Empire Petroleum Corporation (NYSE American: EP) has secured a unanimous decision from the New Mexico Oil Conservation Commission (NMOCD) that affirms the existence of a Residual Oil Zone (ROZ) in the Eunice Monument South Unit (EMSU) and confirms the company’s exclusive rights to produce from that ROZ under a 1984 Commission order. This legal victory, announced on August 14, 2025, clears the way for the launch of a three-year CO₂ enhanced oil recovery (EOR) pilot project and simultaneously delivers a blow to competing injection operations that the company argued could compromise its assets.
The Commission’s ruling also denied five new injection-well applications from Goodnight Midstream Permian, LLC, rejected a request to increase injection volumes, suspended four of Goodnight’s existing injection wells, and denied all related pending motions. For Empire Petroleum Corporation, this combination of approvals and denials removes immediate operational roadblocks and provides a legally protected development pathway.
Why the Commission’s unanimous ruling is pivotal for ROZ rights and the CO₂ pilot launch
The decision validates the presence of the ROZ within the Grayburg and San Andres formations in the EMSU and confirms that Empire Petroleum Corporation’s rights to that zone are exclusive, based on a decades-old Commission order. The NMOCD’s finding not only permits the CO₂ EOR pilot but also creates a clearer regulatory framework for Empire Petroleum Corporation’s subsurface activities.
This ruling comes after a contentious four-year process in which the company presented extensive geological and engineering evidence to substantiate its claims. The Commission determined that the pilot aligns with the principles of maximizing resource recovery while minimizing waste—key standards in New Mexico’s oil and gas regulatory framework.
How the Commission addressed potential reservoir impairment
While the NMOCD found no immediate impairment of correlative rights in the Grayburg from neighboring injection activities, it did find compelling evidence of potential future impairment or waste. This distinction was critical in shaping the outcome. By acknowledging the risk of future harm, the Commission provided Empire Petroleum Corporation with the regulatory backing to proactively protect its reservoirs before irreversible damage could occur.
Following the decision, the company stated that it will move forward with motions to revoke permits held by other third-party saltwater disposal operators injecting into the EMSU and the Arrowhead Grayburg Unit. Litigation for trespass and damages is also on the table, which could further solidify its control over the reservoir environment.
How Empire Petroleum Corporation’s latest quarterly results set the financial and operational stage for its New Mexico CO₂ pilot launch
Empire Petroleum Corporation’s most recent financial results highlight both the headwinds facing smaller exploration and production firms and the operational resilience the company has shown in certain basins. In the second quarter of 2025, product revenue totaled $8.75 million, down from $12.79 million in the same quarter of 2024. The revenue drop was primarily the result of a 23% decline in realized prices per barrel of oil equivalent (Boe), which fell from $53.26 to $40.78.
The net loss widened to $5.06 million, or $0.15 per diluted share, compared to a loss of $4.39 million in Q2 2024. Adjusted EBITDA slipped into negative territory at –$1.18 million, versus a positive $1.73 million a year earlier. Despite the weaker pricing environment, production volumes rose about 15% quarter-on-quarter to 2,357 Boe/d, with crude oil representing 1,493 barrels per day.
The company’s liquidity is being supplemented by a rights offering expected to raise around $5 million, a portion of which will fund the New Mexico CO₂ pilot. This capital raise is seen as an important bridge to project execution, especially given current commodity price volatility.
Why the CO₂ EOR pilot represents both opportunity and challenge
Enhanced oil recovery using CO₂ has been proven in similar carbonate formations, including the Grayburg and San Andres, to boost recovery rates by an additional 4–20 percentage points over primary and secondary recovery methods. For Empire Petroleum Corporation, the pilot offers a chance to monetize previously uneconomic reserves in the ROZ. If successful, it could also qualify the company for carbon credit incentives under U.S. Section 45Q, provided it meets the strict capture, utilization, and storage requirements.
The suspension of competing injection operations within the EMSU and surrounding units further reduces the risk of reservoir interference. With greater control over subsurface pressure and flow dynamics, Empire Petroleum Corporation can optimize injection patterns and potentially lower operating costs per barrel.
What Empire Petroleum Corporation’s leadership says the unanimous New Mexico ruling means for its long-term CO₂ EOR strategy
Phil Mulacek, chairman of the board, called the unanimous decision a strategic milestone for the company’s regulatory and operational positioning. He stressed that the ruling safeguards the value of Empire Petroleum Corporation’s assets from activities that could erode their productivity, while opening a clear path to unlock production potential from both the ROZ and upper zones.
President and CEO Mike Morrisett described the outcome as the culmination of years of coordinated work by employees, legal teams, and consultants. He emphasized that the Commission’s comprehensive review has given the company the regulatory certainty it needs to proceed with development in New Mexico in alignment with long-term growth and fiduciary obligations.
How investors and the market are responding to Empire Petroleum Corporation’s unanimous New Mexico CO₂ EOR ruling
Following the announcement, Empire Petroleum Corporation’s stock price traded in the $5.00–$5.20 range, up from recent lows near $4.70. Market observers interpreted the ruling as de-risking the company’s New Mexico assets, potentially making them more attractive to institutional and ESG-focused investors.
However, analysts note that while the regulatory clarity is a net positive, the company still faces challenges related to profitability and cash flow. For many investors, early pilot results will be the key trigger for any substantial re-rating of the stock.
What Empire Petroleum Corporation plans to do next after securing the unanimous NMOCD ruling on its CO₂ EOR pilot
In the short term, Empire Petroleum Corporation will focus on launching the CO₂ EOR pilot, securing a reliable CO₂ supply, and finalizing injection system designs. The technical success of the pilot—measured by injectivity, reservoir response, and incremental oil recovery—will determine whether the project is expanded beyond its initial scope.
At the same time, the company plans to pursue legal actions to revoke other saltwater disposal permits and seek damages where warranted. Outside New Mexico, Empire Petroleum Corporation is progressing with the Starbuck EOR project in North Dakota, expected to ramp in late 2025, and a horizontal drilling campaign in East Texas set to begin by the end of the year.
How Empire Petroleum Corporation’s valuation and growth prospects compare to other independent oil and gas operators after the NMOCD ruling
Compared to peers, Empire Petroleum Corporation trades at a higher price-to-book ratio of 2.8x but maintains a negative price-to-earnings ratio due to ongoing losses. Its price-to-sales ratio of 3.8x also exceeds the sector average, a sign that investors are assigning a premium to its asset base despite current financial underperformance.
The NMOCD decision could support that premium if the pilot delivers measurable reserve growth and improved margins. Conversely, if oil prices remain soft or the pilot underperforms, the valuation gap could close quickly.
What the unanimous NMOCD ruling could mean for Empire Petroleum Corporation and the broader oil and gas sector over the next decade
The Commission’s decision underscores the importance of regulatory clarity for independent oil and gas operators in competitive basins. For Empire Petroleum Corporation, it secures a development pathway, strengthens asset protection, and enables the deployment of CO₂ EOR technology in a legally secure environment.
Over the next 12–24 months, the company’s challenge will be to execute the pilot efficiently, maintain financial discipline, and leverage potential ESG benefits to broaden its investor base. If these objectives are met, the August 14 ruling could be remembered not just as a legal victory, but as the turning point in the company’s operational and financial trajectory.
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