EMPIRE PETROLEUM CORP (Form: 8-K/A, Received: 01/14/2019 17:16:00)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

______________________________

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

Current Report

Pursuant To Section 13 or 15 ( d ) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):

OCTOBER 29, 2018

EMPIRE PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-16653	73-1238709
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1203 E. 33rd Street, Suite 250, Tulsa Oklahoma	74105
(Address of principal executive offices)	(Zip Code)

(539) 444-8002

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

☐⁭ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐⁭ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐⁭ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐⁭ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

EXPLANATORY NOTE

On November 2, 2018, Empire Petroleum Corporation (the "Company") filed with the Securities and Exchange Commission a Current Report on Form 8-K, dated October 29, 2018 (the "Initial Form 8-K"), to report that Empire Louisiana LLC, a Delaware limited liability company d/b/a Empire Louisiana LLC of Delaware, which is a wholly owned subsidiary of the Company ("Empire Louisiana"), acquired oil and gas properties and assets (the "Riviera Properties") from Riviera Upstream, LLC formerly known as Linn Energy Holdings, LLC ("Riviera") (the " Riviera Acquisition").

This Current Report on Form 8-K/A amends Item 9.01 of the Initial Form 8-K to present certain financial statements of the Riviera Properties and to present certain unaudited pro forma financial statements of the Company in connection with the Riviera Acquisition.

Item 9.01 Financial Statements and Exhibits

(a)	Financial Statements of Business Acquired .

Filed as Exhibit 99.1 to this Current Report on Form 8-K/A, and incorporated herein by reference, are audited Statements of Revenues and Direct Operating Expenses of the Riviera Properties for the years ended December 31, 2017 and 2016, and unaudited Statements of Revenues and Direct Operating Expenses of the Riviera Properties for the six months ended June 30, 2018 and 2017.

(c)	Pro Forma Financial Information .

Filed as Exhibit 99.2 to this Current Report on Form 8-K/A, and incorporated herein by reference, are unaudited pro forma condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2018, and for the year ended December 31, 2017, which have been prepared to give effect to the Riviera Acquisition. These unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent what the Company's actual results of operations or financial position would have been if the Riviera Acquisition had occurred on the dates indicated, nor are they necessarily indicative of the Company's future operating results or financial position.

(d)	Exhibits .

The following exhibits are filed or furnished herewith.

Exhibit

Number

Description

99.1	Statements of Revenues and Direct Operating Expenses of the Riviera Properties.

99.2	Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	EMPIRE PETROLEUM CORPORATION


Date: January 14, 2019	By:	/s/ Michael R. Morrisett
		Michael R. Morrisett
		President

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES EMPIRE PETROLEUM CORPORATION

PURCHASED ON OCTOBER 29, 2018 FROM RIVIERA UPSTREAM, LLC

INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Board of Directors of

Empire Petroleum Corporation

Report on the Statements of Revenues and Direct Operating Expenses

We have audited the accompanying statements of revenues and direct operating expenses of the oil and gas properties Empire Petroleum Corporation purchased on October 29, 2018 from Riviera Upstream, LLC, F/K/A Linn Energy Holdings, LLC . (the Properties) for the years ended December 31, 2017 and 2016 (collectively, the financial statements), and the related notes to the statements of revenues and direct operating expenses.

Management's Responsibility for the Statements of Revenues and Direct Operating Expenses

Management is responsible for the preparation and fair presentation of the statements of revenues and direct operating expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statements of revenues and direct operating expenses that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the statements of revenues and direct operating expenses based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of revenues and direct operating expenses are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the statements of revenues and direct operating expenses referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Properties for the years ended December 31, 2017 and 2016, in accordance with accounting principles generally accepted in the United States of America.

Basis of Presentation

As described in Note 1 to the statements of revenues and direct operating expenses, the accompanying statements of revenues and direct operating expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8K/A Amendment No. 1 of Empire Petroleum Corporation and are not intended to be a complete presentation of the results of the operations of the Properties. Our opinion is not modified with respect to this matter.

