Empire Energy Corp – ‘DEFM14A’ on 5/14/01

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Definitive Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DEFM14A     Definitive Proxy Statement                            81    332K 

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

[X]  Filed by the Registrant                                                    
[ ]  Filed by a Party other than the Registrant                                 

Check the appropriate box:                                                      

[ ]  Preliminary Proxy Statement                                                
[ ]  Confidential, for Use of the Commission Only (as permitted by Rule         
14a-6(e)(2))                                                          
[X]  Definitive Proxy Statement                                                 
[ ]  Definitive Additional Materials                                            
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12              

 Empire Energy Corporation
----------------------------------------------
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement (if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):                              

[ ]  No fee required.                                                           

[X]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.   

    (1)  Title of each class of securities to which transaction applies: Class
B Redeemable Voting Common Stock                            

------------------------------------------------------------------

(2)  Aggregate number of securities to which transaction applies:     

6,750,000                                 

------------------------------------------------------------------

(3)  Per unit price or other underlying value of transaction computed 
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):  

$1.00                                     

------------------------------------------------------------------

      (Amount represents estimated proceeds based on the purchase and sale
     agreement provisions applied to the December 31, 2000 book value of
assets and liabilities in the proposed transaction.)          

(4)  Proposed maximum aggregate value of transaction:                 

$6,750,000                                

------------------------------------------------------------------

(5)  Total fee paid:                                                  

$1,440                                    
------------------------------------------------------------------

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[X]  Fee paid previously with preliminary materials.                            

[ ]  Check box if any part of the fee is offset as provided by Exchange Act     
  Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
 paid previously. Identify the previous filing by registration statement
number, or the form of schedule and the date of its filing.           

(1)  Amount previously paid:                                          

----------------------------------------------              

(2)  Form, Schedule or Registration Statement No.:                    

----------------------------------------------              

(3)  Filing Party:                                                    

----------------------------------------------              

(4)  Date Filed:                                                      

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[EMPIRE ENERGY LOGO]
7500 COLLEGE BLVD.
SUITE 1215
 OVERLAND PARK, KANSAS 66210

May 10, 2001                                                                    

Dear Stockholder:                                                               

  You are cordially invited to attend a special meeting of stockholders of
Empire Energy Corporation to be held on May 25, 2001, at 1:30 p.m., local time, 
at our corporate headquarters, 7500 College Blvd., Suite 1215, Overland Park,   
Kansas 66210.                                                                   

    At this important meeting, you will be asked to consider and to vote upon,

1)   a proposal to approve the acquisition (herein "Acquisition" or   
   "Merger" or "Transaction") of Commonwealth Energy Corp. (herein
          "Commonwealth") by Empire Energy Corporation (herein "Empire") through
   a merger transaction that provides for Empire to acquire all of
         Commonwealth in exchange for approximately 6,750,000 shares of Empire
          Class A Common Shares including shares underlying options and warrants
 to be issued to Commonwealth option and warrant holders. Each
     Commonwealth shareholder will be entitled to receive one share of
          Empire Class A Common Stock for every six shares of Commonwealth stock
          owned. Each Commonwealth shareholder has the right to elect to receive
      one share of Empire Class B Redeemable Voting Common Stock and one
          share of Empire Exchangeco Common Stock in lieu of receiving shares of
        Empire Class A Common Stock. The election, if made, will occur prior
          to the electing shareholder's receipt of any Empire securities. Empire
     Exchangeco, a wholly owned Canadian subsidiary of Empire, will be
formed to serve as a holding company for Empire's Canadian  
   shareholders that were former shareholders of Commonwealth. The
    Commonwealth shareholders will be mailed materials regarding the
          election process upon closing. Each Commonwealth shareholder will make
         the election by marking a box indicating whether he or she desires to
     receive Empire Class A Common Shares or Empire Class B Redeemable
    Common voting Shares and shares in Empire Exchangeco. (Note that
       items 1, 2 and 3 must be approved in order for Empire to consummate
the Acquisition;)                                           

  2)   the amendment and restatement of Empire's Articles of Incorporation
       providing for the increase of its number of Board of Directors from
          five (5) to seven (7). (Note that items 1, 2 and 3 must be approved in
order for Empire to consummate the Acquisition); and        

  3)   the amendment and restatement of Empire's Articles of Incorporation
         providing for the authorization and issuance of 6,750,000 shares of a
          second class of stock, Class B Redeemable Voting Common Stock having a
        par value of $0.0001 per share, necessary to effect the Acquisition.
       In addition to these amendments to Empire's articles, Messrs. Lorne
    Torhjelm and Sieg Deckert will be appointed to Empire's Board of
      Directors. Empire will also form Empire Exchangeco, a wholly owned
          Canadian subsidiary in order to effectuate the Acquisition. (Note that
       items 1, 2 and 3 must be approved in order for Empire to consummate
the Acquisition).                                           

    Please note, ALL of the items subject to shareholder vote must be approved
for any of the items to be approved.                                  

     We urge you to read the accompanying proxy statement which includes details
about the proposed Acquisition and the amendment and restatement of our articles
of incorporation and other important information about us, including pro forma  
financial information.                                                          

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    Our board of directors has carefully reviewed and considered the terms and
conditions of the proposed Acquisition as to the fairness of the consideration  
to be paid by Empire to Commonwealth shareholders from a financial point of view
and, along with management, fully support this acquisition.                     

     The proposed Acquisition described in the accompanying proxy statement will
be completed only if it is approved by a majority of the votes that are entitled
to be cast by holders of shares of Common Stock, voting together as a class.    
Whether or not you plan to attend the meeting, we urge you to complete, sign,   
date and return the enclosed proxy card promptly in the accompanying            
postage-paid envelope. You may, of course, attend the meeting and vote in       
person, even if you have previously returned your proxy.                        

    OUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE AMENDMENT
AND RESTATEMENT OF ITS ARTICLES OF INCORPORATION TO PROVIDE FOR THE TERMS       
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AND RECOMMENDS THAT YOU VOTE FOR  
APPROVAL OF the Acquisition and the amendment and restatement of the Company's  
articles of incorporation. The Acquisition represents an important step in our  
effort to deliver value to our stockholders.                                    

                  Sincerely,

                               /s/  Norman L. Peterson
                                       -------------------------------
                                    Norman L. Peterson
                                           Chairman of the Board and
                                         Chief Executive Officer

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[EMPIRE ENERGY LOGO]                                                            

7500 COLLEGE BLVD., SUITE 1215                                                  
OVERLAND PARK, KANSAS 66210                                                     

-----------------------------                                                   

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS                                       

To be held May 25, 2001                                                         

     We will hold a special meeting of stockholders of Empire Energy Corporation
(herein "Empire") on May 25, 2001 at 1:30 p.m., C.S.T., at our headquarters,    
7500 College Blvd., Suite 1215, Overland Park, Kansas 66210 for the following   
purpose:                                                                        

To consider and vote upon the following,                              

1)   a proposal to approve the Acquisition (herein "Acquisition" or   
     "Merger") of Commonwealth Energy Corp. (herein "Commonwealth") by
Empire Energy Corporation (herein "Empire") through a merger
         transaction that provides for Empire to acquire all of Commonwealth's
   outstanding stock in exchange for its issuance of approximately
     6,750,000 shares of Empire Class A Common Shares including shares
       underlying options and warrants to be issued to Commonwealth option
          and warrant holders. Each Commonwealth shareholder will be entitled to
         receive one share of Empire Class A Common Stock for every six shares
      of Commonwealth stock owned. Each Commonwealth shareholder has the
    right to elect to receive one share of Empire Class B Redeemable
          Voting Common Stock and one share of Empire Exchangeco Common Stock in
          lieu of receiving shares of Empire Class A Common Stock. The election,
          if made, will occur prior to the electing shareholder's receipt of any
   Empire securities. The Commonwealth shareholders will be mailed
materials regarding the election process upon closing. Each 
    Commonwealth shareholder will make the election by marking a box
         indicating whether he or she desires to receive Empire Class A Common
          Shares or Empire Class B Redeemable Common Voting Shares and shares in
 Empire Exchangeco. Empire Exchangeco, a wholly owned Canadian
          subsidiary of Empire, will be formed to serve as a holding company for
   Empire's Canadian shareholders that were former shareholders of
       Commonwealth. (Note that items 1, 2 and 3 must be approved in order
for Empire to consummate the Acquisition;)                  

  2)   the amendment and restatement of Empire's Articles of Incorporation
       providing for the increase of its number of Board of Directors from
          five (5) to seven (7). (Note that items 1, 2 and 3 must be approved in
order for Empire to consummate the Acquisition); and        

  3)   the amendment and restatement of Empire's Articles of Incorporation
         providing for the authorization and issuance of 6,750,000 shares of a
          second class of stock, Class B Redeemable Voting Common Stock having a
          par value of $0.0001 per share necessary to effect the Acquisition. In
    addition to these amendments to Empire's articles, Messrs. Lorne
    Torhjelm and Sieg Deckert will be appointed to Empire's Board of
      Directors. Empire will also form Empire Exchangeco, a wholly owned
      Canadian subsidiary, in order to effectuate the acquisition. (Note
 that items 1, 2 and 3 must be approved in order for Empire to
consummate the Acquisition).                                

        It should be noted that ALL of the items subject to shareholder vote
  must be approved in order for any of the items to be approved.

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   The Merger Agreement provides for Empire's acquisition of Commonwealth in
exchange for approximately 6,750,000 shares of Empire Class A Common Stock      
including shares underlying options and warrants to be issued to Commonwealth   
option and warrant holders. Commonwealth shareholders may elect to receive      
Empire Class B Redeemable Voting Common Stock and Empire Exchangeco common stock
in lieu of Empire Class A Common Stock. Following the Acquisition, Empire's     
existing shareholders will own approximately 73% of Empire's common stock. A    
copy of the Merger Agreement is appended as Appendix A to the proxy statement   
that accompanies this notice.                                                   

Only holders of record of our Common Stock at the close of business on
May 15, 2001 are entitled to notice of, and to vote at, the meeting and any     
adjournment or postponement of the meeting.                                     

We describe the proposal in more detail in the accompanying proxy     
statement, which you should read carefully before you vote. THE ENCLOSED PROXY  
IS SOLICITED BY OUR BOARD OF DIRECTORS. We urge you to date, sign and return the
enclosed proxy promptly. We are enclosing a postage-paid reply envelope for your
convenience. You are cordially invited to attend the meeting in person. The     
return of the enclosed proxy will not affect your right to vote if you attend   
the meeting in person.                                                          

Under the Utah Revised Business Corporation Act ("URBCA"), the Empire 
shareholders have the right to dissent from approving the acquisition (and the  
other matters that are subject to shareholder vote) by demanding payment in cash
for their shares equal to the fair value (excluding any appreciation or         
depreciation in anticipation of the transaction unless exclusion would be       
inequitable) of such shares. In the event of disagreement between the parties   
(Empire and the dissenting shareholder) on fair value, fair value may be        
determined by the court in an action timely brought by the corporation.         

                                           By Order of the Board of Directors,

                              /s/ Norman L. Peterson
                                           -----------------------------------
                                  Norman L. Peterson
                                       Chief Executive Officer

                            Dated:  May 10, 2001

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 TABLE OF CONTENTS
QUESTIONS AND ANSWERS                                                        1  
SUMMARY                                                                      3  
Summary Term Sheet                                                         3
Directors and senior management following the Acquisition                  4
Votes required                                                             4
Our recommendations to stockholders                                        5
Summary unaudited pro forma financial and other information                6
Empire's historical summary selected financial data                        8
Commonwealth's historical summary selected financial data                  9
 Comparative market price data                                              11
 Unaudited pro forma financial statements                                   12
 Notes to unaudited pro forma financial statements                          15
GENERAL PROXY INFORMATION                                                    19 
 Date, time and place of special meeting of stockholders                    19
 Revocability of proxy                                                      19
 Dissenters' right of appraisal                                             20
 Persons making the solicitation                                            21
 The solicitation or recommendation                                         21
 Voting securities and principal holders thereof                            22
 Voting procedures                                                          23
 SHAREHOLDER VOTE ITEM NUMBER 1 - ACQUISITION OF                            23
COMMONWEALTH                                                  

 Background to the acquisition                                              24
 Purposes of the transaction and plans or proposals                         28
 Reports, opinions, appraisals and negotiations                             28
 Past contacts, transactions, negotiations and agreements                   28
 Interest of certain persons in matters to be acted upon                    29
 Terms of the transaction                                                   31
 Selected financial data                                                    38
 Summary of Empire pro forma financial information                          41
 Incorporation by reference of information                                  43
 Post-acquisition information about Empire                                  43
 Compensation of Empire executives                                          45
 Principal holders of Empire voting securities after Acquisition            46
 Options and warrants to purchase Empire common shares                      46
 Business of Commonwealth                                                   48
 Management discussion and analysis of Commonwealth                         51
 Business of Empire                                                         54
SHAREHOLDER VOTE ITEM NUMBER 2 - INCREASE NUMBER                             58 
OF BOARD OF DIRECTORS FROM FIVE TO SEVEN                      
SHAREHOLDER VOTE ITEM NUMBER 3 - AUTHORIZATION                               58 
AND ISSUANCE OF CLASS B REDEEMABLE VOTING                     
COMMON SHARES                                                 

 Other meeting matters                                                      59
 Where you can find more information                                        59

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Appended Schedules to this Proxy Statement are as follows:                      

A.   Text of the Merger Agreement                                     

   B.   Audited Financial Statements of Commonwealth as of and for the years
ended December 31, 2000 and 1999.                           
C.   Amended and Restated Articles of Incorporation of Empire         
D.   Text of URBCA Dissent Rights                                     
E.   Form of Proxy (for your records - a separate form is enclosed for
voting and return)                                          

    F.   William M. Cobb & Associates, Inc. engineering report consent letter.
G.   Thos D. Humphrey Oil Properties, Inc. engineering report consent 
letter.                                                     

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 EMPIRE ENERGY CORP.
("Empire")
7500 College Blvd., Suite 1215
Overland Park, Kansas, 66210
 Telephone (913)-469-5615 Fax (913) 469-1544

 PROXY STATEMENT

 QUESTIONS AND ANSWERS

Q:   What is being proposed?                                                    

A:   Empire is proposing to acquire 100% of the outstanding common stock of     
Commonwealth Energy Corporation ("Commonwealth") in exchange for      
 approximately 6,750,000 shares of Empire Class A Common Stock including
    shares underlying options and warrants to be issued to Commonwealth option
     and warrant holders. The transaction will be structured as an "exchangeable
 share" transaction under which Commonwealth's shareholders can elect to
    receive one share of Empire Class B Redeemable Voting Common Stock AND one
   share of Empire Exchangeco Common Stock in lieu of receiving one share of
   Empire Class A Common Stock. Empire Exchangeco is a wholly-owned Canadian
subsidiary of Empire. The election, if made, will occur prior to the  
 receipt of any Empire securities. The Commonwealth shareholders will be
mailed materials regarding the election process upon closing. Each    
     Commonwealth shareholder will make the election by marking a box indicating
     whether he or she desires to receive Empire Class A Common Shares or Empire
  Class B Redeemable Common Voting Shares and shares in Empire Exchangeco.
 Empire Exchangeco will serve as a holding company for Empire's Canadian
   shareholders that are former shareholders of Commonwealth. As a result of
  the transaction, former Commonwealth shareholders will own approximately
   27% of Empire. See "Summary Term Sheet" beginning on page 3 and "Terms of
     the Transaction" on page 31 for a further discussion regarding the terms of
the Acquisition.                                                      

Q:   Who is Commonwealth?                                                       

A:   Commonwealth is a Canadian company that is publicly traded on the Canadian 
Venture Exchange (CDNX). Commonwealth is primarily engaged in the     
acquisition, exploration and development of petroleum and natural gas 
     properties in the United States. See "Business of Commonwealth" on page 48.

Q:   Why is Empire acquiring Commonwealth?                                      

A:   The board of directors of Empire believes that the Acquisition is in the   
    best interest of the Empire stockholders. Empire should benefit from, 1) a
    larger asset base; 2) better access to capital financing; 3) improved cash
flow; and 4) access to oil and gas properties owned by Commonwealth.  

See "Background to the Acqquisition" beginning on page 24 for a more  
complete discussion of the reasons for the acquisition.               

Q:   Why is the acquisition structured as an "exchangeable" share transaction?  

A:   Structuring the transaction as an exchangeable share transaction will      
provide for Canadian tax deferral for former Commonwealth Canadian    
shareholders who elect to receive the Exchangeable Shares rather than 
Empire Class A Common Stock upon consummation of the transaction.     

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Q:   How will the current management and operations of Empire be effected by the
transaction?                                                          

A:   Empire will maintain its corporate headquarters in Overland Park, Kansas,  
  and will maintain another office in White Rock, British Columbia. Empire
     plans to retain three members of Commonwealth management. Empire also plans
 to retain the services of Commonwealth's external consultants. Empire's
operations will be effected by access to Commonwealth's oil and gas   
 properties for exploration and development purposes, and, as such, will
     have production and/or prospects in Tennessee, Texas, Oklahoma, Wyoming and
   Nicaragua. Refer to "Post Acquisition Information About Empire" beginning
on page 43 for further discussion.                                    

Q:   What does the board of directors recommend?                                

A:   The board of directors recommends that stockholders vote FOR approval of   
   the acquisition and the necessary amendments to the Company's Articles of
Incorporation.                                                        

Q:   What do I need to do now?                                                  

A:   After carefully considering the enclosed information, please indicate how  
    you want to vote and sign and return your proxy card or voting instruction
     card in the enclosed envelope as soon as possible. Your shares will then be
voted at the special meeting in accordance with your instructions.    

Q:   Must all of the items subject to shareholder vote be approved in order for 
the transaction to be consummated?                                    

A:   Yes. ALL of the items subject to shareholder vote must be approved in      
order for the transaction to be consummated.                          

Q:   If my shares are held in "street name", by my broker, will my broker vote  
my shares for me?                                                     

A:   No. You must instruct your broker how to vote your shares or else your     
broker will not vote your shares.                                     

Q:   Who can help answer additional questions that I may have?                  

A:   Empire Energy Corporation                                                  
Investor Relations                                                    
(913) 469 - 5615                                                      
bryan@empireenergy.com                                                

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 SUMMARY

     This summary highlights selected information from this document. It may not
contain all of the information that is important to you. To better understand   
the transaction and for a more complete description of the legal terms, you     
should carefully read this entire document and the documents to which we have   
referred you. See "Where You Can Find More Information" page 59.                

  Empire is proposing to acquire Commonwealth Energy Corp ("Commonwealth")
which has its principal offices at: 2383 King George Hwy, Suite 211,White Rock, 
British Columbia, Canada V4A 5A4 and may be contacted at (800) 950-2587.        

  Commonwealth, a publicly traded company on the Canadian Venture Exchange
(CDNX), (ticker symbol CWY), is primarily engaged in the acquisition and        
exploration and development of petroleum and natural gas properties in the      
United States.                                                                  

THE TRANSACTION                                                                 

Summary Term Sheet.                                                             

    Empire entered into a formal Merger Agreement dated December 12, 2000 (the
"Merger Agreement") with Commonwealth to effect the acquisition of 100% of      
Commonwealth by Empire. The Merger Agreement, if approved by the Empire         
shareholders, provides for the following (the agreement has already been        
approved by the Commonwealth shareholders whereby 99% of their voting           
shareholders approved the Transaction):                                         

    o    Empire's Articles of Incorporation would be amended providing for, 1)
          the increase of its board of directors from five to seven members; and
     2) the authorization and issuance of 6,750,000 Class B Redeemable
       Voting Common Shares having a par value of $0.001. These amendments
are necessary to effect the Acquisition.                    

o    Empire would form Empire Exchangeco, a wholly-owned Canadian     
        subsidiary. Commonwealth would be merged into Empire Exchangeco with
     Empire Exchangeco as the surviving entity. Empire Exchangeco will
        serve as a holding company for Empire's former Commonwealth Canadian
       shareholders that elect to receive Empire Class B Redeemable Common
       Voting Shares and Empire Exchangeco Common Shares in lieu of Empire
Class A Common Shares.                                      

o    In connection with the transaction, each Commonwealth shareholder
         would be entitled to receive one share of Empire Class A Common Stock
     for every six shares of Commonwealth Common Stock owned as of the
         Closing Date. In lieu of receiving Empire Class A Common Shares, each
         Commonwealth Shareholder would have the right to elect to receive one
          share of Empire Exchangeco (Empire's wholly-owned Canadian subsidiary)
         Common Stock and one share of Empire Class B Redeemable Voting Common
        Stock, (collectively referred to as "Exchangeable Shares") for every
         six shares of Commonwealth Common Stock owned as of the Closing Date.
          The election, if made, would occur prior to the issuance of any Empire
       securities. ALL three items must be approved in order for Empire to
         consummate the Acquisition. The election by Commonwealth shareholders
 to receive Empire Exchangeco Common Shares and Empire Class B
       Redeemable Voting Common Shares should result in favorable Canadian
    income tax treatment for Commonwealth's Canadian shareholders as

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    compared to receiving shares of Empire Class A Common Stock upon
        closing. Ultimately, Empire anticipates that all exchangeable shares
     will be exchanged for 6,750,000 Empire Class A Common Shares on a
one-for-one basis.                                          

o    No fractional shares will be issued in connection with the       
   Transaction. All shares will be rounded up to the nearest whole
number.                                                     

o    Empire will issue replacement warrants and options that can be   
         exercised to acquire 983,849 shares of Empire Class A Common Stock to
      replace all existing Commonwealth options and warrants. The shares
       underlying the replacement options and warrants are included in the
          6,750,000 shares that constitute the total consideration to be paid to
      the Commonwealth shareholders. Such options and warrants will have
         exercise prices ranging from US$.80 to US$1.80. Existing shareholders
   of Empire will retain 73% ownership of Empire subsequent to the
          Acquisition assuming exercise of all replacement options and warrants.

 o    The Empire Class B Redeemable Voting Common Shares would be paired
      with the Exchangeable Shares, that is, treated together as a unit;
         (i.e. transferable and exchangeable only as a paired unit). The Class
   B Redeemable Voting Common Shares will be entitled to vote with
      respect to matters upon which Empire Common Shareholders generally
          vote (election of directors, fundamental changes and the like) but are
       not intended to have any economic value (i.e. no interest in Empire
          assets except for the U.S.$0.0001 par value). The Exchangeable Shares,
         issued by Empire Exchangeco, will be non-voting except with regard to
        matters where a separate class vote is required by law. These shares
         will participate in the liquidation value of Empire Exchangeco in the
          event of a wind up but only to the extent of being entitled to receive
          one Empire Class A Common Share per Exchangeable Share in satisfaction
of any liquidation right.                                   

The paired shares are at any time, at the option of the holder,       
exchangeable for Empire Class A Common Shares. Each Exchangeable Share and      
Empire Class B Redeemable Voting Common Share will be exchangeable (upon demand 
by the holder) for one Empire Class A Common Share. Further, the Exchangeable   
Shares will automatically be exchanged into Empire Class A Common Shares in the 
event that only 100,000 Exchangeable Shares remain outstanding or in case of an 
insolvency event, wind-up of Empire Exchangeco or in the event of a merger,     
acquisition or sale of all or substantially all of the assets of Empire in which
the holders of Exchangeable Shares should participate or in any event by        
December 31, 2007.                                                              

Directors and senior management of Empire following the Acquisition (see page   
43)                                                                             

  The board of directors will be increased from five to seven members. The
two new board seats will be held by Mr. Lorne Torheljm and Mr. Sieg Diekert.    
Messrs. Torheljm and Diekert presently serve on Commonwealth's Board of         
Directors. The remaining five board seats will remain unchanged.                

