Reserve Petroleum's Q3 Net Income Dips Amidst Strong YTD Revenue Growth

TL;DR

**RSRV's Q3 net income drop is a red flag, but strong year-to-date revenue and asset growth suggest a buy-the-dip opportunity for long-term oil & gas bulls.**

AI Summary

RESERVE PETROLEUM CO (RSRV) reported a mixed financial performance for the nine months ended September 30, 2025. While total operating revenues increased by 5.07% to $12,273,333 from $11,680,736 in the prior year, net income attributable to common stockholders rose by 22.85% to $4,343,257 from $3,535,852. However, for the three months ended September 30, 2025, net income attributable to common stockholders decreased by 21.80% to $1,368,541 compared to $1,749,051 in the same period of 2024. Oil and Gas Sales, the primary revenue source, increased to $11,794,573 for the nine-month period, up from $10,723,062. The company saw a significant gain on disposition of oil and gas properties of $764,805 for the nine months, compared to zero in the prior year. Cash and cash equivalents increased to $4,791,704 as of September 30, 2025, from $3,923,822 at December 31, 2024. Total assets grew to $41,018,095 from $36,379,773, and total equity increased to $33,434,799 from $30,639,658 over the same period. The company also declared cash dividends of $10.00 per share for the nine months ended September 30, 2025.

Why It Matters

For investors, RSRV's mixed results highlight the volatility inherent in the oil and gas sector, particularly with a quarterly net income decline despite year-to-date growth. The significant increase in cash and total assets suggests a strengthening balance sheet, which could provide stability. Employees might see continued investment in oil and gas properties, indicating job security in core operations. Customers could benefit from RSRV's continued exploration and production efforts, potentially contributing to stable energy supply. In a competitive landscape, RSRV's ability to generate substantial gains from asset dispositions and grow its asset base positions it to potentially acquire new properties or expand existing operations, impacting market share.

Risk Assessment

Risk Level: medium — The company experienced a 21.80% decrease in Net Income Attributable to Common Stockholders for the three months ended September 30, 2025, falling to $1,368,541 from $1,749,051 in the prior year. Additionally, 'Other Income/(Loss), Net' swung to a loss of $119,742 for the quarter, compared to a gain of $463,689 in the same period of 2024, indicating potential volatility in non-core income streams.

Analyst Insight

Investors should closely monitor RSRV's upcoming earnings calls for management's explanation of the Q3 net income decline and its impact on future guidance. While the year-to-date performance is strong, the quarterly dip warrants caution. Consider holding existing positions but delay new investments until a clear trend emerges regarding profitability and 'Other Income/(Loss), Net' stability.

Financial Highlights

debt To Equity

0.23

revenue

$12,273,333

total Assets

$41,018,095

total Debt

$1,048,504

net Income

$4,343,257

cash Position

$4,791,704

revenue Growth

+5.07%

Revenue Breakdown

Key Numbers

• $12.27M — Total Operating Revenues (Increased by 5.07% for the nine months ended September 30, 2025, to $12,273,333 from $11,680,736.)
• $4.34M — Net Income Attributable to Common Stockholders (YTD) (Increased by 22.85% for the nine months ended September 30, 2025, to $4,343,257 from $3,535,852.)
• $1.37M — Net Income Attributable to Common Stockholders (Q3) (Decreased by 21.80% for the three months ended September 30, 2025, to $1,368,541 from $1,749,051.)
• $4.79M — Cash and Cash Equivalents (Increased to $4,791,704 as of September 30, 2025, from $3,923,822 at December 31, 2024.)
• $41.02M — Total Assets (Increased to $41,018,095 as of September 30, 2025, from $36,379,773 at December 31, 2024.)
• $764,805 — Gain on Disposition of Oil and Gas Properties (Significant gain for the nine months ended September 30, 2025, compared to zero in the prior year.)
• $10.00 — Cash Dividends Declared/Paid per Share (Consistent for the nine months ended September 30, 2025 and 2024.)
• $11.79M — Oil and Gas Sales (Increased for the nine months ended September 30, 2025, to $11,794,573 from $10,723,062.)

Key Players & Entities

• RESERVE PETROLEUM CO (company) — registrant
• Grand Woods Development, LLC (company) — consolidated variable interest entity
• Trinity Water Services, LLC (company) — consolidated variable interest entity
• Broadway Sixty-Eight, LLC (company) — equity method investee
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• $12,273,333 (dollar_amount) — total operating revenues for nine months ended September 30, 2025
• $4,343,257 (dollar_amount) — net income attributable to common stockholders for nine months ended September 30, 2025
• $1,368,541 (dollar_amount) — net income attributable to common stockholders for three months ended September 30, 2025
• $764,805 (dollar_amount) — gain on disposition of oil and gas properties for nine months ended September 30, 2025