January 14, 2019

Tulsa, Oklahoma

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES EMPIRE PETROLEUM CORPORATION

PURCHASED ON OCTOBER 29, 2018 FROM RIVIERA UPSTREAM, LLC

	For the six months ended June 30,				For the years ended December 31,
	2018		2017		2017		2016
	(Unaudited)

Revenues – oil and gas sales	$	188,855	$	176,067	$	353,176	$	355,722

Severance taxes		16,041		13,119		25,182		28,206
Lease operating expenses		123,959		139,577		298,104		369,699

Total direct operating expenses		140,000		152,696		323,286		397,905

Excess (deficiency) of revenues over direct operating expenses	$	48,855	$	23,371	$	29,890	$	(42,183	)

See notes to statements of revenues and direct operating expenses.

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES EMPIRE PETROLEUM CORPORATION

PURCHASED ON OCTOBER 29, 2018 FROM RIVIERA UPSTREAM, LLC.

Note 1 – The Properties

On October 29, 2018, Empire Louisiana LLC, a wholly owned subsidiary of Empire Petroleum Corporation ("Empire") closed on the purchase of oil and gas properties (the "Properties") from Riviera Upstream, LLC formerly known as Linn Energy Holdings, LLC ("Riviera") under an assignment, bill of sale and conveyance dated October 25, 2018 (the "ABOS") for a purchase price of $205,000. The effective date of the transaction was October 1, 2018.

The oil and gas properties purchased from Riviera include 1,200 gross developed and undeveloped acres and six wells currently producing approximately 30 barrels of oil equivalent (BOE) per day. The Company's working interests in the wells range from 0% to 50%.

Note 2 – Basis of Presentation

During the periods presented, the Properties were accounted for by Riviera using the tax basis of accounting. Certain costs, such as depreciation, depletion and amortization, interest, accretion, general and administrative expenses, and corporate income taxes were not allocated to the Properties. Accordingly, full separate financial statements prepared in accordance with generally accepted accounting principles do not exist and are not practicable to obtain in these circumstances.

Revenues and direct operating expenses included in the accompanying financial statements represent Empire's net working interest in the Properties for the years ended December 31, 2017 and 2016 and the six months ended June 30, 2018 and 2017 and are presented on the accrual basis of accounting. The revenues and direct operating expenses presented herein relate only to the interests in the producing oil and gas properties acquired and do not represent all the operations and administrative activities of Riviera, the other owners, or other third party working interest owners. Depreciation, depletion and amortization, interest, accretion, general and administrative expenses and corporate income taxes have been excluded. The financial statements presented are not indicative of the results of operations of the Properties going forward due to changes in the business, including the price of oil and gas and inclusion of the aforementioned expenses.

The statements of revenues and direct operating expenses of the Properties for the six months ended June 30, 2018 and 2017 are unaudited. In the opinion of Empire's management, such statements include the adjustments and accruals which are necessary for a fair presentation of results for the Properties. These interim results are not necessarily indicative of results for a full year.

Empire reviewed events occurring after the date of the latest financial statement which could affect the Properties' financial position and/or results of operations for the period. Empire reviewed and evaluated events through January 14, 2019 the date these financial statements were available to be issued.

Note 3 – Unaudited Interim Financial Information

The accompanying statements of revenues and direct operating expenses for the six months ended June 30, 2018 and 2017, are unaudited. The unaudited interim statements of revenues and direct operating expenses were prepared on the same basis as the audited statements of revenues and direct operating expenses for the years ended December 31, 2017 and 2016. In the opinion of management, the unaudited interim statements reflect all adjustments necessary to state fairly the statements of revenues and direct operating expenses of the Properties. The revenues and direct operating expenses for the interim periods ended June 30, 2018 and 2017, are not necessarily indicative of results that may be expected for the years ending December 31, 2018, or any future periods.

Note 4 – Commitments and Contingencies

Empire is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the statements of revenues and direct operating expenses.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On October 29, 2018, a wholly owned subsidiary of Empire Petroleum Corporation ("Empire") closed the purchase of certain oil and gas properties owned by Riviera Upstream, LLC, formerly known as Linn Energy Holdings, LLC ("Riviera"), under an assignment, bill of sale and conveyance dated October 25, 2018 (the "ABOS") for a purchase price of $205,000. The effective date of the transaction was October 1, 2018.

The oil and gas properties purchased from Riviera include 0 - 50% non-operated working interest in four producing wells and two salt water disposal wells in which Empire already owns an operated interest.

