Empire Petroleum Corp (EP) Reports Mixed Q3 2023 Results Amid Strategic Initiatives
Empire Petroleum Corp (EP) sees a decrease in net sales volumes but an increase in realized prices for all products.
Adjusted EBITDA and net income reflect a challenging quarter, with significant year-over-year declines.
Capital expenditures focused on development activities, with liquidity remaining strong at $11.3 million.
On November 13, 2023, Empire Petroleum Corp (EP) released its 8-K filing, detailing its financial and operational results for the third quarter of 2023. The company, engaged in oil and gas production across several U.S. states, faced a mixed quarter with strategic initiatives underway to position itself for long-term success.
Performance and Challenges
Empire Petroleum Corp (EP) reported a decrease in net sales volumes to 2,048 barrels of oil equivalent per day (Boe/d) in Q3 2023 from 2,135 Boe/d in Q2 2023, marking a 4% sequential decline. Year-over-year, the decrease was more pronounced at 8% from 2,232 Boe/d in Q3 2022. The decline was primarily attributed to lower oil sales volumes in New Mexico due to an annual turnaround of the Eunice Monument South Unit waterflood central facility.
Financial Achievements and Highlights
Despite the drop in sales volumes, Empire Petroleum Corp (EP) saw an improvement in commodity prices, with the realized price for all products increasing by 9% to $54.75 per Boe compared to the previous quarter. However, when compared to the same quarter last year, the realized price showed a 20% decline from $68.03 per Boe. Product revenue for Q3 2023 was $10.3 million, a 6% decrease from Q2 2023 and a 35% decrease from Q3 2022.
The company's net loss widened to $2.7 million in Q3 2023 from $2.5 million in Q2 2023, while the adjusted net loss improved by 39% to $1.5 million from $2.4 million in the previous quarter. Adjusted EBITDA was $0.1 million, a 22% decrease from the second quarter of 2023 and a significant 97% decrease from the same quarter in the previous year.
Balance Sheet and Liquidity
Empire Petroleum Corp (EP) invested approximately $2.5 million in capital expenditures during Q3 2023, primarily related to recompletion and other activities to bring production online from existing wells, as well as expenditures for new horizontal drilling in North Dakota. Total liquidity at the end of the quarter was $11.3 million, including $11.0 million in cash and $0.3 million available on the company's credit facility.
Development Program Update
The company is actively drilling the first two of ten to 14 wells as part of the 2023-2024 Starbuck Drilling Program. The first well was spud on October 11, 2023, targeting the Upper Charles Formation. Empire Petroleum Corp (EP) remains focused on executing its strategy to remain financially conservative while targeting opportunities that provide long-term value for shareholders.
Management Commentary
"We were pleased to see improvement in commodity prices during the third quarter. This timing is ideal as we continue to progress through our development campaign that began in the latter part of 2022 on our North Dakota assets and materially expanded in the second half of 2023 with the recent kick off of the Starbuck Drilling Program," said Mike Morrisett, President and CEO of Empire.
"Our capital development programs are designed to drive a meaningful increase in production levels and cash flow for the near and long-term benefit of our shareholders," Morrisett continued.
Phil Mulacek, Chair of the Board of Empire, added, "We are clearly encouraged with the initial well log results from the first two wells of the Starbuck Drilling Program. We look forward to drilling targeted laterals of 5,000 to 6,500 feet within the target Upper Charles Formation."
Empire Petroleum Corp (EP) is navigating a challenging environment with strategic initiatives and a focus on its drilling program. While the company faces headwinds with decreased production and net income, improvements in commodity prices and the progression of its drilling program offer potential for growth and increased shareholder value in the future.
Explore the complete 8-K earnings release (here) from Empire Petroleum Corp for further details.
This article first appeared on GuruFocus.
