PEDEVCO (US:PED)2025-05-15 20:31markdown [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section provides a standard disclosure about forward-looking statements, highlighting their inherent risks and uncertainties. It lists various factors that could cause actual results to differ materially from expectations and states the company's policy not to update these statements unless legally required - Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the company's control[10](index=10&type=chunk) - Factors that could cause actual results to differ include future financial performance, business strategy, projected plans, oil and natural gas realized prices, capital expenditures, government regulation, general economic conditions, and competition in the oil and natural gas industry[10](index=10&type=chunk)[14](index=14&type=chunk) - The company cannot guarantee future results, levels of activity, performance, or achievements and does not undertake any obligation to update or revise publicly any forward-looking statements except as required by law[10](index=10&type=chunk)[11](index=11&type=chunk) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the three months ended March 31, 2025, and 2024, including balance sheets, statements of operations, cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, business description, accounting policies, and specific financial line items [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20(Unaudited)%20and%20December%2031%2C%202024) Consolidated Balance Sheets | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total Assets | $145,575 | $133,845 | | Total Current Assets | $23,595 | $13,215 | | Total Oil and Gas Properties, net | $104,977 | $103,512 | | Total Liabilities | $23,860 | $12,745 | | Total Current Liabilities | $16,909 | $6,908 | | Total Shareholders' Equity | $121,715 | $121,100 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Oil and gas sales | $8,736 | $8,116 | | Total operating expenses | $8,586 | $7,511 | | Operating income | $150 | $617 | | Income before income taxes | $216 | $773 | | Income tax expense | $76 | $- | | Net income | $140 | $773 | | Basic Earnings per common share | $0.00 | $0.01 | | Diluted Earnings per common share | $0.00 | $0.01 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $5,928 | $(4,295) | | Net cash provided by (used in) investing activities | $625 | $(926) | | Net cash provided by financing activities | $- | $- | | Net increase (decrease) in cash and restricted cash | $6,553 | $(5,221) | | Cash, cash equivalents and restricted cash at end of period | $13,160 | $15,494 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Consolidated Statements of Shareholders' Equity | Metric | December 31, 2024 | March 31, 2025 | | :------------------------------------ | :---------------- | :------------- | | Common Stock Shares | 89,495,267 | 91,339,385 | | Common Stock Amount (in thousands) | $89 | $91 | | Additional Paid-in Capital (in thousands) | $227,013 | $227,486 | | Accumulated Deficit (in thousands) | $(106,002) | $(105,862) | | Total Shareholders' Equity (in thousands) | $121,100 | $121,715 | - Issuance of **1,844,118 restricted common stock shares** during the three months ended March 31, 2025[26](index=26&type=chunk) - Share-based compensation expense was **$475,000** for both the three months ended March 31, 2025, and 2024[26](index=26&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [NOTE 1 – BASIS OF PRESENTATION](index=7&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The interim unaudited consolidated financial statements are prepared in accordance with GAAP and SEC rules, consistent with the latest 10-K. The company's future financial condition and liquidity are significantly influenced by the success of its drilling program, oil and natural gas discoveries, production speed, and prevailing commodity prices - Interim financial statements are prepared in accordance with GAAP and SEC rules, and should be read in conjunction with the audited financial statements in the 2024 Annual Report on Form 10-K[28](index=28&type=chunk)[29](index=29&type=chunk) - Future financial condition and liquidity are dependent on the success of the drilling program, the number and quantities of commercially viable oil and natural gas discoveries, the speed of bringing discoveries to production, and prevailing prices for oil and natural gas[31](index=31&type=chunk) [NOTE 2 – DESCRIPTION OF BUSINESS](index=7&type=section&id=NOTE%202%20%E2%80%93%20DESCRIPTION%20OF%20BUSINESS) PEDEVCO is an oil and gas company focused on the development, acquisition, and production of oil and natural gas assets. The company targets legacy proven properties in the Permian Basin (West Texas and eastern New Mexico) and the Denver-Julesberg Basin (Colorado and Wyoming), applying modern drilling and completion techniques - PEDEVCO is an oil and