Executive Summary / Key Takeaways

• Norris Industries, Inc. ($NRIS) is a Texas-focused oil and natural gas exploration and production (E&P) company aiming to unlock value in niche, "under the radar" assets through Enhanced Oil Recovery (EOR) methods and data-driven operational strategies.
• Despite a history of continuous losses since 2016 and negative working capital, the company is actively pursuing a strategy of acquiring smaller, mature oil fields with EOR potential and diversifying into oilfield services or non-oilfield enterprises.
• NRIS leverages specialized technological practices, including expert analysis of shale reservoir mineralogy to guide fracture stimulation, which management believes enhances drilling success and recovery rates, forming a core competitive advantage in its targeted regions.
• Recent financial performance for the six months ended August 31, 2025, shows a net loss of $319,297, primarily impacted by costs associated with plugging four unprofitable wells, while revenues remained relatively flat due to lower oil and gas prices offsetting higher production.
• The company's liquidity is heavily reliant on its largest shareholder, JBB, through an extended credit line, underscoring significant capital and operational risks in a volatile energy market marked by geopolitical instability and inflationary pressures.

A Niche Player in a Volatile Arena

Norris Industries, Inc. ($NRIS), incorporated in Nevada in 2014, operates as a focused oil and natural gas exploration and production (E&P) company with its principal properties concentrated in the Ellenberger formation across Coleman, Jack, and Palo-Pinto Counties in Texas. The company's journey has been marked by a persistent pursuit of growth in a challenging sector, often supported by its largest shareholder, JBB, through various financing agreements. This historical reliance on related-party funding has been a defining characteristic of its capital structure.

The broader energy landscape presents a complex backdrop for NRIS. The industry is grappling with volatile commodity prices, exacerbated by geopolitical events such as the Russian Federation invasion of Ukraine and ongoing conflicts in the Middle East, including a June 2025 strike on Iran's nuclear facilities by Israel and the United States. These events contribute to significant market instability and unpredictable supply-demand balances. Furthermore, inflationary pressures have led to increased costs for materials, equipment, personnel, and services, while tightened financial conditions from US Federal Reserve interest rate policies add another layer of complexity. Amidst these macro trends, the burgeoning demand for natural gas, particularly from the rapidly expanding AI and data center sectors, offers a potential tailwind, yet also intensifies competition for resources and capital.

The Norris Industries Strategy: Unlocking Value in Under-the-Radar Assets

NRIS's core business strategy centers on the acquisition, development, and exploration of crude oil and natural gas properties within Texas. The company's management, comprising veterans in oil and gas exploration, specializes in the Central West Texas region, particularly targeting the prolific Bend Arch-Fort Worth area. This strategic focus is a key differentiator, as NRIS aims to develop existing small producing fields rather than pursuing the larger, more capital-intensive projects favored by major players.

The company's approach involves acquiring "under the radar" prime hydrocarbon land leases. These leases often contain wells producing less than 300 barrels of oil per day (bopd), which are typically deemed uneconomical by larger oil and gas companies that require higher production thresholds. NRIS believes these assets hold substantial hydrocarbon reserves, offer multi-year drilling inventory, and possess reasonable production histories with significant upside potential, yet remain less accessible to public auctions. This niche focus allows NRIS to leverage its regional expertise and potentially secure assets at more reasonable costs. The company's long-term objective is to increase shareholder value by growing reserves, production, and cash flow, which may include diversifying into oilfield services or other non-oilfield enterprises through strategic partnerships and acquisitions.

Technological Edge: Data-Driven Exploration and Enhanced Recovery

In an industry increasingly driven by technological innovation, NRIS emphasizes the application of current, generally available technologies to enhance its operational success. The company focuses on core basic field Enhanced Oil Recovery (EOR) management practices. EOR techniques are critical for maximizing hydrocarbon extraction from mature fields, aligning directly with NRIS's strategy of acquiring and developing smaller, existing producing assets.

NRIS contracts outside experts to provide a deeper understanding of complex mineralogy in shale reservoirs. This specialized analysis is crucial for better determining zones prone to fracture stimulation, a key technique for increasing oil and gas flow from tight formations. By leveraging this data-driven approach, the company aims to "deliver a greater chance of success" in its drilling decisions. While specific quantitative metrics on efficiency gains or cost reductions from these technologies are not publicly detailed, the strategic intent is clear: to increase initial production rates, improve ultimate recovery factors, and enhance the rate of return on invested capital. This technological focus, combined with the local expertise of its field engineers, geologists, and petrophysicists, forms a foundational element of NRIS's competitive moat, enabling more effective resource development in its targeted niche.

Competitive Landscape: A Small Fish Among Giants

Norris Industries operates in a highly competitive environment, primarily contending with larger, more established players in the U.S. oil and gas E&P sector. Key direct competitors include industry giants such as EOG Resources , ConocoPhillips , and Devon Energy . These companies possess significantly greater scale, more diversified asset bases, and robust financial resources, allowing them to invest heavily in advanced R&D and achieve superior operational efficiencies.

