This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good day and welcome to the Empire Petroleum second quarter 2022 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Stephanie Prince of PCG Advisory. Please go ahead.
spk02: Thank you, MJ, and thank you to everyone joining us today. Empire Petroleum released their second quarter financial results early this morning. If you don't have a copy of the press release, please go to the company's website at empirepetroleumcorp.com. and click on the news and press releases in the investor relations section. With me on the call today are Tommy Pritchard, CEO and board director, and Mike Morissette, president and board director. Also on the call are Eugene Sweeney, COO, and Angela Baker, chief accounting officer. Tommy will begin the call with an introduction to Empire Petroleum along with some opening remarks. Mike will then provide a financial review the second quarter before opening the call for questions. Before turning the call over to management, I would like to make the following remarks concerning forward looking statements. Please note that various remarks that may be made on this conference call about future expectations, plans, and prospects for the company constitute forward looking statements for the purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward looking statements as a result of various important factors including those discussed in the company's filings with the SEC. The company assumes no obligation to update the information contained in this conference call. I would now like to turn the call over to Tommy Pritchard. Tommy?
spk04: Yeah, thanks, Stephanie. Welcome, everybody. Thank you for your interest in Empire. Since this is our first ever call, I thought it might be a good idea to step back for a second tell you guys kind of how we got here. And then, of course, we're available after the call to fill everybody in. And I also will direct you to our website where you guys can download our most recent presentation and previous presentations. But Empire has been a public entity since the mid-'80s. Mike and I took over back in 2018 and we focused on buying, producing pre-developed producing properties. At that time, the stock traded on the OTCQB exchange and we bought our first properties at the end of 2018 in Louisiana, followed that up in 2019. where we were successful bidders for a private equity backed north dakota montana properties from energy quest and in 2020 we added the full trinidad field in texas so it had us operating in texas for the first time and in 2021 we added this transformative nevesco acquisition when we bought the uh iconic eunice monument uh and our arrowhead graybird fields from exxon or xto and with the help of our largest shareholder, the Energy Evolution Fund. And then that brings us to 2022, where we uplisted on the New York Stock Exchange American, became a member of the Russell 3000 and 2000, and we'll talk about our record second quarter here. So obviously there's much more to the story than that, but you guys can take a look at our website for previous presentations. We'll be happy to field calls after this call or whenever you guys would like to call in to us. Let me share with you our record results for the second quarter. As you can tell, we're pretty fired up about these results. The results are a direct reflection of our ability to execute on our core strategy of controlling operating costs. have consistent production and the ability to add scalable assets. During the quarter, Empire benefited from strong production and obviously higher realized oil and gas prices. And the result was a record-setting revenue and net income. Revenue increased 26% over our first quarter. In fact, when you combine both quarters, Empire's revenue was higher than all of the last year's or any previous year at $29.5 million. Our net income combined for the two quarters is $9.5 million, and our EBITDA is over $13 million. Our total debt remains low at 8.2, while our cash position has closed the quarter out at 12.4. Empire's sales volume was 195,000 BOE, almost doubling the same quarter of last year, which we reported 104 back last year. This doubling shows what a transformative acquisition coupled with a focused eye on production and costs will do for a company like Empire. At the end of our second quarter, Empire kicked off its Priority Wealth program in our Starbuck field in Botanical County, North Dakota. The plan is projected to cost $10 million and target strong increases in production and book reserves. Early phase work will start at the end of the second quarter. And we saw our team re-stimulating current completions in the field. Field-wide, they focused on water pressure conformance in the water flow, injecting several times the previous injection rate, thereby increasing reservoir pressures. And what we've seen, our early results are showing terrific response and adding to our production. In the second quarter, Empire closed on its successful pursuit of the land of Madison unit, also in Botnett County. This unit is the other half of the land of field that we didn't operate or own. And the acquisition added to our production, but more importantly, it adds to our growing priority well list for 2023 and beyond. The field was originally calculated to contain nearly 15 million barrels in place, combined with 15 million barrels in place. And combine that with Starbuck, that exposes Empire to over 40 million barrels in just those two fields alone. And we have several other fields in North Dakota that have similar characteristics. Our capital spend program is still on track. And even though we haven't provided guidance, we've picked up the pace. We look forward to continued results from this in the second half of 2022. Looking forward into the third quarter, our operations will continue at Starbuck as we lateral sidetrack that to seven wells utilizing a cool tubing drilling unit. These sidetracks are designed to expose more wellbore to productive zones. MPRIME will also drill up to four new vertical wells in the field. Of course, we'll continue to upgrade surface facilities as we move along for better operational efficiencies. Now I'd like to turn the call over to Mike to discuss our financial results.
