PEDEVCO CORP. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on January 22, 2014, regarding events occurring on January 21, 2014. PEDEVCO Corp. (the "Company") announced that its newly formed wholly-owned subsidiary, Red Hawk Petroleum, LLC, entered into a definitive agreement to acquire oil and gas assets from Continental Resources, Inc.
Key Financial Metrics and Transaction Details
- Transaction Value: $30 million in cash (subject to customary adjustments).
- Deposit Paid: $1.5 million non-refundable deposit paid upon signing.
- Assets Acquired: Approximately 28,727 net acres and 40 wells in the DJ Basin, Colorado (Niobrara Shale Formation).
- Production Metrics: Estimated average production of 400 net barrels of oil equivalent per day (as of September 2013).
- Well Composition: 11 operated wells, 14 non-operated wells, and 15 wells with after-payout interest.
- Funding Source: Remaining purchase price expected to be funded via potential issuance of long-term debt securities and cash on hand.
Note: This filing does not provide the Company's consolidated revenue, profit, cash flow, margins, or total debt levels as of the reporting date.
Material Changes and Conditions
The primary material change is the entry into the Purchase Agreement. The transaction is subject to customary closing conditions and due diligence. The effective date of the transaction is December 1, 2013. The closing is expected to occur no later than February 28, 2014, unless extended by mutual agreement.
Termination Rights: Either party may terminate the agreement if title, environmental, casualty, or other defects result in a purchase price decrease of over 15% (subject to a 4% deductible). In such cases, the deposit plus interest must be returned to the Company. The deposit is also refundable if the agreement is terminated for reasons other than a material breach by the Company.
Outlook, Risks, and Management Commentary
Management intends to close the transaction to expand its asset base in the prolific Wattenberg Area. The primary risks identified include the satisfaction of closing conditions, potential title or environmental defects affecting the purchase price, and the Company's ability to secure the necessary long-term debt financing to fund the remaining balance of the purchase price.
Key Facts for Investor Verification
- Confirmation of the Company's ability to secure long-term debt financing for the remaining $28.5 million balance.
- Results of the Company's due diligence regarding title, environmental, and casualty defects.
- Final closing date and any adjustments to the $30 million purchase price.
- Impact of the acquisition on the Company's future liquidity and leverage ratios.