gas company focused on developing, acquiring, and producing oil and natural gas assets[32](index=32&type=chunk) - The company targets legacy proven properties in the Permian Basin and the Denver-Julesberg Basin, leveraging modern drilling and completion techniques[32](index=32&type=chunk) [NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) There have been no changes to the company's significant accounting policies since December 31, 2024. The company is currently evaluating the impact of recently issued FASB ASUs related to income tax disclosures (ASU 2023-09) and income statement expense disaggregation (ASU 2024-03) - No changes to the company's significant accounting policies since December 31, 2024[33](index=33&type=chunk) - The company is evaluating ASU 2023-09 (Income Taxes), effective December 31, 2025, which requires disaggregated information about effective tax rate reconciliation and income taxes paid[34](index=34&type=chunk) - The company is evaluating ASU 2024-03 (Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2026, which requires additional disclosure about specified expense categories[35](index=35&type=chunk) [NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=8&type=section&id=NOTE%204%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Total revenue from contracts with customers increased by 8% to $8.7 million for the three months ended March 31, 2025, compared to $8.1 million in the prior year. This increase was primarily driven by significant growth in natural gas and natural gas liquids sales, while oil sales experienced a slight decrease NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS | Product Type | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Oil sales | $7,074 | $7,454 | $(380) | (5%) | | Natural gas sales | $842 | $333 | +$509 | 153% | | Natural gas liquids sales | $820 | $329 | +$491 | 149% | | Total revenue from customers | $8,736 | $8,116 | +$620 | 8% | [NOTE 5 – CASH AND CASH EQUIVALENTS](index=8&type=section&id=NOTE%205%20%E2%80%93%20CASH%20AND%20CASH%20EQUIVALENTS) The company's total cash, cash equivalents, and restricted cash significantly increased to $13.2 million at March 31, 2025, from $6.6 million at December 31, 2024. The increase in restricted cash is attributed to additional collateral required for a surety bond by the Colorado Bureau of Land Management NOTE 5 – CASH AND CASH EQUIVALENTS | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------- | | Cash | $10,413 | $4,010 | | Restricted cash included in other assets | $2,747 | $2,597 | | Total cash and cash equivalents and restricted cash | $13,160 | $6,607 | - The increase in restricted cash is related to additional collateral for a surety bond required by the Colorado Bureau of Land Management for the company's Colorado operations[39](index=39&type=chunk) [NOTE 6 – OIL AND GAS PROPERTIES](index=8&type=section&id=NOTE%206%20%E2%80%93%20OIL%20AND%20GAS%20PROPERTIES) Total net oil and gas properties increased to $105.0 million at March 31, 2025. The company incurred $5.7 million in capital costs for completion operations in the Permian Basin and recorded a $0.2 million impairment for undeveloped D-J Basin leases. A joint development agreement in the D-J Basin resulted in a $1.7 million payment to the company and a transfer of operatorship NOTE 6 – OIL AND GAS PROPERTIES | Metric | Balance at Dec 31, 2024 (in thousands) | Additions (in thousands) | Disposals (in thousands) | Balance at Mar 31, 2025 (in thousands) | | :------------------------------------------ | :------------------------------------- | :----------------------- | :----------------------- | :------------------------------------- | | Oil and gas properties, subject to amortization | $210,039 | $442 | $(2,028) | $208,453 | | Oil and gas properties, not subject to amortization | $8,442 | $5,238 | $- | $13,680 | | Asset retirement costs | $4,326 | $1,085 | $- | $5,411 | | Accumulated depreciation, depletion and impairment | $(119,295) | $(3,272) | $- | $(122,567) | | Total oil and gas assets | $103,512 | $3,493 | $(2,028) | $104,977 | - Incurred **$5.68 million** in capital costs primarily related to completion operations for four operated wells in the Permian Basin[41](index=41&type=chunk) - Recorded an impairment of **$232,000** for undeveloped D-J Basin leases (232 net acres) that expired or have no future drilling plans[42](index=42&type=chunk) - Entered a joint development agreement in February 2025 for D-J Basin Roth and Amber DSUs, receiving **$1.7 million** and transferring operatorship to a third-party operator[43](index=43&type=chunk)[44](index=44&type=chunk) [NOTE 7 – NOTE RECEIVABLE](index=9&type=section&id=NOTE%207%20%E2%80%93%20NOTE%20RECEIVABLE) The company holds a $1.267 million secured promissory note from Tilloo Exploration and Production LLC, which defaulted on its initial payment due January 8, 