Votes required                                                                  

     The affirmative vote of the holders of a majority of the outstanding shares
of Empire Common Stock is required to approve the Merger Agreement. The         
affirmative vote of the holders of a majority of the outstanding shares of      
Empire Common Stock is required to amend and restate Empire's Articles of       

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Incorporation providing for the increase in the number of its directors from    
five to seven. The affirmative vote of the holders of a majority of the         
outstanding shares of Empire Common Stock is required to amend and restate of   
Empire's Articles of Incorporation providing for the authorization and issuance 
of 6,750,000 Class B Redeemable Voting Common Shares. The transaction has       
already been approved by the requisite majority of the Commonwealth             
shareholders.                                                                   

Our recommendations to stockholders                                             

     Empire's Board of Directors recommends that Empire stockholders vote FOR 1)
the approval of the Acquisition, 2) the amendment and restatement of its        
articles of incorporation providing for the increase of its board of directors  
from five to seven, and 3) the amendment and restatement of its articles of     
incorporation authorizing the issuance of 6,750,000 Class B Redeemable Voting   
Common Shares.                                                                  

The Merger Agreement                                                            

   The Merger Agreement, providing for Empire's acquisition of Commonwealth,
is attached as appendix A to this document. We encourage you to read the Merger 
Agreement because it is the legal document that governs the transaction. It     
contains information that may not be included elsewhere in this document.       

Conditions to the Acquisition                                                   

     In order to complete the transaction, a number of customary conditions must
be satisfied including the following:                                           

o    the approval of the acquisition by the Empire shareholders       
      (Commonwealth shareholders have already approved the transactions.
Refer to page 26);                                          

o    the absence of any law or court order prohibiting the transaction
(Refer to page 26; "Canadian Court Approval")               

o    the continued accuracy of each company's representations and     
      warranties, and the compliance by each company with its agreements
contained in the Merger Agreement.                          

   o    Empire's Common Shares must trade at a weighted average price of not
   less than $1.20 during the five business days prior to Closing;

  o    Empire's share of hydrocarbon production from its properties during
        the 30 days prior to Closing must average 150 barrels of oil (or BTU
equivalent) per day; and                                    

    o    Empire will have at Closing, working capital calculated in accordance
       with generally accepted accounting principles of at least $100,000.

 Note, the Merger Agreement also provides that the Commonwealth Board of
     Directors reserves the right to waive any of the aforementioned conditions.

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OTHER INFORMATION                                                               

Accounting treatment                                                            

The transaction will be treated for financial accounting and reporting
purposes as a purchase of Commonwealth by Empire under the "purchase" method of 
accounting.                                                                     

Comparative per share market price information (see page 11)                    

 Empire's common stock trades on the over-the-counter ("OTC") electronic
bulletin board. Commonwealth's common stock trades on the Canadian Venture      
Exchange (CDNX). On October 23, 2000, the last full trading day prior to the    
public announcement of the proposed transaction, Empire common stock closed at  
US$1.625 per share and Commonwealth common shares closed at CN$0.33 per share.  

Material federal income tax considerations                                      

 The transaction has been structured so that it should not result in any
taxable gain or loss to Empire or the Empire shareholders.                      

Summary Unaudited Pro Forma Financial and Other Information                     

    The following summary unaudited pro forma information has been prepared to
assist in your analysis of the financial effects of the acquisition. This pro   
forma information is based on the historical financial statements of Empire and 
Commonwealth and the pro forma adjustments reflected to account for the proposed
transaction and more fully described in the unaudited pro forma financial       
statements beginning on page 12.                                                

   The unaudited summary pro forma information is presented for illustrative
purposes only. If the proposed transaction had occurred in the past, Empire's   
financial position or operating results might have been different from those    
presented in the unaudited summary pro forma information. You should not rely on
the unaudited summary pro forma information as an indication of the financial   
position or operating results that Empire would have achieved if the merger had 
occurred on December 31, 2000 for the pro forma balance sheet or January 1, 2000
for the pro forma statements of operations. You also should not rely on the     
unaudited pro forma information as an indication of the future results that     
Empire will achieve after the Acquisition.                                      

Balance Sheet                       Empire Pro Forma as of            
-------------                            December 31,                 
US$                                2000 (unaudited)             
---------------------                     ---------------------                 

Working Capital                                 $(407,351)                      

Long-term Assets                                8,303,868                       

Total Assets                                    8,529,471                       

Long-term Obligations                               0                           

Accumulated Deficit                            (19,756,558)                     

Shareholders' Equity                            7,780,713                       

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Statement of Operations        Empire Pro Forma for the   
-----------------------                                   

                              year ended December 31, 2000

US$                            (unaudited)
---------------------------------     -----------------------------       

Revenue                                          $760,668                 
Net Income (Loss) from continuing              (2,073,840)                
operations                                                                
Net Income (Loss) from continuing                 (0.11)                  
operations per share                                                      

Other Data                                                                

Cash dividends declared per common                  0                     
share                                                                     

Ratio of earnings to fixed charges                (66.7)                  
Book value per share                               0.42                   

Empire's Historical Summary Selected Financial Data                             

Balance Sheet                                     As of December 31, 2000       
-------------                                                                   

U.S. dollars                                                                    
------------------------------------           -----------------------------    

Working Capital                                          ($28,591)              
Long-term Assets                                         2,216,969              
Total Assets                                             2,271,827              

Long-term Obligations                                        0                  

Accumulated Deficit                                    (18,398,055)             

Shareholders' Equity                                     2,188,378              

Statement of Operations                    For the year ended December 31, 2000 
-----------------------                    ------------------------------------ 

U.S dollars                                                                     

Revenue                                                  $487,979               

Net Income (Loss) from continuing                        (384,911)              
operations                                                                      

Net Income (Loss) from continuing                         (0.03)                
operations per share                                                            

Other information                                                               

Cash dividends declared per common share                     0                  

Ratio of earnings to fixed charges                        (48.8)                

Book value per share                                       0.17                 

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Commonwealth's Historical Summary Selected Financial Data                       

Balance Sheet                   As of December      As of December    
-------------                     31, 2000            31, 2000        

U.S. GAAP                                                             
---------                                                             

                          Canadian $            U.S. $
--------------------------      -------------       ------------      

Working Capital (deficit)         ($192,178)          ($128,760)      

Long-term Assets                  5,914,354           4,030,819       

Total Assets                      6,169,198           4,201,564       

Long-term Obligations                 0                   0           

Accumulated Deficit              (1,379,161)          (839,760)       

Shareholders' Equity              5,549,335           3,786,255       

Statement of Operations            For the             For the        
-----------------------          year-ended           year-ended      
                             December 31,         December 31,
                          2000                2000
                                               U.S.$

        Canadian $
--------------------------      -------------       ------------      

Revenue                            406,998             $272,689       

Net Income (Loss) from            (467,949)           (313,526)       
continuing operations                                                 

Net Income (Loss) from              (0.02)              (0.01)        

continuing operations per                                             
share                                                                 

Other information                                                     

Cash dividends declared per           0                   0           
common share                                                          

Ratio of earnings to fixed          (13.5)              (13.5)        
charges                                                               

Book value per share                $0.26               $0.18         

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EMPIRE AFTER THE TRANSACTION                                                    

  Empire's Board of Directors and Management believe that Empire will be a
much stronger company post-acquisition. We expect the Acquisition to provide    
Empire with the following advantages: the combined company will have a larger   
asset base, better access to capital financing, better access to oil and gas    
properties for exploration and development purposes, and better cash flow than  
Empire alone. Please see the section titled, "Background to the Acquisition"    
beginning on page 24.                                                           

COMPARATIVE MARKET PRICE DATA                                                   

    The following table sets forth the high and low sales prices of the shares
of Empire Class A Common Stock, traded under the symbol "EECI.OB" on the        
over-the-counter electronic bulletin board, and of the Commonwealth common      
stock, traded under the symbol "CWY.V" on the Canadian Venture Exchange (CDNX), 
for the calendar quarters indicated. Sales prices and trading volumes for 1999  
and 2000 can be found in Empire's most recent Forms 10-K. See "Where You Can    
Find More Information" on page 59.                                              

                         Commonwealth         Empire
                         ------------         ------
                           (CDNX)               (OTC:BB)
                                                --------
                                 High      Low       High      Low
                                 ----      ----      ----      ---
               2000              $CDN      $CDN      $US       $US
----                                
                --------------    ----      ----      ----      ----

                First Quarter     0.62      0.22      6.13      1.38

                Second Quarter    0.52      0.20      4.25      1.75

                Third Quarter     0.65      0.24      4.00      1.19

                Fourth Quarter    0.33      0.16      1.75      0.81

1999                                
              First Quarter     0.44      0.17     N/A       N/A

                Second Quarter    0.38      0.17      1.63      1.13

                Third Quarter     0.30      0.18      1.63      0.10

                Fourth Quarter    0.45      0.17      5.75      1.50

     The currency exchange rate for U.S. to Canadian dollars ranged from CN$.640
to CN$.698 for the two fiscal years ended December 31, 2000. The current (as of 
April 26, 2001) trading price for Commonwealth was CN$.20. The current (as of   
April 26, 2001) trading price for Empire was US$1.00.                           

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UNAUDITED PRO FORMA FINANCIAL STATEMENTS                                        

The following unaudited pro forma consolidated condensed financial    
statements have been prepared to assist in your analysis of the financial       
effects of the acquisition. Following are the unaudited consolidated condensed  
pro forma financial statements of Empire which reflect the acquisition of       
Commonwealth by Empire. The unaudited pro forma consolidated condensed financial
statements have been prepared utilizing the historical financial statements of  
Empire which are incorporated herein by reference to previous filings made with 
the Securities and Exchange Commission. See "Where You Can Find More            
Information" on page 51 and the historical financial statements of Commonwealth 
included as Appendix B to this proxy statement. The unaudited pro forma         
consolidated condensed financial statements should be read in conjunction with  
the historical financial statements of Empire and the attached historical       
financial statements of Commonwealth.                                           

The following unaudited pro forma consolidated condensed statements of
operations for the year ended December 31, 2000 and the unaudited pro forma     
consolidated condensed balance sheet as of December 31, 2000 give effect to the 
acquisition of Commonwealth including the related pro forma adjustments         
described in the notes thereto. The unaudited pro forma consolidated condensed  
statements of operations for the year ended December 31, 2000 give effect to the
acquisition of Commonwealth by Empire as if the acquisition, accounted for as a 
purchase, had occurred on January 1, 2000. The unaudited pro forma consolidated 
condensed balance sheet as of December 31, 2000 gives effect to the acquisition 
as if it had occurred on December 31, 2000. The pro forma financial statements  
reflect the preliminary allocation of the purchase price.                       

     The unaudited pro forma consolidated condensed financial statements may not
be indicative of the results that actually would have occurred if the           
acquisitions had occurred if the acquisitions had been effective on the dates   
indicated or which may be obtained in the future.                               

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EMPIRE ENERGY CORPORATION                                                                                           
  (A DEVELOPMENT STAGE COMPANY)                                                                                     
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET                                                            
=================================================================================================================== 

                    ASSETS                                                                                          
                    ------                                                                                          

                                                                                                         Unaudited  
                                                 Historical December 31, 2000                            Pro Forma  
                                                 ----------------------------           Pro Forma         31 Dec    
                                                  Empire         Commonwealth          Adjustments         2000     
                                                 ------------    ------------          ------------    ------------ 

CURRENT ASSETS                                                                                                      
                                                                                                                    
   Cash                                          $     40,351    $     20,381          $       --      $     60,732 
   Accounts receivable, net                             9,675         102,668                  --           112,343 
   Marketable securities                                4,832          45,210                  --            50,042 
   Prepaids                                              --             2,486                  --             2,486 
                                                 ------------    ------------          ------------    ------------ 
TOTAL CURRENT ASSETS                                   54,858         170,745                  --           225,603 

PROPERTY AND EQUIPMENT, NET                            25,117            --                    --            25,117 

OIL AND GAS PROPERTIES, NET                                                                                         
   Properties being amortized                            --         2,508,171                             2,508,171 
   Properties not subject to amortization           2,062,661       1,499,198    (b)      3,414,583       6,976,442 

OTHER ASSETS:                                                                                                       
  Minority equity investments                            --            23,450                  --            23,450 
  Deposits and other                                   26,349            --                    --            26,349 
  Receivables  related party                          102,842            --                    --           102,842 
                                                 ------------    ------------          ------------    ------------ 
TOTAL ASSETS                                     $  2,271,827    $  4,201,564          $  3,414,583    $  9,887,974 
                                                 ============    ============          ============    ============ 

                    LIABILITIES                                                                                     
                    -----------                                                                                     

CURRENT LIABILITIES                                                                                                 
   Accounts payable and accrued                                                                                     
      expenses                                   $     50,949    $    171,430    (b)   $    250,000    $    472,379 
   Advances from directors                               --           128,075                  --           128,075 
   Notes payable  related parties                      12,500            --                    --            12,500 
   Convertible debentures                              20,000            --                    --            20,000 
                                                 ------------    ------------          ------------    ------------ 
TOTAL CURRENT LIABILITIES                              83,449         299,505               250,000         632,954 
                                                 ============    ============          ============    ============ 

DEFERRED INCOME TAXES                                    --           115,804                  --           115,804 

             STOCKHOLDERS' EQUITY                                                                                   
             --------------------                                                                                   

STOCKHOLDERS' EQUITY                                                                                                
   Common stock                                        15,496       4,469,415    (a)     (4,469,415)         20,926 
                                                         --              --      (b)          5,430            --   
   Stock subscriptions                                   --           156,600    (a)       (156,600)           --   
   Additional paid-in-capital                      23,572,387            --      (b)      6,442,408      30,517,795 
                                                         --              --      (b)        503,000            --   
   Treasury stock                                  (1,125,000)           --                    --        (1,125,000)
   Accumulated other comprehensive loss                (8,451)           --                    --            (8,451)
   Previous accumulated deficit                    (1,867,999)           --                    --        (1,867,999)
   Accumulated deficit                            (18,398,055)       (839,760)   (a)        839,760     (18,398,055)
                                                 ------------    ------------          ------------    ------------ 
TOTAL STOCKHOLDERS' EQUITY                          2,188,378       3,786,255             3,164,583       9,139,216 
                                                 ============    ============          ============    ============ 
TOTAL LIABILITIES AND                                                                                               
   STOCKHOLDERS' EQUITY                          $  2,271,827    $  4,201,564          $  3,414,583    $  9,887,974 
                                                 ============    ============          ============    ============ 

=================================================================================================================== 

                               See notes to Unaudited Pro Forma Financial Statements                                

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EMPIRE ENERGY CORPORATION                                                                                
  (A DEVELOPMENT STAGE COMPANY)                                                                          
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS                                       
======================================================================================================== 

                                                          For the Year Ended December 31, 2000           
                                            ------------------------------------------------------------ 
                                                       Historical            Pro Forma       Unaudited   
                                                Empire      Commonwealth    Adjustments      Pro Forma   
                                            ------------    ------------    ------------    ------------ 

                                                                                                         
OIL AND GAS SALES                           $    487,979    $    272,689    $       --      $    760,668 

EXPENSES                                                                                                 
   Lease operating                                13,406         119,093            --           132,499 
   Depreciation, depletion, amortization                                                                 
      and impairment                             289,948          79,223            --           369,171 
   Interest, net                                   7,894          23,187            --            31,081 
   Loss from equity investments                   17,085          42,858            --            59,943 
   General and administrative                    544,557         321,854            --           866,411 
                                            ------------    ------------    ------------    ------------ 

TOTAL EXPENSES                                   872,890         586,214            --         1,459,104 
                                            ------------    ------------    ------------    ------------ 

OPERATING LOSS                                  (384,911)       (313,526)           --          (698,437)

Provision for income taxes                          --              --              --              --   
                                            ------------    ------------    ------------    ------------ 
Loss from continuing operations             $   (384,911)   $   (313,526)   $       --      $   (698,437)
                                            ============    ============    ============    ============ 
Loss Per Share:                                                                                          
  Loss from continuing operations                                                           $      (0.04)
                                                                                            ============ 
Weighted Average Shares Outstanding                                                           18,345,850 
                                                                                            ============ 

                              See notes to Unaudited Pro Forma Financial Statements.                     

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 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Acquisition of Commonwealth                                                     

   On December 12, 2000, Empire entered into an agreement to acquire 100% of
Commonwealth in a stock exchange on the basis of six shares of Commonwealth for 
one share of Empire. As a result, Empire will exchange approximately 5,429,758  
shares of its common stock for all the issued and outstanding common stock of   
Commonwealth. The purchase price for the stock is $6,447,838 based on a market  
price of $1.1875 per Empire share on the date the agreement was reached.        
Additionally, Empire will grant 488,082 options and 162,434 warrants to replace 
Commonwealth options and warrants currently outstanding on a one for six basis. 
The replacement options and warrants have exercise prices ranging from US$0.80  
to US$1.80 and expire within approximately 6 months to 5 years. A fair value of 
$503,000 was calculated for these options and warrants using the Black-Scholes  
option pricing model, with volatility of 106.55% and a discount rate of 8.5%.   

    The purchase price results in an increase in the cost of the net assets of
Commonwealth of approximately $3,414,583. Based on management's evaluation of   
the fair value of the assets acquired and liabilities assumed, the Company      
allocated this increase in cost to oil and gas properties.                      

    Empire uses the full cost method of accounting for oil and gas properties.
This method of accounting requires that a ceiling test be performed periodically
to compare the recorded cost of oil and gas properties to the value of those    
properties. Management believes that if a full cost ceiling test were performed 
at the date of this transaction, an impairment of approximately $1,400,000 would
result. No charge for this possible impairment is included in the pro forma     
condensed income statement or balance sheet. A full cost ceiling write-down is a
non-recurring charge that is unrelated to the purchase acquisition and is not   
representative of results of ongoing operations.                                

     Not included in these pro forma consolidated condensed financial statements
are the proceeds and issuance of shares related to a Commonwealth private       
placement that was completed on February 2, 2001. The private placement         
consisted of 2,000,000 units, each unit consisting of one share of Commonwealth 
stock and one, two year warrant to purchase Commonwealth stock at $.30 Canadian 
per share for total proceeds from the sale of units of approximately $345,000   
U.S.Upon closing, 333,333 additional shares of Empire stock will be exchanged   
for the 2,000,000 shares issued in the private placement and 333,333 replacement
warrants will be granted for the 2,000,000 warrants granted in the private      
placement.                                                                      

    The acquisition of Commonwealth is subject to Empire shareholder approval.
In order for the transaction to be consummated, ALL of the items subject to     
shareholder vote must be approved.                                              

  The historical financial information for Commonwealth was prepared using
U.S. Generally Accepted Accounting Principles.                                  

  Commonwealth's reporting currency is the Canadian dollar. Accounts whose
functional currency is the U.S. dollar that were translated to Canadian dollars 
for Commonwealth reporting purposes were translated back at the rates used by   
Commonwealth. Accounts whose functional currency is the Canadian dollar were    
translated in the following manner: assets and liabilities at year end rates;   
stockholder's equity at historical rates and results of operations at the       
monthly average exchange rates. The effects of exchange rate changes are        
reflected as a separate component of stockholders' equity.                      

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The unaudited pro forma adjustments are as follows:                             

a.   To remove the equity of Commonwealth upon the purchase by Empire.

   b.   To record the acquisition of Commonwealth under the purchase method:

Net assets acquired at fair value:                          

     Current assets                                      $   170,745
     Oil and gas properties                                7,421,952
     Minority equity investments                              23,450
      Current liabilities                                    (299,505)
      Deferred income taxes                                  (115,804)
                                                          ----------

    Total                                                 $7,200,838
                                                          ==========

Consideration comprised of 5,429,758                        

    common shares of Empire                               $6,447,838
    Estimated transaction costs                              250,000
Estimated consideration for replacement                     
     options and warrants issued                             503,000
                                                          ----------

    Total                                                 $7,200,838
                                                          ==========

Earnings per share:                                                             

The following is a reconciliation of historical to pro forma weighted average   
shares outstanding:                                                             

                                          Year Ended
                                           December 31, 2000
                                           -----------------

Historical                                  12,916,092

Shares issued to acquire                                      
Commonwealth (assumed to                                      
be at beginning of period)                       5,429,758    
                                            ----------

Pro forma                                       18,345,850    
                                            ==========

Basic earnings per share of common stock was computed by dividing loss          
applicable to common stockholders, by the weighted average number of common     
shares outstanding for the year. Diluted loss per share is not presented because
all potential common shares are anti-dilutive including those to be issued as   
replacement options and warrants.                                               

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 COMMONWEALTH SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

The following costs were incurred by Commonwealth in oil and gas acquisition,   
exploration, development, and producing activities during the year ended        
December 31, 2000:                                                              

Acquisition costs:                                                              
Proved                                                    --                
Unproved                                               (16,788)             
Development                                              467,530                
Exploration                                                5,253                
                                        --------
                                        $455,995

Information regarding cost of oil and gas properties, both proven and           
unevaluated and related depreciation and depletion is included in the notes to  
the attached historical financial statements of Commonwealth.                   

OIL AND GAS RESERVES                                                            

The estimates of Commonwealth's proved oil and gas reserves and related future  
net cash flows that are presented in the following tables are based upon        
estimates made by independent petroleum engineering consultants.                

Commonwealth's reserve information was prepared as of December 31, 2000. There  
are many inherent uncertainties in estimating proved reserve quantities,        
projecting future production rates, and timing of development expenditures.     
Accordingly, these estimates are likely to change as future information becomes 
available. Proved oil and gas reserves are the estimated quantities of crude    
oil, condensate, natural gas and natural gas liquids which geological and       
engineering data demonstrate with reasonable certainty to be recoverable in     
future years from known reservoirs under existing economic and operating        
conditions. Proved developed reserves are those reserves expected to be         
recovered through existing wells, with existing equipment and operating methods.