The following unaudited pro forma combined financial statements (which we refer to as the "unaudited pro forma financial statements") present the combination of the historical consolidated financial statements of Empire adjusted to give effect to the purchase of the Riviera assets and related transactions. The unaudited pro forma combined statements of operations (which we refer to as the "unaudited pro forma statements of operations") for the year ended December 31, 2017, and for the six months ended June 30, 2018, combine the historical statements of consolidated operations of Empire and the Riviera assets purchased, giving effect to the purchase and related transactions as if they had been consummated on January 1, 2017, the beginning of the earliest period presented. The unaudited pro forma combined balance sheet (which we refer to as the "unaudited pro forma balance sheet") combines the historical consolidated balance sheet of Empire and the purchase of the Riviera assets as of June 30, 2018, giving effect to the purchase as if it had been consummated on June 30, 2018.

As of the date of this Form 8-K/A, Empire has not completed the detailed valuation study necessary to arrive at the required final estimates of the fair value of the Riviera assets acquired and the liabilities assumed and the related allocations of purchase price. A final determination of the fair value of Riviera's assets and liabilities, including intangible assets with both indefinite or finite lives, will be based on the actual net tangible and intangible assets and liabilities of Riviera that exist as of the closing date of the purchase. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statements presented below. Empire estimated the fair value of Riviera's assets and liabilities based on preliminary valuation studies, due diligence and information obtained from the previous owner of the Riviera assets. Any increases or decreases in the fair value of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the unaudited pro forma balance sheet and/or statements of operations. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.

Assumptions and estimates underlying the adjustments to the unaudited pro forma financial statements (which we refer to as the "pro forma adjustments") are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the unaudited pro forma financial statements to give effect to the purchase that are directly attributable to the purchase, factually supportable and, with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results of Empire and the Riviera assets following the purchase. The unaudited pro forma financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the purchase occurred on the dates indicated. Further, the unaudited pro forma financial statements do not purport to project the future operating results or financial position of Empire following the purchase.

The unaudited pro forma financial statements have been developed from and should be read in conjunction with:

•

the accompanying notes to the unaudited pro forma financial statements;

•

the historical audited consolidated financial statements of Empire for the year ended December 31, 2017, included in Empire's Annual Report on Form 10-K; and

•

the historical unaudited consolidated financial statements of Empire as of and for the six months ended June 30, 2018, included in Empire's Quarterly Report on Form 10-Q.

EMPIRE PETROLEUM CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of June 30, 2018

	Empire Historical			Pro Forma Adjustments			Empire Pro Forma Combined
ASSETS
Current assets:
Cash	$	4,235		$	—		$	4,235
Oil and gas sales receivable		—			36,178			36,178
Total current assets		4,235			36,178			40,413

Property and equipment
Oil and gas properties, successful efforts method		—			227,902	A		227,902
Accumulated depletion and depreciation		—			—			—
Total oil and gas investments		—			227,902			227,902

Investment in Masterson West II		300,000			—			300,000
Total assets	$	304,235		$	264,080		$	568,315

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	184,273		$	31,889		$	216,162
Current portion of convertible notes, net		164,447			—			164,447
Total current liabilities		348,720			31,889			380,609

Convertible notes, net		51,805			205,000	B		256,805
Asset retirement obligations		—			27,191	A		27,191

Stockholders' deficit:
Common stock-$.001 par value authorized 150,000,000 shares, issued and outstanding
11,328,942 shares		11,328			—			11,328
Common stock subscribed not yet issued (2,000,000 shares)		2,000			—			2,000
Additional paid in capital		16,478,149			—			16,478,149
Accumulated deficit		(16,587,767	)		—			(16,587,767	)
Total stockholders' deficit		(96,290	)		—			(96,290	)
Total liabilities and stockholders' equity	$	304,235		$	264,080		$	568,315

See accompanying notes to unaudited pro forma financial statements

EMPIRE PETROLEUM CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

	Empire Historical			Riviera Historical		Pro Forma Adjustments				Empire Pro Forma Combined
Revenues:
Oil and gas sales	$	—		$	188,855	$	—			$	188,855