2025, and subsequent payments. The company has issued a default notice and intends to pursue all available remedies, believing the note is fully secured - Note receivable from Tilloo Exploration and Production LLC totals **$1.267 million** (**$498,000** current, **$769,000** long-term including accrued interest) as of March 31, 2025[46](index=46&type=chunk) - Tilloo failed to make the initial installment payment due on January 8, 2025, and subsequent monthly payments[47](index=47&type=chunk) - The company issued a notice of default and intends to pursue all available remedies, including potential foreclosure, believing the note is fully secured[47](index=47&type=chunk) [NOTE 8 – ASSET RETIREMENT OBLIGATIONS](index=9&type=section&id=NOTE%208%20%E2%80%93%20ASSET%20RETIREMENT%20OBLIGATIONS) Asset retirement obligations increased to $7.5 million at March 31, 2025, from $6.4 million at the beginning of the period, primarily due to changes in estimates and accretion expense. The company reimbursed $53,000 and incurred an additional $173,000 for plugging and abandoning inactive wells in New Mexico NOTE 8 – ASSET RETIREMENT OBLIGATIONS | Metric | Three Months Ended March 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------------------------- | | Balance at the beginning of the period | $6,371 | | Accretion expense | $293 | | Liabilities settled | $(226) | | Changes in estimates, net | $1,085 | | Balance at end of period | $7,523 | - Reimbursed the New Mexico Oil and Gas Conservation Division **$53,000** and incurred an additional **$173,000** in plugging and abandoning costs related to inactive legacy wells in the Permian Basin Asset[50](index=50&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=10&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company has an operating sublease for office space with a total lease liability of $203,000 as of March 31, 2025, expiring in February 2027. Leasehold drilling commitments include 776 net acres in the D-J Basin expiring in the remainder of 2025 and 4,821 net acres expiring within the next two years. The company is not currently involved in any material legal proceedings but is in a dispute with Tilloo regarding alleged misrepresentations in the Milnesand Sale and the Tilloo Note default - Operating lease liability for office space is **$203,000** as of March 31, 2025, with a weighted-average remaining lease term of **1.9 years**[55](index=55&type=chunk)[56](index=56&type=chunk) - Leasehold drilling commitments include **776 net acres** in the D-J Basin expiring during the remainder of 2025, and **4,821 net acres** expiring within the next two-year period[58](index=58&type=chunk) - The company is in a dispute with Tilloo Exploration & Production, LLC regarding alleged intentional misrepresentations in the Milnesand Sale and the subsequent default on the Tilloo Note[62](index=62&type=chunk) [NOTE 10 – SHAREHOLDERS' EQUITY](index=11&type=section&id=NOTE%2010%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) During the three months ended March 31, 2025, the company granted an aggregate of 1,844,118 restricted stock awards to various employees - Granted an aggregate of **1,844,118 restricted stock awards** to employees during the three months ended March 31, 2025[63](index=63&type=chunk) [NOTE 11 – SHARE-BASED COMPENSATION](index=11&type=section&id=NOTE%2011%20%E2%80%93%20SHARE-BASED%20COMPENSATION) In January 2025, the company granted 1,844,118 restricted stock awards and options to purchase 464,000 shares. Stock-based compensation expense for the three months ended March 31, 2025, totaled $475,000, comprising $419,000 for restricted stock and $56,000 for options - On January 23, 2025, **1,844,118 restricted common stock shares** were granted to officers and employees with a total fair value of **$1,568,000**[65](index=65&type=chunk) - On January 23, 2025, options to purchase **464,000 shares** of common stock were granted at an exercise price of **$0.85 per share**, with an aggregate fair value of **$195,000**[67](index=67&type=chunk)[68](index=68&type=chunk) - Stock-based compensation expense for Q1 2025 was **$419,000** for restricted stock and **$56,000** for stock options, totaling **$475,000**[66](index=66&type=chunk)[69](index=69&type=chunk) NOTE 11 – SHARE-BASED COMPENSATION | Metric | Number of Stock Options | Weighted Average Exercise Price | | :-------------------------- | :---------------------- | :------------------------------ | | Outstanding at December 31, 2024 | 1,835,667 | $1.12 | | Granted | 464,000 | $0.85 | | Expired/Canceled | (215,667) | $1.68 | | Outstanding at March 31, 2025 | 2,084,000 | $1.00 | | Exercisable at March 31, 2025 | 1,156,666 | $1.14 | [NOTE 12 – EARNINGS PER COMMON SHARE](index=12&type=section&id=NOTE%2012%20%E2%80%93%20EARNINGS%20PER%20COMMON%20SHARE) Basic and diluted earnings per common share for the three months