Estimated quantities of proved reserves and proved developed reserves of oil and
gas, as well as the changes in proved reserves, are as follows:                 

PROVED RESERVES:                                  GAS (MCF)          OIL (BBL)  
----------------                                  ---------         ----------  

Beginning of year ........................        1,523,730            407,418  
Extensions and discoveries ...............          505,000               --    
Production ...............................          (49,474)            (1,305) 
                                               ----------         ----------
End of year ..............................        1,979,256            406,113  
                                               ==========         ==========
Proved developed reserves ................        1,979,256            310,124  
                                               ==========         ==========
% of proved developed reserves ...........            100.0%              76.4% 
                                               ==========         ==========

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The following table sets forth a standardized measure of the estimated          
discounted future net cash flows attributable to Commonwealth's proved oil and  
gas reserves. Oil and gas prices have fluctuated widely in recent years. The    
sales prices utilized for the purposes of estimating Commonwealth's proved      
reserves and future net revenues were year end prices with no provision for     
escalation of either revenue or costs. . The future production and development  
costs represent the estimated future expenditures to be incurred in developing  
and producing the proved reserves, assuming continuation of existing economic   
conditions. Future income tax expense was computed by applying statutory income 
tax rates to the difference between pretax net cash flows relating to the proved
reserves and the tax basis of proved properties and available operating loss    
carryovers.                                                                     

                                                 Gas               Oil
                                                  -----------      -----------

Future cash inflows ..........................     $ 1,707,048      $ 9,152,652 
Future production costs ......................        (315,994)      (1,137,300)
Future development costs .....................         (21,450)        (207,500)
Future income taxes ..........................        (162,848)      (1,442,356)
                                                  -----------      -----------
Future net cash flows ........................       1,206,756        6,365,496 
10% discount to reflect timing of cash                                          
  flows ......................................        (546,601)      (3,799,803)
                                                  -----------      -----------
Standardized measure of discounted future                                       
 net cash flows .............................     $   660,155      $ 2,565,693
                                                  ===========      ===========

The following summarizes the principal factors comprising the changes in the    
standardized measure of discounted future net cash flows:                       

                                                   Gas             Oil
                                                    -----------    -----------

Standardized measure, beginning of period ........   $   173,918    $ 2,302,868 
Sales of oil and gas, net of production                                         
  costs ..........................................       (32,316)       (20,225)
Extensions and discoveries .......................        74,000           --   
Net change in sales prices, net of production                                   
 costs ..........................................       499,000        275,000
Accretion of discount ............................         7,391         51,379 
Net change in income taxes .......................       (61,838)       (43,329)
                                                    -----------    -----------
Standardized measure, end of period ..............   $   660,155    $ 2,565,693 
                                                    ===========    ===========

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 GENERAL PROXY INFORMATION

DATE, TIME AND PLACE OF SPECIAL MEETING OF STOCKHOLDERS                         

 We will hold a special meeting of stockholders on May 25, 2001, at 1:30
p.m., C.S.T. time, at our corporate headquarters, which are located at 7500     
College Blvd., Suite 1215, Overland Park, Kansas 66210.                         

We are furnishing this proxy statement to the holders of shares of our
Common Stock in connection with the solicitation of proxies by our board of     
directors for use at a special meeting of stockholders in connection with the   
Company's proposed acquisition of Commonwealth Energy Corp.                     

The board of directors does not know of any matters other than those  
described in the notice of the special meeting that are to come before the      
special meeting. If any other business is properly brought before the special   
meeting, including among other things, a motion to adjourn or postpone the      
meeting to another time and/or place for the purpose of soliciting additional   
proxies in favor of the proposal to approve the Commonwealth acquisition and the
related amendments to Empire's Articles of Incorporation or to permit           
dissemination of information about important developments relating to the       
transaction or otherwise related to the meeting, one or more proxy holders named
in the proxy card will vote the shares represented by the proxy on those matters
as determined in their discretion.                                              

   Each record holder of common stock is entitled to one vote per share. The
presence, either in person or by properly executed proxy, of holders of a       
majority of the outstanding shares entitled to vote will constitute a quorum for
the conduct of business at the meeting. For purposes of determining the presence
or absence of a quorum only, we intend to count as present at the meeting and   
entitled to vote, stockholders of record who are present at the meeting in      
person or by proxy and who abstain.                                             

 All references in this proxy statement to "we," "us," "our" or "Empire"
mean Empire Energy Corporation.                                                 

     The date of this proxy statement is May 10, 2001. We are first mailing this
proxy statement, the attached notice and the enclosed proxy card to stockholders
on or about May 15, 2001.                                                       

The Securities and Exchange Commission (herein "SEC") has not in any way  
passed upon the merits of the transaction described herein and any        
representation to the contrary is an offense.                             

REVOCABILITY OF PROXY                                                           

   You may vote your shares by attending the meeting and voting in person or
by marking the enclosed proxy card with your vote and dating, signing and       
returning it in the enclosed postage-prepaid return envelope. The individual    
named as proxy holder on the enclosed proxy card will vote all shares of Common 
Stock represented at the meeting by properly executed proxies that are timely   
received and not revoked according to the instructions marked on the proxies. If
you do not mark your instructions on your proxy, the proxy holder(s) will vote  
your proxy for approval of the purchase and sale agreement and the transactions 
contemplated by the purchase and sale agreement, except as otherwise provided in
this proxy statement. THE PROXIES ARE SOLITICED ON BEHALF OF OUR BOARD OF       
DIRECTORS.                                                                      

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  You may revoke your proxy at any time before it is voted. To revoke your
proxy you must:                                                                 

-    deliver to the Secretary of Empire before the meeting, or at the meeting   
and before your shares have been voted, a written notice of revocation
bearing a later date than the proxy;                                  

-    properly execute a new proxy relating to the same shares which bears a     
later date than the original proxy and deliver it to the Secretary of 
  Empire before the meeting, or at the meeting and before your shares have
been voted; or                                                        

-    attend the meeting and vote in person, although attending the meeting will 
not in and of itself constitute revocation of your proxy.             

    You should deliver any written notice or subsequently dated proxy which is
intended to revoke an earlier proxy to the principal executive offices of Empire
Energy Corporation, 7500 College Blvd., Suite 1215, Overland Park, Kansas 66210,
Attention: Secretary.                                                           

DISSENTERS' RIGHT OF APPRAISAL                                                  

Under the Utah Revised Business Corporation Act ("URBCA"), the Empire 
shareholders have the right to dissent from approving the acquisition (and the  
other matters that are subject to shareholder vote). In order to possess        
dissenters' rights under Utah state law, a shareholder must have been a         
shareholder with respect to the shares for which payment is demanded as of the  
date the proposed corporate action creating dissenters' rights. In order to be  
able to assert his dissenters' rights, a shareholder, (i) must cause the        
corporation to receive, before the vote is taken, written notice of his intent  
to demand payment for shares if the proposed action is effectuated; and (ii) may
not vote any of his shares in favor of the proposed action.                     

     If proposed corporate action creating the dissenters' rights is authorized,
the corporation shall give a written dissenters' notice to all shareholders who 
are entitled to demand payment for their shares. A shareholder who is given a   
dissenters' notice and wishes to assert dissenters' rights must, in accordance  
with the terms of the dissenters' notice: (i) cause the corporation to receive a
payment demand, (ii) deposit certificates for his certificated shares in        
accordance with the terms of the dissenters' notice; and (iii) if required by   
the corporation in the dissenters' notice certify in writing, in or with the    
payment demand, whether or not he or the person on whose behalf he asserts      
dissenters' rights acquired beneficial ownership of the shares before the date  
of the first announcement to news media or to shareholders of the terms of the  
proposed corporate action creating dissenters' rights.                          

A shareholder who properly demands payment retains all rights of a    
shareholder except the right to transfer the shares until the effective date of 
the proposed corporate action giving rise to the exercise of dissenters' rights 
and has only the right to receive payment for the shares after the effective    
date of the corporate action. A shareholder who does not demand payment and     
deposit share certificates as required, by the date or dates set in the         
dissenters' notice, is not entitled to payment for shares.                      

     In the event of disagreement between the parties (Empire and the dissenting
shareholder) on fair value, fair value may be determined by the court in an     
action timely brought by the corporation. Please see Appendix B for the complete
text of the URBCA dissenters' rights.                                           

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PERSONS MAKING THE SOLICITATION                                                 

   THE PROXIES ARE SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS. This Proxy
Statement is provided in connection with the solicitation by the Directors of   
Empire of proxies for the Special Meeting of the Shareholders of Empire (the    
"Meeting") to be held at its offices located at 7500 College Blvd., Suite 1215, 
Overland Park, KS, 66210, at 1:30 in the afternoon on May 25, 2001. We will     
furnish to brokerage houses, fiduciaries and custodians holding in their names  
shares beneficially owned by others copies of solicitation material to forward  
to the beneficial owners. Upon request, we will reimburse persons representing  
beneficial owners of shares for their expenses in forwarding solicitation       
material to the beneficial owners. Empire will bear the entire cost of          
soliciting proxies from our stockholders. Empire shareholders who do not hold   
their shares in their own name, as registered shareholders, should read "Advice 
to Beneficial Shareholders" within for an explanation of their rights.          

The board of directors does not contemplate a solicitation of proxies 
otherwise than by mail. We may supplement original solicitation of proxies by   
mail with telephone or personal solicitations by directors, officers or other   
regular employees of Empire. We will not pay any additional compensation to our 
directors or officers or our other regular employees for these services.        

   Empire has not retained (directly or indirectly) any person or classes of
persons to make solicitations or recommendations in connection with the         
transaction.                                                                    

The solicitation or recommendation.                                             

  Empire's Board of Directors recommends that its shareholders approve, 1)
its acquisition of Commonwealth; 2) the amendment and restatement of its        
articles of incorporation providing for the increase of its Board of Directors  
from five to seven; and 3) the amendment of its articles of incorporation       
providing for the authorization and issuance of 6,750,000 shares of Class B     
Redeemable Voting Common Shares having a par value of $0.0001. Note:  ALL three 
must be approved for any of the items to be approved.                           

Intent to tender.                                                               
-----------------                                                               

  To the best knowledge of Empire's Board of Directors and management, the
directors and officers of Empire and Commonwealth intend to hold their (both    
owned directly or indirectly) Empire shares after consummating the merger for   
the foreseeable future.                                                         

Appointment of Proxies                                                          

A shareholder has the right to appoint a nominee (who need not be a   
shareholder) to represent him at the Meeting other than Norman Peterson, who is 
the Chief Executive Officer and Chairman of the Board of Directors of Empire    
(the "Board Designee") and is designated in the enclosed proxy form. To appoint 
a proxy other than the Board Designee, insert the name of the proposed proxy    
holder in the blank space provided in the proxy, and delete therefrom the name  
of the Board Designee or complete another proper form of proxy. Such shareholder
should notify the nominee of his appointment, obtain his or her consent to act  
as proxy and should instruct him or her on how the shareholder's shares are to  
be voted. The nominee should bring personal identification with him to the      
Meeting. In any case, the form of proxy should be dated and executed by the     
shareholder or by his attorney. Where a proxy is signed on behalf of a          
shareholder by his proxy, the attorney must have written authorization to act   
and the written authorization must be attached to the proxy form.               

A form of proxy will not be valid for the Meeting or any adjournment  
thereof unless it is completed and delivered to Empire, at least forty-eight    
(48) hours, excluding Saturdays and holidays, before the Meeting or any         

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adjournment thereof. Late proxies may be accepted or rejected by the Chairman of
the Meeting in his discretion. The Chairman is under no obligation to accept or 
reject any particular late proxy.                                               

Advice to Beneficial Shareholders                                               

  Shareholders who do not hold their shares in their own name (referred to
herein as "Beneficial Shareholders") are advised that only proxies from         
registered shareholders (i.e. shareholders of record) can be recognized, and    
only registered shareholders may vote at the Meeting. Beneficial Shareholders   
who complete and return a proxy must indicate thereon the name and address of   
the person or company (usually a brokerage or brokerage clearing house) which   
holds their shares as a registered shareholder. Every reasonable attempt will be
made to pass such proxies along to the appropriate registered shareholder in    
order that the registered shareholder may vote in accordance with the wishes of 
the Beneficial Shareholder. The form of proxy supplied to Beneficial            
Shareholders is identical to that provided to registered shareholders.          

     All references to shareholders in this Proxy Statement and the accompanying
form of Proxy and Notice of Meeting are to shareholders of record (registered   
shareholders) unless specifically stated otherwise. Where documents are stated  
to be available for review or inspection, such items will be shown upon request 
to registered shareholders who produce proof of their identity and              
shareholdings.                                                                  

Voting of Proxies                                                               

     The person named in the enclosed form of proxy is a director and officer of
Empire and has indicated his willingness to represent as proxy the shareholders 
who appoint him. Each shareholder may instruct his proxy how to vote his shares 
by completing the blank on the proxy form.                                      

    Shares represented by properly executed proxy forms in favor of the person
designated on the enclosed form will be voted or withheld from voting in        
accordance with the instructions made on the proxy forms. In the absence of     
contrary instructions, such shares will be voted in favor of all matters        
identified in the Notice of Meeting.                                            

    The enclosed form of proxy confers discretionary authority upon the person
named therein with respect to amendments and variations to matters identified in
the Notice of Meeting and with respect to any other matters which may properly  
come before the Meeting. At the time of printing this Proxy Statement, the Board
of Empire knows of no such amendments, variations or other matters to come      
before the Meeting.                                                             

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF                                 

Empire is authorized to issue fifty million (50,000,000) shares of par
value stock at $0.001 per share. As of the date of this Proxy Statement, being  
May 10, 2001 Empire has 15,591,896 common shares issued (of which 750,000 are   
held in treasury) and 14,841,896 are outstanding. There are no other shares     
outstanding, of any class. The Common Shares are the only shares entitled to be 
voted at the Meeting, and holders of Empire Common Shares are entitled to one   
vote for each Empire Common Share held.                                         

  Empire's Transfer Agent has prepared a list of shareholders of record at
the close of business on May 15, 2001 (the "Record Date"). A holder of Empire   
Common Shares named on that list will be entitled to vote the shares then       
registered in such holder's name, except to the extent that (a) the holder has  
transferred the ownership of any of his shares after the Record Date, and (b)   
the transferee of those shares produces properly endorsed share certificates, or

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otherwise establishes that he owns the shares, and demands not later than ten   
(10) days before the day of the Meeting that his name be included in the list of
persons entitled to vote at the Meeting, in which case the transferee will be   
entitled to vote his shares at the Meeting.                                     

VOTING PROCEDURES                                                               

    The Company's transfer agent compiles a list of the shareholders as of the
record date and each shareholder's number of shares (including the shareholder's
ownership percentage in the Company). All returned proxies are mailed to the    
Company who tabulates them. The Company nominates persons to administer         
the process by which votes are cast at the meeting. A shareholder who is present
at the meeting must declare his intention to vote his shares at the meeting. He 
is then allowed to cast his vote and his vote is combined with the transfer     
agent's records. If the shareholder has previously submitted his proxy to the   
transfer agent, the transfer agent will update its records accordingly.         

SHAREHOLDER VOTE ITEM NUMBER 1 - ACQUISITION OF COMMONWEALTH                    

   The first item subject to shareholder vote is Empire's acquisition of all
of the outstanding shares Commonwealth in exchange for 6,750,000 shares of      
Empire Class A Common Shares. The Acquisition would be structured as an         
Exchangeable Share transaction in which the Commonwealth shareholders would have
the right to elect to receive one share of Empire Class B Redeemable Voting     
Common Stock and one share of Empire Exchangeco Common Stock in lieu of         
receiving Empire Class A Common Shares. The election, if made, will occur prior 
to the issuance of any Empire securities to the Commonwealth shareholders. The  
Empire shares will be paid to the Commonwealth shareholders on a one-for-six    
basis (i.e. each Commonwealth shareholder as of the Closing Date would be       
entitled to receive one share of Empire Class A Common Stock in exchange for    
every six shares of Commonwealth Common Stock. Fractional shares will not be    
issued in connection with the Acquisition. Any fraction shares will be rounded  
up to the nearest whole number. Empire's Board of Directors has approved the    
Acquisition and recommends that the Empire shareholders vote in favor of the    
transaction. Please note, all of the items subject to shareholder vote must be  
approved in order for any of the items to be approved.                          

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Background to the Acquisition                                                   

     During the summer of 2000, Empire began actively seeking acquisition/merger
candidates. The search focused on a universe of smaller companies, including OTC
listed companies, pink sheet companies and those companies that had recently    
been delisted from the OTC due to their inability to comply with new reporting  
rules. Empire believes that the most cost effective method of growing its       
business would be through the acquisition or merger with other oil and gas      
companies who had proven oil and gas properties as well as development          
properties and began actively seeking such candidates in early 2000. Because of 
the relatively high number of small publicly traded companies with modest market
capitalization who are engaged in oil and gas producing activities, Empire      
believed that it could merge with or acquire such a company possessing valuable 
oil and gas properties for a purchase price less than the cost the Company would
incur acquiring and developing the properties singularly. Empire observed that  
during the past year the increase in natural gas prices and elevated oil prices 
drove the industry into an environment that had not been seen in quite some     
time. As the commodity prices increased, so did the cost of doing business. The 
ability to locate, research, understand, evaluate, close and develop prospect   
properties became more competitive and costly to do. Because Commonwealth had   
established a portfolio of properties consisting of operations in three U.S.    
states (Texas, Oklahoma and Wyoming) and in Canada, and because they had the    
infrastructure in place in each of these vastly differing regions which include 
working interest and net revenue interest positions, property expertise,        
geologic knowledge, engineering knowledge, leasor relationships, database       
management, etc., that Empire would save considerable time, effort and cost by  
acquiring Commonwealth. This was viewed as the most efficient and expeditious   
vehicle to building asset and shareholder value, increased revenues and         
diversification than if we attempted to do it on an individual                  
property-by-property basis.                                                     

Empire's management identified approximately seven or eight targets   
(through review of the target's publicly available reports) that Empire believed
to be potential merger/acquisition candidates. Also during this time, Empire    
observed in various industry periodicals a market trend of U.S. oil and gas     
companies acquiring/merging with Canadian oil and gas companies. According to   
these periodicals, the impetus behind this activity appeared to be both the     
exchange rate between the US dollar and the Canadian dollar (US$1 equalled      
approximately CN$1.5) and the fact that the trading prices of these companies   
were below their book values. This caused Empire to expand its search to include
Canadian public reporting companies. Thus, Empire began searching for a Canadian
public company with significant oil and gas properties in the United States.    
Empire's research revealed that several Canadian public reporting companies met 
its search criteria and generated five or six companies that might be viable    
acquisition candidates. After analyzing many factors, including public          
availability of the target company's information, the location of their         
properties, the balance of their production (whether in oil or gas) and the     
capital structure of the potential target (shares outstanding, debt, revenues,  
book value, trading price, etc.), Empire's management determined that           
Commonwealth was the best merger/acquisition candidate for the following        
reasons:                                                                        

    1)   Commonwealth's natural gas properties, especially Commonwealth's Leon
        County, Texas property, which is attractive to Empire management due
      to the development potential from multiple producing zones (Cotton
        Valley Pinnacle Reefs and the Bossier Sand), an existing well on the
lease and a good working interest position,                 

  2)   Commonwealth's stock price ( trading below book value at the time),

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3)   Commonwealth's assets (mainly located in the US),                

4)   Commonwealth's diversity in the location of their properties ,   

5)   Commonwealth's nominal debt and,                                 

   6)   the acquisition of Commonwealth would provide Empire with sufficient
          assets to allow application for listing on the American Stock Exchange
   which would be a benefit to the shareholders of both companies.

After making this determination, Empire's President, Bryan Ferguson,  
contacted Lorne Torjhelm, President of Commonwealth in August of 2000 at which  
time they began preliminary merger discussions. After several "fact finding"    
discussions with Mr. Torjhelm, Empire proposed a verbal proposal, outlining the 
terms described below and received a favorable response, that these terms were  
acceptable. There were no further negotiations on the terms of the transaction  
with the exception of discussion of some of the mechanics of getting the        
transaction completed.                                                          

     Empire calculated the value of Commonwealth's properties and reserves using
Present Worth (PW) discounts on future net cash flows. A PW future net cash     
flow, when used with respect to oil and gas reserves, refers to the present     
worth (or present value) of the dollars (income, or stream of income) to be     
received at some specified time in the future, discounted back to the present at
a specified interest rate. Industry standards exist for placing value on        
reserves and the common practice is to pay PW18 or higher, before interest and  
taxes for proved producing properties and some higher PW rate yet for riskier,  
proved non-producing or unproved reserves. In evaluating Commonwealth's         
reserves, Empire used PW18 for proved reserves and PW25 for unproved reserves.  
The unproved reserve volumes were reduced by 50%, before being discounted, to   
allow for risk. Using these discounts, Empire estimated that Commonwealth's     
reserves had a value of approximately $5.08MM ($2.06MM proved reserves and      
$3.02MM unproved reserves). The proved reserves consisted of oil and gas        
properties located in Oklahoma (406,300 barrels of oil) and Texas (1,979,000 MCF
of gas in Parker and Coleman Counties). The unproved reserves consisted of oil  
and gas properties located in Oklahoma (110,500 barrels of oil) and Texas       
(13,750,000 MCF of gas in Leon, Parker and Coleman Counties). A constant price  
of $24.00 per barrel was used to calculate the oil reserves and a constant price
of $4.00/MCF was used to calculate the natural gas reserves.                    

     Empire did not assign a specific value to Commonwealth's Wyoming leases but
did give consideration to the land costs and development potential provided by  
Commonwealth's familiarity and knowledge of the properties and geology in the   
region. When evaluating the asset value of Commonwealth's working interest in   
the Alberta gas operations, Empire relied solely on the projected monthly cash  
flow of $7,500. Empire primarily relied upon review of the reports that         
Commonwealth provided and in verbal discussions with Commonwealth and their     
operating consultants regarding production and development potential of their   
properties.                                                                     

When Empire management initiated their preliminary evaluation of      
Commonwealth, they assigned an estimated value of $10,000,000 to Commonwealth's 
reserves, production and operations. This preliminary value was used to         
negotiate a share exchange ratio with the management of Commonwealth. The actual
purchase price of the transaction is based on the trading price of Empire's     
stock. Based upon Commonwealth's estimated 32,000,000 outstanding shares, Empire
calculated an underlying price of approximately $.32 per share                  
($10,000,000/32,000,000 shares). Further, Empire valued its shares for the      
transaction at $2.00 per share because of the stock's trading price at the time 
that negotiations began and factored in the stocks volatility and liquidity     
(Empire stock was trading between $1.87 and $2.75 during the month of August    
2000). Based on these values per share, Empire determined that the conversion   

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ratio upon the exchange should be six Commonwealth shares for each share of     
Empire stock issued in connection with the acquisition (dividing the $.32 per   
share of Commonwealth into $2.00 per share of Empire to come up with the 6 to 1 
ratio). This equation was viewed to be both logical and appropriate because of  
its focus on the fundamentals of the transaction, allowing a possible premium on
the Commonwealth shares and providing for the development potential on their    
properties. Empire's Board of Directors and management believe that the 6 to 1  
exchange ratio (Commonwealth shares to Empire shares) is a fair financial       
transaction to the Empire shareholders. Commonwealth accepted Empire's initial  
proposal of the 6 to 1 ratio. The negotiation between the two companies         
primarily focused on the conditions precedent to the transaction's closing (i.e.
Empire share trading price, Empire's working capital as of the closing date and 
Empire's hydrocarbon production levels).                                        

         The Empire Board of Directors also considered several possible negative
factors related to the transaction, including:                                  

1)   the possible collapse of oil and natural gas prices,             

    2)   whether Commonwealth's current technical professionals, which consist
        of external paid consultants including geologists and engineers (not
        Commonwealth employees), were in fact available, willing and able to
      adequately and efficiently continue to support any operations that
Empire would assume vis a vis the acquisition,              

 3)   Empire's ability to effectively take on the operations required to
manage such a large portfolio of projects and,              

4)   the ability of Empire to raise sufficient funds to develop these 
properties.                                                 

    The purchase price for Commonwealth is substantially higher than we or any
other party would typically pay to purchase only the proved reserves of         
Commonwealth. We have committed to pay this higher value because of our         
experienced management team and the unproved reserve potential of the           
Commonwealth properties, particularly the Leon County, Texas property. In       
analyzing these unproved reserves, we reviewed the drilling and production      
history of similar geologic zones on properties in the area. In particular, we  
observed that since 1996, over 170 new wells with as much as 1 TCF of reserves  
have been drilled and completed in Freestone, Leon and Robertson counties. The  
most concentrated drilling has been by Anadarko Petroleum in its Dew-Mimms Creak
area of southern Freestone County. By October 2000, Anadarko had drilled at     
least 160 wells in this area, was producing over 175 MMcfd of gas and had 20    
rigs active at new locations.                                                   

The ultimate value that we may realize from the unproved reserves     
attributable to the Leon County property is very speculative and the actual     
reserves discovered and produced could be substantially less than we have       
estimated. Estimates of probable and possible oil and gas reserves are highly   
speculative and subject to numerous risks and uncertainties. You should be aware
of the substantial risks involved in acquiring probable and possible reserves in
amounts of this magnitude and realize that this acquisition could result in     
substantial losses and possibly liquidity problems to us in the future if the   
expected reserves are not developed, if the costs of developing these reserves  
significantly exceed our present estimates or if oil and gas prices fall        
significantly below the projections we have made for the future.                

