PEDEVCO CORP. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on January 14, 2019, covering events occurring on January 11, 2019. PEDEVCO Corp., a Texas corporation, reported the entry into a material definitive agreement to acquire oil and gas assets in the Permian Basin and the issuance of a convertible promissory note to fund operations.
Key Financial Metrics and Transactions
- Asset Acquisition: Agreed to purchase oil and gas assets for a base consideration of $700,000, subject to working capital and production adjustments.
- Debt Financing: Issued a $15,000,000 Convertible Promissory Note to SK Energy LLC.
- Debt Terms: The note accrues interest at 8.5% per annum, payable at maturity or upon conversion. It is due on January 11, 2022.
- Conversion Terms: Convertible into common stock at $1.50 per share, with a 49.9% beneficial ownership limitation for the lender.
- Liquidity Impact: The filing does not provide current cash balance, revenue, or profit figures; it focuses on the new capital raised and the pending asset purchase.
Material Changes and Asset Details
The company entered into a Purchase and Sale Agreement to acquire approximately 22,000 net leasehold acres in the San Andres play of the Permian Basin (eastern New Mexico). The assets include one producing horizontal well, three shut-in wells, and one saltwater disposal well. These assets are contiguous with the company's existing 23,000 net leasehold acres in the same region. The effective date for the acquisition is scheduled for February 1, 2019.
Outlook, Management Commentary, and Risks
Use of Proceeds: The $15,000,000 raised from the convertible note is designated to fund the completion of four recently drilled wells, the drilling of one initial horizontal well on the newly acquired assets, further asset development, and general working capital.
Risks and Contingencies:
- The acquisition is subject to customary closing conditions and may be terminated if closing does not occur by February 8, 2019.
- The company retains the right to terminate the purchase agreement at any time if due diligence is unsatisfactory.
- The convertible note was issued to SK Energy LLC, a company wholly-owned by the CEO and director, Dr. Simon Kukes, creating a related-party transaction.
- The securities were issued under Section 4(a)(2) and/or Rule 506 of Regulation D and are subject to transfer restrictions.
Investor Verification Checklist
- Verify the final purchase price of the assets after working capital and production adjustments are calculated at the February 1, 2019 effective date.
- Confirm the successful closing of the asset acquisition by the February 8, 2019 deadline.
- Review the specific terms of the related-party transaction with SK Energy LLC and the impact of the 49.9% conversion limitation on future dilution.
- Monitor the progress of the four new wells and the initial horizontal well on the new assets as funded by the note proceeds.
- Check subsequent filings for the actual financial statements of the acquired assets required by the purchase agreement.