ended March 31, 2025, were $0.00, a decrease from $0.01 in the prior year, reflecting the lower net income. Share equivalents related to options were excluded from diluted EPS calculations as their inclusion would have been anti-dilutive NOTE 12 – EARNINGS PER COMMON SHARE | Metric | March 31, 2025 | March 31, 2024 | | :------------------------------------ | :------------- | :------------- | | Net income (in thousands) | $140 | $773 | | Weighted average common shares – basic | 90,868,110 | 88,753,838 | | Earnings per common share – basic | $0.00 | $0.01 | | Earnings per common share – diluted | $0.00 | $0.01 | - Share equivalents related to options (**2,294,000** for Q1 2025 and **2,092,334** for Q1 2024) were excluded from diluted EPS computation due to their anti-dilutive effect[74](index=74&type=chunk) [NOTE 13 – INCOME TAXES](index=13&type=section&id=NOTE%2013%20%E2%80%93%20INCOME%20TAXES) The company's effective tax rate increased to approximately 34.9% for the three months ended March 31, 2025, from 0.0% in the prior year, resulting in an income tax expense of $76,000. This change was primarily due to state income taxes and other tax adjustments, contrasting with a full valuation allowance in the previous period - Effective tax rate was approximately **34.9%** for Q1 2025, compared to **0.0%** for Q1 2024[75](index=75&type=chunk) - Recognized income tax expense of **$76,000** for Q1 2025, primarily due to state income taxes and other tax adjustments[75](index=75&type=chunk) [NOTE 14 – SEGMENT INFORMATION](index=13&type=section&id=NOTE%2014%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates as a single reportable segment focused on oil and natural gas development, exploration, and production. Financial performance is assessed on a consolidated enterprise basis, with resource allocation decisions made across the entire portfolio based on project economics rather than geographic area - The company operates in one reportable operating segment: oil and natural gas development, exploration, and production[76](index=76&type=chunk) - Financial performance is assessed as a single enterprise, and resource allocation is made on a project basis across the entire portfolio, considering return on investment and market conditions, without regard to geographic area[76](index=76&type=chunk) [NOTE 15 – SUBSEQUENT EVENTS](index=13&type=section&id=NOTE%2015%20%E2%80%93%20SUBSEQUENT%20EVENTS) On April 3, 2025, effective January 1, 2025, the company sold all its operated production, including wellbore and surface equipment, in Weld County, Colorado, to a private buyer for an adjusted price of $606,000, while retaining ownership of its existing leasehold - On April 3, 2025, the company sold all of its operated production (wellbore and surface equipment) in Weld County, Colorado, for **$606,000**, effective January 1, 2025[78](index=78&type=chunk) - The company retained ownership in all its existing leasehold in the D-J Basin Asset despite the sale of operated production[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and cash flows for the three months ended March 31, 2025, compared to the prior year. It covers the business overview, strategic initiatives, detailed results of operations, liquidity, capital resources, and critical accounting estimates [Introduction](index=13&type=section&id=Introduction) - This MD&A should be read in conjunction with the consolidated financial statements and notes in this Quarterly Report on Form 10-Q and the Annual Report on Form 10-K for the year ended December 31, 2024[80](index=80&type=chunk) - References to 'Company,' 'we,' 'us,' 'our,' 'PEDEVCO,' and 'PEDEVCO Corp.' refer to PEDEVCO Corp. and its wholly and majority-owned subsidiaries[83](index=83&type=chunk) [General Overview](index=14&type=section&id=General%20Overview) - PEDEVCO is an oil and gas company focused on acquiring and developing assets in the Permian Basin and D-J Basin, applying modern drilling and completion techniques to legacy proven properties[85](index=85&type=chunk) - As of March 31, 2025, the company held approximately **14,105 net Permian Basin acres** (35 gross, 33.5 net wells) and **18,572 net D-J Basin acres** (82 gross, 21.9 net wells)[85](index=85&type=chunk)[88](index=88&type=chunk) - Effective January 1, 2025, the company sold all **17 gross (15.4 net) operated wells** in its D-J Basin Asset to reduce plugging and abandonment liabilities and recurring operational expenses[88](index=88&type=chunk) [Strategy](index=15&type=section&id=Strategy) - The company's strategy is to optimize existing assets and opportunistically seek additional acreage, focusing on horizontal development and exploitation in the Permian and D-J Basins to increase stockholder value[89](index=89&type=chunk) - Key strategies include growing production, cash flow, and reserves through operated and non-operated projects, applying