8-K: Empire Petroleum Wins Key CO2 Development Ruling

Empire Petroleum Corporation secured a unanimous and favorable ruling from the New Mexico Oil Conservation Commission, affirming its exclusive rights to the Residual Oil Zone in the Eunice Monument South Unit and allowing a CO2 enhanced oil recovery pilot project.

Summary

• The New Mexico Oil Conservation Commission (NMOCD) issued a unanimous and favorable ruling on August 14, 2025, regarding Empire Petroleum's rights to the Residual Oil Zone (ROZ) in the Eunice Monument South Unit (EMSU) Unitized Interval in Lea County, New Mexico.
• The ruling affirms the existence of a ROZ in the Grayburg and San Andres formations within the EMSU and confirms Empire's exclusive rights to produce the ROZ under a 1984 Commission Order.
• Empire is now allowed to implement a CO2 enhanced oil recovery (EOR) pilot project over the next three years.
• The Commission unanimously denied five new injection well applications from Goodnight Midstream Permian, LLC, and denied their application for increased injection.
• Injection operations on four existing Goodnight injection wells were suspended, and all pending motions attached to these cases were denied.
• While the Commission found Empire did not prove immediate correlative rights impairment from neighboring operators' injection activities, it acknowledged compelling evidence of possible future impairment or waste.
• Empire intends to proceed with Motions to Revoke existing permits granted to other third-party saltwater disposal operators disposing wastewater into the EMSU and Unitized Interval of the Arrowhead Grayburg Unit.
• Empire will concurrently advance litigation for trespass and damages against these third-party operators.

Sentiment

Score: 9

Explanation: The unanimous and favorable regulatory ruling significantly de-risks a key asset, affirms exclusive development rights, and enables a valuable CO2 EOR project, positioning the company for future growth and protecting its assets from detrimental third-party activities.

Positives

• Received a unanimous and favorable ruling from the New Mexico Oil Conservation Commission (NMOCD).
• The ruling affirms Empire's exclusive rights to the Residual Oil Zone (ROZ) in the Eunice Monument South Unit (EMSU).
• Empire is now permitted to implement a CO2 enhanced oil recovery (EOR) pilot project over the next three years, unlocking potential for sustained production.
• The NMOCD denied five new injection well applications and an application for increased injection from Goodnight Midstream Permian, LLC.
• Four existing Goodnight injection wells had their operations suspended, protecting Empire's EMSU assets from potentially harmful third-party activities.
• The decision provides a clear path forward for Empire to responsibly develop resources and position for sustained growth and returns.

Negatives

• The Commission found Empire did not prove immediate correlative rights impairment in the Grayburg from neighboring operators' injection activities, despite presenting compelling evidence of possible future impairment or waste.

Risks

• Future commodity prices.
• Ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties.
• General economic conditions both domestically and abroad, including inflation, tariffs, and interest rates.
• Uncertainties associated with legal and regulatory matters.
• Other risks and uncertainties related to the conduct of business by the Company.

Future Outlook

Empire intends to proceed with Motions to Revoke existing permits granted to remaining third-party saltwater disposal operators in the EMSU and Arrowhead Grayburg Unit, while concurrently advancing litigation for trespass and damages. The CO2 EOR pilot project is expected to unlock capacity for sustained production in the ROZ and upper zones. Management is committed to realizing the long-term value in the EMSU assets and positioning Empire for sustained growth and returns.

Management Comments

• Phil Mulacek, Chairman of the Board: "This unanimous decision marks a significant regulatory win for Empire and reinforces our position in New Mexico. It paves the way for us to move forward with CO2 development to unlock the capacity for sustained production in the ROZ and upper zones, while also safeguarding our assets from activities that threaten their value."
• Mike Morrisett, President and CEO: "This outcome reflects years of dedicated work by our employees, legal team, and consultants... We take seriously our fiduciary responsibility to our shareholders and remain committed to realizing the long-term value we see in the EMSU assets. This decision gives us a clear path forward to responsibly develop these resources and position Empire for sustained growth and returns."

Industry Context

The ruling supports the application of CO2 enhanced oil recovery (EOR), a widely used technique to extend the life and increase production from mature oil fields. The protection of assets from detrimental third-party injection activities is a critical concern for operators in mature basins like New Mexico, where multiple parties often have overlapping interests and operations. This decision reinforces regulatory oversight in managing such complex operational environments.

Legal Proceedings

• Advancing litigation for trespass and damages against third-party saltwater disposal operators.
• Proceeding with Motions to Revoke existing permits granted to remaining third-party saltwater disposal operators disposing wastewater into the EMSU and Unitized Interval of the Arrowhead Grayburg Unit.

Stakeholder Impact

• Shareholders: Positive impact due to de-risking of a key asset, affirmation of exclusive development rights, potential for increased production and long-term value from CO2 EOR, and protection against asset impairment.
• Employees: Positive impact due to continued and potentially expanded operational activities related to CO2 EOR and asset protection.
• Competitors (Goodnight Midstream Permian, LLC): Negative impact due to denial of new injection wells, denial of increased injection, and suspension of existing injection operations.

Next Steps

• Implement a CO2 enhanced oil recovery (EOR) pilot project over the next three years.
• Proceed with Motions to Revoke existing permits granted to remaining third-party saltwater disposal operators in the EMSU and Arrowhead Grayburg Unit.
• Advance litigation for trespass and damages against third-party saltwater disposal operators.
• The full text of the Commission's decision will be available on the NMOCD website in the coming days.

Key Dates

Recommendation

The unanimous and favorable ruling from the New Mexico Oil Conservation Commission is a significant de-risking event for Empire Petroleum, affirming its exclusive rights to the valuable Residual Oil Zone in the EMSU and enabling a multi-year CO2 EOR project. This decision not only protects existing assets from detrimental third-party activities but also provides a clear path for sustained production growth and long-term value creation. The denial and suspension of competitor injection wells further solidify Empire's operational control and asset integrity. This regulatory victory, coupled with the planned litigation for trespass and damages, positions the company for enhanced profitability and asset utilization, making it a compelling investment opportunity.

Keywords

Empire Petroleum, CO2 EOR, Enhanced Oil Recovery, New Mexico Oil Conservation Commission, NMOCD, Eunice Monument South Unit, EMSU, Residual Oil Zone, ROZ, Oil and Gas, Regulatory Ruling, Litigation, Goodnight Midstream Permian, Asset Protection