Upon review and consideration of the possible negative factors, Empire's Board  
of Directors still believes that the Acquisition of Commonwealth based on the   
proposed structure is fair from a financial point of view to the Empire         
shareholders.                                                                   

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Purposes of the transaction and plans or proposals.                             

   Empire's Board of Directors is proposing approval of the Merger Agreement
by Empire Shareholders to acquire Commonwealth because management believes that 
the combination of Empire and Commonwealth will be beneficial to Empire         
Shareholders as the combined company will have a larger asset base, better      
access to capital financing and better cash flow than Empire alone.             

The board believes that the acquisition will provide the Company with 
valuable oil and gas properties in a cost effective manner particularly in light
of recent trends in wholesale oil and gas prices. In addition, the board        
believes that the merged company will have better access to capital financing in
order to explore for and develop oil and gas reserves held by both companies.   

     Empire has been actively seeking potential acquisition or merger candidates
and has held preliminary discussions with several companies. In the Board of    
Directors and management's opinion, the acquisition of Commonwealth proposed    
herein represents the most cost efficient transaction providing Empire with     
significant new oil and gas properties with development potential. Empire is not
currently engaged in any discussions with other potential acquisition or merger 
candidates however the Company will continue to seek potential acquisition or   
merger candidates meeting its criteria.                                         

    Empire plans to retain the Commonwealth shares that it will receive in the
acquisition and continue Commonwealth's existing operations.                    

Reports, opinions, appraisals and negotiations.                                 

    Empire management discussed and considered engaging an independent firm to
render a fairness opinion and discussed such with the board of directors.       
Management concluded that an independent fairness opinion was unnecessary for   
the following reasons: 1) The assets of the company being acquired consisted    
almost entirely of oil and gas leases, the most valuable of which had recent    
engineering reports. 2) Management felt such reports in themselves gave the     
Company an independent valuation of the assets similar to what would be expected
from an independent fairness opinion. 3) Liabilities of the target company could
be obtained from recent audited and unaudited financial statements and would be 
the same information used by anyone preparing a fairness opinion. 4) The        
fairness opinion obtained by Commonwealth was made available to Empire's        
management. 5) The board of directors felt that Empire's management possessed   
sufficient skills and experience to calculate a fair exchange ratio for shares  
that would be issued for these to Commonwealth shareholders and, 6) In addition 
to the above reasons, management believed that a fairness opinion would not     
differ from the independent reserve analyses and valuation that the Company     
already possessed and therefore would not be a prudent use of company funds.    

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Past contacts, transactions, negotiations and agreements.                       

    In November and December 2000, Empire acquired a 44.6% working interest in
approximately 704 acres of oil and gas properties in Leon County, Texas,        
primarily from Trend Capital Corporation ("Trend"). The total consideration paid
was 1,784,000 shares of Empire Class A Common Stock with a fair value of        
approximately $2,063,000. One of Trend's principals is Lorne Torhjelm, who is   
the current chairman of Commonwealth and who is proposed to be appointed to the 
Empire board upon the closing of the Acquisition. Empire learned of the Leon    
County oil and gas properties through its due diligence performed while it was  
considering Commonwealth as a potential merger/acquisition candidate. As of     
December 31, 2000, the acquired properties were not generating revenues.        

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON                         

    No Empire director, officer or other member of management has any interest
(material or immaterial), direct or indirect, in the transaction other than as  
an Empire shareholder.                                                          

     To the knowledge of the directors and senior officers of Empire, no person,
firm or corporation beneficially owns, directly or indirectly, or exercised     
control or direction over voting securities carrying more than 5% of the voting 
rights attached to any class of voting securities of Empire except as set out in
the table below:                                                                

--------------------------------------------------------------------------------
Title of Class                                 Amount of                      
                   More than 5% owners        Nature of           Percentage
                                                                    of
                 Name of Beneficial        Beneficial Ownership    Class
Owner                                 
--------------------------------------------------------------------------------

Common Stock      Peterson & Sons Holding        3,975,875           26.8%
Company             
7500 College Blvd.,               
Suite 1215                
Overland Park, KS 66210               

                   Owen Enterprises, LLC           833,090            5.6%
11011 King St, Suite 260              
Overland Park, KS 66210               

                    Trend Capital Corp           1,220,000            8.2%
2383 King George Hwy                
White Rock, BC, Canada                

--------------------------------------------------------------------------------

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    The members of the Board of Directors and executive officers of Empire are
the beneficial owners of Empire common stock as shown in the table below:       

Title of Class          Board Members         Amount of       Percent of class  
                     nature of
Name of beneficial       beneficial   
  owner              ownership
--------------       ------------------       ---------       ----------------  

Class A Common       Norman L. Peterson        415,000             2.8%         
Stock                Director, CEO                                              

Class A Common       Bryan S. Ferguson,         32,800             0.2%         
Stock                President                                                  

Class A Common       John Garrison,             52,500             0.4%         
Stock                Director                                                   

Class A Common       John R. Dixon,             72,500             0.5%         
Stock                Director                                                   

Class A Common       Elliott M. Kaplan,         27,500             0.2%         
Stock                Director                                                   

Class A Common       John L. Hersma,           190,000             1.3%         
Stock                Director                                                   

The members of the board of directors and executive officers of Empire
cumulatively are the beneficial owners of Empire common stock shown in the table
below:                                                                          

   Title of Class    Name of beneficial        Amount of        Percent of class
         owner          nature of beneficial
                       ownership
   --------------    ------------------   --------------------  ----------------

Common Stock        Management and           790,300               5.4%   
directors, as                     
a group                           

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TERMS OF THE TRANSACTION                                                        

Material Terms                                                                  

Brief description of the transaction.                                           

   The principal terms of the transaction provide that at the effective time
of the merger (anticipated to occur on May 31, 2001) all Commonwealth           
shareholders will be deemed to have exchanged their Commonwealth Common Shares  
on a six-for-one basis for Empire Class A Common Shares. Note, each Commonwealth
shareholder has the right to elect to receive one share of Empire Class B       
Redeemable Voting Common Stock and one share of Empire Exchangeco Common Stock  
(the "Exchangeable Shares") in lieu of receiving Empire Class A shares. Empire  
Exchangeco, a wholly owned Canadian subsidiary of Empire, will be formed to     
serve as a holding company for Empire's Canadian shareholders that were former  
shareholders of Commonwealth. The Exchangeable Shares will be exchangeable at   
any time chosen by the holder into publicly traded Class A Common Shares of     
Empire ("Empire Common Shares") on a one-for-one basis. Commonwealth            
Shareholders will be issued the Empire Class B Redeemable Common Voting shares  
(the "Empire Voting Shares") so that Commonwealth Shareholders will have voting 
rights equivalent to Empire Common Shares until they elect to exchange          
Exchangeable Shares for Empire Class A Common Shares. As of April 27, 2001      
Commonwealth has 34,578,544 of Commonwealth Common Shares outstanding which will
be exchanged on a six-to-one basis for Empire Common Shares. In addition,       
Commonwealth has warrants and options outstanding that will be exchanged for    
983,849 warrants or options to purchase Empire Class A Common Shares with       
exercise prices ranging from US$.80 to US$1.80. Commonwealth Option Holders and 
Commonwealth Warrant Holders will receive options and warrants in Empire,       
appropriately adjusted as to number and exercise price (herein "Replacement     
Option" and "Replacement Warrants").                                            

At the conclusion of the transaction, subject to approval of Empire   
shareholders and certain business conditions (U.S.$1.20 minimum Empire Common   
Share trading price, minimum working capital and hydrocarbon production for     
Empire), Commonwealth will become a controlled subsidiary of Empire, to be      
renamed Empire Energy Canada Ltd. Commonwealth Shareholders would hold, upon    
exchange of their Exchangeable Shares, approximately 32% of the 20.9 million    
Empire Common Shares anticipated to be then outstanding (assuming all           
replacement options and warrants are exercised). Note:  ALL three items must be 
approved for any of the items to be approved.                                   

Commonwealth Securityholders' Approvals                                         

The transaction and Plan of Arrangement were approved by the requisite
majority of Commonwealth's shareholders and security holders at Commonwealth's  
special shareholder meeting held on February 12, 2001.                          

Canadian Court Approval                                                         

Commonwealth applied for and received the Final Order from the Queen's
Bench of Alberta on February 14, 2001. In contemplating issuing the Final Order,
it should be noted that the court passed upon the fairness of the transaction,  
was advised of the fact that Empire and Commonwealth were relying on the hearing
as the basis for exemption from registration under the 1933 Securities Act; and 
each person that will receive Empire shares in the transaction had the right to 
appear at and received actual notice of the final court hearing. The final order
is not effective until filed with the Director appointed under the CBCA and the 
Final Order will only be filed when all other conditions to closing have been   
met. Any security holder or creditor of Commonwealth has the right to appear at 
such hearing, be heard and present evidence if such person is of the view that  
his or her interests are prejudiced by the transaction.                         

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Timing                                                                          

 It is anticipated that the closing of the transaction will occur in May
2001; however, it is possible that closing may be delayed later than this date  
if conditions to closing cannot be timely met in which event Empire will, in    
consultation with Commonwealth, make a joint announcement updating the status of
the transaction.                                                                

Consideration offered to security holders.                                      

   The Commonwealth shareholders are entitled to receive one share of Empire
Class A Common Shares for every six shares of Commonwealth. In lieu of receiving
Empire Class A Common Shares, each Commonwealth shareholder may elect to receive
one share of Empire Exchangeco Common Stock and one share of Empire Class B     
Redeemable Voting Common Stock for every six shares of Commonwealth. The Empire 
Class A Common Shares to be issued to Commonwealth shareholders are exempt from 
registration under Section 3(a)(10) of the Securities Act of 1933. A court order
was issued on February 14, 2001 that constitutes the basis for the exemption to 
apply to the Empire shares that are to be issued to the Commonwealth            
shareholders in exchange for their Commonwealth shares. With respect to the     
application of Section 3(a)(10), it is observed that:                           

    a)   The Court of Queen's Bench of Alberta passed upon the fairness of the
transaction;                                                

b)   The Court was advised prior to the hearing that Commonwealth and 
    Empire were relying on the hearing as a basis for exemption from
registration under the 1933 Act under Section 3(a)(10); and 

  c)   Each person to whom securities will be issued under the Arrangement
      had the right to appear at and received actual notice of the final
 court hearing (details of which are in the Commonwealth proxy
materials).                                                 

The Class B Redeemable Voting Common Shares and Exchangeco Shares               

The Class B Redeemable Voting Common Stock shall not be entitled to   
dividend rights. The shares are exchangeable on a one-for-one basis for Empire  
Class A Common Stock. However, because each share of Class B Redeemable Voting  
Common Stock is paired to a share of Exchangeable Stock the holder must also    
tender one Exchangeable Share in order to be able to exchange a share of Class B
Redeemable Voting Common Stock for a share Class A Common Stock. A sinking fund 
has not been established in connection with the Class B Redeemable Voting Common
Stock. The Class B shares are entitled to one vote per share for each share held
at all meetings of stockholders. The Class B shares shall vote together with the
Class A shares as a single class. There is no cumulative voting. The Class B    
shares are not entitled to receive any assets of the corporation upon the       
dissolution or liquidation except for their par value. The Class B shares do not
possess pre-emption rights. The Class B shares are subject to transfer          
restrictions. The shares may not be transferred to a third party. A Class B     
share can only be "put" to Empire in exchange for one share in Empire. However, 
as noted above, the holder must also "put" an equal number of Exchangeable      
Shares to Empire. The Class B shares do not contain any limiting provisions with
respect to significant shareholders.                                            

   The rights of the holders can only be modified by a vote of a majority of
the shares outstanding. No preferred shares are being issued. The rights of     
holders of the Class B shares are "paired" to a class of Exchangeable Shares in 
Empire Exchangeco. It is anticipated that Empire Exchangeco will be a           
wholly-owned Canadian subsidiary that will serve as a holding company for the   
Commonwealth operations. The Exchangeable Shares are entitled to dividends. A   

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dividend must be declared on the Exchangeable Shares to the extent that a       
dividend is declared on the Class A Common Shares. A sinking fund has not been  
established in connection with the Exchangeable Shares. The Exchangeable Shares 
are not entitled to vote. The Exchangeable Shares provide rights for the holder 
to participate equally with the Class A Common Shareholders in the event of     
dissolution or liquidation. In order to protect this right, the Exchangeable    
Shares contain provisions requiring the creation of a Trust in the event of     
Empire's dissolution or liquidation. The Exchangeable Shares do not possess     
pre-emption rights. The Exchangeable Shares are "paired" to the Class B         
Redeemable Voting Common Shares and are subject to identical transfer           
restrictions. A holder may only "put" an Exchangeable Share (along with a Class 
B Redeemable Voting Common Share) to Empire in exchange for one share of Class A
Common Stock. The Exchangeable Shares do not contain any limiting provisions    
with respect to significant shareholders.                                       

   The Empire Class B Redeemable Voting Common Shares will not be registered
under the Securities Act of 1933, and therefore will not be freely tradeable. In
addition, the shares contain transfer restrictions that only allow the holder to
"put" the shares back to Empire in exchange for Empire Class A Common Shares or 
for Empire to "call" the shares in exchange for Empire Class A Common Shares or 
for the cash equivalent of that day's current trading price.                    

Replacement Options and Warrants                                                

 The Empire Class A Common Shares underlying the replacement options and
warrants issued to Commonwealth securityholders will not be registered          
securities under the Securities Act of 1933. Holders will need to register such 
securities or have a valid exemption under the Securities Act of 1933 in order  
to effect transfers.                                                            

Explanation of any material differences in the rights of security holders as a  
result of the transaction                                                       

 The rights of the Empire shareholders will be identical in all material
respects before and after the acquisition transaction.                          

Accounting treatment of the transaction                                         

The transaction will be treated for financial accounting and reporting
purposes as a purchase of Commonwealth by Empire.                               

Federal income tax consequences of the transaction                              

 The transaction has been structured so that it should not result in any
taxable gain or loss to existing Empire shareholders.                           

Eligibility for listing or trading                                              

    The Exchangeable Shares and Empire Class B Redeemable Voting Common Shares
to be issued to the Commonwealth shareholders will not be registered under the  
Securities Act of 1933. The Empire Class A Common Shares issued in exchange for 
the Exchangeable Shares and Empire Class B Redeemable Voting Common Shares will 
be issued either (i) in reliance upon the exemption provided by Section 3(a)(10)
of the 1933 Act or (ii) in reliance upon exemptions from registration provided  
by Regulation S or Rule 506 of Regulation D of the 1933 Act.                    

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Section 3(a)(10):                                                               

Section 3(a)(10) exempts securities issued in exchange for one or more
outstanding securities from the general requirement of registration where the   
terms and conditions of the issuance and exchange of such securities have been  
approved by a recognized court, after a hearing upon the fairness of the terms  
and conditions of the issuance and exchange at which all Persons to whom such   
securities will be issued have the right to appear. The Court is authorized to  
conduct a hearing to determine the fairness of the terms and conditions of the  
Arrangement, including the proposed issuance of securities in exchange for other
outstanding securities. The Court entered the Interim Order on January 8, 2001  
and, the Final Order was issued on February 14, 2001.                           

    The Exchangeable Shares and Empire Class B Redeemable Voting Common Shares
received in exchange for Commonwealth Common Shares in the Arrangement in       
reliance upon the exemption provided by Section 3(a)(10) will be freely         
transferable under United States federal securities laws, except for such shares
held by persons who are deemed to be "affiliates" (as such term is defined under
the 1933 Act see below) of Commonwealth prior to the Arrangement which may be   
resold by them only in transactions permitted by the resale provisions of Rule  
145(d)(1), (2), or (3) promulgated under the 1933 Act or as otherwise permitted 
under the 1933 Act. In the event Empire Class A Common Shares are publicly      
listed, Rule 145(d)(1) generally provides that "affiliates" of Commonwealth may 
sell securities of Empire received in the Arrangement if such sale is effected  
pursuant to the volume, current public information and manner of sale           
limitations of Rule 144 promulgated under the 1933 Act, including Regulation S  
thereunder.                                                                     

     Rule 144 limitations generally require that any sales in any 3 month period
made by a securityholder who is subject to such limitations shall not exceed the
greater of 1% of the outstanding shares of the securities being sold or the     
average weekly trading volume over the 4 calendar weeks preceding the placement 
of the sell order and that such sales be made in unsolicited, open market       
"brokers transactions". Rules 145(d)(2) and (3) generally provide that the      
foregoing limitations lapse for non-affiliates of Empire after a period of 1 or 
2 years, respectively, depending upon whether certain currently available       
information continues to be available with respect to Empire. Persons who may be
deemed to be affiliates of an issuer generally include individuals or entities  
that control, are controlled by, or are under common control with, such issuer  
and may include certain officers and directors of such issuer as well as        
principal shareholders of such issuer. Under Rule 904 of Regulations S, persons 
who are not "affiliates" of Empire (or who are affiliates of Empire solely by   
virtue of holding a position as an officer or director of Empire) may sell      
Exchangeable Shares if no "directed selling efforts" (as defined in Rule 902 of 
Regulation S) are made by the seller or any of its affiliates or any person on  
their behalf, no offer is made to a person in the United States, and either (i) 
at the time the buy order is originated, the buyer is outside the United States,
or the seller and any person acting on behalf of the seller reasonably believes 
the buyer is outside the United States, or (ii) the transaction is executed in, 
on or through the facility of a recognized Stock Exchange and neither the seller
nor any person acting on behalf of the seller knows that the Transaction has    
been pre-arranged with a buyer in the United States. In the case of sales by a  
person who is an officer or director of Empire and is an affiliate of Empire    
solely by virtue of holding that position, no selling concession, fee or other  
remuneration may be paid in connection with the offer or sale other than the    
usual and customary broker's commission that would be received by a person      
executing the transaction as agent. Additional conditions apply to resales by   
persons who are affiliates of Empire other than by virtue of holding a position 
as an officer or director of Empire. There will be no listing of Exchangeable   
Shares or Empire Class B Redeemable Voting Common Shares upon completion of the 
Arrangement or in the foreseeable future.                                       

    The Empire Class A Common Shares issued by Empire upon the exchange of the
Exchangeable Shares, in accordance with the terms of the pairing agreement, will
be issued in reliance upon the exchange exemption provided for in Section       
3(a)(9) of the 1933 Act. Section 3(a)(9) exempts securities issued in exchange  
by the issuer with its existing securities holders exclusively where no         
commission or other remuneration is paid or given directly or indirectly for    

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soliciting such exchange. The Empire Common Shares issued in exchange for the   
Exchangeable Shares should be freely transferable under United States federal   
securities laws, in the same manner and subject to the same limitations as the  
Exchangeable Shares and Empire Voting Shares.                                   

Regulation S and Rule 506 of Regulation D:                                      

  In the event that the issuance of Exchangeable Shares and Empire Class B
Redeemable Voting Common Shares to Commonwealth Shareholders cannot be issued in
reliance upon the exemption provided by Section 3(a)(10) of the 1933 Act, the   
Exchangeable Shares and the Empire Voting Shares will be issued (i) to non-U.S. 
persons outside the United States pursuant to an exemption from registration    
provided by Regulation S and (ii) to U.S. persons or persons in the United      
States in reliance upon an exemption from registration under Rule 506 of        
Regulation D under the 1933 Act, in such an event Commonwealth Shareholders     
shall be required to make certain representations and warranties in connection  
with the issuance of the Exchangeable Shares and the Empire Voting Shares .     
Exchangeable Shares and the Empire Voting Shares issued in reliance upon        
exemptions from registration under Regulation S and Rule 506 of Regulation D    
will not be freely tradable and may not be offered for sale, sold or otherwise  
transferred or assigned for value, directly or indirectly, unless registered    
under all applicable United States federal and state securities laws or in a    
transaction that complies with an applicable exemption from registration under  
the 1933 Act, such as that provided by Rule 144 or Rule 904, and other          
applicable securities laws. In general, under Rule 144 as currently in effect, a
Commonwealth Common Shareholder who has beneficially owned the securities for at
least one year and who is not an affiliate would be entitled to sell such       
securities, subject to the Rule 144 limitations described above.                

Empire Class A Common Shares are anticipated to be issued by Empire in
exchange for the Exchangeable Shares in reliance upon the exchange exemption    
provided for in Section 3(a)(9) of the 1933 Act. Empire Class A Common Shares   
issued in exchange for the Exchangeable Shares in reliance upon Section 3(a)(9) 
should have the same restrictions on resale as were applicable to the           
Exchangeable Shares, described above, and have the same applicable holding      
period for the purposes of Rule 144.                                            

    This summary is of a general nature only and is not intended to be, and is
not to be construed as, securities resale advice to any particular Holder.      
Accordingly, each Holder is urged to consult the Holder's own professional      
advisors with respect to the particular tax and legal implications of the       
Arrangement to such Holder. Except as otherwise expressly stated, this summary  
does not take into account any provincial, state, "blue sky" territorial or     
foreign tax law or treaty.                                                      

Dividends.                                                                      

    Neither Empire nor Commonwealth has paid dividends to date and Empire will
not pay dividends in the foreseeable future. There is no restriction on         
Commonwealth's current or future ability to pay dividends.                      

Prior stock purchases.                                                          

   Neither Empire nor any of its directors and management have purchased any
Commonwealth shares during the past two years.                                  

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Expenses.                                                                       
---------                                                                       

Empire has incurred or expects to incur the following expenses in     
connection with the acquisition:                                                

Legal fees                $10,000           
Accounting fees           $15,000           
Printing costs            $ 2,500           
Filing fees               $ 1,450           
Overnight services        $   375           
Engineer fees             $ 3,600           
Travel                    $ 1,550           
Lodging                   $ 1,080           
Miscellaneous             $   545           

Interest in securities of the subject company.                                  

Securities ownership.                                                           
---------------------                                                           

     Currently, neither Empire nor any of its board members or officers have any
ownership (including beneficial) of Commonwealth shares.                        