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The company's revenue is heavily reliant on oil and gas prices. Fluctuations in these prices, driven by global supply and demand, geopolitical events, and economic conditions, can significantly impact profitability and cash flows. For the nine months ended September 30, 2025, oil and gas sales increased to $11,794,573, but the underlying price sensitivity remains a key risk.
• Exploration and Production Risks [medium — operational]: As an independent oil and gas company, RSRV faces inherent risks in exploration and production activities, including the possibility of unsuccessful drilling, unexpected geological conditions, and operational failures. These risks can lead to significant capital expenditures with no guarantee of return.
• Access to Capital and Liquidity [medium — financial]: While cash and cash equivalents increased to $4,791,704 as of September 30, 2025, the company's ability to fund future exploration, development, and operational needs depends on continued access to capital markets and favorable borrowing conditions. The company has a Note Payable of $1,048,504 (current and long-term combined).
• Environmental Regulations [medium — regulatory]: The oil and gas industry is subject to stringent and evolving environmental regulations. Compliance with these regulations, including those related to emissions, waste disposal, and land use, requires ongoing investment and can lead to significant liabilities if not managed properly. The Asset Retirement Obligation stands at $2,497,698.
• Gain on Asset Dispositions [low — financial]: The company reported a significant gain on disposition of oil and gas properties of $764,805 for the nine months ended September 30, 2025, compared to zero in the prior year. While this boosted net income, over-reliance on asset sales for financial performance can be unsustainable and masks underlying operational trends.

Industry Context

Reserve Petroleum Company operates in the independent oil and gas sector, focusing on exploration and production. This industry is characterized by high capital intensity, significant price volatility for its products, and a complex regulatory environment. Companies in this space often engage in property acquisitions and dispositions to manage their asset base and production profiles.

Regulatory Implications

The company must adhere to various regulations governing oil and gas exploration, production, and environmental protection. Compliance with SEC reporting requirements, environmental standards, and tax laws is critical. The Asset Retirement Obligation of $2,497,698 highlights the long-term financial commitment related to environmental stewardship.

What Investors Should Do

1. Monitor Q4 and FY2025 performance, particularly the trend in net income.
2. Analyze the sustainability of revenue growth and profitability drivers.
3. Evaluate the company's cash flow generation and capital allocation strategy.
4. Assess the impact of rising current liabilities on liquidity.

Key Dates

• 2025-09-30: End of Nine-Month Period and Third Quarter — Reporting period for the 10-Q, showing year-to-date and quarterly financial performance. Total operating revenues were $12.27M YTD, with net income of $4.34M YTD, but Q3 net income declined 21.80% to $1.37M.
• 2025-12-31: Prior Year End — Baseline for comparison of year-end balance sheet items. Cash and cash equivalents were $3.92M, and total assets were $36.38M.

Glossary

Successful Efforts Method of Accounting

An accounting method for oil and gas companies where costs of exploring for and developing oil and gas reserves are capitalized. Only costs that are directly associated with successful exploration and development activities are capitalized, while unsuccessful exploration costs are expensed. (This method is used by RSRV for its Oil and Gas Properties, impacting the valuation of its core assets on the balance sheet.)

Variable Interest Entities (VIEs)

Entities for which the total equity investment is not sufficient to permit the entity to finance its activities without additional financial support from other parties, or where the equity investors lack the characteristics of a controlling financial interest. Companies must consolidate VIEs if they are the primary beneficiary. (RSRV consolidates Grand Woods Development, LLC and Trinity Water Services, LLC, which are identified as VIEs, impacting its reported assets and liabilities.)

Asset Retirement Obligation

A legal obligation associated with the retirement of tangible long-lived assets, such as oil and gas wells or facilities. It represents the estimated cost to remove the asset and restore the site at the end of its useful life. (RSRV has an Asset Retirement Obligation of $2,497,698 as of September 30, 2025, reflecting future costs associated with its oil and gas properties.)

Depreciation, Depletion, Amortization

Accounting methods used to allocate the cost of tangible assets (depreciation), natural resources (depletion), and intangible assets (amortization) over their useful lives. For oil and gas properties, depletion is the primary method for allocating the cost of proved reserves. (Accumulated depreciation, depletion, and amortization for RSRV's oil and gas properties totaled $63,599,132 as of September 30, 2025, reducing the net book value of these assets.)

Year-Over-Year Comparison

Compared to the year ended December 31, 2024, Reserve Petroleum Co. has seen a 5.07% increase in total operating revenues for the nine months ended September 30, 2025, reaching $12.27M. Net income attributable to common stockholders also shows a healthy 22.85% rise YTD to $4.34M, partly due to a $764,805 gain on property disposition not present in the prior year. However, a notable divergence is the 21.80% decrease in Q3 net income, indicating potential headwinds or a normalization of earnings after a strong prior period. Total assets have grown to $41.02M from $36.38M, and cash reserves have improved to $4.79M from $3.92M.

