RESERVE PETROLEUM CO Annual Report - How They Did This Year

I’ve put together this guide to help you understand how Reserve Petroleum Co performed this year. My goal is to turn complex financial filings into simple information you can use to decide if this company fits your investment goals.

1. What does this company do?

Think of Reserve Petroleum as an "energy landlord." They don't operate drills themselves. Instead, they own over 88,000 acres of mineral rights across 12 states, mostly in Oklahoma, Texas, and Kansas.

They make money by letting other companies drill on their land in exchange for royalties. They also partner with these companies to share the costs and profits of new wells. With only eight employees, their overhead costs are very low. This helps them keep high profit margins even when energy prices change.

2. Financial performance

The core business remains steady. In 2025, they earned $3.42 million from royalties, nearly matching the $3.46 million from 2024. Total revenue reached roughly $5.8 million, bolstered by their non-oil investments.

However, two customers—Crawley Petroleum and Mewbourne Oil—account for over 55% of their sales. If either partner struggles or moves their drilling elsewhere, Reserve’s profit could be impacted.

3. Major wins and challenges

• The Win: They are staying active. In 2025, they participated in 39 development wells for steady cash flow and 10 exploratory wells to find new oil. This strategy helps offset the natural production decline of older wells.
• The Challenge: Exploration is a gamble. Six of their 10 exploratory wells were "dry holes." They spent about $450,000 on these projects with no return. This is a standard part of the business, though it creates fluctuations in quarterly profit.

4. Financial health

The company takes a cautious approach. Beyond oil and gas, they hold a $15 million portfolio of stocks, real estate, and other ventures. This provides dividend and interest income that stabilizes the company when energy prices fall. They have no long-term debt, which allows them to navigate industry downturns without the pressure of interest payments.

5. Key risks

• Price Swings: They sell oil and gas at daily market prices. They do not use contracts to lock in prices. If oil prices drop, their royalty revenue drops immediately.
• Customer Concentration: Relying on just two big buyers is a notable risk. Because Reserve doesn't operate the wells, they depend entirely on their partners' technical skill and financial health.
• The "Dry Hole" Cost: They write off the costs of failed wells immediately. A year with many failed wells can cause their profit to swing by 20–30%.

6. Future outlook

Management remains focused on a conservative strategy. They prioritize joining high-quality drilling projects with experienced partners while keeping risks low. They also emphasize cybersecurity to protect their data. Investors should expect a strategy focused on preserving value rather than aggressive, high-risk growth.

Is this right for your portfolio? Reserve Petroleum is a low-overhead, debt-free company that acts more like a diversified holding company than a traditional oil driller. If you are looking for steady, conservative exposure to energy with a "safety net" of non-oil investments, this may be worth a closer look. However, if you are uncomfortable with the risks of relying on just two major partners or the inherent unpredictability of exploratory drilling, you might prefer a more diversified energy producer.