EP

Why Empire Petroleum($EP) Director Bought 130K Shares Amid 47% Stock Plunge

09/17/2025 22:50

Empire Petroleum ($EP) Director Phil Mulacek has been sending strong confidence signals with his purchase of over 130,000 shares in the past three months, drawing investor attention as the stock has fallen approximately 47% from its early-year high of $7.78 to the current $4.11. This Texas-based small-cap oil development company, with a market capitalization of approximately $139 million, focuses on developing unconventional oil and gas assets in North America. Its primary operational areas are Texas and North Dakota, generating revenue through shale oil extraction and efficiency improvement projects for existing wells. Within the industry, it's classified as a small independent oil company, differing in scale from major shale operators like Pioneer Natural Resources and EOG Resources, but maintaining competitiveness through regional specialized expertise. Most notable is Mulacek's buying pattern. When the stock plummeted to $3.89 in May, he purchased 86,000 shares worth approximately $330,000 over five days. In September, as the stock again declined to the low-$4 range, he bought an additional 46,000 shares for $170,000. Particularly significant is that these purchases were discretionary trades, not pre-planned 10b5-1 transactions, demonstrating strong management conviction. Investors should carefully observe the pattern of insiders consistently buying during stock price declines. While CAO Matthew Watson sold a small amount of stock in early September, this was a minor transaction of fewer than 5,000 shares and doesn't significantly impact the overall insider buying trend. Rather, Mulacek's massive purchase of over 130,000 shares serves as an overwhelming signal. Financially, Empire Petroleum faces ongoing challenges. Q2 net loss widened to $5.1 million year-over-year, marking the fourth consecutive quarter of losses. However, positive signals exist. Q2 net production increased 15% year-over-year, reflecting improved efficiency of existing assets and results from new development projects. The company recently announced a $5.0 million rights offering to optimize its balance sheet. These funds will be used for future growth investments, specifically new drilling operations in Texas and Enhanced Oil Recovery (EOR) facility installation in North Dakota. Management stated that EOR facilities are expected to become operational in Q4, with production increases anticipated within the next 6-9 months. Current oil price environment is also a factor to consider. Management forecasts commodity prices will trend upward over the next 4-6 quarters, supported by ongoing global supply chain instability and geopolitical risks, alongside policies promoting U.S. energy self-sufficiency. Key indicators investors should monitor include Q4 EOR facility startup and realized production increases as a critical turning point. Progress on new Texas drilling operations and initial production performance also warrant close observation. If these investments proceed as planned and quarterly losses begin to narrow, the insider's buying judgment could prove correct. However, warning signs exist. With four consecutive quarters of losses, continued loss expansion for another 1-2 quarters could intensify liquidity pressure. Small oil companies are inherently vulnerable to oil price volatility and rising capital costs. The current elevated U.S. interest rate environment could significantly burden additional funding costs. Analyzing future scenarios, in the optimistic case, EOR facility operations and successful new drilling could significantly increase production and revenue from Q4, approaching breakeven. Stock price could potentially recover to $6-7 levels. The most likely base scenario involves gradual improvement, where production increases materialize but profitability improvement requires 2-3 additional quarters, with stock price fluctuating in the $5-6 range. Risk scenarios include oil price collapse or underperforming new investment projects, potentially creating additional funding pressure and pushing the stock down to the high-$3 range. Key triggers for scenario transitions will be Q4 earnings results and actual EOR facility production contributions. In conclusion, despite financial difficulties, Empire Petroleum's strong insider confidence signals and concrete growth investment plans suggest potential for future turnaround. However, considering the volatility inherent to small oil companies and execution risks, this situation warrants careful consideration by investors with high risk tolerance.