8-K: PEDEVCO Enters Joint Development Agreement with Private Equity-Backed E&P Company in D-J Basin

PEDEVCO Corp. announces a joint development agreement with a private equity-backed E&P company to expand and develop its Roth and Amber DSUs in the D-J Basin.

Summary

• PEDEVCO Corp. has entered into a joint development agreement with a large private equity-backed D-J Basin E&P company.
• The agreement focuses on the expansion and development of PEDEVCO's Roth and Amber DSUs in Weld County, Colorado.
• The Operator will pay PEDEVCO approximately $1.7 million.
• PEDEVCO will submit applications to increase the size of its Roth and Amber DSUs from approximately 1,280 acres to approximately 1,600 acres.
• The Operator will take over operatorship of the DSUs.
• Both parties will jointly participate in the development of the Roth DSU, with each holding at least a 40% working interest.
• The Operator will commence drilling five new horizontal wells in the Roth DSU in Q3 2025, with completion estimated in Q4 2025.
• PEDEVCO retains the right to assume operations if the wells are not started on time.
• Upon timely completion of the wells, but no later than June 30, 2026, the Operator has the option to acquire up to 50% of PEDEVCO's leasehold interest in the Amber DSU, resulting in each party holding up to approximately 45% of the working interests.

Sentiment

Score: 7

Explanation: The announcement is positive due to the joint venture bringing capital and expertise to PEDEVCO. However, it's tempered by the inherent risks of oil and gas development and the forward-looking nature of the statements.

Positives

• The joint development agreement provides PEDEVCO with $1.7 million in funding.
• PEDEVCO benefits from the Operator's expertise and operational experience in the D-J Basin.
• The agreement allows for the expansion of the Roth and Amber DSUs, potentially increasing production and reserves.
• PEDEVCO expects to realize economies of scale and cost savings from the collaboration due to the Operator having a continuous rig running in the area.
• PEDEVCO has a high degree of confidence in the Operator due to past successful collaborations.

Risks

• The press release contains forward-looking statements that are subject to known and unknown risks, uncertainties, and assumptions.
• Actual events and/or results may differ materially from those projected in the forward-looking statements.
• The success of the joint development agreement depends on the Operator's ability to timely commence and complete the drilling of the new wells.
• The Operator's option to acquire a portion of the Amber DSU is contingent upon the timely completion of the Roth DSU wells.
• The company's future performance is subject to various risks, including the volatility of oil and natural gas prices, regulatory changes, and economic conditions.

Future Outlook

The company anticipates increased development and production from its Roth DSU through the joint development agreement, with potential expansion into the Amber DSU.

Management Comments

• J. Douglas Schick, President and Chief Executive Officer of the Company, stated, 'We are excited to announce this new joint development agreement with one of the top operators in the D-J Basin to develop our Roth DSU in 2025.'
• He also mentioned that PEDEVCO expects to realize economies of scale and cost savings from this collaboration and has a high degree of confidence in the Operator's ability to deliver strong results.

Industry Context

Joint ventures are common in the oil and gas industry to share risk and expertise, particularly in developing shale resources like those in the D-J Basin. PEDEVCO's partnership with a private equity-backed operator aligns with this trend, allowing them to leverage the operator's experience and capital to accelerate development.

Comparison to Industry Standards

• The D-J Basin is a well-established oil and gas region, and joint ventures are a typical method for companies to develop assets.
• Similar agreements often involve larger operators bringing capital and expertise to smaller companies with existing acreage.
• The size of the DSUs (expanding to ~1,600 acres) is fairly standard for modern horizontal drilling in shale plays.
• The planned drilling of five wells is a reasonable initial development phase for the Roth DSU.

Stakeholder Impact

• Shareholders may benefit from increased production and reserves resulting from the joint development agreement.
• The agreement could create jobs in the D-J Basin.
• The collaboration may lead to increased revenue and profitability for PEDEVCO.

Next Steps

• PEDEVCO will submit spacing applications to the Colorado Energy and Carbon Management Commission (the ECMC).
• The Operator will commence drilling five new horizontal wells in the Roth DSU in Q3 2025.
• The Operator may exercise its option to acquire up to 50% of PEDEVCO's leasehold interest in the Amber DSU by June 30, 2026.

Key Dates