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SELECTED FINANCIAL DATA                                                                                       

Summary Financial Information of Empire (US$) (using United States generally                                  
accepted accounting principles)                                                                               

Balance                 As of and       As of and      As of and     As of and     As of and      As of and   
-------                for the 12      for the 12     for the 12     for the 12    for the 12     for the 12  
Sheet                     mos.             mos.           mos.          mos.          mos.           mos.     
-----                    ended            ended          ended         ended         ended          ended     
                     Dec. 31, 2000    Dec. 31, 1999  Dec. 31, 1998  Dec 31, 1997  Dec. 31, 1996  Dec. 31, 1995
                     -------------    -------------  -------------  ------------  -------------  -------------

                                                                                                              

Working Capital        ($28,591)       $(354,979)       $4,195        $(50,703)    $(164,381)     $(285,458)  
(deficit)                                                                                                     

Long-term Assets      2,216,969           62,091           0              0             0              0      

Total Assets          2,271,827          126,147         5,000            0           41,012           0      

Long-term                  0                0              0              0             0              0      
Obligations                                                                                                   

Accumulated         (18,398,055)        (651,649)     (192,033)       (200,667)      (94,857)        (8,633)  
Earnings Deficit                                                                                              

Shareholders'         2,188,378        $(292,888)        4,195         (50,703)     (164,381)      (285,458)  
Equity (deficit)                                                                                              

Statement of                                                                                                  
------------                                                                                                  
Operations                                                                                                    
----------                                                                                                    

Revenue                 487,979           69,401           0              0             0              0      

Net Income (Loss)      (384,911)        (843,682)       (8,634)        (37,368)       (8,860)        (6,001)  
from continuing                                                                                               
operations                                                                                                    

Net Income (Loss)         (0.03)           (0.08)        (0.01)          (0.02)        (0.01)         0.00    
from continuing                                                                                               
operations per                                                                                                
share                                                                                                         

Net Income (Loss)         (1.81)           (0.08)        (0.01)           0.06          0.08          (0.00)  
per common share                                                                                              

Other                                                                                                         
-----                                                                                                         
information:                                                                                                  
------------                                                                                                  

Cash dividends              0                0              0               0            0              0     
declared per                                                                                                  
common share                                                                                                  

Ratio of earnings         (48.8)           (11.0)          N/A             N/A          N/A            N/A    
to fixed charges                                                                                              

Book value per             0.17            (0.03)        (0.00)          (0.03)        (0.13)         (0.23)  
share                                                                                                         

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     The above summary financial information of Empire should be read in                                  
conjunction with the Annual Report to Shareholders on Form 10KSB/A for the year                           
ended December 31, 2000 which is incorporated herein by reference. Copies of                              
such reports are also available by contacting the Company.                                                

Summary Financial Information of Commonwealth (Cdn.$)                                                     
(using Canadian generally accepted accounting principles)                                                 

                                                As of and          As of and      As of and     As of and 
                                                for the 12         for the 12     for the 12    for the 12
                                                mos. ended         mos. ended     mos. ended    mos. ended
                                                 Dec. 31,           Dec. 31,       Dec. 31,      Dec. 31, 
Balance Sheet                                      2000               1999           1998          1997   
-------------                                   ----------         ----------     ----------    ----------

                                                                                                          
Working Capital (deficit)                       $(192,178)         $(360,636)     $ (216,704)  $   66,427 

Long-term Assets                                5,710,124          4,670,911       4,486,380    3,776,037 

Total Assets                                    5,964,968          4,801,703       4,694,523    4,108,477 

Long-term Obligations                               0                  0               0            0     

Accumulated Deficit                            (1,883,391)        (1,408,174)       (821,161)    (329,623)

Shareholders' Equity                            5,345,104          4,310,275       4,287,039    3,967,350 

Statement of Operations                                                                                   
-----------------------                                                                                   

Revenue                                           406,998            146,148          41,973       35,158 

Net   Income   (loss)   from    continuing       (475,217)          (587,013)       (491,538)    (100,301)
operations                                                                                                

Net   Income   (Loss)   from    continuing          (0.02)             (0.04)          (0.03)       (0.01)
operations per share                                                                                      

Net Income (Loss) per share                         (0.02)             (0.04)          (0.03)       (0.01)

Other information                                                                                         

Cash dividends declared per common share             0                  0               0             0   

Ratio of earnings to fixed changes                  (13.7)             (11.1)          (19.9)        N/A  

Book value per common share                          0.25               0.27            0.30         0.21 

     Commonwealth was incorporated and began operations on December 14, 1997,                             
and accordingly, the selected financial data represented above includes                                   
operations from that date forward. The above summary financial information of                             
Commonwealth should be read in conjunction with the Audited Financial Statements                          

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of Commonwealth for the year ended December 31, 2000 appended to this proxy     
statement as Appendix B. In addition, refer to page 48 for more detailed        
discussion of the history and operations of Commonwealth.                       

Summary of Empire Pro Forma Financial Information                               

Following is pro forma selected financial data which assumes the      
acquisition was completed as of December 31, 2000 for the balance sheet and     
January 1, 1999 with respect to the statement of operations:                    

Balance Sheet Data                       Empire (Actual)    Empire (Pro Forma)
------------------                         December 31,        December 31,   
                                      2000                2000
U.S.$                                         
---------------------                    ---------------    ------------------

Working Capital (deficit)                  $  (28,591)         $ (407,351)    

Long-term assets                            2,216,969           8,303,868     

Total assets                                2,271,827           8,529,471     

Long-term obligations                           0                   0         

Total stockholders equity                   2,188,378           7,780,713     

Book value per share                           0.17                0.42       

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Income Statement Data       Empire Actual Year      Pro Forma Year              
                 Ended December 31,     Ended December 31,

U.S. $                    2000                   2000         
---------------------       ------------------     ------------------           

Revenues                         $487,979               $760,668                

Net loss from                    (384,911)            (2,073,840)               
continuing operations                                                           

Loss per share from               (0.03)                 (0.11)                 
continuing operations                                                           

Other Data                 (Actual) year           (Pro Forma) year             
----------                 ended December           ended December              
            31, 2000                  31, 2000
-------------------------  --------------           ---------------             

Cash dividends per               $0                      $0                     
common share                                                                    

Book value per share            $0.17                   $0.42                   

   The above summary pro forma financial information regarding Empire should
be read in conjunction with the Unaudited Proforma Consolidated Condensed       
Financial Statements included in this Proxy Statement on page 10.               

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Incorporation by Reference of Information                                       

  Certain information regarding Empire is incorporated herein by reference
and is available by contacting Empire directly or through the website           
www.sec.com. Such information includes without limitation the following:        

 -    Annual Report on Form 10KSB/A for the year ended December 31, 1999

    -    Quarterly Report on Form 10QSB/A for the 9 months ended September 30,
2000.                                                       

     -    Quarterly Report on Form 10QSB/A for the 6 months ended June 30, 2000.

-    Quarterly Report on Form 10QSB/A for the 3 months ended March 31,
2000.                                                       

 -    Annual Report on Form 10KSB/A for the year ended December 31, 2000

-    Report on Form 8-K/A (Omega acquisition).                        

-    Report on Form 8-K/A (Talisman acquisition).                     

-    Report on Form 8-K/A (One E Group acquisition).                  

-    Report on Form 8-K/A (One E Group disposition).                  

-    Report on Form 8-K/A (Bedsole acquisition).                      

POST-ACQUISITION INFORMATION ABOUT EMPIRE                                       

Directors and Officers of Empire                                                

   The following is brief description of the current and intended management
and directors of Empire:                                                        

Name and Municipality of     Age            Position           Number of Empire 
Residence                                                      Securities Owned 
------------------------     ---     ------------------------  ---------------- 

Norman L. Peterson           61      CEO, Treasurer, Chairman       415,000     
Overland Park, Kansas                      of the Board                         

Bryan S. Ferguson            38      President                       32,800     
Lenexa, Kansas                                                                  

John Garrison                48      Director                        52,500     
Overland Park, Kansas                                                           

John R. Dixon                67      Director                        72,500     
Overland Park, Kansas                                                           

Elliott M. Kaplan            49      Director                        27,500     
Overland Park, Kansas                                                           

John L. Hersma               53      Director                       190,000     
Overland Park, Kansas                                                           

Lorne Torhjelm               56      Director(to be appointed     1,628,888*    
White Rock, BC                          pending transaction                     
                   approval)

Sieg Deckert                 65      Director (to be appointed      889,871*    
Grand Cayman, B.W.I.                     pending transaction                    
                   approval)

* Estimated number assuming approval and completion of Merger.                  

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     Norman L. Peterson has been Chief Executive Officer, Treasurer and Chairman
of the Board of Directors of Empire since it began active operations in April of
1999. From 1974 to 1979, he was a senior officer, director and stockholder of   
the holding company that owned Platte Valley Bank and Trust Company as well as a
director and shareholder of the bank. From 1988 to 1996, he was chairman and    
chief executive officer of Advanced Financial, Inc. a publicly held mortgage    
lending financial institution located in Shawnee, Kansas. From 1984 through     
December 2000, he was president of Peterson and Sons Holding Company, a         
privately held investment and financial consulting company and major shareholder
of Empire. From the period 1996 to 1999, Mr. Peterson operated as an independent
businessman performing consulting work for finance and banking related          
activities.                                                                     

Bryan Ferguson is President of Empire. He is a Registered Professional
Geologist who received a Bachelor of Science Degree in Geology from Emporia     
State University in 1984. He has over 15 years of experience in prospect        
evaluation, prospect generation, assessment and management in the oil field and 
engineering consulting industry. He began his professional career as a well-site
geologist based in western Colorado in the middle 80's and for a period of      
approximately 10 years served as a project manager in environmental engineering 
for IT Corporation, an engineering and consulting company. He left IT           
Corporation in 1999 to join the management of Empire. His work experience       
includes electric log interpretation, cuttings interpretation, geological and   
geophysical data interpretation, ranking and high-grading of prospects for      
formulation of exploration strategy, basin analysis, risk assessment, ultimate  
potential and economic analyses, seismic interpretation, basin modelling,       
stratigraphic trap modelling, evaluation of structural relief prospects,        
near-surface static and velocity problems, surface topographic interpretation,  
market analyses, research, economic evaluation, AFE preparation and, industry   
forecast modelling.                                                             

John C. Garrison has been a director of Empire since April 1999. Mr.  
Garrison is a certified public accountant with over twenty-five years of        
experience in accounting, auditing and financial management. He served as       
corporate secretary, director and chief accounting officer of Infinity, Inc., a 
publicly traded oilfield service and oil and gas exploration and development    
company from April 1995 to August 1999. He is also a director of one other      
public traded energy company, Quest Resources, Inc. He is licensed to practice  
public accountancy in Kansas and Missouri and has been involved in an active    
practice since 1976. Mr. Garrison received a degree in business administration  
and accounting from Kansas State University.                                    

     John R. Dixon has been a director of Empire since April 1999. He received a
degree from the University of Kentucky in 1958 in electrical engineering. He has
worked in the public utility industry and as a consultant to private industry   
regarding rate analysis, service-contract negotiations and related functions. He
founded two consulting firms and served as director on several publicly traded  
companies. Mr. Dixon served as President of Synergy, Inc. from 1978 to 1982 and 
from 1982 to 1988 he served as CEO of HSD, Inc., an engineering holding company.
Since 1988, Mr. Dixon has acted as a private consultant to three private clients
of HSD, Inc. and as a consultant to the public corporation to whom HSD was sold.

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Elliot M. Kaplan has been a director of Empire since 1999. He is a    
practicing attorney and an officer and director of Daniels & Kaplan, P.C.,      
Attorneys at Law where he has been employed since 1994. Mr. Kaplan received his 
Bachelor of Arts Degree from Antioch University in 1978 and received both Juris 
Doctor and Master of Business Administration degrees from Whittier College in   
1982. Mr. Kaplan is a member of the American Bar Association, the Missouri Bar, 
and the District of Columbia Bar.                                               

 John L. Hersma has been a director of Empire since 1999. A former Chief
Operating Officer with AMSCO International, a healthcare equipment manufacturer,
which was acquired by Steris, Inc. in 1996. Mr. Hersma has served in various    
sales, marketing and management capacities in the health care industry, retiring
in July of 1996 to pursue personal business interests and investment strategies.
Mr. Hersma graduated in 1968 with a degree in Business Administration and       
Marketing from Northern Illinois University.                                    

Lorne Torhjelm, age 56, is the President & CEO and a director of      
Commonwealth Energy Corp. He has served in these capacities since 1997. Mr.     
Torhjelm is also currently President of R.N.J. Ventures Ltd., a private real    
estate and financial investment corporation. Mr. Torhjelm was actively involved 
in real estate investing from July 1996 to the time that he joined Commonwealth 
in 1997. Mr. Torhjelm has over 30 years of experience in the oil and gas        
industry, and has served as a director of a number of public and private oil and
natural gas companies. He most recently served as a director of Scimitar        
Hydrocarbons Corporation, a public oil and natural gas exploration and          
development company trading on the Alberta Stock Exchange (April 1995 to July   
1996).                                                                          

     Sieg Deckert, age 65, currently serves as a director of Commonwealth Energy
Corp. He has served as a director for Commonwealth since September 1997. Mr.    
Deckert has been an independent businessman with various financial investments  
and land development activities since 1990. From July, 1980 to September, 1990, 
Mr. Deckert, was the founder and Chairman of Muffin Break Intl. Inc., a         
franchise chain of approximately 100 retail stores with operations throughout   
Canada, USA, Australia and New Zealand. Prior thereto, Mr. Deckert was the      
founder and President of the Tropic Sun Fruit and Nut Franchise chain which     
established 19 stores throughout Ontario prior to its sale in April, 1980.      

Compensation of Empire Executives                                               

    The only compensated member of Empire's management is Bryan Ferguson whose
compensation is under $100,000 US per annum. Empire plans to retain the services
of three Commonwealth executives for an aggregate salary not to exceed US$10,000
per month.                                                                      

Impact on Benefits and Compensation of Empire Management                        

The Acquisition will not impact Empire Management's employee benefits,
compensation structure, etc.                                                    

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Principal Holders of Empire Voting Securities after Acquisition                     
(assuming conversion of Exchangeable Shares but excluding options and warrants)     

Name and Municipality of       Number of         % of Class           % of Class    
Residence                      Securities   Prior to Acquisition   After Acquisition
---------------------------    ----------   --------------------   -----------------

                                                                                    
Peterson & Sons Holding Co.     3,975,875           27%                  19.7%      
Overland Park, Kansas                                                               

Owen Enterprises LLC              833,090            6%                   4.1%      
Overland Park, KS                                                                   

Lorne Torhjelm                  1,628,888           N/A                   8.0%      
White Rock, BC                                                                      

Sieg Deckert                      889,871           N/A                   4.4%      
Vancouver, BC                                                                       

                                                        [Enlarge/Download Table]


OPTIONS AND WARRANTS TO PURCHASE EMPIRE COMMON SHARES                                                     

Existing Empire Options                                                                                   

                                                                                            Expiration    
            Name                     Status               Number         Exercise Price        Date       
            ----                     ------               ------         --------------        ----       
                                                                                                          
       Norm Peterson                Director               62,500            $0.60        March 23, 2004  
         John Dixon                 Director               75,000            $0.60        March 23, 2004  
        John Hersma                 Director               62,500            $0.60        March 23, 2004  
       Elliot Kaplan                Director               62,500            $0.60        March 23, 2004  
       John Garrison                Director               62,500            $0.60        March 23, 2004  

    Owen Enterprises LLC       Former Consultant          450,000            $0.60        March 23, 2004  
        Allen Reeves                Attorney              125,000            $1.00        August 9, 2002  
        Karen Taylor               Consultant              50,000            $1.00        August 9, 2002  
        Phil Snowden               Consultant             149,500            $1.00        August 9, 2002  
        Clark Burns                Consultant             151,000            $1.00        August 9, 2002  

         Ted Abele                 Consultant              19,000            $1.00        August 9, 2002  
        Robert Kane                Consultant               4,000            $1.00        August 9, 2002  
       Bryan Ferguson              President              240,000         $1.00/$2.50      June 30, 2005  
       John Garrison               Consultant              75,000            $1.00        August 9, 2002  
        Mike Cuniff                Consultant               8,000            $2.00       December 31, 2002
                                                    -------------------                                   
                                                        1,596,500                                         
                                                    ===================                                   

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Existing Empire Warrants                                                                                  

Name                               Status                  Number          Exercise Price  Expiration Date
----                               ------                  ------          --------------  ---------------
                                                                                                          
Torreon Holdings Inc.             Investor               11,000,000             $3.00         June, 2001  

Replacement Options and Warrants (from Empire) US$ to Cdn$ (US1.00:1.50 Cdn.)                             

                                Status (with                               Exercise Price                 

Name                            Commonwealth)              Number              (US$)       Expiration Date
----                            ------------               ------            ----------    ---------------
Lorne Torhjelm                     Director                83,333              $0.80        Nov. 30, 2004 
                                                           93,906              $1.20        Jan. 18, 2005 

Robert Stewart                     Director                 8,444               $1.20       Dec. 21, 2003 
                                                          100,000               $1.00       Oct. 23, 2005 

Sieg Deckert                       Director                85,734               $1.20       Jan. 18, 2005 

Doug Wolters                       Employee                16,666               $1.20       Dec. 21, 2003 
                                                           16,666               $0.80       Nov. 30, 2004 
                                                            8,333               $1.80      April 17, 2005 

Gordon Bradford                    Director                41,667               $1.20       Jan. 18, 2005 

Fred Chelstad                      Director                33,333               $1.20       Jan. 18, 2005 
                                                  ----------------------                                  
                                                          488,082                                         
                                                  ======================                                  

Note:                                                                                                     

The above figures do not include an anticipated additional 540,000 Empire                                 
options to be granted to members of Commonwealth management who will become                               
members of Empire management after the Acquisition.                                                       

Replacement Warrants                                                                                      

                                  Status (with                             Exercise Price                 
Name                              Commonwealth)            Number               (US$)      Expiration Date
----                              ------------             ------            ----------    ---------------

Sieg Deckert                       Director                50,000               $1.20        Jan., 2002   
                                                           61,602               $1.20        July, 2001   

Doug Wolters                       Employee                 7,083               $1.20        Jan., 2002   

Abe Reimer                                                 41,666               $1.20        July, 2001   

Others                                                      2,083               $1.20        July, 2001   
                                                  ----------------------                                  
                                                          162,434                                         
                                                  ======================                                  

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Public and Insider Ownership                                                    

   Upon completion of the Acquisition the following is the estimated
distribution of Empire Shares (excluding options/warrants).                     

                                        Number of Shares       %
                                          ----------------    ------

Current Empire board members and management         790,300          3.9%     

Commonwealth Management joining Empire (Sieg      2,518,759         12.5%     
Deckert, Lorne Torhjelm)                                                      

Public Shareholders                              16,866,761         83.6%     

                                          ----------------    ------

                                            20,175,820        100.0%

                                          ================    ======

Auditors, Transfer Agent                                                        

The auditors of Empire are Sartain Fishbein & Co., Tulsa, Oklahoma. No
change in auditors or transfer agent is anticipated upon completion of the      
Acquisition. The Transfer Agent of Empire is Interwest Transfer Company, Salt   
Lake City, Utah.                                                                

The Company has invited its principal accountant, Sartain Fischbein & 
Company ("Sartain") to attend or otherwise participate in the Special Meeting   
and Sartain will have the opportunity to make a statement if it desires to do   
so. The Company anticipates that Sartain will be available to respond to        
appropriate questions raised at the meeting.                                    

BUSINESS OF COMMONWEALTH                                                        

Overview                                                                        

 Commonwealth is primarily engaged in the acquisition and exploration of
petroleum and natural gas properties in the United States. Commonwealth was     
incorporated on December 14, 1997 and listed for trading on the Canadian Venture
Exchange (formerly the Alberta Stock Exchange) in 1997. Commonwealth has two    
wholly owned subsidiaries, Blue Mountain Resources Inc. and Commonwealth Energy 
(USA) Inc.                                                                      

Properties                                                                      

1.   Wyoming Properties                                                         

The following are descriptions of Commonwealth's principal producing, 
exploration and development properties located in the State of Wyoming, USA.    
They are held by its wholly owned subsidiary Commonwealth Energy (USA) Inc.     

(a)  7 Channel Sand Prospects, Powder River Basin, Weston County, Wyoming       

    Commonwealth owns a group of 7 Prospects located in the Powder River Basin
in Weston County, Wyoming. All of these Prospects are targeting the Fall River  
(Dakota) Formation and are referred to as the Channel Sand Prospects.           

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Commonwealth purchased these 7 Prospects from a group of geologists in
Wyoming who completed geological studies from which they derived there to be    
potential for economic hydrocarbons.                                            

  Commonwealth has signed an exclusive 5-year agreement with Electro Seise
Inc. of Fort Worth, Texas to employ their proprietary 3-D gravity/E geological  
survey technology in the Powder River Basin of Wyoming. They have completed     
their Airborne Survey on each of the above-mentioned Prospects. Two test wells  
were drilled unsuccessfully to test targets suggested by this survey.           

(b)  Beacon Prospect, Wyoming                                                   

     Commonwealth has acquired a 100% interest in a 2,215.28 acre lease known as
the Beacon Prospect in Converse County, Wyoming. The Prospect is located a few  
miles south of Douglas, Wyoming in T. 32 N., Rgs. 70-71 W. Commonwealth will    
retain a 25% working interest in this well and intends to farm out the balance. 

Detailed correlation of the Canyon Springs interval shows two separate
sandstone units, with the upper sand completely pinching-out along the updip    
(south) edge of the Prospect area. The lower, more massive sand persists        
southward to the outcrop flanking LaBonte Anticline. A strong east-southeast    
plunging nose can be documented with subsurface control, and parallels other    
structural noses to the south associated with LaBonte Anticline. The upper      
Canyon Springs sand pinchout crosses this plunging nose, forming the trap area. 

 Reservoir studies of other areas producing from the Canyon Springs sand
confirm the presence of a very high quality reservoir, with porosities commonly 
exceeding 20% and permeabilities up to several hundred millidarcies. Secondary  
objectives with shows in the immediate area include Jurassic marine sands above 
the Canyon Springs, and the shallower Cretaceous Muddy, Dakota, and Lakota      
sandstones. A 2,600 foot test well will evaluate the section through the Canyon 
Springs sand objective. High gravity (40 degrees API) green oil is anticipated  
however there is no guarantee that we will discover oil or gas on this property.

(c)  The Seedy Draw Extension Prospect, Wyoming                                 

     Commonwealth holds a 45% working interest in 3,304 (1,486 net) acres in the
form of leases near the Giggs Thompson and Seedy Draw oil fields in the Weston  
and Niobrara Counties. The lands lie in Townships 40 and 41N, Ranges 63 and 64W 
in the Powder River Basin. In this area, regional stratigraphic dip is to the   
southwest. Three oil-bearing target zones have been encountered in this area.   
The Upper Cretaceous Turner Sandstone, and the Lower Cretaceous Muddy and Dakota
reservoirs, have formed the principal prospects to date. These lands appear to  
lie over Dakota channel sands.                                                  

(d)  Double Dare Prospect (Powder River Basin, Wyoming)                         

    The prospect is located in the heart of the Powder River Basin, nine miles
northeast of the Sand Dune field (discovered by Kerr McGee). This field has     
produced 30 Million Barrels of Oil.                                             

This new exploration prospect is in the evaluation stage.             

2.   Texas Properties                                                           

The following are descriptions of Commonwealth's principal producing, 
exploration and development properties located in the State of Texas, USA. They 
are held by its wholly owned subsidiary Commonwealth Energy (USA) Inc.          

