Phoenix Energy One, LLC - 10-Q Summary (Q1 2026)
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Phoenix Energy One, LLC is an oil and gas exploration and production (E&P) company operating primarily in the Williston, Uinta, Permian, and Denver-Julesburg Basins. The company executes a three-pronged strategy: direct drilling operations (via PhoenixOp), acquisition of royalty assets, and acquisition of non-operated working interests. As of March 31, 2026, the company had 121 producing wells in service.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $298.7 million | $115.7 million |
| Net Income (Loss) | $(140.1) million | $5.6 million |
| Adjusted EBITDA | $130.2 million | $69.2 million |
| Operating Cash Flow | $103.8 million | $18.1 million |
| Capital Expenditures | $238.6 million | $182.4 million |
| Total Debt Outstanding | $1.70 billion | $1.53 billion |
| Cash and Equivalents | $70.2 million | $35.4 million |
| Working Capital | $(358.0) million (Negative) | Not Disclosed |
Material Changes vs. Prior Period
- Revenue Surge: Total revenue increased 158% year-over-year, driven by a 115% increase in product sales (due to 121 producing wells vs. 37 in Q1 2025) and $77.1 million in new purchased crude oil sales from Firebird Marketing.
- Net Loss: The company reported a net loss of $140.1 million compared to a net income of $5.6 million in Q1 2025. This was primarily caused by a $178.8 million unrealized loss on derivatives due to unfavorable mark-to-market changes.
- Production Growth: Average daily production increased 94.3% to 37,976 Boe/d. Crude oil production rose 87.8% to 2.92 million Bbls.
- Debt Expansion: Total debt increased by approximately $172 million to $1.70 billion, funded by new issuances under the Fortress Credit Agreement and various bond offerings to support capital expenditures.
Guidance, Outlook, and Risks
- Capital Plan: Management expects to drill 75 to 105 gross wells and participate in 310 to 410 gross non-operated wells over the next 12 months, requiring $750 million to $810 million in capital expenditures.
- Liquidity Needs: The company anticipates needing to raise approximately $147.3 million in capital in 2026 to fully realize its business plan. It recently raised $92.7 million in debt subsequent to the balance sheet date.
- Covenant Waiver: On May 7, 2026, the company obtained a waiver for noncompliance with its current ratio covenant as of March 31, 2026, attributed to the timing of accelerated well completion expenditures.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2026, due to material weaknesses including inadequate segregation of duties and ineffective IT general controls. Remediation efforts are underway.
- Market Risk: The company has significant exposure to commodity price volatility. As of March 31, 2026, it had hedged approximately 16.6 million Bbls of anticipated oil production through 2028.
Investor Verification Checklist
- Derivative Exposure: Verify the impact of the $178.8 million unrealized derivative loss on future cash flows and the specific terms of the hedging program (swaps, collars, options).
- Liquidity Sufficiency: Assess the company's ability to meet the $750M-$810M capital expenditure plan given the negative working capital of $358 million and the need to raise an additional $147.3 million.
- Debt Covenants: Monitor compliance with the Fortress Credit Agreement covenants, specifically the current ratio, following the recent waiver.
- Internal Control Remediation: Review the progress of remediation efforts for the identified material weaknesses in internal controls over financial reporting.
- Production Costs: Analyze the trend in operating costs per Boe, which increased to $21.91 in Q1 2026 from $18.01 in Q1 2025, and management's ability to moderate these costs as production scales.