Key Financial Figures

• $0.50 — 025, 151,616 shares of the Registrant's $0.50 par value common stock were outstanding

Filing Documents

• rsrv-20250930.htm (10-Q) — 765KB
• rsrv-20250930xexx311.htm (EX-31.1) — 10KB
• rsrv-20250930xexx312.htm (EX-31.2) — 10KB
• rsrv-20250930xexx32.htm (EX-32) — 6KB
• rsrv-20250930_g1.jpg (GRAPHIC) — 2KB
• 0000083350-25-000027.txt ( ) — 4843KB
• rsrv-20250930.xsd (EX-101.SCH) — 31KB
• rsrv-20250930_cal.xml (EX-101.CAL) — 68KB
• rsrv-20250930_def.xml (EX-101.DEF) — 158KB
• rsrv-20250930_lab.xml (EX-101.LAB) — 454KB
• rsrv-20250930_pre.xml (EX-101.PRE) — 323KB
• rsrv-20250930_htm.xml (XML) — 592KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Page Item 1. Consolidated Financial Statements (Unaudited) 2 Consolidated Balance Sheets 2 Consolidated Statements of Income 4 Consolidated Statements of Equity 5 Consolidated Statements of Cash Flows 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Note 1 - Basis of Presentation 8 Note 2 - Segment Reporting 9 Note 3 - Revenue Recognition 10 Note 4 - Other Income /(Loss) , Net 10 Note 5 - Investments and Related Commitments and Contingent Liabilities, Including Guaranties 11 Note 6 - Non-Controlling Interest and Variable Interest Entities 12 Note 7 - Note Payable 14 Note 8 - Asset Retirement Obligation 14 Note 9 - Fair Value Measurements 14 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 21 Item 4.

Controls and Procedures

Controls and Procedures 21

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 22 Item 1A.

Risk Factors

Risk Factors 22 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Purchases of Equity Securities 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Mine Safety Disclosures 22 Item 5. Other Information 22 Item 6. Exhibits 23 1 Table of Contents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THE RESERVE PETROLEUM COMPANY CONSOLIDATED BALANCE SHEETS (1) (Unaudited) ASSETS September 30, 2025 December 31, 2024 Current Assets: Cash and Cash Equivalents $ 4,791,704 $ 3,923,822 Equity Securities 2,901,072 2,501,194 Refundable Income Taxes 294,460 236,482 Accounts Receivable, Net of Allowance for Credit Losses 2,331,927 2,774,487 Total Current Assets 10,319,163 9,435,985 Investments: Equity Method Investments 1,803,378 2,479,433 Other Investments 3,820,097 3,176,329 Total Investments 5,623,475 5,655,762 Property, Plant and Equipment: Oil and Gas Properties, at Cost, Based on the Successful Efforts Method of Accounting – Unproved Properties 5,469,999 4,751,323 Proved Properties 80,897,552 76,669,648 Oil and Gas Properties, Gross 86,367,551 81,420,971 Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance ( 63,599,132 ) ( 62,476,410 ) Oil and Gas Properties, Net 22,768,419 18,944,561 Other Property and Equipment, at Cost 2,520,198 2,520,198 Less – Accumulated Depreciation ( 213,160 ) ( 176,733 ) Other Property and Equipment, Net 2,307,038 2,343,465 Total Property, Plant and Equipment, Net 25,075,457 21,288,026 Total Assets $ 41,018,095 $ 36,379,773 See accompanying notes to unaudited consolidated financial statements 2 Table of Contents THE RESERVE PETROLEUM COMPANY CONSOLIDATED BALANCE SHEETS, CONTINUED (1) (Unaudited) LIABILITIES AND EQUITY September 30, 2025 December 31, 2024 Current Liabilities: Accounts Payable $ 1,225,921 $ 520,182 Other Current Liabilities 65,183 45,180 Note Payable, Current Portion 152,726 148,155 Total Current Liabilities 1,443,830 713,517 Long-Term Liabilities: Asset Retirement Obligation 2,497,698 2,362,060 Deferred Tax Liability, Net 2,745,990 1,653,957 Note Payable, Less Current Portion 895,778 1,010,581 Total Long-Term Liabilities 6,139,466 5,026,598 Total Liabilities 7,583,296 5,740,115 Equity:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) Note 1 – BASIS OF PRESENTATION The Reserve Petroleum Company, a Delaware corporation, is an independent oil and gas company focused on exploration and production. In addition to its core operations, the Company manages a diverse investment portfolio. Our consolidated subsidiaries consist of Grand Woods Development, LLC ("Grand Woods"), an Oklahoma limited liability company and wholly owned Trinity Water Services, LLC ("TWS"), an Oklahoma limited liability company. Unless otherwise specified or the context otherwise requires, all references in these notes to "the Company," "its," "our," and "we" are to The Reserve Petroleum Company and its consolidated subsidiaries. The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of The Reserve Petroleum Company and its subsidiaries in which we hold a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, we consolidate Variable Interest Entities ("VIEs") under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications to the consolidated financial statements are made to prior period financial information to conform to the current year presentation. These reclassifications had no material impact on net income or retained earnings. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC (the "2024 Form 10-K"). In the opinio

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