10-Q: PEDEVCO Corp. Reports First Quarter 2024 Results with Net Income of $0.8 Million

PEDEVCO Corp. announced a net income of $0.8 million for the first quarter of 2024, a decrease compared to the $1.8 million reported in the same period last year.

Summary

• PEDEVCO Corp. reported a net income of $0.8 million for the three months ended March 31, 2024, which is a decrease from the $1.8 million reported for the same period in 2023.
• The decrease in net income is primarily attributed to a $0.9 million increase in depletion expense and a slight increase in lease operating expenses.
• Total revenue for the quarter was $8.116 million, a slight decrease from $8.164 million in the same period last year.
• The company's production volumes increased due to participation in new non-operated wells in the D-J Basin and the completion of operated wells in the Permian Basin.
• However, these increases were offset by production declines in existing wells.
• The company incurred $5.362 million in capital costs, primarily related to drilling and completion activities.
• The company acquired approximately 407 net lease acres in the D-J Basin for $230,000.
• The company's 2024 capital expenditure estimate ranges from $20 million to $30 million.
• The company expects to have sufficient cash to meet its needs over the next 12 months.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to decreased net income and increased expenses, offset by increased production and strategic acquisitions. The company's future outlook is cautiously optimistic, but there are risks associated with commodity prices and operational challenges.

Positives

• The company's production volumes increased due to new well participation and completions.
• The company acquired additional lease acreage in the D-J Basin.
• The company expects to have sufficient cash to meet its needs over the next 12 months.
• The company continues to implement cost reduction measures on its operated properties.

Negatives

• Net income decreased by $1.0 million compared to the same period last year.
• Depletion expense increased by $0.9 million.
• Total revenue decreased slightly compared to the same period last year.
• Production declines in existing wells offset some of the gains from new wells.

Risks

• The company's financial results are dependent on volatile commodity prices.
• The company's ability to find and develop sufficient reserves at economical costs is critical to its long-term success.
• The company's future financial condition and liquidity will be impacted by the success of its drilling program.
• The company's operations are subject to environmental risks.
• The company's disclosure controls and procedures were not designed at a reasonable assurance level and were not effective.

Future Outlook

The company plans to optimize existing assets, seek additional acreage, and continue to develop its Permian and D-J Basin assets. The company expects to have sufficient cash to meet its needs over the next 12 months and anticipates funding its 2024 development program through cash flow, existing cash, potential equity infusions or loans from the CEO, and credit facilities.

Management Comments

• Management believes that horizontal development and exploitation of conventional assets in the Permian Basin and development of the Wattenberg and Wattenberg Extension in the D-J Basin represent among the most economic oil and natural gas plays in the U.S.
• Management plans to optimize existing assets and opportunistically seek additional acreage.
• Management believes its technical and operating expertise can be accretive to shareholder value.

Industry Context

The report reflects the ongoing challenges and opportunities in the oil and gas industry, including fluctuating commodity prices and the need for efficient operations. The company's focus on modern drilling techniques and strategic acquisitions aligns with industry trends aimed at maximizing production and profitability.

Comparison to Industry Standards

• PEDEVCO's production results are mixed, with increased volumes from new wells offset by declines in existing wells, a common challenge in the oil and gas industry.
• The company's capital expenditure plans are in line with other small to mid-sized exploration and production companies, focusing on development and strategic acquisitions.
• The company's focus on the Permian and D-J Basins is consistent with industry trends, as these are considered some of the most economic plays in the U.S.
• Compared to companies like EOG Resources and Devon Energy, PEDEVCO is a smaller player, but its strategy of leveraging existing infrastructure and applying modern techniques is similar to how larger companies optimize their assets.
• The company's reported EBITDA and Adjusted EBITDA are metrics commonly used in the industry to assess operational performance, and its results are within the range of other companies of similar size.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income, but encouraged by the company's growth plans.
• Employees may be affected by the company's cost reduction measures and strategic shifts.
• Customers and suppliers may see changes in the company's operations and production volumes.

Next Steps

• The company plans to continue evaluating D-J Basin well proposals and participate in those deemed most economic.
• The company plans to continue its 2024 development program, subject to market conditions and other factors.
• The company plans to maintain a disciplined financial profile to pursue growth opportunities.

Key Dates

Keywords

oil and gas, production, Permian Basin, D-J Basin, drilling, completion, reserves, capital expenditures, net income, revenue