Empire Petroleum (EP) risk factors, FY2025 10-K

Other

1. 01The Standardized Measure of estimated reserves may not be accurate estimates of the current fair value of estimated proved oil and natural gas reserves
2. 02Estimates of proved reserves and future net cash flows are not precise. The actual quantities of our proved reserves and future net cash flows may prove to be lower than estimated
3. 03Furthermore, different reserve engineers may make different estimates of reserves and cash flows based on the same data. Our actual production, revenues and expenditures with respect to reserves will likely be different from estimates and the differences may be material
4. 04Unless reserves are replaced, production and estimated reserves will decline, which may adversely affect our financial condition, results of operations and/or cash flows
5. 05New technologies may cause our exploration and development methods to become obsolete, causing an adverse effect on our production
6. 06We have indebtedness and may incur substantially more debt. Higher levels of indebtedness make us more vulnerable to economic downturns and adverse business developments49% rewritten
7. 07We may incur substantially more debt in the future. The Credit Facility contains restrictions on the incurrence of additional indebtedness
8. 08Our business requires substantial capital expenditures. Management may be unable to obtain needed capital or financing on satisfactory terms or at all, which could lead to a decline in oil and natural gas reserves
9. 09The loss or unavailability of capital provided by our two largest stockholders could have a material adverse effect on our business
10. 10If we are unable to comply with the covenants in our agreements governing our indebtedness, including the Credit Facility, there could be a default under the terms of such agreements, which could result in an acceleration of payment of funds that we have borrowed
11. 11We may not be able to generate cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligationsNew
12. 12A negative shift in stakeholder sentiment towards the oil and natural gas industry and increased attention to ESG matters and conservation matters could adversely affect our ability to raise equity and debt capital
13. 13Liquidity and capital constraints could adversely affect our operations and financial conditionsNew
14. 14We have a present need for additional funding to satisfy current operational obligations, which raises questions about our ability to continue as a going concern. We may be unable to raise capital when needed, which would force us to delay, reduce or eliminate aspects of our business or cause our business to failNew
15. 15A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments
16. 16Competition for assets, materials, people and capital can be significantNew
17. 17Our producing properties and proved reserves are concentrated in New Mexico, North Dakota, Montana, Texas, and Louisiana, making us vulnerable to risks associated with operating in limited major geographic areas
18. 18A significant portion of our oil, natural gas, and NGLs sales are concentrated in only a few purchasers, which increases our exposure to substantial sales interruptions28% rewritten
19. 19Our insurance policies may not adequately protect us against certain unforeseen risks
20. 20Hedging transactions may expose us to risk of financial loss or limit participation in commodity price increases and involve other risks
21. 21If forecasted prices for oil, natural gas, and NGLs decrease, we may be required to take significant future write-downs of the financial carrying values of our properties in the future73% rewritten
22. 22We are subject to various environmental risks, and governmental regulation relating to environmental matters
23. 23Properties we acquire may not produce as projected and we may be unable to determine reserve potential, identify liabilities associated with the properties that we acquire or obtain protection from sellers against such liabilities
24. 24Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions we or other operators may take when drilling, completing, or operating wells that we or they own
25. 25Acquisitions involve a number of risks, including the risk that we will discover unanticipated liabilities or other problems associated with the acquired business or property
26. 26We may not realize an adequate return on oil and natural gas investmentsNew
27. 27In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, given the long-term trend toward increasing regulation, future federal GHG regulations of the oil and natural gas industry remain a significant possibilityNew
28. 28As a final note, climate change could have an effect on the severity of weather (including hurricanes, droughts and floods), sea levels, water availability and quality, and meteorological patterns. If such effects were to occur, our development and production operations have the potential to be adversely affected
29. 29The marketability of our production is dependent upon gathering systems, transportation facilities and processing facilities that we do not own or control. If these facilities or systems are unavailable, our oil and natural gas production can be interrupted and our revenues reduced
30. 30We operate or participate in oil and natural gas leases with third-parties who may not be able to fulfill their commitments to our projects
31. 31Because we cannot control activities on properties we do not operate, we cannot directly control the timing of exploration. If we are unable to fund required capital expenditures with respect to non-operated properties, our interests in those properties may be reduced or forfeited
32. 32We could be adversely affected by increased costs of service providers utilized by us
33. 33Our ability to use our existing net operating loss carryforwards or other tax attributes could be further limited26% rewritten
34. 34The credit risk of our counterparties could adversely affect us
35. 35Unexpected events could disrupt our business and adversely affect our results of operationsNew
36. 36Climate change legislation, regulations restricting emissions of GHG’s or legal or other action taken by public or private entities related to climate change could result in increased operating costs and reduced demand for the oil and natural gas that we produce30% rewritten
37. 37Any change to government regulation or administrative practices may have a negative impact on our ability to operate and our profitability
38. 38We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilitiesNew
39. 39Liability for cleanup costs, natural resource damages and other damages arising as a result of environmental laws and regulations could be substantial and could have a material adverse effect on our business, results of operations, and financial conditionNew
40. 40A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss
41. 41We face risks associated with Artificial Intelligence and other emerging technologiesNew
42. 42The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business100% rewritten
43. 43The price of our common stock may fluctuate significantly, which could negatively affect us and the holders of our common stock
44. 44We do not expect to declare or pay any dividends in the foreseeable future
45. 45Provisions of our certificate of incorporation and bylaws and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for our common stock75% rewritten
46. 46In addition, as a smaller reporting company, we take advantage of our ability to provide certain other less comprehensive disclosures in our SEC filings, including, among other things, providing only two years of audited financial statements in annual reports and simplified executive compensation disclosuresNew
47. 47Regulatory requirements applicable to smaller reporting companies may become increasingly burdensome as our operational scale grows and filing status changesNew
48. 48Holders of our outstanding Series A Voting Preferred Stock have effective control of our board of directors56% rewritten
49. 49A small number of stockholders own a significant amount of our common stock and may have influence over the CompanyNew