modern drilling and completion techniques, optimizing well density, maintaining operational control, leveraging acquisition expertise, and preserving financial flexibility[90](index=90&type=chunk) - Estimated net capital expenditures for 2025 range from **$27 million to $33 million**, with approximately **70% to 75%** allocated to D-J Basin development under joint development agreements[91](index=91&type=chunk) - The company expects to have sufficient cash for the next 12 months from projected cash flow, existing cash, potential equity infusions/loans, public/private debt or equity financings (including up to **$8.0 million** from an ATM offering), and an undrawn **$250 million** reserve-based lending facility (initial borrowing base of **$20 million**)[93](index=93&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - Entered a joint development agreement in February 2025 for D-J Basin Roth and Amber DSUs, receiving **$1.7 million** and transferring operatorship, following a Participation Agreement in August 2024 for the SW Pony Prospect[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Results of Operations and Financial Condition](index=17&type=section&id=Results%20of%20Operations%20and%20Financial%20Condition) [Market Conditions and Commodity Prices](index=17&type=section&id=Market%20Conditions%20and%20Commodity%20Prices) The company's financial results are highly dependent on the volatile prices of natural gas and crude oil, which are influenced by external factors such as market supply and demand, weather conditions, and inventory levels. The company anticipates continued price volatility for the remainder of the year - Financial results are highly dependent on the price of natural gas and crude oil, which are affected by factors outside the company's control[98](index=98&type=chunk) - Commodity prices are influenced by market supply and demand, weather conditions, inventory storage levels, and basis differentials[98](index=98&type=chunk) - The company expects prices to remain volatile for the remainder of the year[98](index=98&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Net income decreased by $0.7 million to $0.1 million in Q1 2025 from $0.8 million in Q1 2024, primarily due to a $1.1 million increase in total operating expenses (including a $0.2 million impairment) and income tax expense, partially offset by a $0.6 million increase in total revenues. The revenue increase was driven by higher production volumes, particularly from new non-operated D-J Basin wells - Net income for the three months ended March 31, 2025, was **$0.1 million** (**$0.00 per common share**), down from **$0.8 million** (**$0.01 per share**) in the prior year period[100](index=100&type=chunk) - The decrease in net income was primarily due to a **$1.1 million** increase in total operating expenses (including a **$0.2 million** impairment of oil and gas properties) and **$76,000** in income tax expense, partially offset by a **$0.6 million** increase in revenues[100](index=100&type=chunk) Results of Operations | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Increase (Decrease) | % Increase (Decrease) | | :---------------------- | :-------------------------------- | :-------------------------------- | :------------------ | :-------------------- | | Crude Oil (Bbls) | 102,699 | 100,903 | 1,796 | 2% | | Natural Gas (Mcf) | 166,733 | 131,939 | 34,794 | 26% | | NGL (Bbls) | 23,143 | 11,557 | 11,586 | 100% | | Total (Boe) | 153,631 | 134,450 | 19,181 | 14% | | Crude Oil ($/Bbl) | $68.88 | $73.87 | $(4.99) | (7%) | | Natural Gas ($/Mcf) | $5.05 | $2.52 | $2.53 | 100% | | NGL ($/Bbl) | $35.43 | $28.48 | $6.95 | 24% | | Total Revenues | $8,736 | $8,116 | $620 | 8% | - Total revenues increased by **$0.6 million** (**8%**) due to a favorable volume variance of **$0.7 million**, offset by an unfavorable price variance of **$0.1 million**. The volume increase is primarily from participation in **11 new non-operated D-J Basin wells**[104](index=104&type=chunk) Results of Operations | Expense Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Increase (Decrease) (in thousands) | % Increase (Decrease) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :--------------------------------- | :-------------------- | | Total Lease Operating Expenses | $3,412 | $2,531 | $881 | 35% | | Depreciation, Depletion, Amortization and Accretion | $3,346 | $3,485 | $(139) | (4%) | | Impairment of Oil and Gas Properties | $232 | $- | $232 | 5% | | Total General and Administrative Expense | $1,596 | $1,495 | $101 | 7% | | Interest Income | $64 | $149 | $(85) | (57%) | - Lease Operating Expenses increased by **$0.9 million** (**35%**) due to higher direct and variable costs associated with increased oil volume and new non-operated D-J Basin wells[106](index=106&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary cash sources