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(a)  Bedsole Unit, Leon County, Texas                                           

 Commonwealth is the operator of and holds a 50% Working Interest in the
703.96 acre Bedsole Unit located in Leon County, Texas.                         

 Commonwealth hired the engineering firm of William M. Cobb & Associates
Inc., Worldwide Petroleum Consultants to do an Engineering and Economic study of
the existing well bore on the property. The study completed on April 1, 2000    
analyzed the Bossier Zone at a depth of 14,140 feet, the Cotton Valley Sand Zone
at a depth of 12,738 feet, and the Travis Peak Zone at a depth of 9,370 feet.   
The results of the Engineering Study indicate net unproven probable recovery in 
excess of 12 Billion Cubic feet of Gas. This is the combined total in the three 
zones behind casing in the well based on a 160-acre spacing unit.               

 In addition 3D Seismic as well as Electro-Seise Inc.'s airborne Gravity
Seismic technology both indicate that there may be potential Pinnacle Reef      
drilling targets contained within the 704-acre Bedsole Unit. The Bedsole Unit   
lies on trend within 1.5 miles of two Reef discoveries. The Marshall A-1        
discovery has to date produced 90 Billion Cubic feet of Gas in 15 years and     
continues to produce 10 Million Cubic feet of Gas per Day. The Poth Discovery   
has produced more than 60 Billion Cubic feet of Gas from 2 wells and current    
production is more than 20 Million Cubic feet of Gas per Day. Pinnacle Gas, a   
subsidiary of Western Gas Pipeline has a 20-inch pipeline within 3,000 feet of  
the Amerada Hess Bedsole #1 well (Bedsole #1 well).                             

(b)  Camp Colorado Prospect; Coleman County, Texas                              

 Commonwealth is the operator of and holds a 39% working interest in the
Camp Colorado Prospect located in Coleman County, Texas.                        

Coleman County is situated in north central Texas and lies on the Bend
Arch. The Bend Arch is a region well known for its concentration of oil and gas 
fields. This prospect is in the northeast quarter of the county. Production in  
the immediate area is primarily gas.                                            

     There are multiple target formations on the Prospect. The Duffer formation,
Caddo Limestone formation and Marble Falls formation are 3 primary target zones.
Wells in the area drilled to each of the Duffer and Marble Falls formations have
produced in excess of 1 BCF of gas per well.                                    

Commonwealth has drilled 2 wells that are currently producing on the  
Prospect. The Warren / Thurmond #1 well was successfully drilled and completed  
in July 1999. The Warren / Thurmond #2 well was successfully drilled and        
completed in January / February 2000. Commonwealth is now putting together a    
further development program for this Prospect.                                  

(c)  Old World Prospect, Parker County, Texas                                   

Commonwealth owns a 50% working interest in the 3,000 acre Old World  
Prospect located in Parker County, Texas.                                       

   An independent engineering report dated April 9, 1999 by Thos D. Humphery
Oil Properties, Inc. states that the 3,000 acre Old World field contains proven 
and unproven gas reserves. The proved developed producing gross reserves of the 
6 (six) wells currently producing are 844,980,000 cubic feet of gas.            
Furthermore, the report states that there are an additional 716,361,000 cubic   

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feet of gas in gross reserves behind pipe in these 6 (six) wells. In addition to
these proven reserves, engineering opinions suggest the 3,000 acre prospect     
potentially contains additional undeveloped gas reserves.                       

3.   Oklahoma Properties                                                        

The following are descriptions of Commonwealth's principal producing, 
exploration and development properties located in the State of Oklahoma. They   
are held by its wholly owned subsidiary Commonwealth Energy (USA) Inc.          

(a)  Oklahoma Johnston & Tyler Leases                                           

  Blue Mountain Resources Inc.; a wholly owned subsidiary of Commonwealth,
holds a 50% working interest in Johnston and Tyler Lease (Contiguous), a 480    
acre project located in Washington County, Oklahoma, near Bartlesville,         
Oklahoma. The Johnston Lease produces oil from the Wayside sand formation from  
four producing wells at a current of 155.41 bbls/mo. The Tyler Lease produces   
oil from the Wayside and Bartlesville Sand formations and is currently off-line.
There are a total of 29 existing wells on the property. Current engineering     
reserve reports have been ordered but not yet received, as such, reserve values 
have not been included herein.                                                  

(b)  Spring Creek, Oklahoma                                                     

 Commonwealth holds a working interest in the Spring Creek field. At the
moment, no drilling is being conducted on this site. However, in the future     
there may be further exploration conducted on this property.                    

Management Discussion & Analysis of Commonwealth                                

Financing Activities:                                                           

   Commonwealth raised $650,000.00 Cdn in two private placements in 1999 and
2000. The first was completed in July, 1999 raising $500,000.00 Cdn. The second 
was completed between December 1999 - March 2000 and raised $150,000.00 Cdn. The
Company also raised $845,814.30 Cdn through the exercise of Warrants and Stock  
Options. In addition, $1,023,048.70 US was raised through the selling of working
interests in 4 drilling projects completed between July 1999 and April 2000 in  
Wyoming and Texas.                                                              

An approximate total of $1,730,000.00 US was utilized to finance the  
various purchasing, leasing, drilling, and completion activities of the Wyoming 
and Texas projects listed below. The following is a summary of the drilling and 
completion projects completed from January, 1999 to the present:                

        (a)  Camp Colorado Prospect (Coleman County, Texas): Warren/Thurmond
          #1 Well Drilled (July/August, 1999), Warren/Thurmond #2 Well
               Drilled (January/February, 2000); Both wells put onto production.

    (b)  Old World Prospect (Parker County, Texas): Acquired (March,
          1999), Byrd #1 Well Reentered and Completed (October, 1999);
Currently producing.                              

  (c)  Alkali Draw Prospect (Wyoming): F24-5 Beltch Well Drilled
(September, 1999); Dry hole.                      

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          (d)  Madren Draw Prospect (Wyoming): Driscoll 22-19 Well Drilled                                   
               (April, 2000); Dry hole.                                                                      

          (e)  Bedsole Unit (Leon County, Texas): Bedsole #1 Well Completion                                 
               Operations (July, 2000 - Present). Currently under development.                               

Field Operations:                                                                                            

     Commonwealth made a natural gas discovery in Coleman County, Texas on the                               
Prospect known as Camp Colorado. Management anticipates a development program                                
for this 2,600 acre Prospect will be implemented in the next 12 months. Two                                  
successful wells have been drilled on this prospect, the Warren/Thurmond #1 and                              
the Warren/Thurmond #2. They are each producing from two different formations.                               
The two formations where discoveries were made are known as the Caddo Limestone                              
and the Duffer formations. Both formations exist in each well. The wells have                                
been through an evaluation period and management has decided to open up the                                  
alternate zones in each of the wells and then proceed with an initial 3-well                                 
development drilling plan for the prospect. The estimated cost of this drilling                              
plan is $400,000.00 US.                                                                                      

     The first step will be to treat the Warren/Thurmond #1 well to unload the                               
water that has built up in the well preventing production of the natural gas.                                
Then, alternate zones will be opened in each well. Following this, the Company                               
plans to drill 3 additional developmental wells on the property before further                               
evaluating the potential of the field. Gas reserves attributed to the Caddo and                              
the Duffer included 297,029 MCF proved, developed producing and 523,896 MCF                                  
proved, developed non-producing. Management intends to have an Engineering Field                             
Development study completed as the company goes forward with its development                                 
plan.                                                                                                        

     Current Production Data:                                                                                

     The following table shows the production for the month of February 2001 for                             
the 2 wells on the Camp Colorado Project in Coleman County, Texas.                                           

Well Name                Water Production (Barrels       Oil Production               Gas Production         
                                 of Water)              (Barrels of Oil)        MCF (Thousand Cubic Feet)    
------------------       -------------------------      ----------------        -------------------------    

                                                                                                             
Warren/Thormond #1                 0                           0                Well is currently filled with
                                                                                water and needs treatment.   

Warren/Thurmond #2               62.64                         0                          2,422              

     The Bedsole #1 well on the Company's Bedsole Unit in Leon County, Texas is                              
currently undergoing completion operations in the Cotton Valley formation. The                               
estimated cost to complete the entire Cotton Valley zone is approximately $1                                 
million US. A seismic study also suggests the potential of two possible Pinnacle                             
Reef targets on the Prospect. The Company will be completing an additional 3D                                
Seismic study and then will approach several larger oil and gas companies,                                   
offering them the opportunity to participate in drilling for the Pinnacle Reef                               
gas targets. The cost to drill one Pinnacle Reef well is approximately $3                                    
million US. Therefore, the Company may finance this project by inviting a larger                             
oil and gas company to fully finance the drilling and completion of the well for                             
a portion of the working interest.                                                                           

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   A study will be completed on the 3,000 acre Old World Gas field in Parker
County, Texas to determine the most efficient development program to ensure     
maximum recovery of the potential natural gas reserves (441,970 MCF proved,     
developed producing). Currently there is production from 6 wells. The results of
the study will determine the necessary capital investment needed to maximize    
daily production from this field.                                               

     The following table shows the production for the month of February 2001 for
8 wells on the Old World Project in Parker County, Texas.                       

Well Name       Water Production     Gas Production MCF      Oil Production   
             (Barrels of Water)   (Thousand Cubic Feet)   (Barrels of Oil)
------------    ------------------   ---------------------   ----------------   

Byrd Unit #1           0                     588                     0          

Ellis, A-2             0                   1,542                     0          

Lester B#3             0                   2,546                     0          

Leonard #1             0                     420                     0          

Lester B#1             0                     145                     0          

LS Byrd #2             0                       0                     0          

Byrd #1                0                       0                     0          

Ellis B-3              0                       0                     0          

Currently, there are 5 wells producing. The number of wells producing 
changes from month to month.                                                    

Commonwealth's wholly owned subsidiary 638260 Alberta Inc. owns small 
Working Interests and Royalty Interests in a group of 740 proven producing oil  
and natural gas wells as well as several plant facilities and gas gathering     
facilities throughout Alberta, Canada. The majority of the wells are located in 
the Vermilion area of East Central Alberta. 90% of the 740 wells are designated 
as natural gas wells. The portfolio of oil and gas assets are fully managed by  
an intermediate operator, Signalta Resources Limited. Commonwealth purchased    
638260 Alberta Inc. in December, 1999. The cash flow realized in 2000 from      
638260 Alberta Inc. was $101,716.28 compared with monthly costs of approximately
$1,000.00.                                                                      

In the Powder River Basin of Wyoming, Commonwealth owns ten Oil & Gas 
Prospects. They are as follows:                                                 

  1.       Seedy Draw            6.       West Hay Creek
2.       Double Dare           7.       Hay Creek   
3.       Beacon                8.       Jim Creek   
4.       Alkali Draw           9.       West Fork   
   5.       Madren Draw           10.      Lodgepole Creek

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Management of Commonwealth believes that a 10 well drilling program is
necessary to evaluate the potential of further development programs on the 10   
Wyoming Prospects listed above. The costs to drill on each of these Prospects   
vary according to the target formations depth. Drilling and Completion costs can
range from $150,000.00 to $500,000.00 US per well.                              

The estimated amount of capital that is needed to proceed with the    
development plans on the Camp Colorado and Bedsole Prospects in Texas is        
approximately $1,400,000.00 US. The estimated capital needed to properly assess 
the development potential of the 10 Wyoming Prospects is approximately $3       
million US. Further studies are to be completed to evaluate the necessary       
capital investment necessary to extract the hydrocarbon reserves of the         
Company's Johnston & Tyler Lease in Oklahoma and the Old World Prospect in      
Texas.                                                                          

Business of Empire                                                              

Introduction                                                                    

  Empire Energy Corporation ("Empire") is a reporting company under the US
1934 Securities Act whose common shares trade on the OTC bulletin board under   
ticker symbol EECI.OB. The Company is headquartered in Overland Park, Kansas    
(Kansas City area). Empire was incorporated in November of 1983 in the state of 
Utah under the name Medivest, Inc. Medivest engaged in various business         
enterprises and eventually filed for protection under the bankruptcy laws. The  
Company emerged from bankruptcy and had its corporate charter reinstated in 1995
but remained inactive until 1999. At that time, Peterson & Sons Holding Company 
acquired control by purchasing a majority of the then outstanding shares of     
Empire from the majority shareholder. On May 17, 1999, the shareholders of      
Medivest approved a change of name from Medivest Inc. to Empire Energy          
Corporation and Empire commenced commercial activity in the oil and gas         
industry. Empire was initially financed through the issuance of convertible     
debentures (now converted) at $1.00 US per Empire share, raising $500,000 in    
1999.                                                                           

The Company was subsequently reorganized with new management with the 
objective of accumulating oil and gas production and properties at a time when  
oil and gas prices were at 25-year lows. The primary prospect, at inception, was
the opportunity presented in the country of Nicaragua. In the interim, the      
Company began participating in an exploration program in Tennessee and realized 
its first revenues from that program in late 1999. In November 2000, the Company
acquired a working interest in a natural gas field in Texas. An overview of     
these projects as well as the Company's plan for growth is provided below.      

Empire is engaged in oil and natural gas exploration, development and 
production operations. Empire's operations primarily involve oil and gas        
exploration, development and production in the Cumberland Plateau Region of     
north-central Tennessee (Overton County). Empire is also expanding its          
operations into an international setting and has recently focused in the areas  
of Central America and Africa. Empire owns 51% of Industria Oklahoma-Nicaragua, 
S.A., a Nicaraguan company that has been legally, technically and financially   
qualified under Nicaragua's 1998 Hydrocarbon law. The Company is currently      
awaiting the opening of a licensing round by the country in which it anticipates
that a hydrocarbon exploration concession will be granted. The licensing round  
refers to a bidding round required by Nicaraguan Hydrocarbon Law No. 286 whereby
bid packages will be provided to qualified companies, bids prepared and returned
and a possible bid award made in the form of an exploration concession. Empire  
has a 100% wholly-owned subsidiary named Omega International, Inc., which       
operates in the country of Ghana, West Africa. Operations in this subsidiary    
have been suspended pending economic and political difficulties in the West     
African sub-region.                                                             

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    Empire's corporate strategy is to expand its domestic reserve base through
acquisitions and additional exploration and developmental drilling under its    
existing oil and gas exploration program and to reinvest a substantial portion  
of the cash flow generated from its domestic operations to acquire or           
participate in international prospects that have the potential for larger       
petroleum reserves and greater revenues.                                        

Exploration and Development Activities                                          

Tennessee Exploration Program                                                   

    In the third quarter of 1999, Empire signed an agreement to participate in
a Joint Venture Exploration Agreement with Pryor Oil Company of Parkville,      
Missouri where Empire has a 60% working interest. Pryor Oil, an unrelated entity
whose Tennessee operations are based in Livingston, Tennessee, had been engaged 
in the evaluation of large areas of central Tennessee, where Overton County is  
located, to eastern Tennessee, where significant reserves of natural gas had    
been reported to have been discovered by others. Pryor planned to establish     
operations and explore for oil and gas in the north-central portion of the state
and engaged Empire in a Participation Agreement to conduct the exploration      
program. In this program, Empire bears its share of the acquisition, drilling,  
extraction and production costs incurred and Pryor Oil is responsible for       
conducting and managing all drilling, production and marketing activities to    
exploit the prospects. To date, this arrangement has produced cash flows of     
$20,000 to $80,000 per month and provided a gross profit on the investment. This
prospect is characterized by very shallow reserves (less than 2,000 feet), light
sweet crude (41 gravity and low sulfur), and favorable, available leasing       
conditions. Since initiating this project in mid 1999, Empire has returned a    
profit on its investment and expects to continue as such over this long-term    
development project.                                                            

The exploration program was developed under the concept of using      
technology-based criteria to search for and locate oil and gas producing        
reservoirs. Target reservoirs are all present in geologic formations that are no
deeper than 2,000 feet below ground surface. Of the current producing oil wells 
in the program, oil production is from depths of 835 feet and 790 feet below    
ground surface.                                                                 

During the fiscal year ended December 31, 1999, domestic oil sales for
Empire from Tennessee included production during the fourth quarter only. A new 
field discovery well was spud on September 9, 1999 and was brought onto         
production on October 5, 1999. Total production from the field during this      
period (fourth quarter, fiscal year 1999) was 6,577 barrels of oil. Total field 
production through 2000 was 43,856 barrels. Sales from the program are to       
Somerset Refinery, Inc., Somerset, Kentucky and represented 100% of Empire's    
consolidated oil revenues at this time.                                         

     The program currently consists of the oil production and an estimated seven
(7) potential gas wells that are currently categorized as "dry hole oil wells". 
These seven gas wells have not been measured, are not currently producing and   
are shut-in awaiting a gas pipeline in which to sell the gas. There is no       
assurance or guarantee that the Company will be able to produce and sell gas    
from these wells. In November 1999, an offset well was drilled which encountered
commercial quantities of gas but the well has been shut-in awaiting a market in 
which to sell the gas. The second producing oil well in the program was spud in 
fiscal year 2000 (January 25, 2000) and brought onto production on March 5,     
2000. During the year 2000, the program drilled an estimated nine (9) wells with
approximately 70% encountering commercial quantities of hydrocarbons. The       
production is characterized as a gas-driven, fractured porosity and, as such,   
quantitative volumetrics of hydrocarbons cannot be reliably estimated and thus  
cannot be categorized as proved reserves. Initial oil production data can be    
measured but due to the uncertainty of the nature and extent of the fractures in
which the hydrocarbons reside, including the aerial extent, the total volume is 
unknown. To date, the three oil wells that have been placed onto production have

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produced 15,200, 14,900 and 15,500 barrels of oil respectively. In addition, the
region has proven to be prolific in natural gas. Approximately 70% of the wells 
drilled encounter significant natural gas. The gas encountered is considered    
significant based on observations made in the field during drilling operations  
and is not based on actual measurements or calculations of pressure, flow and   
volume. The blow-down and re-pressure cycles observed during drilling are the   
basis for this observation and are in no way intended to be relied upon for     
ultimate production potential or to guarantee potential reserves or revenues.   
Although there are currently no gas pipelines in which the gas can be delivered 
to market, dialogue with pipeline companies was initiated in late 2000 with the 
anticipation that a market may be available in 2001 in which the gas reserves   
may be sold. The closest pipeline at the present time is located approximately  
four miles from the Company's gas reserves. The Company was advised in February 
2001 that a 4" gas pipeline was being laid into the area that would provide a   
market for which the Company can sell its gas reserves. According to the        
pipeline company, Coastal Hydrocarbons, LLC, the pipeline system should be      
completed on or about June 1, 2001.                                             

 In so far as additional drilling targets are present on existing leases
that are held in the program, it is the desire to lease an extensive land block 
(32,000 acres) in a region located to the east of the current program drill     
sites. This acreage is believed to be host to deeper, more extensive formations.
The premise for this belief is the fact that in the central part of the state,  
where the Company currently operates, the producing formations extend to        
approximately 2,000 feet deep. In the eastern portion of the state, these same  
formations appear at a depth of 5,000 feet and are producing hydrocarbons at    
higher rates. As such, the Company feels that the area in between will have     
deeper formations with higher production that warrants exploration. Operating   
costs to drill and produce on the acreage are expected to be higher however, as 
mentioned above, production of oil and gas is expected to be higher as well.    
Additionally, gas pipelines are present in the vicinity providing an immediate  
market in which to sell any production that is encountered.                     

    In 2000, Empire expended an estimated $192,000 in the program and realized
revenues of approximately $488,000. The average cost to Empire to drill a       
producing well in this program was $42,000 including completion costs. Moreover,
the dry hole costs averaged approximately $12,000 per well.                     

  The initial exploration activity has resulted in an improved exploration
database and the program is actively engaged in a leasing and exploration       
program to expand activities and prospects in the region. Moreover, the operator
is currently conducting an expanded seismic shoot in an effort to further       
understand the geology of the region using existing wells and existing          
production horizons as control points. Planned activities include the drilling  
of additional wells during the year 2001.                                       

Nicaraguan Exploration Activities                                               

    Empire has a 51% ownership in Industria Oklahoma-Nicaragua S.A., a company
that has been technically, legally and financially qualified by the government  
of Nicaragua to conduct oil exploration under a new law (circa 1998) in that    
country. Industria Oklahoma-Nicaragua, S.A. along with Empire and other members 
of the consortium are actively pursuing the execution of a contract with the    
government of Nicaragua for a contract (oil and gas concession) allowing the    
firms the rights to explore on a substantial acreage block, never before        
explored in the Central American nation. In management's view, Nicaragua has not
been adequately explored and data suggests that this land mass may be host to   
hydrocarbons. Evidence of the presence of hydrocarbons is provided by the first 
hand observation of the live oil seeps in the country as well as geological data
provided from various sources including a two-series article appearing in the   
Oil and Gas Journal (February 7 and February 14, 2000 issues) that describe the 
geological conditions of the country and support the concept of the presence of 
hydrocarbons. Empire management has traveled to the country, representatives    
have met with officials and an ongoing dialogue between energy ministry         

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officials and company representatives are continuing. It is anticipated that    
once the licensing round is officially opened by the government, the consortium 
will be granted a concession. Plans are being evaluated to joint venture with a 
moderate to large independent oil company to fully exploit this prospect. At    
this time, the Company has not identified a possible joint venture partner and  
does not have an executed agreement or letter of intent. There are four other   
oil companies and three individuals that own the balance of the 49% of Industria
Oklahoma-Nicaragua S.A. not owned by Empire. Empire has been involved in and    
working towards this concession for a period of nearly two years.               

Texas Natural Gas Prospect                                                      

 Empire acquired a 44.6% working interest in a 704-acre lease located in
Leon County, Texas of which Commonwealth currently owns 50%. The Bedsole lease  
has one well, drilled by Amerada Hess to 16,300 feet deep, completed and logged.
Seismic information suggests that there may be pinnacle reef structures present 
on the lease that could be host to hydrocarbons. Similar structures in the area 
have produced in excess of 30 BCF. A 20" gas pipeline is present within 3000    
feet of the well. Empire will acquire an additional 50% working interest in the 
lease at the close of the Commonwealth transaction and will become the operator 
of the lease. It is anticipated that once Empire owns 94.6% or greater that the 
opportunity to do a farm-out for drilling the reefs will be increased           
significantly.                                                                  

Empire does not have formal reserve reports on its properties and does not claim
to have any "proven reserves".                                                  

Other Activities                                                                

    In February 2000, the Company acquired all of the outstanding common stock
of Omega International, Inc. (Omega) for 560,000 shares of the Company's common 
stock. The transaction was accounted for as a purchase for financial accounting 
purposes. Omega is focused on business opportunities in Africa, primarily the   
purchase and resale of minerals in Ghana. Activities in this subsidiary have    
been suspended due to the depressed price of gold on the international market as
well as the economic and political unrest in the West African sub-region.       
Messrs. Ferguson and Garrison received 20,000 Empire shares each as part of the 
transaction in that they sold their interests in Omega to Empire. Refer to Form 
8-K/A filed with the SEC dated March 23, 2001 with respect to this transaction. 

In April 2000, the Company acquired substantially all of the assets of
Talisman Marketing, Inc. for 562,150 shares of the Company's common stock. The  
objective of this acquisition was to build a "non-energy" business unit as well 
as to build the asset base of the Company. Subsequently, this activity lost key 
personnel and has been discontinued. Refer to Form 8-K filed with the SEC dated 
March 26, 2001 with respect to this transaction.                                

