PEDEVCO (PED) - 2023 Q4 - Annual Results

Executive Summary & Key Highlights Company Overview PEDEVCO Corp. acquires and develops strategic, high-growth U.S. energy projects, primarily in the Permian and D-J Basins - PEDEVCO Corp. is an energy company engaged in the acquisition and development of strategic, high growth energy projects in the U.S.[1][24] - The Company's principal assets are its Permian Basin Asset located in eastern New Mexico, and its D-J Basin Asset located in Weld and Morgan Counties, Colorado[24] 2023 Key Operational & Financial Highlights PEDEVCO achieved strong 2023 operational and financial results, with 43% production growth and 8% Adjusted EBITDA increase, despite lower commodity prices. The company reduced expenses, divested non-core assets, and ended the year with zero debt, positioning for future growth - Strong operational and financial results in 2023, including a 43% increase in year-over-year production, with revenue and EBITDA growth over 2022 despite significantly lower commodity prices[3] - Maintained disciplined G&A expenses, reduced LOE expenses, and significantly trimmed P&A liabilities and operational complexities with the sale of non-core assets, exiting the year with a strong cash position and zero debt[3][9] - Positioned for growth in both the Permian (drilled and completed three wells in joint venture) and the D-J Basins (received approval for up to 11 operated wells and participated in 13 non-operated wells)[3] 2023 Key Financial & Operational Highlights: | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Average Daily Production (BOEPD) | 1,427 | ~998 | +43% | | Adjusted EBITDA | $17.5M | $16.1M | +8% | | Revenue | $31M | $30.0M | +2% | | Operating Expenses | $26.7M | $27.4M | -3% | | Net Income | $0.3M | $2.8M | -89% | | Net Income per diluted share | $0.00 | $0.03 | -100% | | Cash & Cash Equivalents (Dec 31) | $20.7M | $33.0M | -37% | | Debt | $0 | $0 | No Change | Financial Performance Analysis (2023 vs. 2022) Net Income Net income decreased significantly in 2023 to $0.3 million from $2.8 million in 2022, primarily due to a $4.3 million loss on the sale of the EOR subsidiary, partially offset by increased revenue and decreased operating expenses Net Income Comparison: | Metric | 2023 | 2022 | Change | | :-------------------------- | :----- | :----- | :----- | | Net Income | $0.3M | $2.8M | -$2.5M | | Net Income per diluted share | $0.00 | $0.03 | -$0.03 | - The decrease in net income was primarily due to a $4.3 million loss on the sale of the EOR subsidiary[5][9] - Offset by a $0.8 million increase in revenue and by a decrease of $0.7 million in total operating expenses[5] Revenue, Production & Prices Total revenue increased by 2% to $30.8 million in 2023, driven by a 43% increase in production volume (520,886 Boe), which generated a $7.4 million favorable volume variance. However, this was largely offset by a 28% decrease in combined average realized sales price per Boe to $59.10, resulting in a $6.6 million unfavorable price variance Production and Revenue Overview: | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Total Revenue | $30.8M | $30.0M | +2% | | Total Production (Boe) | 520,886 | ~364,256 | +43% | | Average Realized Sales Price (per Boe) | $59.10 | $82.34 | -28% | - Liquids production comprised 84.7% of total production in 2023[11] - The increase in production volume is related to the positive performance from participation in 14 non-operated wells in the D-J Basin Asset[13] Operating Expenses Total operating expenses decreased by $0.7 million (3%) to $26.7 million in 2023, primarily due to cost control measures and efficiency improvements in LOE, partially offset by increases in G&A and DD&A Total Operating Expenses: | Metric | 2023 | 2022 | Change | | :--------------------- | :----- | :----- | :----- | | Total Operating Expenses | $26.7M | $27.4M | -$0.7M | Lease Operating Expenses (LOE) LOE decreased by $0.6 million to $9.8 million in 2023, mainly due to expense reduction measures and efficiency improvements on operated properties, despite increased direct operating expenses from non-operated wells and costs related to plugging 11 wells Lease Operating Expenses: | Metric | 2023 | 2022 | Change | | :-------------------- | :----- | :----- | :----- | | Lease Operating Costs | $9.8M | $10.4M | -$0.6M | - Decrease primarily due to implementation of expense reduction measures and operation and lift efficiency improvements on operated properties in Permian Basin and D-J Basin Assets[14] - Offset by a corresponding increase in direct operating expenses from participation in non-operated wells and a loss related to plugging 11 wells in the Permian Basin Asset[14] Depreciation, Depletion, Amortization and Accretion (DD&A) DD&A decreased by $0.3 million to $10.9 million in 2023, primarily due to a $0.5 million decrease in accretion expense from the sale of the EOR Operating Company, partially offset by a $0.2 million increase in depletion expense from higher production DD&A Expenses: | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | DD&A | $10.9M | $11.2M | -$0.3M | - The decrease was primarily the result of a $0.5 million decrease in accretion expense from the sale of EOR Operating Company and related assets[15] - Offset by a $0.2 million increase in depletion expense from increased production[15] General and Administrative Expenses (G&A) G&A expenses (excluding share-based