in Q1 2025 were $8.7 million from sales of crude oil, natural gas, and NGLs, used mainly for drilling, completion, and operating costs. Working capital surplus increased by $0.4 million to $6.7 million. The company has $8.0 million available under an ATM offering and an undrawn $250 million reserve-based lending facility (initial $20 million borrowing base), expecting sufficient cash for its 2025 development program - Primary cash sources for Q1 2025 were **$8.7 million** from sales of crude oil, natural gas, and NGLs, primarily used for drilling, completion, and operating costs[111](index=111&type=chunk) - Working capital surplus increased by **$0.4 million** to **$6.7 million** at March 31, 2025, from **$6.3 million** at December 31, 2024[112](index=112&type=chunk) - The company has **$8.0 million** of availability under a December 2024 'at the market' (ATM) offering sales agreement, with no securities sold to date[113](index=113&type=chunk) - A **$250 million** reserve-based lending facility with Citibank, N.A., provides an initial borrowing base of **$20 million**, with no borrowings drawn down as of the report date[115](index=115&type=chunk) - The company expects to have sufficient cash to meet its needs over the next 12 months, including funding the 2025 development program, from operations, existing cash, potential equity/loans, ATM offerings, and the RBL facility[114](index=114&type=chunk) [Cash Flows](index=20&type=section&id=Cash%20Flows%20(in%20thousands)) Net cash provided by operating activities significantly increased by $10.2 million, moving from a use of $4.3 million in Q1 2024 to a provision of $5.9 million in Q1 2025. Investing activities also shifted from a net use to a net provision, primarily due to cash received from the sale of oil and gas properties Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash flows provided by (used in) by operating activities | $5,928 | $(4,295) | | Cash flows provided by (used in) investing activities | $625 | $(926) | | Cash flows provided by financing activities | $- | $- | | Net increase (decrease) in cash and restricted cash | $6,553 | $(5,221) | - Net cash provided by operating activities increased by **$10.2 million**, primarily due to a **$10.7 million** net increase in other components of working capital, partially offset by a decrease in net income and DDA[117](index=117&type=chunk) - Net cash provided by investing activities increased by **$1.6 million**, mainly due to cash received from the sale of oil and gas properties, offset by increased capital spending for drilling and completion activities[118](index=118&type=chunk) [Non-GAAP Financial Measures](index=20&type=section&id=Non-GAAP%20Financial%20Measures) The company presents EBITDA and Adjusted EBITDA as non-GAAP measures to provide additional analytical insight into its performance, excluding non-cash items and certain non-recurring or non-estimable items. Adjusted EBITDA for Q1 2025 was $4.3 million, a decrease from $4.7 million in Q1 2024 - EBITDA and Adjusted EBITDA are non-GAAP measures used to evaluate performance, excluding interest, taxes, depreciation, amortization, share-based compensation, impairment of oil and gas properties, and gain on sale of fixed assets[119](index=119&type=chunk) Non-GAAP Financial Measures | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net income | $140 | $773 | | EBITDA | $3,562 | $4,258 | | Adjusted EBITDA | $4,269 | $4,721 | [Critical Accounting Estimates](index=21&type=section&id=Critical%20Accounting%20Estimates) This section outlines the company's critical accounting policies that involve significant estimates and judgments. These include the successful efforts method for oil and gas properties, revenue recognition based on control transfer, asset retirement obligations (ARO) for future site reclamation, and stock-based compensation valuation using the Black-Scholes model with subjective assumptions - Uses the successful efforts method for oil and gas properties, capitalizing development wells and proved mineral interests, expensing geological/geophysical costs, and evaluating exploratory wells for economic viability[122](index=122&type=chunk)[123](index=123&type=chunk) - Recognizes sales revenues for oil, natural gas, and NGLs when control transfers to the customer, based on the contract price, which may include adjustments for market differentials and downstream costs[127](index=127&type=chunk)[128](index=128&type=chunk) - Records asset retirement obligations (ARO) for estimated future costs of site reclamation, dismantling facilities, or plugging wells, capitalizing the present value in oil and gas properties and subsequently accreting and depreciating it[130](index=130&type=chunk) - Estimates the fair value of employee stock option awards using the Black-Scholes option pricing model, which requires subjective assumptions such as