PEDEVCO Corp. — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it does not provide standalone fourth-quarter results. PEDEVCO is a small, U.S. oil and gas producer operating in the Permian Basin in New Mexico and the D-J Basin in Colorado. At year-end it reported approximately 32,870 net Permian acres and 11,580 net D-J Basin acres.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Oil and gas revenue | $15.86 million | $8.06 million |
| Net loss | $1.30 million | $32.69 million |
| Operating loss | $1.87 million | $33.82 million |
| Cash provided by operating activities | $5.97 million | $0.01 million |
| Cash used in investing activities | $2.76 million | $14.77 million |
| Cash provided by financing activities | $14.69 million | $0.37 million |
| Cash at year-end | $25.93 million | $8.03 million |
| Working capital | $22.8 million | $6.8 million |
| Total liabilities | $6.74 million | $3.93 million |
- Sales volumes were reported as 265,302 Boe, averaging 727 Boe/day, versus 252,807 Boe and 691 Boe/day in 2020. Average realized prices rose to $64.76/Bbl for oil, $4.70/Mcf for gas and $36.09/Bbl for NGLs.
- Lease operating expenses were $5.94 million, up 34%; DD&A was $7.38 million. No oil and gas impairment was recorded in 2021, compared with $19.33 million in 2020. The filing reports average production costs of $13.44/Boe, excluding workovers, marketing and certain taxes.
- Year-end proved reserves were 14.7 MMBoe, including 12.5 MMBoe of proved undeveloped reserves (PUDs). Reported PV-10 was $196.6 million before income taxes; the standardized measure of discounted future net cash flows was $164.0 million.
- The company reported no outstanding debt at year-end after forgiveness of its $370,000 PPP loan and $4,000 accrued interest. It had $1.53 million in asset retirement obligations, including current and long-term amounts.
Material changes versus 2020
- Revenue increased 97%, primarily from higher commodity prices, with a smaller contribution from higher production. Production volumes rose about 5%.
- Net loss narrowed by $31.4 million, mainly because the prior year included the $19.3 million impairment; higher revenue, a $1.8 million property-sale gain and $374,000 of PPP-loan forgiveness also contributed.
- Operating cash flow rose to $5.97 million. The company raised $14.7 million net from two common-stock offerings in 2021, increasing shares outstanding and diluting existing holders.
- Proved reserves increased approximately 0.6 MMBoe. Management attributed the increase primarily to D-J Basin PUD additions and favorable SEC pricing; reserve value growth was described as commodity-price driven.
Outlook, risks and unusual items
- Management estimated 2022 net capital expenditures of $35–$40 million, including $33–$38 million for drilling and completions. It cited roughly 10%–15% per-well cost inflation compared with costs experienced since Q3 2021. The program may change with commodity prices, permitting, service availability, liquidity and capital allocation.
- Management expected available resources to fund the foreseeable future and the remainder of the 2022 program, relying on operating cash flow, cash on hand and potential financing. Possible SK Energy support is not contractually committed; other potential sources include debt or equity, asset sales and farm-outs. The ATM offering allowed up to $3.6 million in sales, but none had been sold as of the report.
- In February 2022, the company acquired additional D-J Basin interests for approximately $500,000, including 46.6 net acres and interests in 14 producing horizontal wells; estimated drilling and completion costs payable were approximately $2.4 million.
- Key exposures include oil-price volatility, concentrated operations in two basins, customer concentration (two customers represented 72% and 12% of 2021 revenue), reliance on third-party gathering and transportation, and dependence on access to capital. Colorado regulatory changes, including new financial-assurance rules effective April 30, 2022, may increase costs. The company also disclosed permitting delays for New Mexico salt-water disposal wells.
- The company reported no material pending legal proceedings. The auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls and internal control over financial reporting were effective. The auditor did not attest to internal controls, as the company is a smaller reporting company.
Important facts for investors to verify
- Reconcile production-volume disclosures: the MD&A narrative gives 263,302 Boe, while the production tables report 265,302 Boe.
- Reconcile the 2021 year-end share count: the balance sheet states 84,236,146 shares, while the statement of shareholders’ equity states 84,263,146; the cover reports 85,463,146 shares outstanding as of March 10, 2022.
- Review the independent reserve report, especially PUD development timing, the estimated $170–$190 million PUD development cost through 2026, and the assumptions behind PV-10 and standardized-measure values.
- Assess the funding plan against the $35–$40 million 2022 capital budget, including the absence of a binding SK Energy funding commitment and the potential for further equity dilution.
- Monitor regulatory and permitting developments in Colorado and New Mexico, service-cost inflation, customer concentration and the company’s ability to convert planned drilling into production and cash flow.