compensation) increased by $0.2 million in 2023, attributed to a new employee, increased accrued bonuses, and higher accounting and professional services. Share-based compensation nominally decreased due to forfeitures, but new restricted shares were issued to board members G&A Expenses (excluding share-based compensation): | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Selling, General and Administrative | $6.0M | $5.9M | +$0.2M | - Increase primarily due to the addition of a new employee, an increase in accrued bonuses, and general increases in accounting and professional services[16] - Share-based compensation decreased nominally due to forfeiture of certain employee stock-based options, offset by the issuance of restricted shares of common stock to board members[17] Loss on Sale of Oil and Gas Properties The Company recognized a $4.3 million loss in 2023 from the sale of its wholly-owned subsidiary EOR Operating Company and related non-core vertical assets. This divestiture is expected to reduce plugging and abandonment liabilities by over $3.2 million and significantly lower future monthly LOE expenses in the Permian Basin Loss on Sale of Oil and Gas Properties: | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Loss on sale of oil and gas properties | ($4.3M) | $0 | ($4.3M) | - The Company sold its wholly owned subsidiary EOR Operating Company and related non-core vertical assets in November 2023[18] - This divestiture is estimated to reduce plugging and abandonment liabilities by over $3.2 million and significantly reduce monthly LOE expenses on the Permian Basin Asset going forward[18] Other Income/Expense Total other income increased to $0.46 million in 2023 from $0.21 million in 2022, primarily driven by a significant increase in interest income to $422,000 due to higher interest rates on cash accounts Other Income: | Metric | 2023 | 2022 | Change | | :------------- | :----- | :----- | :----- | | Interest Income | $422K | $117K | +$305K | | Other Income | $40K | $97K | -$57K | | Total Other Income | $462K | $214K | +$248K | - Interest income increased significantly due to higher interest rates on interest-bearing cash accounts[20] Financial Position & Liquidity Working Capital and Cash Position The working capital surplus decreased by $9.4 million to $5.7 million at December 31, 2023, from $15.1 million in 2022. This reduction was mainly due to a decrease in the cash balance, which fell to $20.7 million (including restricted cash) from $33.0 million, primarily driven by capital expenditures for drilling and completion activities Working Capital and Cash Position: | Metric | Dec 31, 2023 | Dec 31, 2022 | Change | | :-------------------------- | :----------- | :----------- | :----------- | | Total Current Assets | $24.6M | $32.1M | -$7.5M | | Total Current Liabilities | $18.9M | $17.0M | +$1.9M | | Working Capital Surplus | $5.7M | $15.1M | -$9.4M | | Cash & Cash Equivalents (incl. restricted) | $20.7M | $33.0M | -$12.3M | - Decrease in cash balance largely due to capital expenditures related to drilling and completion of wells in Permian Basin and D-J Basin Assets[8][20] - Total restricted cash decreased due to the transfer of collateralized deposits related to plugging and abandonment bonds with the State of New Mexico to the purchaser in connection with the sale of EOR Operating[10] Capital Expenditures & Future Outlook PEDEVCO estimates 2024 net capital expenditures to range between $20 million and $30 million, primarily for drilling and completion costs in the Permian and D-J Basins, along with other capital expenses. The company expects to meet future liquidity needs through projected cash flow, existing cash, potential equity infusions/loans from the CEO, and credit facilities, while also considering asset sales or farm-out arrangements for potential acquisitions Estimated 2024 Capital Expenditures: | Category | Estimated Range | | :-------------------------------- | :-------------- | | Total Net Capital Expenditures | $20M - $30M | | Drilling and Completion Costs | $17M - $27M | | Other Capital Expenses | ~$3M | - The estimate does not include anything for acquisitions or other projects that may arise but are not currently anticipated[21] - Future liquidity is expected from projected cash flow from operations, existing cash on hand, potential equity infusions or loans from the CEO, and funding through credit or loan facilities[22] - The Company may seek additional funding through asset sales, farm-out arrangements, and credit facilities to fund potential acquisitions during the remainder of 2024[22] Consolidated Financial Statements Consolidated Balance Sheets As of December 31, 2023, total assets increased to $120.1 million from $116.1 million in 2022, driven by a significant increase in oil and gas properties not subject to amortization. Total liabilities also increased to $21.3 million from $19.7 million, while total shareholders' equity grew to $98.8 million Consolidated Balance Sheet Highlights (amounts in thousands): | Metric | Dec 31, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----------- | | Total Assets | $120,058 | $116,110 | +$3,948 | | Total Liabilities | $21,292 | $19,651 | +$1,641 | | Total Shareholders' Equity | $98,766 | $96,459 | +$2,307 | | Cash and cash equivalents | $18,515 | $29,430 | -$10,915 | | Oil and gas properties, not subject to amortization, net | $12,407 | $775 | +$11,632 | | Accounts