limited and highly selective drilling activity, as well as improving margins and reducing unit operating costs,” commented Mr Pritchard.

Statement of intent Tulsa-based Empire’s standout statement among its many asset acquisitions since its official launch in 2018 is the May 2021 purchase of operated New Mexico oil and gas assets from ExxonMobil.

The acquired, operated assets comprise 700 gross oil, gas, and injector wells. They encompass about 40,000 net acres of Permian Basin upstream assets in the Eunice Monument Field (EMSU) in Lea County, around 15 miles southwest of Hobbs.

The EMSU field, discovered in 1929, was regarded as the second largest carbonate reservoir in the Texas-New Mexico Permian area. USGS estimated that known recoverable efficiency in the Eunice Field and surrounding satellites at close to 40%, with the 50

Empire Petroleum

primary and secondary recovery of an estimated 4.5 billion original oil barrels in place. This makes Eunice Monument one of the largest fields in the US. The properties currently produce around 1,100 barrels per day, with 67% being oil.

“We believe the EMSU and surrounding acquired fields have a significant resource base,” said Mr Morrisett. “In our view, these assets have current infill drilling and return-to-production well potential that should shortly enhance daily production.”

Empire CEO Tommy Pritchard added: “The acquisition is a terrific example of what Empire looks to manage in our assets: mature producing oil properties with predictable, long-life production and with significant upside potential.”

Both acknowledged the geological location holds 23,400 acres of residual oil zone potential, enabling a robust pipeline of growth opportunities.

Building of an empire Empire Petroleum was established initially in 1983, later domiciling in Delaware through an acquisition in 2001. Empire’s recent history under its current management team began with the addition of assets in central Louisiana in 2018, followed by five additional acquisitions over the next several months.

The company has stuck to optimising developed production by employing field management methods to maximise reserve recovery. Structured as a proven developed producing (PDP) focused company, it works to mitigate the steep decline curves and geologic risks associated with exploration and new well development.

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EMPIRE PETROLEUM

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PROFILE

Mr Morrisett commented: “Empire has been a public-listed company since 1985 and was initially developed as a hobby by its founder Al Whitehead. As he got older, Tommy and I came in, and with our extensive backgrounds in the oil and gas industry, we took it on from there.”

Empire focuses on economic well rehabilitation, stimulation, field maintenance and management to generate low-risk cash flows that provide stability and growth for shareholders. Lastly, they employ a multi-year hedging program to lock in pricing.

With the EMSU acquisition, Empire now operates with an aggregate of over 100,000 net leasehold acres and 1,800 net barrels per day.

Apart from Lea County in New Mexico, Empire owns and operates wells in Bottineau, Renville, Burke, and McKenzie Counties in North Dakota; Richland County in Montana; St Landry and Beauregard Parishes in Louisiana; and Houston, Leon and Madison Counties in Texas.

In addition to current wellbore production, Empire maintains leases for production through 48,000 acres of Permian Central Basin Platform, 20,000 acres in the ND/MT Williston Basin, multi-

stacked pay zones in central Louisiana, and 30,000 acres in the East Texas basin, including Woodbine, Eagle Ford and Buda-Rose.

Mr Pritchard commented: “We are buying proven developed reserves. Each well goes into a decline period and then flattens out. So we look to wells that have a long life and stable decline rates. We look to manage that decline rate and produce the oil at a cheaper price than the previous owner, bringing greater economies of scale.”

Both pointed to the fact that their assets are at diverse ends of the country, with Dakota and Montana in the north, and Texas, Louisiana and New Mexico in the south. Dakota and Montana have experienced the most challenging winter with constant winds and temperatures approaching -50°C. “Our cold weather ops go 24/7 and hung in there,” commended Mr Pritchard. “In Texas, we had a very frigid week in 2021 and that closed down some of the operations.”

In 2018, Empire was staffed by just the CEO and President, but the company’s staff numbers have risen, topping eight at the Tulsa HQ and seven technicians in the field. “We also outsource tasks to people that are experts. But we run a very lean operation,” said Mr Pritchard.

Moving forward While there was a dip in oil production in 2020, the company has experienced substantial business growth from very little in 2018 to around $11 million for Q4, 2021.

“We are on pace to do $40 million alone in 2022, compared to what was close to zero in 2018,” Mr Pritchard said. “We have been growing through acquisition, and the latest one, in New Mexico, formerly operated for 40 years by Exxon Mobil, made a big difference in our revenue. And that’s really when people began starting to pay attention to Empire, which has been transformative for the company.”

Both said Empire’s focus is to return more inactive wells within its owned asset portfolio to production, and look for new zones and reserves within wells that are both active and inactive.

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Empire Petroleum

“Many existing oil fields we are purchasing are older, and with a greater focus on the environmental part of the ESG, we are finding there are new products, companies, and regulations to work within environmentally as we grow the hydrocarbon business,” said Mr Pritchard.

“We are adopting new technologies, and one surrounds fugitive emissions, which is nothing more than ensuring gas is not leaking from the wellheads into the atmosphere. Imagine having 40,000 acres to focus and marshal. Hence, we utilise a business that can fly over and uses laser photonics to find fugitive methane emissions, allowing us to go in and fix problems before they get too big.”

Empire has also adopted initiatives to continue to monitor the wear and tear of rigging equipment and is constantly upgrading equipment in the field.

Mr Morrisett said: “One of the biggest challenges is growing the business through high oil prices. The service providers we rely on are also raising their prices. So costs are escalating, and we are focusing on managing those costs.

“We are still on the tail end of the Covid crisis, and we are continuing to deal with that, but our employees have been highly motivated and have been working hard to ensure the business continues on track.”

Another challenge is to stay ahead of local, state and national rules that are increasingly focused on the environment.

Mr Pritchard said: “Overall, we are trying to keep our expenses down and look to return production, study new zones and spend a lot of time looking to scale the company further.

“Although we are not big, we have a healthy balance sheet, and it’s continuing to get even better. We want to uplift our stock, and hope to go into the NASDAQ in pretty short order. New initiatives that we are discussing will certainly set us apart in our existing fields in the next few years.”

Mr Morrisett concluded: “We have terrific shareholders in our public stock, and they have helped to raise capital when they needed to. We are going through interesting times with great shareholders. We will focus on every dollar that we invest and what that return will be. It is all about driving shareholder value and being a good company at the same time.” n

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We are happy to be a part of Empire Petroleum Corporation’s continued success in maintaining and operating their vast array of wells throughout their portfolio. editorial mention

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