PEDEVCO CORP. 10-Q Summary
Business Context and Reporting Period
Company: PEDEVCO Corp. (PED)
Reporting Period: Quarter and six months ended June 30, 2026
Business Overview: An oil and natural gas exploration and production company focused on legacy assets in the Denver-Julesberg Basin (Colorado/Wyoming), Powder River Basin (Wyoming), and Permian Basin (New Mexico).
Key Corporate Actions:
- Reverse Stock Split: A 1-for-20 reverse stock split became effective on March 13, 2026. All share data in this report is retroactively adjusted.
- Mergers: Completed acquisitions of North Peak Oil & Gas and Century Oil and Gas in October 2025, significantly expanding asset base and production.
- Capital Structure: Series A Preferred Stock issued for the mergers automatically converted to common stock on February 27, 2026.
Key Financial Metrics
| Metric (in thousands, except per share) | Three Months Ended June 30, 2026 |
Six Months Ended June 30, 2026 |
Six Months Ended June 30, 2025 |
|---|---|---|---|
| Revenue | $46,113 | $86,335 | $15,708 |
| Net Income (Loss) | $17,454 | $(8,173) | $(1,536) |
| EPS (Basic & Diluted) | $1.31 | $(0.77) | $(0.34) |
| Operating Cash Flow | N/A | $25,873 | $5,508 |
| Capital Expenditures (Drilling/Completion) | N/A | $(20,008) | $(3,675) |
| Cash & Restricted Cash | $12,142 (Balance Sheet) | $12,142 (Balance Sheet) | $6,321 (Balance Sheet) |
| Revolving Credit Facility Outstanding | $85,000 | $85,000 | $0 |
| Working Capital | $(10,922) Deficit | $(10,922) Deficit | N/A |
Material Changes vs. Prior Period
Revenue Growth: Revenue increased 561% for the quarter and 450% for the six months compared to the prior year periods. This is primarily driven by the October 2025 Mergers, which added significant production volumes (Crude oil production increased 349% QoQ and 385% YoY).
Profitability Volatility:
- Q2 2026: Reported a net income of $17.5 million, a turnaround from a $1.7 million loss in Q2 2025. This was aided by a $5.0 million gain on derivative contracts due to temporary price decreases.
- YTD 2026: Reported a net loss of $8.2 million, widening from a $1.5 million loss in YTD 2025. The loss was driven by a $26.3 million net loss on derivative contracts (unrealized losses due to rising commodity prices) and $4.0 million in interest expense.
Balance Sheet: Total assets decreased slightly to $359.7 million from $375.9 million at year-end 2025, primarily due to amortization and impairments. Current liabilities decreased significantly ($50.7M vs $64.5M) due to the reduction of capital payables following drilling program completions.
Guidance, Outlook, Risks, and Unusual Items
Capital Expenditure Guidance: Net capital expenditures for 2026 are estimated between $16 million and $20 million. Approximately 90% is allocated to the D-J Basin for drilling and optimization projects.
Liquidity: The company maintains a working capital deficit of $10.9 million but expects sufficient cash to meet needs for the next 12 months via operating cash flow, existing cash, and an available borrowing base of $125 million (with $85 million currently drawn). An "at-the-market" (ATM) equity offering has $7.6 million remaining capacity.
Unusual Items:
- Derivatives: Significant volatility in earnings due to hedging. The company recorded a $26.3 million loss on derivatives for the six months ended June 30, 2026, largely unrealized, due to commodity prices rising above hedge ceilings.
- Impairments: Recorded $2.4 million in impairments for the six months ended June 30, 2026, related to undeveloped leases in the D-J Basin allowed to expire.
Risks and Contingencies:
- Legal Proceedings: Ongoing litigation with Tilloo Exploration regarding a defaulted promissory note (trial set for March 2027). A dispute with Phoenix Energy One regarding a property sale was settled in June 2026, with payments totaling $6.75 million to be received.
- Lease Expirations: Significant acreage in the D-J Basin and Powder River Basin is scheduled to expire in 2026-2028 if drilling commitments are not met.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of June 30, 2026, due to material weaknesses identified in the prior year-end audit that remain unremediated.
Investor Verification Checklist
- Derivative Exposure: Verify the extent of unrealized losses on derivative contracts and the impact of rising commodity prices on future earnings, given the company's hedging requirements under its credit agreement.
- Internal Control Remediation: Review the specific material weaknesses in internal controls over financial reporting and the timeline for remediation, as this poses a risk to financial reporting reliability.
- Lease Retention: Assess the company's ability to meet drilling commitments on expiring leases in the D-J Basin and Powder River Basin to avoid further impairments.
- Liquidity Position: Monitor the working capital deficit and the utilization of the $125 million credit facility to ensure sufficient liquidity for the $16M-$20M capital program.
- Legal Outcomes: Track the resolution of the Tilloo litigation and the finalization of the Phoenix settlement payments.