Costs and expenses:
Production and operating		—			123,959		—				123,959
Depletion, depreciation and accretion		—			—		7,885		A		7,885
Severance taxes		—			16,041		—				16,041
General and administrative		437,079			—		—				437,079
Total costs and expenses		437,079			140,000		7,885				584,964
Operating income (loss)		(437,079	)		48,855		(7,885	)			(396,109	)

Other expense:
Interest expense		39,473			—		6,919		B		46,392
Total other expense		(39,473	)		—		(6,919	)			(46,392	)


Net income (loss)	$	(476,552	)	$	48,855	$	(14,804	)		$	(442,501	)

Net loss per common share, basic & diluted	$	(0.04	)	$	—	$	—			$	(0.04	)

Weighted average number of common shares outstanding basic and diluted		11,071,720			—		—				11,071,720

See accompanying notes to unaudited pro forma financial statements

EMPIRE PETROLEUM CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

	Empire Historical			Riviera Historical		Pro Forma Adjustments				Empire Pro Forma Combined
Revenues:
Petroleum sales	$	—		$	353,176	$	—			$	353,176

Costs and expenses:
Production and operating		—			298,104		—				298,104
Depletion, depreciation and accretion		—			—		19,306		A		19,306
Severance taxes		—			25,182		—				25,182
General and administrative		757,069			—		—				757,069
Total costs and expenses		757,069			323,286		19,306				1,099,661
Operating income (loss)		(757,069	)		29,890		(19,306	)			(746,485	)

Other expense:
Interest expense		72,998			—		13,838		B		86,836
Total other expense		(72,998	)		—		(13,838	)			(86,836	)


Net income (loss)	$	(830,067	)	$	29,890	$	(33,144	)		$	(833,321	)

Net loss per common share, basic & diluted	$	(0.08	)	$	—	$	—			$	(0.08	)

Weighted average number of common shares outstanding basic and diluted		10,859,070			—		—				10,859,070

See accompanying notes to unaudited pro forma financial statements

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited pro forma combined financial information has been derived from the historical consolidated financial statements of Empire and information provided by the previous owners of the Riviera assets. The unaudited pro forma combined balance sheet as of June 30, 2018 gives effect to the purchase as if the purchase had been completed on June 30, 2018. The unaudited pro forma combined statements of operations for the year ended December 31, 2017, and the six months ended June 30, 2018, give effect to the purchase as if the purchase had been completed on January 1, 2017.

The unaudited pro forma combined financial statements reflect pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions that Empire believes are reasonable; however, actual results may differ from those reflected in these statements. In Empire's opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The unaudited pro forma combined financial statements do not purport to represent what the Empire's financial position or results of operations would have been if the transaction had actually occurred on the dates indicated above, nor are they indicative of Empire's future financial position or results of operations. These unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements and related notes of Empire for the periods presented.

Note 2. Unaudited Pro Forma Combined Balance Sheet

The allocation of the preliminary estimated purchase price is based upon management's estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of June 30, 2018 using currently available information. Due to the fact that the unaudited pro forma combined financial information has been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein. Empire expects to finalize its allocation of the purchase consideration as soon as practicable after the date of the purchase.

The fair values of assets acquired and liabilities assumed were based on the following key inputs:

Oil and natural gas properties

The fair value of proved oil and natural gas properties was measured using valuation techniques that convert the future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average costs of capital. Empire utilized a combination of the New York Mercantile Exchange ("NYMEX") strip pricing and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties acquired.

The fair value of asset retirement obligations totaled $59,295 and is included in proved oil and natural gas properties with a corresponding liability in the table above. The fair value was determined based on a discounted estimated plugging and abandonment costs estimated in the reserve report.

The inputs used to value oil and natural gas properties and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs.

Financial instruments and other

The fair values determined for accounts receivable and accounts payable and accrued liabilities were equivalent to the carrying value due to their short-term nature.

Note 3. Pro Forma Adjustments

The following adjustments have been made to the accompanying unaudited pro forma combined financial statements:

A.	Reflects addition of oil and gas properties and estimate of depreciation, depletion and amortization ("DD&A") for the periods presented based on the purchase price, asset retirement obligation, and production.
B.	Reflects the draw down from initial borrowing base for Cross First loan to fund purchase of oil and gas properties.