Compared to these larger rivals, NRIS's financial performance, as indicated by its negative TTM Gross Profit Margin of -65.39% and Net Profit Margin of -180.42%, starkly contrasts with the profitability suggested by the positive P/E ratios of its competitors (e.g., EOG (EOG) at 10.11, COP (COP) at 11.89, DVN (DVN) at 7.17). NRIS's smaller scale inherently leads to higher operational costs and less bargaining power with suppliers, impacting its margins. While its localized expertise and "under the radar" asset acquisition strategy provide a unique value proposition, it struggles to compete head-to-head on broader financial metrics, operational execution, or the speed of innovation seen in its larger counterparts. The company's strategic adaptability is stronger in localized markets, but insufficient against the broader capabilities of its rivals. Indirect competitors, such as renewable energy companies, also pose a long-term threat by potentially shifting energy demand away from traditional hydrocarbons, a trend that larger, more diversified energy companies may be better equipped to address.

Financial Performance: A Path to Profitability Remains Elusive

Norris Industries has consistently reported losses since 2016, a trend that continued into the most recent reporting period. For the three months ended August 31, 2025, the company generated revenues of $84,388 from oil and gas sales, an increase from $77,007 in the prior year, primarily due to higher production. However, for the six months ended August 31, 2025, revenues remained largely flat at $177,158, a slight decrease from $177,274 in the same period of 2024, as higher production was offset by a decrease in oil and gas prices.

Operating expenses have been a significant drag on profitability. Lease operating expenses increased to $119,716 for the three months and $254,653 for the six months ended August 31, 2025, driven by higher variable costs associated with increased production. General and administrative expenses saw a substantial rise, reaching $78,858 for the three months and $162,182 for the six months, primarily due to additional costs incurred from plugging and abandoning four unprofitable wells. This expense exceeded management's prior estimations for asset retirement obligations. Interest expense decreased to $28,690 for the three months and $56,038 for the six months, a positive development resulting from the conversion of a portion of outstanding related-party notes to equity in November 2024. Despite this, the company reported a net loss of $151,889 for the three months and $319,297 for the six months ended August 31, 2025, with the increase in losses mainly attributable to the costs of well abandonment.

Liquidity and Capital: The Lifeline of Related-Party Financing

Norris Industries faces significant liquidity challenges, operating with a cash balance of approximately $40,000 and negative working capital of roughly $75,000 as of August 31, 2025. The company incurred cash losses of approximately $245,000 from its operating activities during the six months ended August 31, 2025, highlighting its ongoing need for external financing. Net cash used in operating activities for the six-month period was $245,304, while net cash provided by financing activities, primarily from related-party loans, amounted to $200,000.

The company's financial statements are prepared on a "going concern" basis, indicating that its ability to continue operations is dependent on generating sufficient revenues to cover expenses or securing additional funding. NRIS has historically relied heavily on its largest shareholder, JBB, for financing. As of August 31, 2025, the company had $700,000 available on its existing credit line with JBB, which was recently increased by an additional $500,000 to a total of $4.80 million, with a maturity date extended to March 31, 2027. Subsequent to the quarter-end, an additional $100,000 was drawn from this line. While JBB has indicated a willingness to provide selective funding for low-risk initiatives and is expected to fund the fiscal year 2026 capital expenditure program, there is no legal obligation for them to continue doing so. Should additional capital be required beyond the existing credit line, NRIS anticipates seeking funds through restricted private placement sales of equity and debt securities from other sources, though there is no assurance such financing will be available on acceptable terms, or at all.

Outlook and Risks: A Future Dependent on Execution and Capital

Norris Industries' outlook hinges on its ability to execute its strategy of focusing on existing fields, implementing Enhanced Oil Recovery methods, and selectively acquiring larger-reserve, low-production properties. The company also aims for long-term cash flow enhancement by identifying and acquiring other oilfield-related or niche enterprises to diversify its revenue streams. However, management has indicated that the operating budget for current wells will be limited to basic maintenance, and a decision on new drilling programs in the near future has not yet been made.

The investment thesis for NRIS is subject to substantial risks. The company's persistent history of losses and negative working capital raise fundamental concerns about its long-term viability. A primary risk is the uncertainty surrounding its ability to secure additional capital, which is crucial for funding operations and any acquisition program. Without adequate financing, NRIS may be forced to undertake aggressive cost-cutting measures, potentially lose rights and interests in its prospects, or even cease operations. Furthermore, the inherent volatility of commodity prices, coupled with ongoing geopolitical instability and inflationary pressures, creates an unpredictable operating environment that can significantly impact revenues and costs. Operational disruptions, including labor shortages and increased supplier costs stemming from global events, are also expected to continue. Finally, the identified material weaknesses in the company's internal control over financial reporting as of August 31, 2025, present an additional layer of risk for investors.

Conclusion

Norris Industries ($NRIS) presents a compelling, albeit high-risk, investment narrative centered on its focused strategy within the niche Texas oil and gas market. The company's commitment to leveraging regional expertise and advanced EOR technologies to extract value from "under the radar" assets offers a differentiated approach compared to larger industry players. This technological edge, aimed at improving recovery rates and drilling success, is foundational to its long-term growth aspirations. However, NRIS's financial performance, characterized by persistent losses and negative working capital, underscores the significant challenges it faces in achieving sustained profitability.

The company's reliance on related-party financing from JBB, while providing a crucial lifeline, highlights the precarious nature of its capital structure and the ongoing need for external funding. For investors, the core investment thesis rests on NRIS's ability to successfully execute its EOR-driven growth strategy, secure necessary capital from diversified sources, and navigate the inherent volatility and competitive pressures of the energy sector. The path to realizing its potential is fraught with operational and financial risks, making it a speculative opportunity dependent on strong execution and favorable market dynamics.