   In June 2000, the Company acquired a majority ownership interest in One E
Group, Inc. in exchange for a total of 846,667 shares of the Company's common   
stock. The objective of this acquisition was an attempt to continue construction
of the "non-energy" business unit. One E Group provides leading-edge technology 
solutions to companies seeking to broaden their market penetration via the      
Internet. Complementing these activities is the Company's ability to design and 
host web sites. In August 2000, One E Group lost the services of critical       
personnel and key proposed contracts and, as a result, the Company discontinued 

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operations and liquidated equipment and assets in settlement of corporate       
liabilities. Subsequently, the Company sold its investment in One E Group and   
any claims the Company may have against the sellers to Peterson & Sons Holding  
Company in exchange for 750,000 shares of Empire common stock. Refer to Form 8-K
filed with the SEC dated March 27, 2001 with respect to this transaction.       

     The Company has discontinued any efforts to build a non-energy business and
intends to focus entirely on oil and gas revenue production.                    

Material Agreements:                                                            

     Pryor Oil Co.: Participation Agreement - The agreement dated August 6, 1999
between Pryor Oil Co. and Empire provides for Empire to participate in the      
Tennessee drilling program on a 60% working interest basis. Empire has the      
option to participate on a well by well basis with no obligation to proceed,    
allowing it the opportunity to review technical data for each proposed well     
and/or completion.                                                              

     Industria Oklahoma-Nicaragua, S.A.: Participation Agreement - The agreement
dated April 24, 1999 between Industria Oklahoma-Nicaragua, S.A. and Empire      
provides for Empire to fund approximately 67% of the costs through the first    
well estimated at US$1.5 million. As such, Empire has and will continue to fund 
all activities related to obtaining the concession and their proportionate share
of drilling the first well.                                                     

     Mike Cunniff: Consulting Agreement - The agreement provides for Mr. Cunniff
to provide consulting services related to market conditions, investor relations 
and public relations. The terms of the agreement are as follows: six-month term 
(September 2000 through February 2001), $1,500 per month fee, 2,000 options per 
month at an exercise price of $2.00 per share. In March 2001, this agreement was
extended for one-year under similar terms.                                      

SHAREHOLDER VOTE ITEM NUMBER 2 - INCREASE NUMBER OF BOARD OF DIRECTORS
----------------------------------------------------------------------
FROM FIVE TO SEVEN                                                              
------------------                                                              

The second item subject to shareholder vote is the amendment and      
restatement of Empire's Articles of Incorporation in order to expand the number 
of directors sitting on its board from five (5) to seven (7). No shareholder    
action is being taken with respect to electing directors in connection with the 
expansion of Empire's board. However, Messrs. Lorne Torheljm and Sieg Deckert   
will be appointed to Empire's Board of Directors in connection with the merger  
transaction for the interim period until Empire's next annual shareholder       
meeting. See "Directors and Officers of Empire" on page 43 for information      
regarding Messrs. Torheljm and Deckert. Please note, all of the items subject to
shareholder vote must be approved for any of the items to be approved.          

SHAREHOLDER VOTE ITEM NUMBER 3 - AUTHORIZATION AND ISSUANCE OF CLASS B          
----------------------------------------------------------------------          
REDEEMABLE VOTING COMMON SHARES                                                 
-------------------------------                                                 

     The third item subject to shareholder vote is the amendment and restatement
of Empire's Articles of Incorporation to provide for the authorization and      
issuance of 6,750,000 shares of Class B Redeemable Voting Common Shares with a  
par value of $.0001. Please note, all of the items subject to shareholder vote  
must be approved for any of the items to be approved.                           

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OTHER MEETING MATTERS                                                           

The Management of Empire knows of no other matters to come before the 
Meeting other than those referred to in the Notice of Meeting. Should any other 
matters properly come before the Meeting, the shares represented by the Proxy   
solicited hereby will be voted on such matters in accordance with the best      
judgment of the persons voting the proxy.                                       

WHERE YOU CAN FIND MORE INFORMATION                                             

  Empire files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,    
D.C., New York, New York and Chicago, Illinois. Please call the SEC at          
1-800-SEC-0330 for further information on the public reference rooms. Our SEC   
filings are also available to the public on the Free Edgar website at           
"http://www.freeedgar.com" and at the website maintained by the SEC at          
"http://www.sec.gov".                                                           

     The SEC allows us to "incorporate by reference" information into this proxy
statement, which means that we can disclose important information to you by     
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy statement, except  
for any information superseded by information in, or incorporated by reference  
in, this proxy statement. This proxy statement incorporates by reference the    
documents set forth below that we have previously filed with the SEC. These     
documents contain important information about our company and its finances.     

Empire SEC Filings                          Period                              
(File No. 1-10077)                                                              
---------------------------------           ----------------------------------  

Annual Report on Form 10-KSB/A              Year ended December 31, 1999        
Quarterly Report on Form 10-QSB/A           Quarter ended March 31, 2000        
Quarterly Report on Form 10-QSB/A           Quarter ended June 30, 2000         
Quarterly Report on Form 10-QSB/A           Quarter ended September 30, 2000    
Annual Report on Form 10-KSB/A              Year ended December 31, 2000        
Current Report on Form 8-K/A                Filed on May 10, 2001               
Current Report on Form 8-K/A                Filed on May 10, 2001               
Current Report on Form 8-K/A                Filed on May 10, 2001               
Current Report on Form 8-K/A                Filed on May 10, 2001               
Current Report on Form 8-K/A                Filed on May 10, 2001               

If you are a stockholder, we may have sent you some of the documents  
incorporated by reference, but you can obtain any of them by contacting Empire  
directly, or the SEC. Documents incorporated by reference are available from us 
without charge, excluding all exhibits unless we have specifically incorporated 
by reference an exhibit in this proxy statement. Stockholders may obtain        
documents incorporate by reference in this proxy statement by requesting them in
writing, by e-mail or by telephone from the appropriate party at the following  
address:                                                                        

Empire Energy Corporation                                                       
7500 College Blvd.                                                              
Suite 1215                                                                      
Overland Park, KS 66210                                                         
Attn: Corporate Secretary                                                       
Tel: (913) 469 - 5615                                                           
bryan@empireenergy.com                                                          

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You should rely only on the information contained or incorporated by  
reference in this proxy statement. We have not authorized anyone to provide you 
with information that is different form what is contained in this proxy         
statement. This proxy statement is dated May 10, 2001.                          

CERTIFICATES

The foregoing constitutes full, true and plain disclosure of all material facts 
relating to the securities of Empire assuming completion of the transactions    
described herein.                                                               

------------------------                    -------------------------           
Norman Peterson                             Bryan Ferguson                      
Chief Executive Officer,                    President                           
Chief Financial Officer                                                         

------------------------                    -------------------------           
John Garrison                               John Hersma                         
Director                                    Director                            

Dated May 10, 2001                                                              

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                              Commonwealth Energy Corp.Commonwealth Energy Corp.
Consolidated        
Financial Statements
           (Expressed in Canadian Dollars)
                             December 31, 1998December 31, 2000, 1999 and 1998

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Contents                                                                        

                                                                  Page
                                                                  ----

Auditors' Report                                                          1     

Consolidated Balance Sheets                                               2     

Consolidated Statements of Operations and Deficit                         3     

Consolidated Statements of Cash Flows                                     4     

Notes to the Consolidated Financial Statements                         5-16     

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Report of Independent Auditors                                                  

To the Shareholders of                                                          
Commonwealth Energy Corp.                                                       

We have audited the consolidated balance sheets of Commonwealth Energy Corp. as 
at December 31, 2000 and 1999 and the consolidated statements of operations and 
deficit and cash flows for the years ended December 31, 2000, 1999 and 1998.    
These financial statements are the responsibility of the company's management.  
Our responsibility is to express an opinion on these financial statements based 
on our audits.                                                                  

We conducted our audits in accordance with U.S. generally accepted auditing     
standards for the years ended December 31, 2000, 1999 and 1998. Those standards 
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes   
examining, on a test basis, evidence supporting the amounts and disclosures in  
the financial statements. An audit also includes assessing the accounting       
principles used and significant estimates made by management, as well as        
evaluating the overall financial statement presentation.                        

In our opinion, these consolidated financial statements present fairly, in all  
material respects, the consolidated financial position of the company as at     
December 31, 2000 and 1999 and the results of its operations and its cash flows 
for the years ended December 31, 2000, 1999 and 1998 in accordance with Canadian
generally accepted accounting principles.                                       

                                                       /s/  GRANT THORNTON LLP
Vancouver, Canada                                       ------------------------
April 20, 2001                                          Chartered Accountants   

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--------------------------------------------------------------------------------

Commonwealth Energy Corp.                                                       
Consolidated Balance Sheets                                                     
(expressed in Canadian Dollars)                                                 
                                                 December 31       December 31
                                                        2000              1999
--------------------------------------------------------------------------------
Assets                                                                          
Current                                                                         
  Cash and cash equivalents                       $   30,419        $   54,147
  Short term investments                              67,478            14,433
  Receivables                                        153,236            59,795
  Prepaids                                             3,711             2,427
                                                  ----------        ----------

                                                     254,844           130,802
Property and equipment (Note 4)                     3,553,505         3,164,855 
Unevaluated properties (Note 5)                     2,121,619         1,506,056 
Investment in Comanche Energy, Inc. (Note 6)           35,000              --   
                                                  ----------        ----------

                                                  $5,964,968        $4,801,713
                                                  ==========        ==========

--------------------------------------------------------------------------------

Liabilities                                                                     
Current                                                                         
  Payables and accruals                          $   255,865       $   322,785
  Advances from directors (Note 7)                   191,157           168,653
                                                 -----------       -----------

                                                     447,022           491,438
Future income taxes (Note 8)                          172,842              --   
                                                 -----------       -----------

                                                     619,864           491,438
                                                 -----------       -----------
Shareholders' Equity                                                            
Capital stock (Note 9)                              6,994,764         5,723,950 
Capital stock subscribed (Note 9)                     233,731              --   
Share subscriptions receivable                           --              (5,501)
Deficit                                            (1,883,391)       (1,408,174)
                                                 -----------       -----------

                                                   5,345,104         4,310,275
                                                 -----------       -----------

                                                 $ 5,964,968       $ 4,801,713
                                                  ===========       ============

--------------------------------------------------------------------------------

Commitments (Note 12)                                                           

See accompanying notes to the consolidated financial statements.

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                                                        [Enlarge/Download Table]


----------------------------------------------------------------------------------------------------                        

Commonwealth Energy Corp.                                                                                                   
Consolidated Statements of Operations and Deficit                                                                           
(expressed in Canadian Dollars)                                                                                             
                                                                Year            Year            Year                        
                                                               Ended           Ended           Ended                        
                                                         December 31     December 31     December 31                        
                                                                2000            1999            1998                        
----------------------------------------------------------------------------------------------------                        
                                                                                                                            
Oil and gas activities                                                                                                      
   Production revenues                                  $    406,998    $    146,148    $     41,973                        
                                                        ------------    ------------    ------------                        

Expenses                                                                                                                    
   Operating                                                 187,380         153,043          15,388                        
   General and administrative                                480,379         307,355         370,387                        
   Interest                                                   34,608          52,838          24,649                        
   Depletion and depreciation                                115,881         219,925         123,087                        
Write-down of investment in Comanche Energy, Inc.                                                                           
   (Note 6)                                                   63,967            --              --                          
                                                        ------------    ------------    ------------                        

                                                             882,215         733,161         533,511                        
                                                        ------------    ------------    ------------                        

Net loss                                                $   (475,217)   $   (587,013)   $   (491,538)                       
                                                        ============    ============    ============                        

Loss per share                                          $      (0.02)   $      (0.04)          (0.03)                       
                                                        ============    ============    ============                        

Weighted average common shares outstanding                21,234,584      16,137,348      14,290,180                        
                                                        ============    ============    ============                        

----------------------------------------------------------------------------------------------------                        

Deficit, beginning of year                              $ (1,408,174)   $   (821,161)   $   (329,623)                       

Net loss                                                    (475,217)       (587,013)       (491,538)                       
                                                        ------------    ------------    ------------                        

Deficit, end of year                                    $ (1,883,391)   $ (1,408,174)   $   (821,161)                       
                                                        ============    ============    ============                        

----------------------------------------------------------------------------------------------------                        

                     See accompanying notes to the consolidated financial statements.                                       

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--------------------------------------------------------------------------------------------------------------------------- 

Commonwealth Energy Corp.                                                                                                   
Consolidated Statement of Cash Flows                                                                                        
(expressed in Canadian Dollars)                                                                                             
                                                                               Year                Year                Year 
                                                                              Ended               Ended               Ended 
                                                                        December 31         December 31         December 31 
                                                                               2000                1999                1998 
--------------------------------------------------------------------------------------------------------------------------- 

Cash derived from (applied to)                                                                                              

   Operating                                                                                                                
     Net loss                                                           $  (475,217)        $  (587,013)        $  (491,538)
     Depletion and depreciation                                             115,881             219,925             123,087 
     Write-down of investment in Comanche Energy, Inc.                                                                      
       (Note 6)                                                              63,967                --                  --   
     Amortization of reorganization costs                                      --                17,363              17,363 
     Change in non-cash operating working capital (Note 10)                 (51,736)           (112,465)            182,745 
                                                                        -----------         -----------         ----------- 

                                                                           (347,105)            462,190)            168,343)
                                                                        -----------         -----------         ----------- 
   Financing                                                                                                                
     Issue of capital stock, net of issue costs                           1,001,315             474,499             766,711 
     Capital stock subscribed                                               233,731                --                44,516 
     Advances from directors                                                 21,504              21,881              85,869 
     Cash assumed on acquisition of 638260 Alberta Inc.                         908                --                  --   
                                                                        -----------         -----------         ----------- 

                                                                          1,257,458             496,380             897,096 
                                                                        -----------         -----------         ----------- 
   Investing                                                                                                                
     Property and equipment                                                (881,036)            (89,456)           (833,430)
     Prepaids and deferred charges                                             --                90,160              90,159 
     Short term investments                                                 (53,045)            (14,433)               --   
                                                                        -----------         -----------         ----------- 

                                                                           (934,081)            (13,729)           (743,271)
                                                                        -----------         -----------         ----------- 

Net (decrease) increase in cash                                             (23,728)             20,461             (14,518)

Cash and cash equivalents                                                                                                   

   Beginning of year                                                         54,147              33,686              48,204 
                                                                        -----------         -----------         ----------- 

   End of year                                                          $    30,419         $    54,147         $    33,686 
                                                                        ===========         ===========         =========== 

--------------------------------------------------------------------------------------------------------------------------- 

Supplementary cash flow information                                                                                         
   Interest paid                                                        $     1,929         $    25,654         $     1,932 
Non-cash investing and financing transactions                                                                               
   not included in cash flows                                                                                               
   Trade payables assumed by purchaser on sale of                                                                           
     capital assets                                                     $   101,479         $      --                  --   
   Capital assets acquired through the assumption of                                                                        
     trade payables                                                     $      --           $   202,500         $      --   
   Investment in Comanche Energy, Inc. acquired in                                                                          
     exchange for capital assets (Note 6)                               $    98,967         $      --           $      --   
   Capital stock issued to acquire 638260 Alberta Inc.                                                                      
     less cash assumed (Note 3)                                         $   274,092         $      --           $      --   
   Capital stock issued for settlement of payables                      $      --           $    23,250         $      --   
   Capital stock issued to acquire resource property                    $      --           $   112,500         $      --   
   Capital stock issued for share subscriptions                         $      --           $    50,017         $      --   

--------------------------------------------------------------------------------------------------------------------------- 

                           See accompanying notes to the consolidated financial statements.                                 

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--------------------------------------------------------------------------------

Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

1.   Nature of operations and going concern                                     

Commonwealth Energy Corp. is a junior petroleum and natural gas exploration and 
development company with interests in Wyoming, Texas and Oklahoma, U.S.A. and   
Alberta, Canada.                                                                

The company was incorporated under the laws of Alberta on December 14, 1987. On 
December 12, 1997, the company acquired 100% of the shares of Blue Mountain     
Resources Inc. and Commonwealth Energy (U.S.A.) Inc., both incorporated and     
carrying on petroleum and natural gas exploration and development in the United 
States. On January 1, 2000, the company acquired 100% of the shares of 638260   
Alberta Ltd. carrying on petroleum and natural gas exploration and development  
in Alberta, Canada (Note 3).                                                    

These consolidated financial statements have been prepared on a going concern   
basis, which assumes the realization of assets and the settlement of liabilities
in the normal course of business. The application of the going concern concept  
is dependent upon the company's ability to achieve future profitable operations 
and to generate sufficient cash flows to pay operating costs and for future     
exploration and development. Management is of the opinion that sufficient       
working capital will be obtained from operations, debt financing or share       
offerings to meet the company's liabilities and commitments as they come due.   

--------------------------------------------------------------------------------

2.   Summary of significant accounting policies                                 

Principles of consolidation                                                     

The consolidated financial statements include the accounts of the company and   
its wholly-owned subsidiaries, Blue Mountain Resources Inc., Commonwealth Energy
(U.S.A.) Inc. and 638260 Alberta Ltd. The results of operations of these        
subsidiaries have been included from their date of acquisition and all material 
intercompany balances and transactions have been eliminated.                    

Use of estimates                                                                

In preparing the financial statements, management is required to make estimates 
and assumptions that affect the reported amounts of assets and liabilities, the 
disclosure of contingent assets and liabilities at the date of the financial    
statements and reported amounts of revenue and expenses during the period.      
Actual results could differ from these estimates.                               

General principles                                                              

These consolidated financial statements are presented in Canadian dollars and   
are prepared in accordance with accounting principles generally accepted in     
Canada. The accounting principles used conform in all material respects to      
accounting principles generally accepted in the United States except as         
disclosed in Note 15.                                                           

Short term investments                                                          

Short term investments consist of interest bearing certificates of deposit      
carried at cost.                                                                

Other investments                                                               

The company accounts for investments in companies over which it does not        
exercise control or significant influence at their historic cost. Declines in   
the market value of such investments below historic cost are recognized when    
such declines are considered to be other than temporary.                        

                                                                               5

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

2.   Summary of significant accounting policies (Continued)                     

Joint operations                                                                

Substantially all petroleum and natural gas activities are conducted jointly    
with others. These financial statements reflect only the company's proportionate
interest in such activities.                                                    

Resource properties and equipment                                               

Capitalized costs                                                               

The company uses the full cost method of accounting for petroleum and natural   
gas properties. Under this method, direct costs incident to the acquisition,    
exploration, and development of properties (both developed and undeveloped),    
including costs of abandoned leaseholds, lease rentals, unproductive wells, and 
well drilling and equipment costs, are capitalized. The company expenses all    
general corporate overhead and other internal cost not directly identified with 
acquisition, exploration and development activities.                            

Generally, no gains or losses are recognized on the sale or disposition of      
petroleum and natural gas properties, except for significant disposals for which
a gain or loss is included in earnings. Income in connection with contractual   
services performed on wells in which the company has an economic interest is    
credited to petroleum and natural gas properties as a component of the full cost
pool.                                                                           

Depletion and depreciation                                                      

Depletion and depreciation of petroleum and natural gas properties and of well  
equipment is provided using the unit-of-production method based upon estimated  
proven reserves. The costs of unevaluated properties are excluded from costs    
subject to depletion but are evaluated regularly by management to ascertain     
whether an impairment has occurred. Exploratory dry holes are transferred to    
costs subject to depletion when it is determined that proven reserves are not   
economically producable for the lease. Geological and geophysical costs such as 
seismic surveys and library data which cannot be associated with the potential  
acquisition of specific properties are included in the amortization base as     
incurred. For depletion and depreciation purposes, relative volumes of petroleum
and natural gas production and reserves are converted at the energy equivalent  
conversion rate to equivalent barrels of crude oil.                             

Future site restoration costs                                                   

Estimated future site restoration costs are provided for using the              
unit-of-production method and are included in the provision for depletion and   
amortization. Costs are estimated by the company based on current regulations,  
costs, technology and industry standards.                                       

Ceiling test                                                                    

In applying the full cost method, the company performs a ceiling test           
calculation whereby the carrying value of petroleum and natural gas properties  
is compared to estimated undiscounted future net cash flows from the production 
of proven reserves. Net cash flows are estimated using period end prices, less  
estimated royalties and operating expenses, estimated future general and        
administrative expenses, financing costs and income taxes. Should this          
comparison indicate that the carrying value exceeds future net cash flows, the  
excess is charged against earnings as additional depletion and depreciation.    

                                                                               6

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

2.   Summary of significant accounting policies (Continued)                     

Reorganization costs                                                            

Reorganization costs are being amortized on the straight line method over three 
years.                                                                          

Foreign currency translation                                                    

Monetary assets and liabilities of the company's wholly-owned U.S.A.            
subsidiaries are translated into Canadian dollars at the year end rate of       
exchange, and non-monetary assets and liabilities at the exchange rates in      
effect at the time of acquisition or issue. Revenue and expenses are translated 
at the average rate of exchange for the year. Exchange gains or losses arising  
on translation are included in net income or loss for the period.               

Stock options                                                                   

The company has outstanding stock options as disclosed in Note 9. No            
compensation expense is recognized for this plan when shares or share options   
are issued to employees and directors. Any consideration paid by employees and  
directors on exercise of share options or purchase of shares is credited to     
share capital. If shares or share options are repurchased from employees and    
directors, the excess of the consideration paid over the carrying amount of the 
shares or share options cancelled is charged to the deficit.                    

Income taxes                                                                    

Prior to 2000, the company followed the tax allocation method of accounting for 
income taxes, whereby differences between the provision for income taxes on the 
earnings or loss for accounting purposes and the income taxes currently payable 
or recoverable were shown as deferred income taxes. In 2000, the company has    
adopted the new accounting recommendations for income taxes issued by the       
Canadian Institute of Chartered Accountants, whereby future income tax assets   
and liabilities are computed based on differences between the carrying amount of
assets and liabilities on the balance sheet and their corresponding tax values, 
using the enacted income tax rates at each balance sheet date. Future income tax
assets also result from unused loss carry-forwards and other deductions. The    
carrying value of future income tax assets is reviewed annually and adjusted, if
necessary, by use of a valuation allowance to reflect the estimated realizable  
amount.                                                                         

The company has adopted this change in accounting policy retroactively. This    
adoption results in no changes to the financial statements of prior periods.    

