PEDEVCO Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 15, 2023. PEDEVCO is an oil and gas producer with assets in the Permian Basin and Denver-Julesburg (D-J) Basin.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Oil and gas revenue | $8.164 million | $7.090 million | +15% |
| Operating income | $1.629 million | $1.256 million | +30% |
| Net income | $1.762 million | $1.339 million | +32% |
| Basic and diluted EPS | $0.02 | $0.02 | No change |
| Cash from operations | $1.782 million | $1.415 million | +$0.367 million |
| Cash used in investing | $17.073 million | $5.508 million per MD&A | Higher spending |
Operating margin was approximately 20.0% versus 17.7%; net margin was approximately 21.6% versus 18.9%. Adjusted EBITDA, a non-GAAP measure, was $4.861 million versus $3.788 million.
Production averaged 1,428 Boe/d, up 33% from 1,074 Boe/d. Revenue growth reflected higher volumes, partly offset by lower realized crude oil prices ($72.19/Bbl versus $82.24) and NGL prices ($18.90/Bbl versus $43.07). Natural gas averaged $5.75/Mcf versus $5.59.
Financial position and liquidity
- At March 31, cash and cash equivalents were $14.139 million, plus $3.547 million of restricted cash; total cash and restricted cash was $17.686 million. Cash and cash equivalents included a $5.0 million U.S. Treasury bill.
- Current assets were $20.076 million and current liabilities were $6.767 million, resulting in working capital of $13.309 million, down from $15.147 million at year-end 2022.
- Total liabilities were $9.395 million. The filing states the Company maintained no debt; liabilities included asset retirement obligations and lease obligations.
- Operating cash flow was more than offset by investing outflows. Investing cash use included $17.032 million of drilling and completion payments; the Company also paid approximately $12.5 million of accrued 2022 capital expenditures during Q1.
Material changes and business developments
- Revenue increased $1.074 million: higher sales volumes contributed approximately $2.0 million, offset by an approximately $0.9 million unfavorable price variance. Eight new non-operated D-J Basin wells began producing during the quarter; six additional wells had started producing in late 2022.
- Depreciation, depletion, amortization and accretion rose 37% to $2.581 million, primarily with higher production. Lease operating costs increased 5% to $2.466 million; selling, general and administrative expense declined 7% to $1.488 million.
- Capital additions included participation in eight D-J Basin non-operated wells and Permian Basin workovers. The Company acquired approximately 187 net mineral acres and 1,523 net lease acres in the D-J Basin for reported acquisition and due-diligence costs of $291,000 and $1.267 million, respectively.
- After quarter-end, PEDEVCO acquired approximately 1,899 additional D-J Basin net lease acres for total acquisition costs of $783,000.
Outlook, risks and other matters
- Management estimated 2023 net capital expenditures of $25 million to $35 million, including $23 million to $33 million for drilling and completion. Approximately $4.9 million had been incurred through March 31. Estimates may change with commodity prices, drilling results, permitting, contractor availability, partner decisions, liquidity and acquisition opportunities.
- Management expected available resources to meet needs for at least the next 12 months, citing operating cash flow and cash on hand, as well as potential financing. Potential CEO funding is not committed; other possible sources include ATM sales, debt or equity financing, credit facilities, asset sales and farm-outs.
- Management expects commodity prices to remain volatile. Results also depend on drilling and reserve outcomes, development costs, market access, and regulatory and environmental matters, including additional permit scrutiny in Colorado. The filing reported no material change to previously disclosed risk factors.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile Q1 investing cash-flow presentation: the cash-flow statement reports $17.073 million used in 2023 and $5.808 million used in 2022, while the MD&A reports $5.508 million for 2022. The filing text does not clearly reconcile the 2022 figures.
- Track cash use against the $25 million–$35 million 2023 capital-spending estimate, including payment of prior-period accruals and discretionary acreage acquisitions.
- Assess whether production growth and realized prices support the development program and management’s liquidity outlook; some potential funding sources are not assured.
- Review dilution from equity compensation: 1.25 million restricted shares were granted in January 2023, and 540,000 options were also granted.