PEDEVCO CORP. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 15, 2024. PEDEVCO is an oil and gas producer with assets in the Permian Basin and Denver-Julesburg Basin.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Oil and gas revenue | $8.116 million | $8.164 million, down 1% |
| Operating income | $617,000 | $1.629 million |
| Operating margin | 7.6% | 20.0% |
| Net income | $773,000; $0.01 per share | $1.762 million; $0.02 per share |
| Net margin | 9.5% | 21.6% |
| Adjusted EBITDA (non-GAAP) | $4.721 million | $4.861 million |
| Net cash from operations | $(4.295) million | $1.782 million provided |
| Net cash used in investing | $(926,000) | $(17.073) million |
Production averaged 1,478 Boe/day, up 4%; oil volumes declined 3%, while natural gas volumes rose 49%. Lower natural gas prices (down 56% to $2.52/Mcf) offset stronger NGL pricing and higher gas/NGL volumes. Oil averaged $73.87/Bbl, up 2%; NGLs averaged $28.48/Bbl, up 51%.
At March 31, cash and cash equivalents were $13.294 million, plus $2.2 million of restricted cash. Working capital was positive $4.8 million, down from $5.7 million at year-end. Total liabilities were $18.281 million; the company reported no debt. Operating cash use reflected working-capital movements, including decreases in accrued expenses and revenue payable. Capital costs were approximately $5.6 million, including accrued development spending.
Material changes and operating activity
- Net income fell $989,000 year over year, primarily as depreciation, depletion, amortization and accretion rose $904,000 (35%), mainly due to development costs and new wells.
- Lease operating costs increased 3% to $2.531 million; G&A was essentially flat at $1.495 million.
- The company incurred $5.362 million of oil and gas capital costs, including participation in 13 new non-operated D-J Basin wells, work on three operated Permian wells, and D-J Basin workovers. It acquired about 407 net D-J Basin acres for $230,000.
- Shares outstanding increased from 87.25 million to 89.36 million, including 2.105 million restricted shares granted to employees.
Outlook, risks and other notable items
- Management estimates 2024 net capital expenditures of $20–$30 million, including $17–$27 million for drilling and completion. It reports approximately $5.1 million of drilling and completion spending and $0.3 million of other budgeted capital expenditures through March 31.
- Management expects available cash to meet needs for the next 12 months, citing operating cash flow, cash on hand, possible CEO funding (for which the CEO has no obligation), and potential credit or loan facilities. Asset sales, farm-outs or credit facilities may also be pursued for acquisitions.
- Management expects commodity prices to remain volatile. Results and liquidity depend on prices, production, drilling success, development costs and the timing of bringing discoveries on production. The company may adjust its program for market conditions, permitting, contractor availability, capital availability and partner decisions.
- Leasehold exposure includes 5,829 net D-J Basin acres expiring within the next two years and 40 net Permian acres expiring during the remainder of 2024; the company plans to retain acreage through drilling or extensions where available.
- In April 2024, the company increased restricted cash collateral for New Mexico surety bonds by $447,000 following an updated government assessment.
- Disclosure controls and procedures were deemed ineffective as of March 31, 2024, and not designed to provide reasonable assurance. Management reported no material change in internal control over financial reporting during the quarter.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. The company cites, among other risks, additional Colorado permit scrutiny and exposure to commodity-price volatility.
Important facts for investors to verify
- Whether production growth and planned drilling translate into sustained revenue, operating cash flow and returns on capital.
- How the negative operating cash flow and working-capital movements develop, and whether the $20–$30 million capital program can be funded as planned.
- Progress on remediation of ineffective disclosure controls and procedures.
- Actual costs and timing of development, lease extensions and the additional New Mexico surety collateral.
- Terms and availability of any prospective CEO funding or external credit; the CEO is not obligated to provide funding.