spk03: Thanks, Tommy, and good morning and afternoon, everyone. My comments today will primarily focus on selected financial data and quarterly results compared to 2022 Q1, and in some cases, the same period a year ago. For a more detailed discussion of our financials, Please see our second quarter 10Q we filed yesterday with the SEC and our earnings press release this morning. Looking at our statement of operations, revenue from oil, natural gas, and natural gas liquids was $16.5 million for the second quarter compared to $13 million for 2022 Q1. This is up from $4.9 million in the 2021 comparable period. Our operating expenses in Q2 were $5.5 million, which was a slight increase from Q1 of $5.2 million. So altogether, our net income for the quarter was $5.5 million, up from $3.6 million in Q1 2022. And just to point out that a year ago for the same period, we had a net loss of $5.3 million. As the majority of our production is from oil, The average oil prices received for second quarter production realized $109 per barrel versus 91 per barrel in the first quarter of 2022. Regarding our cash position, we started out 2022 with 3.7 million, and at the end of this quarter, we have 12.4 million. During the second quarter and in July, our outstanding legacy warrants have been 100% exercised. at $2 per share. This resulted in an increase of just over a million and a half common shares issued and 3.4 million of cash inflow. Currently now, we have approximately 21.6 million common shares outstanding, with insiders owning almost 50%. I'm happy to report that in the second quarter, we earned 27 cents per share, 24 fully diluted, And that was up from 18 cents, 15 cents, fully bloated in 2022 Q1. As a company and operating strategy, we're not really big on debt. We have a small RBL, about 7 million with Crossverse here in Tulsa. It's collateralized only by our assets in North Dakota, Montana, and Louisiana. We pay down 300,000 per quarter. We're unhedged at the moment. except for a few puts to facilitate our RBL covenant. Our current and future capital spend is to facilitate increased production at a low cost per barrel. This is accomplished organically with assets we already own. As Tommy mentioned, we are currently on a field in North Dakota that will be about a $10 million spend. Our goal is to bring on new production at less than 10,000 per barrel and in some cases, much less. In the second quarter, we also purchased the other half of the landed field in North Dakota for $1.4 million, paid for with cash on hand, and this is one of our many 2023 projects. Around the time of being included in the RUSLE indexes, we initiated an ATM with Raymond James. Given our strong position or given our strong cash position and anticipated future cash flow at this point in time, we really don't foresee utilizing the ATM at these current price levels of our stock. As we just recently uplisted to the NYSE American, we're focused on increasing liquidity. We look forward to meeting more investors in an effort to broaden our shareholder base. And with that, I'll turn it back over to Tommy. to wrap up the call and move us on to Q&A.
spk04: Yeah, thanks, Mike. As you heard from both Mike and me, our 2022 second quarter results demonstrate our emphasis on pre-developed assets with upside, large held by production acreage, and low debt levels. We expect that Going forward, we expect production, operating cash flow, and net income will continue to grow throughout the remainder of 2022, assuming the existing price environment continues. Complementing these efforts are our ongoing capital expenditures drill program and initiatives to drive efficiencies in our operating cost structure. And now we'll like to open it up to question and answers.
spk01: Thank you. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today comes from David Slane of MLM Capital Management. Please go ahead.
spk06: Hey, I'd like to congratulate you guys on a great quarter, but I'd also like to ask when you're going to have an investment bank follow you guys in research to give some kind of signal on whether they like it or buy, sell, hold, whatever. Do you see anything in the near future?