expected volatility and expected life[131](index=131&type=chunk) [Recently Issued Accounting Pronouncements](index=22&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) The company is evaluating two recently issued FASB ASUs: ASU 2023-09 (Income Taxes), effective December 31, 2025, for disaggregated tax information, and ASU 2024-03 (Income Statement Expenses), effective December 15, 2026, for additional expense disclosures. Neither is expected to have a material effect on the consolidated financial statements - Evaluating ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective December 31, 2025, for disaggregated information about effective tax rate reconciliation and income taxes paid[132](index=132&type=chunk) - Evaluating ASU 2024-03, 'Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,' effective for annual periods beginning after December 15, 2026[133](index=133&type=chunk) - The company does not expect either ASU to have a material effect on its consolidated financial statements[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' PEDEVCO Corp. is not required to provide quantitative and qualitative disclosures about market risk under Item 305(e) of Regulation S-K - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a 'smaller reporting company'[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CAO concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025, due to un-remediated material weaknesses identified in the 2024 Form 10-K. No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025 - The CEO and CAO concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to un-remediated material weaknesses identified in the 2024 Form 10-K[137](index=137&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[138](index=138&type=chunk) [PART II – OTHER INFORMATION](index=23&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal or governmental proceedings. While it may be involved in litigation in the normal course of business, it has implemented policies and procedures to mitigate environmental risks associated with its natural gas and oil operations - The company is not currently a party to any material legal or governmental proceedings[141](index=141&type=chunk) - Various policies, programs, and procedures have been implemented to reduce and mitigate environmental risks inherent in the natural gas and oil business[142](index=142&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024. Investors are advised to review those factors - No material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not issue or sell any unregistered equity securities during the quarter ended March 31, 2025. There were also no uses of proceeds from the sale of registered securities or purchases of equity securities by the issuer during this period - The company did not issue or sell any unregistered equity securities during the quarter ended March 31, 2025[144](index=144&type=chunk) - There were no uses of proceeds from the sale of registered securities or purchases of equity securities by the issuer and affiliated purchasers[145](index=145&type=chunk)[146](index=146&type=chunk) [Item 3. Defaults Upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is included in the report's table of contents but contains no specific information, indicating that there were no defaults upon senior securities during the reported period - No information provided, implying no defaults upon senior securities[147](index=147&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not Applicable' in the report, indicating that the company does not have operations requiring mine safety disclosures - This item is marked as 'Not Applicable'[148](index=148&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) During the quarter ended March 31, 2025, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements - None of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025[149](index=149&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the company's 2021 Equity Incentive Plan and related forms, certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and various Inline XBRL documents - Exhibits include the PEDEVCO Corp. 2021 Equity Incentive Plan and related forms of restricted shares and stock option grant agreements[150](index=150&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed/furnished[150](index=150&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Documents are included[150](index=150&type=chunk) [Signatures](index=24&type=section&id=Signatures) The Quarterly Report on Form 10-Q was duly signed on behalf of PEDEVCO Corp. by J. Douglas Schick, President and Chief Executive Officer, and Paul A. Pinkston, Chief Accounting Officer, on May 15, 2025 - The report was signed by J. Douglas Schick, President and Chief Executive Officer, and Paul A. Pinkston, Chief Accounting Officer, on May 15, 2025[156](index=156&type=chunk)