8-K: PEDEVCO Corp. Announces Q1 2024 Financial Results and Operations Update

PEDEVCO Corp. reported a slight decrease in revenue and a significant decrease in operating income for Q1 2024, despite increased production and new well activity.

Summary

• PEDEVCO Corp. announced its financial results for the quarter ended March 31, 2024, with an average production of 1,478 barrels of oil equivalent per day (BOEPD), 84% of which was liquids.
• The company's Q1 2024 revenue was $8.12 million, a slight decrease of $48,000 compared to Q1 2023.
• Operating income decreased by 62% to $0.6 million, while operating expenses increased by 15% to $7.5 million compared to the same period last year.
• Net income for the quarter was $0.8 million, or $0.01 per share, down from $1.8 million, or $0.02 per share, in Q1 2023.
• Adjusted EBITDA decreased by $140,000 to $4.72 million compared to $4.86 million in Q1 2023.
• The company had $15.5 million in cash and cash equivalents, including $2.2 million in restricted cash, and no debt as of March 31, 2024.
• PEDEVCO participated in 13 new non-operated wells in the D-J Basin and drilled three horizontal San Andres wells in the Permian Basin with Evolution Petroleum Corporation.
• The company received approval for its Roth 2-11 Oil and Gas Development Plan in Colorado, covering 2,560 acres and up to 11 horizontal Niobrara wells.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to decreased profitability and increased expenses, despite increased production and new well activity. The company's future outlook is cautiously optimistic, but the current results are concerning.

Positives

• Production volumes increased due to new wells in the D-J Basin and Permian Basin.
• Initial production results from the Permian Basin wells are better than expected with shallower declines.
• New non-operated wells in the D-J Basin are expected to increase production into Q2 2024.
• The company has a strong cash position with $15.5 million and no debt.
• The company received approval for a new development plan in Colorado.
• The company is actively working with Evolution Petroleum to plan the next phase of development in the Permian Basin.

Negatives

• Revenue decreased slightly by $48,000 compared to Q1 2023.
• Operating income decreased significantly by 62% compared to Q1 2023.
• Operating expenses increased by 15% compared to Q1 2023.
• Net income decreased by $1.0 million compared to Q1 2023.
• Adjusted EBITDA decreased by $140,000 compared to Q1 2023.
• Cash and cash equivalents decreased from $20.7 million at the end of 2023 to $15.5 million at the end of Q1 2024 due to increased capital spending.

Risks

• The company's financial performance is subject to the volatility of oil and natural gas prices.
• There are risks associated with discovering, estimating, developing, and replacing oil and natural gas reserves.
• The company's operations may not be profitable or generate sufficient cash flow to meet obligations.
• Changes in the legal and regulatory environment could impact the company.
• The company faces risks related to the availability of oil and gas gathering, transportation, and storage facilities.
• The company's operations could be disrupted by war, accidents, political events, severe weather, cyber threats, or terrorist acts.
• The company may need additional capital to complete future acquisitions and fund operations.
• There are risks associated with the uncertainty of drilling, completion, and enhanced recovery operations.
• The company's stock is subject to illiquidity and volatility.

Future Outlook

The company expects stronger results in Q2 2024 as new non-operated wells in the D-J Basin are expected to increase production. They will continue to focus on developing their Permian Basin asset and growing production in the D-J Basin, while controlling operating and G&A expenses.

Management Comments

• J. Douglas Schick, President of the Company, stated, 'We believe our Q1 2024 results continue to demonstrate the strength of our assets and our ability to develop them effectively and efficiently both as an operator and in partnership with others.'
• Management is pleased with the early production results from the Permian Basin wells, noting shallower than expected declines.
• Management expects to deliver even stronger results over Q2 2024 as new non-op wells in the D-J Basin are expected to continue to increase production.

Industry Context

The announcement reflects the ongoing challenges and opportunities in the oil and gas industry, with companies balancing production growth with cost control. PEDEVCO's focus on both operated and non-operated assets in different basins is a common strategy to diversify risk and maximize returns. The partnership with Evolution Petroleum is also a common approach to share development costs and expertise.

Comparison to Industry Standards

• PEDEVCO's production of 1,478 BOEPD is relatively small compared to larger operators in the Permian and D-J Basins, such as EOG Resources or Occidental Petroleum, which produce hundreds of thousands of BOEPD.
• The company's operating income decrease of 62% is significant and may be concerning to investors, especially when compared to companies that have managed to maintain or increase profitability in the same period.
• The increase in operating expenses by 15% is also a point of concern, as many companies are focused on cost reduction. Companies like Devon Energy have been actively reducing operating costs through efficiency improvements.
• The adjusted EBITDA of $4.72 million is modest compared to larger peers, and the decrease from the previous year is a negative trend. Companies like Diamondback Energy have reported much higher EBITDA figures due to their scale and operational efficiency.
• The company's focus on non-operated wells is a common strategy for smaller companies to gain exposure to production without the full capital burden. However, this also means less control over operations and production timing.
• The approval of the Roth 2-11 OGDP is a positive development, but the timeline for development and production is not yet clear. Other companies in the D-J Basin, such as PDC Energy, have more established development plans and production timelines.

Stakeholder Impact

• Shareholders may be concerned about the decrease in profitability and the increase in operating expenses.
• Employees may be impacted by the company's efforts to control costs.
• Customers will likely see continued production of oil and gas.
• Suppliers and vendors may see increased activity related to the new development plans.
• Creditors will be reassured by the company's strong cash position and lack of debt.

Next Steps

• The company will continue to work with Evolution Petroleum to plan the next phase of development in the Permian Basin.
• The company will continue to develop its Permian Basin Asset and grow operated and non-operated production in its D-J Basin Asset.
• The company will continue to control its lease operating and G&A expenses.
• The company is working with vendors and partners on scheduling and planning details for the Roth 2-11 Oil and Gas Development Plan.

Key Dates

Keywords

Oil and Gas, Production, Permian Basin, D-J Basin, Financial Results, EBITDA, Drilling, Energy, Exploration, Operations