spk04: Yeah, David, that's a great story. You know, and that's a good question that we'd love to be able to answer. However, you know, Mike and I both came from the financial community. Times are a lot different than when we were in the business. But, you know, we continue to do that. And we hope, you know, if we keep putting up numbers like we put up and our stock keeps, you know, performs accordingly, that, you know, Folks will work their way into putting us into their rotation. But for right now, don't have any real comments on anybody picking us up anytime soon.
spk06: Okay, thank you.
spk01: Again, if you have a question, please press star, then 1. The next question today comes from George Markleson from Dakota. Please go ahead.
spk07: Good morning, Mike. Good morning, Tommy. How are you doing? Good. How are you doing, George? Doing well. Congratulations on the quarter. Certainly nice numbers. I've got two or three questions for you if you have a moment. First question is you talked about the Starbuck field, and you're talking about an increase in production by year-end. Can you give me any more detailed description of what kind of targeted increase you're looking for?
spk04: Yeah, I'll start off, and then we can – this is Tommy. I'll start off, and we can vote Eugene on the line as our COO in charge of that project. We – this field was unitized back in the – I think it was 2008 – It's a water bud. It's really two water buds, two different formations. And through the years, folks really didn't – just kept the existing wells, and they injected a minor amount of fluid into the formation. It really didn't create any kind of pressure conformance there. We looked at this and said, boy, this is – These are two formations at 3,000 foot depth. We can add more to that and add more wells in the ground and create a better pressure or water drive throughout the field and make a difference in production. But rather than me drone on about this, let me let Eugene in there, because Eugene scripted this whole four-phase project for the enhancement of the Starbuck field. And Eugene, what could you add to that?
spk05: Thanks, Tommy. Yeah, George, to answer that question, we're targeting at least a 500-barrel-a-day increase. That's our daily production target. and uh you and and to double the reserves count on that um we're you know we like i said we're looking at that as a conservative target where we're thinking we're going to come in quite a bit better but that's our baseline and you're looking for that by year end or by year end that's right okay and george we put together uh
spk04: presentation for folks to look at after the call and a little bit of detail on the Starbucks enhancement program is in those few slides on that.
spk07: Do you have any goal of what you're hoping your total barrels production will be by year end? I know you're around 2,000. I believe it's around 2,000 a day now. Are you shooting for 3,000, 4,000, sticking at 2,000? Do you have any goal in mind?
spk04: I think we started the year, while we don't provide guidance, we started the year kicking around where we'd like to be. And we would like to have our production double this year, year over year, from 2,000 to 4,000. I'm not saying we're for sure going to get there, but hopefully we'll be well on the way to getting there. And, you know, it all depends on how we're able to, you know, how the Starbucks field reacts to what we're doing to it and how quickly we can get services out there and how it all operates. As of right now, we're on target to at least gather what Eugene is focused on, and we'd be – real disappointed if we didn't get there. Got you.
spk07: All right, last question. I'm just curious, any additional acquisitions in your pipeline, anything you're looking at in the future that you can talk about?
spk04: You know, we always have a real full pipeline of acquisitions, whether it be something we we've proactively gone after or that is in the market. The problem is right now is that the bid offer spread between what the sellers are anticipating in $90 to $100 oil and what we're willing to pay is pretty wide. So if we can find some good Bolton acquisitions like the land acquisition or something like that, will definitely participate.
spk07: Appreciate your time. Good luck with everything going forward.
spk03: Thanks, George.
spk01: Seeing no more questions in the queue, this concludes our question and answer session. I would like to turn the conference back over to Tommy Pritchard for any closing remarks.
spk04: Yes, thank you, operator. Look, to sum this up, first of all, thank you for your questions. We're very excited about the future and our opportunities in our existing portfolio of assets. We're going to remain focused on keeping our costs low and allocating our capital to the highest return projects. I thank all of you for joining today and we're excited. We will continue to work hard for our shareholders. Have a good day. Thank you.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer