Royale Energy, Inc.

Royale Energy, Inc.

Overview

• Royale Energy, Inc. is an independent oil and natural gas producer, incorporated in Delaware and the successor by merger to Royale Energy Funds, Inc., a California corporation formed in 1983.
• Primary activities: production and sale of oil and natural gas; acquisition of oil and gas lease interests and proved reserves; drilling exploratory and development wells; and selling fractional working interests in wells to be drilled by Royale.
• Employees: 11 full‑time employees as of December 31, 2025.
• Geographic focus: Texas (Mitchell County and Ector County), California (Sacramento Basin and San Joaquin Basin), and Oklahoma, with an additional overriding royalty interest in a non‑producing well in Alaska.
• Business model: Royale sells portions of working interests in wells to accredited investors via private placements, commonly in multi‑well bundles to diversify investor risk and reduce Royale’s cash outlay. Royale generally drills or participates in drilling after acquiring leaseholds and retains interests for its own account.

Recent activity and financing

• Pradera Fuego acquisition: On September 3, 2025, Royale (through its subsidiary Royale Energy Funds, Inc.) acquired non‑operated working and net revenue interests in seven gross wells (0.189 net) and about 382.9 net acres in the Pradera Fuego project from Pradera Fuego, LP, effective July 1, 2025. Total cash consideration was $1.5 million, financed with $1.0 million cash on hand and $0.5 million additional borrowings.
• 2025 drilling: Drilled one gross (0.0035 net) developmental well in Texas that was productive.
• Revenue mix: Approximately 99% of 2025 revenue came from oil and natural gas produced and sold.
  • 2025 oil/gas production revenue: $1,926,442.
  • 2024 oil/gas production revenue: $2,246,073.
• Turnkey drilling gains:
  • 2025: $1,322,149 gain on turnkey drilling.
  • 2024: $1,607,677 gain on turnkey drilling.
• Administrative overhead allocation: Overhead charged to operations (offsetting G&A) was $441,965 in 2025 and $430,680 in 2024.

Operations and property

• Core operating model:
  • Acquire lease interests and develop oil and gas properties.
  • Drill development and exploratory wells, often selling fractional working interests to accredited investors to fund drilling.
  • Title and leasehold interests may be subject to royalties, overriding royalties, and other customary encumbrances; Royale conducts due diligence but cannot guarantee title in all cases.
• Production and offtake arrangements:
  • California gas: Largely sold through PG&E pipelines to independent customers on monthly contract terms; some gas sold via privately owned pipelines.
  • Jameson, Texas (oil): Sold to Energy Transfer Crude Marketing LLC under an evergreen contract based on WTI spot prices.
  • Jameson, Texas (gas): Sold under a long‑term contract with WTG Jameson, L.P. based on Henry Hub spot prices.
  • Pradera Fuego (non‑operated): Production sold under operator contracts, generally based on posted spot prices.
• Operations scope: Royale operates wells in California and Texas and maintains non‑operating interests in wells in California, Texas, and Oklahoma.

Reserves and value (as of December 31, 2025)

• Reserve base (NSAI estimates, SEC‑compliant):
  • Total proved oil: 647.089 MMBBL
  • Total proved natural gas: 1,815.759 MMCF
  • Proved developed reserves:
    • Oil: 238.740 MMBBL
    • Natural gas: 392.800 MMCF
  • Proved undeveloped reserves:
    • Oil: 429.375 MMBBL
    • Natural gas: 1,213.380 MMCF
• Regional reserve details (selected):
  • Texas: Proved developed oil 126.730 MMBBL; proved developed natural gas 233.750 MMCF; proved undeveloped oil 86.190 MMBBL; proved undeveloped natural gas 154.450 MMCF; total Texas proved oil 192.378 MMBBL; total Texas proved natural gas 573.572 MMCF.
  • California: Proved developed oil 25.820 MMBBL; proved developed natural gas 1.950 MMCF; total California proved oil 25.336 MMBBL; total California proved natural gas 22.206 MMCF.
  • Other states: minor amounts disclosed for developed/undeveloped splits.
• Prices used for reserve evaluation:
  • Oil: $66.01 per barrel
  • Natural gas: $3.39 per MCF
• Proved undeveloped reserves (as of 12/31/2025): ~631,605 BOE comprising 429,375 barrels of oil & NGL and 1,213,380 MMCF of natural gas.
• PV‑10 (discounted future net cash flows) as of 12/31/2025: $11,176,100.
• Reserve report: NSAI prepared the reserve report for Royale; estimates and the discounted present value are based on engineering, geological, and economic assumptions and may be revised.

Plan of business and strategy

• Diversify risk by acquiring multiple interests and funding drilling through private working‑interest participations sold to accredited investors.
• After lease acquisition, drill or participate in drilling of development and exploratory wells and sell fractional interests in undeveloped wells to finance drilling costs.
• Use turnkey drilling arrangements; Royale recognizes gains on turnkey drilling when funds received exceed drilling, development, lease acquisition costs and costs incurred on behalf of participants and Royale’s own account.
• Generally operate the wells it completes, earning operator fees and reimbursements; overhead related to operations is charged to operations.

Material financial highlights

• 2025 oil and gas production revenue: $1,926,442 (approx. 99% of total 2025 revenue).
• 2024 oil and gas production revenue: $2,246,073 (approx. 99% of total 2024 revenue).
• 2025 gains on turnkey drilling: $1,322,149.
• 2024 gains on turnkey drilling: $1,607,677.
• 2025 PV‑10 (reserve value): $11,176,100.
• 2025 total proved reserves: Oil 647.089 MMBBL; Natural gas 1,815.759 MMCF.
• 2025 proved developed reserves: Oil 238.740 MMBBL; Natural gas 392.800 MMCF.
• 2025 proved undeveloped reserves: Oil 429.375 MMBBL; Natural gas 1,213.380 MMCF.