Norris Industries (NRIS) 2025 10-K Review

In this deep dive, we examine Norris Industries, Inc. (OTC: NRIS), a small exploration and production (E&P) company focused on crude oil and natural gas assets in Texas. Using the firm’s fiscal 2025 10-K, we review: 1) the company’s business model and strategy; 2) key financials and cash flows; 3) reserve estimates and standardized measures; 4) major risk factors; 5) management’s outlook; and 6) an overall investment assessment.

Warren.AI 💰 3.5 / 10

Net Loss 2025: $561,574 – A slight improvement from the $643,335 loss in 2024, but a continued challenge for a small E&P operator.

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1. Business Description & Strategy (Item 1)

Core Focus: NRIS is a Nevada‐incorporated E&P company, headquartered in Weatherford, Texas. Since 2014 it has targeted under‐the‐radar shallow wells (<5,000 ft) and small producing fields in the Bend Arch—Fort Worth Basin and other North Texas regions. Management believes that smaller fields offer upside via recompletions, workovers, and enhanced oil recovery (EOR) at costs not justified by major operators.

Key Assets (all 100% net revenue interest where noted):

• Bend Arch Lion 1A & 1B JVs (Coleman County): 380 acres total, 10-producing wells, proven reserves in Gray Sand and Ellenburger formations; WI of 39.5% and 46% respectively.
• Marshall Walden JV (Kilgore City): Acquired full working interest, 45 acres, 8 Woodbine Sand wells (4 active, 2 injectors).
• Stuart Leases (Jack & Palo Pinto Counties): 2,790 acres, 20 wells, 75% net revenue interest, ~50 BOE/day existing production.

Growth Path:

1. Improve existing leases via targeted recompletions and EOR, focusing limited capital on proven upside in multiple pay zones.
2. Selective acquisitions of small fields and leases with minimal production but large untapped recoveries.
3. Partnerships & joint ventures to raise funding for drilling new wells and extending acreage development.
4. Maintain low overhead with a lean team, outsourcing technical execution to geologists, engineers, and field operators on a project basis.

Differentiators:

• Focus on small fields (sub-300 bopd) with multi-year drilling inventory.
• Shallow drilling reduces cost and risk versus deep targets.
• Under‐the‐radar leases often ignored by majors needing 300 bopd+ wells.
• Strategic position in 4,200 acres across multiple regions for geographic diversification.

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2. Financial & Cash Flow Analysis (Items 7, 8)

2.1 Income Statement Highlights

Fiscal Year Ended 2025 vs. 2024:

• Revenues: $329,334 vs. $329,610 (–0.08%)
• Lease Operating Expenses (LOE): $503,417 vs. $530,369 (LOE $/BOE remains elevated)
• G&A: $189,611 vs. $200,787 (cost controls reduced G&A slightly)
• DD&A: $54,675 vs. $114,827 (change in estimate and lower volumes)
• Net Loss: $(561,574) vs. $(643,335)

Margins remain negative: LOE alone exceeds sales, highlighting extremely thin economics on these small fields. Depletion & accretion is falling as reserves decline.

2.2 Cash Flows & Liquidity

• Operating Activities: $(368,590) vs. $(397,514)
• Investing: $0 (no new capex)
• Financing: +$400,000 vs. +$300,000 (advanced from related‐party credit line)
• Ending Cash: $85,627 vs. $54,217
• Working Capital: Negative $13,505 (current liabilities $126,355 exceed current assets $112,850)
• Related‐Party Debt: $3.3 million convertible notes + $639,532 accrued interest

NRIS depends heavily on its primary shareholder and related‐party credit line (up to $2 million available with JBB Partners Inc.) to finance operations and acquisitions. Without fresh capital, production and SG&A must be cut further—or operations cease.

2.3 Balance Sheet & Capital

• Oil & Gas PP&E (net): $247,485 vs. $386,510 (full‐cost ceiling test write‐downs reduced carrying value)
• Asset Retirement Obligation: $400,983 (plug & abandonment for older wells)
• Equity: $(4.1 million) vs. $(4.9 million)

Highly leveraged with negative equity and no external bank debt.

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3. Reserve Data & Valuation

Proved Reserves (2/28/25):

• Oil: 25,000 bbl (net)
• Gas: 110,000 Mcf
• Total: ~44 MBOE

Prices used (12‐mo avg ended 2/28/25): WTI $75.37/bbl, Henry Hub $2.26/MMBtu.

Standardized Measure PV@10%: $472,200 (discounted net cash flows)

With a PV under half‐a-million dollars, capex needed for even modest workovers may exceed economic upside without external funding or JV partners.

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4. Risk Factors (Item 1A)

1. Limited Operating History: E&P since 2014 but small revenue base – high chance of failure.
2. Negative Cash Flow: LOE > revenue, SG&A & DD&A add to losses. Requires outside funding.
3. Related‐Party Dependence: Primary shareholder loans finance >100% of cash needs; limited alternatives.
4. Penny Stock: (<$5.00/share) – restricted liquidity & brokerage interest.
5. Industry Cyclicality: Oil/gas price volatility (COVID lockdowns, Russia/Ukraine war, Middle East conflicts) can force shut‐ins.
6. High Fixed Costs: Aging wells need workovers/abandonment; ARO = $400k+.
7. Regulatory & Environmental: Potential hydraulic fracturing restrictions, environmental liabilities, ARO uncertainties.
8. Corporate Governance: No independent audit or nominating committees; control by majority shareholder.
9. Cybersecurity & Operational: Limited controls/documents to withstand supply chain or cyber‐attack disruptions.
10. Dilution: Future equity or convertible debt issuances likely to sustain operations can dilute existing holders heavily.

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5. Management & Governance (Items 10, 11, 14)

Leadership:

• Patrick L. Norris: CEO, President, CFO, chairman – 40+ years in oilfield services and manufacturing; sole funding source.
• Ross H. Ramsey: Director, President of Oil & Gas division – decades of shallow well operations, engineering, JV structuring.

Independence: Both executives are insiders and related parties; no independent directors or audit committee.

Compensation: Modest – Mr. Norris $18k/yr; Mr. Ramsey $79,200/yr in 2025. No equity‐based pay or benefits.

Audit Fees: ~$84k annual audit; no other SEC‐reporting services.

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6. Investment Assessment & Score

3.5/10 – High Risk, Modest Upside

While Norris Industries operates niche, under‐the‐radar oil plays with some proven reserves and competent management, the financial profile is challenging:

• Negative cash flow from operations; LOE exceeds revenue.
• Dwindling cash, negative equity, steep related‐party debt.
• Very small PV of future net cash flows ($472k).
• Ongoing need for material funding via dilutive equity or high-interest related-party debt.
• Lack of independent governance structures.

Potential Upside: If oil prices remain >$70/bbl, well workovers succeed, and JV structures bring in low-cost capital, there is limited upside on 44 MBOE. But that upside is small relative to funding needs, dilution, and execution risk.

Bottom Line: NRIS remains a speculative micro‐cap E&P play. It is best suited for risk‐tolerant investors with conviction in small‐field recompletion strategies and deep patience for capital raises.

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Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Always do your own research or consult a financial advisor.