Loss per share                                                                  

Per share data is computed by dividing net loss by the weighted average number  
of common shares outstanding during each period. A total of 9,865,370 shares    
issued in escrow (see Note 9), which are subject to return to treasury if       
specific cash flow targets are not met, are excluded from outstanding shares for
this purpose until release conditions are met. Fully diluted per share amounts  
are not presented as the effect of the outstanding options and warrants is      
anti-dilutive.                                                                  

Financial instruments                                                           

The company has various financial instruments including cash, short term        
investments, receivables, payables and accruals, and advances from directors. It
was not practicable to determine the fair value of the advances from directors. 
The carrying values of all other financial instruments approximates their fair  
values.                                                                         

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

3.   Acquisition                                                                

On January 1, 2000, the company acquired 638260 Alberta Ltd. in a               
share-for-share exchange where the company issued 1,375,000 of its common shares
in exchange for all the issued and outstanding shares of 638260 Alberta Ltd. The
acquisition has been accounted for by the purchase method with the company as   
the acquirer as follows:                                                        

Identifiable assets acquired at                                                 
estimated fair market value                                                   
  Current assets                                                        $  8,869
  Petroleum and natural gas properties                                   439,504
                                                                        --------

                                                                         448,373
Less liabilities assumed:                                                       
  Current liabilities                                                        531
  Future income taxes                                                    172,842
                                                                        --------

Net assets acquired                                                     $275,000
                                                                        ========

Consideration                                                                   
  1,375,000 common shares                                               $275,000
                                                                        ========

--------------------------------------------------------------------------------

                                                                [Download Table]


4.   Property and equipment                    December 31  December 31  December 31
                                                      2000         1999         1998
                                                      ----         ----         ----

                                                                                    
Petroleum and natural gas properties            $4,258,465   $3,753,934   $3,630,547
Less:  accumulated depletion and depreciation      708,679      594,252      376,401
                                                ----------   ----------   ----------

                                                 3,549,786    3,159,682    3,254,146
                                                ----------   ----------   ----------

Office equipment                                    11,954       11,954       11,954
Less:  accumulated depreciation                      8,235        6,781        4,707
                                                ----------   ----------   ----------

                                                     3,719        5,173        7,247
                                                ----------   ----------   ----------

                                                $3,553,505   $3,164,855   $3,261,393
                                                ==========   ==========   ==========

The company has not included any direct or indirect internal costs in the cost  
of its petroleum and natural gas properties. All costs capitalized as petroleum 
and natural gas properties represent external, third party costs incurred.      

Depreciation and depletion of petroleum and natural gas properties per          
equivalent barrel of crude oil production:                                      

December 31, 1998                                 $       47.73           
December 31, 1999                                 $       20.72           
December 31, 2000                                 $       19.99           

                                                                               8

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

5.   Unevaluated properties                                                     

The company owns unevaluated prospects in the states of Wyoming and Texas,      
U.S.A. Evaluation studies and exploration plans are intended to be put in place 
to assess each of the prospects with the goal being to bring as many of them to 
producing status. The associated costs have been excluded in computing depletion
of the full cost pool.                                                          

Costs of unevaluated properties include:                                        

                                                                [Download Table]


                      Acquisition   Exploration  Development            
Year Incurred               Costs         Costs        Costs       Total
-------------               -----         -----        -----       -----

                                                                        
1997                   $  506,728    $    2,557   $  341,247  $  850,532
1998                       78,673          --        295,782     374,455
1999                       17,272        12,533      251,264     281,069
                       ----------    ----------   ----------  ----------

At December 31, 1999      602,673        15,090      888,293   1,506,056
2000                      (25,057)        7,841      632,779     615,563
                       ----------    ----------   ----------  ----------

At December 31, 2000   $  577,616    $   22,931   $1,521,072  $2,121,619
                       ==========    ==========   ==========  ==========


The company has not included any direct or indirect internal costs in the costs 
of its unevaluated properties. All costs capitalized as unevaluated properties  
represent external, third party costs incurred.                                 

The company will begin to deplete these costs when proven reserves are          
established or an impairment is determined. Management believes this assessment 
will occur in 24 to 36 months.                                                  

--------------------------------------------------------------------------------

6.   Investment in Comanche Energy, Inc.                                        

On January 1, 2000, the company disposed of an undivided 25% interest in an oil 
and gas property located in Parker County, Texas. The consideration received for
this disposition was 220,000 common shares of Comanche Energy, Inc. with a fair 
value of $98,967 on the date that the shares were acquired. The company's       
investment in Comanche Energy, Inc. represents approximately 0.05% of that      
company's issued and outstanding common shares.                                 

During 2000, management concluded that there was a permanent impairment in the  
value of this investment and accordingly, has recorded a valuation adjustment of
$63,967.                                                                        

--------------------------------------------------------------------------------

7.   Advances from directors                                                    

Certain directors of the company have made cash advances for working capital.   
These advances are unsecured, bear interest at 18% per annum, and are due on    
demand.                                                                         

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


8.   Future income taxes                                                             

Provision for income taxes                                                           
                                              December 31  December 31   December 31 
                                                    2000          1999          1998 
                                                    ----          ----          ---- 

                                                                                     
Loss before taxes                              $(475,217)    $(587,013)    $(491,538)
                                               ---------     ---------     --------- 

Expected tax expense at combined federal and                                         
   provincial rates of 44.62%                  $(212,041)    $(261,925)    $(219,324)
Increase (decrease) resulting from:                                                  
   Write-down of investment for accounting                                           
     purposes                                     28,529          --            --   
   Statutory rate differences                     20,018        17,367        14,542 
   Increase in valuation allowance                                                   
    on future tax asset                           98,566       244,558       204,782 
   Other                                          64,928          --            --   
                                               ---------     ---------     --------- 

                                               $     Nil     $     Nil     $     Nil 
                                               =========     =========     ========= 

Future income taxes consist of the following effects of temporary differences:  

                                                December 31    December 31
                                                       2000           1999
                                                       ----           ----

 Petroleum and natural gas properties           $   (587,842)   $  (311,000)
Investment in excess of accounting value             29,000              -
Non-capital loss carry forwards                   1,020,000        846,000
 Valuation adjustment                               (634,000)      (535,000)
                                               ------------    -----------

                                               $   (172,842)   $       Nil
                                               ============    ===========

The future income tax liability balance relates to operations of the Canadian   
subsidiary.                                                                     

The company has operating losses available for tax purposes that expire as      
follows:                                                                        

 2001                                                           $     43,000
 2003                                                                 30,000
 2004                                                                 37,000
 2005                                                                325,000
 2006                                                                295,000
 2007                                                                431,000
 2011                                                                160,000
 2012                                                                536,000
 2018                                                                165,000
 2019                                                                378,000
 2020                                                                103,000
                                                                ------------

                                                                $  2,503,000
                                                                ============

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


9.   Capital stock                                                                                  

Authorized:                                                                                         

The company is authorized to issue an unlimited number of voting common shares                      
and an unlimited number of non-voting preferred shares, issuable in series, as                      
may be determined by the directors of the company.                                                  

Issued:                                                                                             

   Common shares:                                                                                   
                                                                              Number of             
                                                                                 Shares       Amount
                                                                                 ------       ------

                                                                                                    
   Balance, December 31, 1997                                                23,419,709  $ 4,296,973

   Private placement at $0.70                                                   760,459      532,321
   Exercise of stock options at $0.50                                           468,780      234,390
                                                                             ----------  -----------

   Balance, December 31, 1998                                                24,648,948    5,063,684

   Issued for settlement of payables at $0.38                                    61,184       23,250
   Exercise of stock options at $0.50                                            49,031       24,516
   Issued to SHA Stephens for the acquisition of property at $0.30              375,000      112,500
   Private placement at $0.20 per unit.  Each unit consists of one                                  
     common share and one common share purchase warrant                                             
     exercisable until July 29, 2001 at $0.30 per share                       2,500,000      500,000
                                                                             ----------   ----------

   Balance, December 31, 1999                                                27,634,163    5,723,950

   Issued for the acquisition of 638260 Alberta Inc.                          1,375,000      275,000
   Private placement at $0.20 per unit.  Each unit consists of one                                  
     common share and one common share purchase warrant                                             
     exercisable until March 14, 2002 at $0.30 per share                        750,000      150,000
   Exercise of stock options at $0.30                                           543,993      163,198
   Exercise of warrants at $0.30                                              2,275,388      682,616
                                                                             ----------   ----------

   Balance, December 31, 2000                                                32,578,544  $ 6,994,764
                                                                             ==========  ===========

Preferred shares:                                                         

No preferred shares have been issued.                                     

Subscribed:                                                                     

Subsequent to year end, the company issued 934,924 shares in consideration for  
the $233,731 received during 2000.                                              

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

9.   Capital stock (Continued)                                                  

Stock options                                                                   

The company has established a plan for granting stock options to officers,      
directors, employees and key consultants under a share option plan approved by  
the shareholders on September 25, 1997. At December 31, 2000, options covering  
2,928,504 common shares were outstanding at varying exercise prices.            

                                                        [Enlarge/Download Table]


                        Options Outstanding                                            Options Exercisable                
-------------------------------------------------------------------------------    -----------------------------          

                                                      Average         Weighted                         Weighted           
                                                    Remaining          Average                          Average           
                                                  Contractual         Exercise                         Exercise           
                                                         Life            Price           Number           Price           
Number Outstanding                                 (In Years)        Per Share      Exercisable       Per Share           
------------------                                 ----------        ---------      -----------       ---------           

                                                                                                                          
        600,000                                          3.91             0.20          600,000            0.20           
        600,000                                          4.81             0.25          600,000            0.25           
      1,678,504                                          3.69             0.30        1,678,504            0.30           
         50,000                                          4.30             0.45           50,000            0.45           
      ---------                                                                       ---------                           

      2,928,504                                                                       2,928,504                           
      =========                                                                       =========                           

Changes in the number of options outstanding during each of the three years ended December 31, 2000, 1999 and 1998 are:   

                                                  December 31              December 31              December 31           
                                                         2000                     1999                     1998           
                                                         ----                     ----                     ----           

        Balance, beginning of period                2,572,497                1,671,528              $ 2,140,308           
        Exercised                                    (543,993)                 (49,031)                (468,780)          
        Granted                                     2,177,841                1,200,000                     --             
        Cancelled                                  (1,277,841)                 (50,000)                    --             
        Expired                                          --                   (200,000)                    --             
                                                   -----------              -----------              -----------          

        Balance, end of period                      2,928,504                2,572,497              $ 1,671,528           
                                                   -----------              -----------              -----------          

Warrants                                                                                                                  

                                  Warrants Outstanding                                           Warrants Exercisable     
-----------------------------------------------------------------------------------------    -----------------------------

                                                                Average         Weighted                         Weighted 
                                                              Remaining          Average                          Average 
                                                            Contractual         Exercise                         Exercise 
                                                                   Life            Price           Number           Price 
Number Outstanding                                           (In Years)        Per Share      Exercisable       Per Share 
------------------                                           ----------        ---------      -----------       --------- 

        224,612 warrants issued in a private placement                                                                    
                in 1999                                            0.58             0.30          224,612            0.30 
        750,000 warrants issued in a private placement                                                                    
                in 2000                                            1.15             0.30          750,000            0.30 
                                                                                                  -------                 
                                                                                                  974,612                 
                                                                                                  =======                 

                                                                                                                       12 

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Commonwealth Energy Corp.                                                                                                 
Notes to the Consolidated Financial Statements                                                                            
(expressed in Canadian Dollars)                                                                                           
December 31, 2000, 1999 and 1998                                                                                          
--------------------------------------------------------------------------------                                          

9.   Capital stock (Continued)                                                                                            

Changes in the number of warrants outstanding during each of the three years                                              
ended December 31, 2000, 1999 and 1998 are:                                                                               

                                     December 31               December 31              December 31                       
                                            2000                      1999                     1998                       
                                            ----                      ----                     ----                       

Balance, beginning of period           2,500,000                      --                       --                         
Exercised                             (2,275,388)                     --                       --                         
Issued                                   750,000                 2,500,000                     --                         
Cancelled                                   --                        --                       --                         
Expired                                     --                        --                       --                         
                                      ----------                ----------               ----------                       

Balance, end of period                   974,612                 2,500,000                      Nil                       
                                      ==========                ==========               ==========                       


Escrow shares                                                                   

As at December 31, 2000, a total of 9,865,370 common shares issued on the       
acquisition of Blue Mountain and Commonwealth U.S.A. to certain officers and    
directors are held in escrow. These common shares may be released from escrow on
approval by the Canadian Venture Exchange ("CDNX"), on the basis of one common  
share for every $0.50 of cash flow realized by the company from its oil and gas 
properties. If not released from escrow by December 18, 2002, any shares        
remaining in escrow shall be cancelled, unless otherwise exempted by the CDNX.  

--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


10.  Change in non-cash operating working capital     December 31               December 31               December 31 
                                                             2000                      1999                      1998 
                                                             ----                      ----                      ---- 

                                                                                                                      
Receivables                                             $ (84,480)                $ (19,476)                $  12,379 
Prepaids                                                   (1,284)                     (655)                   (1,772)
Payables and accruals                                      34,028                   (92,334)                  172,138 
                                                        ---------                 ---------                 --------- 

                                                        $ (51,736)                $ 112,465)                $ 182,745 
                                                        =========                 =========                 ========= 

--------------------------------------------------------------------------------------------------------------------- 

11.  Related party transactions                                                 

During the year, the company had the following transactions with related        
parties:                                                                        

(a)  Included in interest expense is interest paid to directors in the amount of
$32,678 (1999: $27,184: 1998: $22,717).                               

(b)  Incurred management fees of $Nil: (December 31, 1999: $Nil: December 31,   
1998: $9,200) for services provided by the directors of the company.  

(c)  Incurred salaries and benefits of $96,000: (December 31, 1999: $109,156:   
    December 31, 1998: $104,606) for services provided by the directors of the
company.                                                              

(d)  Included in receivables are amounts due from directors in the amount of    
     $7,968 (1999: $7,967: 1998: $32,810). Included in payables and accruals are
amounts due to directors in the amount of $189,657 (December 31, 1999:
$Nil: December 31, 1998: $Nil).                                       

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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

11.  Related party transactions (Continued)                                     

(e) In January, 2000, the company acquired from a director all issued and 
 outstanding shares of 638260 Alberta Ltd., which owns petroleum and
natural gas leases and land in the Vermillion area of East Central
       Alberta. The purchase price for the acquisition of $275,000 was satisfied
     by the issuance of 1,375,000 common shares of the company at a price of
   $0.20 per share which was an estimate of the fair value of the shares
issued on the date of acquisition (Note 3).                       

     Subsequent to year end, the assets of 638260 Alberta Ltd. were sold for
   cash consideration of $325,000 to a company in which a director is an
officer.                                                          

--------------------------------------------------------------------------------

12.  Commitments                                                                

During 1999, the company entered into an agreement with respect to investor     
relations consulting services for the company. The term of this agreement shall 
be for a period of one year, effective January 1, 2000, and can be renewed at   
the option of the company for a further six months. The company is required to  
pay $5,000 per month for a total of $60,000.                                    

--------------------------------------------------------------------------------

13.  Subsequent event                                                           

Pursuant to a Share Exchange Agreement dated December 12, 2000, and subject to  
shareholder and regulatory approval, the company will become a wholly-owned     
subsidiary of Empire Energy Corporation ("Empire") a U.S. company trading on the
OTC bulletin board. The acquisition of the company by Empire will be effected   
through a transaction referred to as a "paired" exchangeable share transaction. 
The exchangeable shares will automatically be exchanged for Empire common shares
on or before December 31, 2007, and it is expected that this conversion will be 
completed well in advance of this date. Upon conversion of the exchangeable     
shares issued in this transaction, former Commonwealth shareholders will own    
5,763,091 Empire common shares representing 30% of Empire's issued and          
outstanding common shares.                                                      

--------------------------------------------------------------------------------

14.  Segmented information                                                      

Commencing in 2000, the company operates in two geographical segments: Canada   
and the United States. The income and expenses for the prior years were         
attributable to one geographical segment, the United States. For the year ended 
and as at December 31, 2000, income and expenses, and assets were attributable  
to the following segments:                                                      

                                                                [Download Table]


                               Canada         U.S.A.        Total 
                               ------         ------        ----- 

                                                                  
Revenue                   $   154,146   $   252,852   $   406,998 
Operating expenses            (13,800)     (173,580)     (187,380)
Write-down of investment         --         (63,967)      (63,967)
                          -----------   -----------   ----------- 

                          $   140,346   $    15,305       155,651 
                          ===========   ===========               
Corporate expenses                                        630,868 
                                                      ----------- 

Net loss                                              $  (475,217)
                                                      =========== 

Property and equipment    $   434,329   $ 3,119,176   $ 3,553,505 
Unevaluated properties           --       2,121,619     2,121,619 
                          -----------   -----------   ----------- 

                          $   434,329   $ 5,240,795   $ 5,675,124 
                          ===========   ===========   =========== 

                                                               14 


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Commonwealth Energy Corp.                                                       
Notes to the Consolidated Financial Statements                                  
(expressed in Canadian Dollars)                                                 
December 31, 2000, 1999 and 1998                                                
--------------------------------------------------------------------------------

15.  Reconciliation between Canadian and United States generally accepted       
accounting principles                                                 

These consolidated financial statements have been prepared in accordance with   
Generally Accepted Accounting Principles (GAAP), in Canada, which differ in some
respects from GAAP in the United States. The material difference between the two
is summarized below:                                                            

Under U.S. GAAP, the company would have calculated the gain or loss on foreign  
exchange in accordance with FAS 52 under which assets and liabilities are       
translated at the foreign exchange rate at the balance sheet date and the       
results of operations are translated at the average foreign exchange rate for   
the period. Under Canadian GAAP, the company converts the financial position and
results of operations of its U.S. subsidiaries under the temporal method under  
which U.S. dollar property and equipment costs are translated to Canadian       
dollars at historical exchange rates. Also, under U.S. GAAP, the foreign        
exchange gain or loss recorded by the company from translation of foreign       
currency balances would have been presented as a component of shareholders      
equity instead of being included in net loss.                                   

Also, under U.S. GAAP, SOP 98-5 requires reorganization costs to be expensed as 
incurred. Under Canadian GAAP, deferral and amortization of such costs is       
permissible.                                                                    

The effect of the above differences in the carrying value of total assets,      
shareholders' equity, loss for the year and on the statement of cash flows are  
as follows:                                                                     

                                                        [Enlarge/Download Table]


                                                                    December 31     December 31     December 31 
                                                                           2000            1999            1998 
                                                                           ----            ----            ---- 
                                                                                                                
Total assets                                                                                                    
   Canadian basis                                                   $ 5,964,968     $ 4,801,713     $ 4,686,173 
   Add:Increase in net book value of the carrying                                                               
         value of petroleum and natural gas                                                                     
         properties as a result of the application of                                                           
         FAS 52                                                         208,398          90,303         318,204 
Deduct: Expense deferred reorganization costs in                                                                
             accordance with SOP 98-5                                      --              --           (17,363)
             Increase in depletion as a result of the                                                           
             application of FAS 52                                       (4,168)         (1,806)         (6,364)
                                                                    -----------     -----------     ----------- 

   U.S. basis                                                       $ 6,169,198     $ 4,890,210     $ 4,980,650 
                                                                    ===========     ===========     =========== 

Shareholders' equity                                                                                            
   Canadian basis                                                   $ 5,345,105     $ 4,310,275     $ 4,287,039 
   Add:Increase in shareholders' equity as a result                                                             
         of the application of FAS 52                                   208,398          90,303         318,204 
Deduct: Expense deferred reorganization costs in                                                                
             accordance with SOP 98-5                                      --              --           (17,363)
             Increase in depletion as a result of the                                                           
             application of FAS 52                                       (4,168)         (1,806)         (6,364)
                                                                    -----------     -----------     ----------- 

   U.S. basis                                                       $ 5,549,335     $ 4,398,772     $ 4,581,516 
                                                                    ===========     ===========     =========== 

                                                                                                             15 

DEFM14A
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Commonwealth Energy Corp.                                                                                       
Notes to the Consolidated Financial Statements                                                                  
(expressed in Canadian Dollars)                                                                                 
December 31, 2000, 1999 and 1998                                                                                
--------------------------------------------------------------------------------                                

15.  Reconciliation between Canadian and United States generally accepted                                       
     accounting principles (Continued)                                                                          

                                                                  December 31     December 31     December 31   
                                                                         2000            1999            1998   
                                                                         ----            ----            ----   
Loss for the year                                                                                               
   Canadian basis                                                 $   475,217     $   587,013     $   491,538   
   (Decrease) increase in loss as a result of the                                                               
     application of FAS 52                                             (9,630)         22,207          10,906   
   Decrease in loss as a result of the application of                                                           
     SOP 98-5                                                            --           (17,363)        (17,363)  
   Increase (decrease) in loss related to depletion                                                             
     adjustment                                                         2,362          (4,558)          5,988   
                                                                  -----------     -----------     -----------   

   U.S. basis                                                     $   467,949     $   587,299     $   491,069   
                                                                  ===========     ===========     ===========   

   Loss per share                                                                                               
     Canadian basis                                               $     (0.02)    $     (0.04)    $     (0.03)  
                                                                  ===========     ===========     ===========   

     U.S. basis                                                   $     (0.02)    $     (0.04)    $     (0.03)  
                                                                  ===========     ===========     ===========   

Consolidated statement of cash flows                                                                            
   Cash derived from (applied to)                                                                               
     Operating                                                                                                  
       U.S. basis net loss                                        $  (467,949)    $  (587,299)    $  (491,069)  
       U.S. basis foreign exchange                                     (9,630)         22,207          10,906   
       U.S. basis depletion                                           118,243         215,367         129,075   
       Write-down of investment in Comanche                            63,967            --              --     
       Change in non-cash operating working capital                                                             
         balances                                                     (51,736)       (112,465)        182,745   
                                                                  -----------     -----------     -----------   

   Operating under Canadian and U.S. basis                        $  (347,105)    $  (462,190)    $  (168,343)  
                                                                  ===========     ===========     ===========   

   Financing under Canadian and U.S. basis                        $ 1,257,458     $   496,380     $   897,096   
                                                                  ===========     ===========     ===========   

   Investing under Canadian and U.S. basis                        $  (934,081)    $   (13,729)    $  (743,271)  
                                                                  ===========     ===========     ===========   

                                                                                                           16   

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEFM14A’ Filing		Date		First		Last			Other Filings
		12/31/07		12		79			10-K/A,  10KSB,  NT 10-K
		10/23/05		50
		6/30/05		49					10QSB,  NT 10-Q
		4/17/05		50
		1/18/05		50
		11/30/04		50
		3/23/04		49
		12/21/03		50
		12/31/02		49					10KSB,  10KSB/A
		12/18/02		78
		8/9/02		49
		3/14/02		76
		7/29/01		76
		6/1/01		59
		5/31/01		36
		5/25/01		3		27
		5/15/01		6		28
Filed on:		5/14/01
		5/10/01		3		63
		4/27/01		36
		4/26/01		17
		4/20/01		66
		3/27/01		61					10QSB/A,  8-K
		3/26/01		60					10QSB/A,  8-K
		3/23/01		60					10KSB/A,  8-K/A
		2/14/01		36		39
		2/12/01		36
		2/2/01		21
		1/8/01		39
		12/31/00		1		81			10KSB,  10KSB/A,  10QSB/A,  NT 10-K
		12/12/00		11		79			8-K/A
		10/23/00		14
		9/30/00		46		62			10QSB,  10QSB/A,  8-K
		6/30/00		46		62			10QSB,  10QSB/A,  NT 10-Q
		4/1/00		53
		3/31/00		46		62			10QSB,  10QSB/A,  NT 10-Q
		3/5/00		58
		2/14/00		59
		1/25/00		58
		1/1/00		14		79
		12/31/99		8		81			10KSB,  10KSB/A,  NT 10-K
		10/5/99		58
		9/9/99		58
		8/6/99		61
		5/17/99		57					DEF 14C,  PRE 14C,  PREM14C
		4/24/99		61
		4/9/99		53
		1/1/99		44
		12/31/98		42		81			10KSB
		12/14/97		43		51
		12/12/97		70
		9/25/97		77
		12/31/96		42					10KSB
		12/31/95		42					10KSB
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