payable | $6,580 | $1,556 | +$5,024 | | Accrued expenses | $8,712 | $13,835 | -$5,123 | Consolidated Statements of Operations For the year ended December 31, 2023, the company reported a net income of $0.26 million, a significant decrease from $2.84 million in 2022. This was primarily due to a $4.27 million loss on the sale of oil and gas properties, which resulted in an operating loss of $0.20 million compared to an operating income of $2.63 million in the prior year Consolidated Statements of Operations Highlights (amounts in thousands): | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Oil and gas sales | $30,784 | $30,034 | +$750 | | Total operating expenses | $26,714 | $27,404 | -$690 | | Loss on sale of oil and gas properties | ($4,268) | $0 | ($4,268) | | Operating income (loss) | ($198) | $2,630 | ($2,828) | | Net Income | $264 | $2,844 | ($2,580) | | Basic Loss per common share | $0.00 | $0.03 | ($0.03) | Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $23.48 million in 2023 from $15.98 million in 2022, driven by adjustments for non-cash items like the loss on sale of properties and changes in working capital. However, net cash used in investing activities significantly increased to $35.74 million, primarily due to higher drilling and completion costs, leading to a net decrease of $12.26 million in cash and restricted cash for the year Consolidated Statements of Cash Flows Highlights (amounts in thousands): | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $23,481 | $15,981 | +$7,500 | | Net cash used in investing activities | ($35,743) | ($12,266) | ($23,477) | | Net cash provided by financing activities | $0 | $35 | ($35) | | Net (decrease) increase in cash and restricted cash | ($12,262) | $3,750 | ($16,012) | | Cash paid for drilling and completion costs | ($34,951) | ($12,252) | ($22,699) | Non-GAAP Financial Measures Adjusted EBITDA Reconciliation Adjusted EBITDA increased by 8% to $17.45 million in 2023 from $16.09 million in 2022. This non-GAAP measure adjusts net income by adding back depreciation, depletion, amortization, accretion, share-based compensation, and the loss on sale of oil and gas properties Adjusted EBITDA Reconciliation (in thousands): | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net income (loss) | $264 | $2,844 | ($2,580) | | Depreciation, depletion, amortization and accretion | $10,875 | $11,153 | ($278) | | EBITDA | $11,139 | $13,997 | ($2,858) | | Share-based compensation | $2,043 | $2,097 | ($54) | | Loss on sale of oil and gas properties | $4,268 | $0 | +$4,268 | | Adjusted EBITDA | $17,450 | $16,094 | +$1,356 | Use of Non-GAAP Financial Information The company uses non-GAAP measures like EBITDA and Adjusted EBITDA to provide supplemental information on performance, as they exclude various non-cash items. These measures are not GAAP-recognized and should not be considered alternatives to GAAP performance measures, but are used by management and investors to evaluate companies in the industry - EBITDA and Adjusted EBITDA are presented as supplemental measures of the Company's performance and are not recognized in accordance with GAAP[25] - Adjusted EBITDA is defined as EBITDA before share-based compensation expense, gain on sale of oil and gas properties, gain on forgiveness of PPP loan, and accounts payable settlements[25] - These measures are used because they provide additional useful information to investors due to various noncash items and are frequently used by analysts, investors, and other interested parties to evaluate companies in the industry[25] - Limitations include not reflecting cash expenditures, future requirements for capital expenditures, working capital needs, or interest/principal payments on debt[25] Additional Information About PEDEVCO Corp. PEDEVCO Corp. is a publicly-traded energy company (NYSE American: PED) headquartered in Houston, Texas, focused on acquiring and developing strategic, high-growth energy projects in the U.S., with principal assets in the Permian and D-J Basins - PEDEVCO Corp. (NYSE American: PED) is a publicly-traded energy company headquartered in Houston, Texas[24] - Engaged in the acquisition and development of strategic, high growth energy projects in the United States[24] - Principal assets are its Permian Basin Asset in eastern New Mexico, and its D-J Basin Asset in Weld and Morgan Counties, Colorado[24] Cautionary Statement Regarding Forward-Looking Statements This section warns that the press release contains forward-looking statements subject to known and unknown risks and uncertainties, which may cause actual results to differ materially from expectations. Investors are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to update them, except as required by law - This press release may contain forward-looking statements, including information about management's view of PEDEVCO's future expectations, plans and prospects[27] - These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of PEDEVCO and its subsidiaries to be materially different than those expressed or implied[27] - The Company cautions that the foregoing list of important factors is not complete and undertakes no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, except to the extent required by applicable laws[27][28] Contact Information Provides contact details for PEDEVCO Corp. for inquiries - Contact for PEDEVCO Corp. is (713) 221-1768 or PR@pedevco.com[37]