8-K: PEDEVCO Reports Q2 2025 Loss Amid Production Decline

PEDEVCO Corp. announced a net loss of $1.7 million for Q2 2025, driven by lower production, commodity prices, and a significant credit loss write-off.

Summary

• Reported a net loss of $1.7 million, or $0.02 loss per basic and diluted share outstanding, for the three months ended June 30, 2025, compared to a $2.7 million gain, or $0.03 income per share, in Q2 2024.
• Q2 2025 revenue was $7.0 million, a decrease of $4.8 million (41%) from Q2 2024.
• Operating loss for Q2 2025 was $2.2 million, a decrease of $4.9 million from an operating income in Q2 2024.
• Average production for Q2 2025 was 1,517 barrels of oil equivalent per day (BOEPD), 86% liquids, representing a 25% decrease from Q2 2024 production of 2,010 BOEPD.
• Adjusted EBITDA, a non-GAAP measure, decreased 58% to $3.0 million in Q2 2025, down from $7.4 million in Q2 2024.
• Cash and cash equivalents, including $2.75 million in restricted cash, stood at $11.2 million as of June 30, 2025, with zero debt.
• The company received first production from four recently completed horizontal San Andres wells in its core Chaveroo Field (Permian Basin) starting in May 2025.
• Participated in the drilling of 18 non-operated wells in the D-J Basin across three projects with varying working interests (7.5%, 44%, 5%), with completions and initial production expected from mid-August 2025 through mid-Q4 2025.
• A $1.378 million note receivable credit loss was recognized due to the full write-off of a note receivable and accrued interest related to the 2023 sale of the EOR Operating Company subsidiary.
• Recorded a $0.5 million impairment of oil and gas properties related to 776 net acres of undeveloped leases in the D-J Basin that expired or have no drilling plans.
• Achieved a $1.021 million gain on the sale of 17 operated wells in the D-J Basin in April 2025.
• Working capital surplus increased to $7.0 million as of June 30, 2025, from $6.3 million at December 31, 2024.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant declines in key financial metrics (revenue, net income, production, Adjusted EBITDA) and the recognition of a substantial credit loss and impairment. While the company maintains a strong balance sheet and has future wells coming online, the current quarter's performance is poor.

Positives

• Maintained a strong balance sheet with $11.2 million in cash and cash equivalents and zero debt as of June 30, 2025.
• Secured an untouched $250 million Revolving Borrowing Base Loan (RBL) with Citibank, providing significant liquidity.
• Successfully brought four new horizontal San Andres wells in the Permian Basin online in May 2025, with positive early production results.
• Actively participating in the drilling of 18 non-operated wells in the D-J Basin, with 12 wells expected to commence production in Q4 2025, indicating future production growth.
• Achieved a $1.021 million gain from the sale of 17 operated wells in the D-J Basin, optimizing asset portfolio.
• Increased working capital surplus to $7.0 million, demonstrating improved liquidity management.

Negatives

• Reported a net loss of $1.7 million in Q2 2025, a significant decline from a $2.7 million net income in Q2 2024.
• Revenue decreased by $4.8 million (41%) to $7.0 million in Q2 2025 compared to Q2 2024.
• Experienced an operating loss of $2.2 million in Q2 2025, a $4.9 million deterioration from Q2 2024.
• Average daily production decreased by 25% to 1,517 BOEPD in Q2 2025 from 2,010 BOEPD in Q2 2024.
• Adjusted EBITDA declined by 58% to $3.0 million in Q2 2025 from $7.4 million in Q2 2024.
• Incurred a $1.378 million note receivable credit loss due to the full write-off of a note related to a 2023 asset sale.
• Recorded a $0.5 million impairment of oil and gas properties due to undeveloped lease expirations in the D-J Basin.
• Production was negatively impacted by a large non-operated D-J Basin pad being offline for a week and Permian Basin wells being shut-in for offset frac operations.
• Lower commodity prices contributed to an unfavorable price variance of $2.3 million in revenue.

Risks

• Volatility of oil and natural gas prices can significantly impact financial results.
• Uncertainty in discovering, estimating, developing, and replacing oil and natural gas reserves.
• Risk of operations not being profitable or generating sufficient cash flow to meet obligations.
• Dependence on the status and availability of oil and natural gas gathering, transportation, and storage facilities.
• Exposure to changes in the legal and regulatory environment governing the oil and gas industry, including new environmental legislation.
• Potential impact from crude oil production quotas or other actions imposed by OPEC and other producing countries.
• Disruption or interruption of operations due to war, accidents, political events, severe weather, cyber threats, terrorist acts, or other natural or human causes.
• Need for additional capital to complete future acquisitions, conduct operations, and fund the business, with uncertainty regarding availability and cost.
• Limited control over activities on properties where the company does not operate.
• Speculative nature of oil and gas operations, including the uncertainty of drilling, completion, and enhanced recovery operations.
• Illiquidity and volatility of common stock.
• Dependence upon present management and the significant beneficial ownership of common stock by Dr. Simon G. Kukes.
• Ability to maintain the listing of common stock on the NYSE American.
• Impacts from pandemics, governmental responses, economic downturns, and possible recessions.
• Inflationary risks and recent increased interest rates, and the risks of recessions caused by efforts to reduce inflation.
• Risks related to military conflicts in oil-producing countries.
• Limitations in the availability of, and costs of, supplies, materials, contractors, and services, which may delay or increase the expense of wells.
• Uncertainty regarding the amount and timing of future development costs.
• Availability and demand for alternative energy sources.
• Regulatory changes, including those related to carbon dioxide and greenhouse gas emissions.

Future Outlook

The company believes its outlook is bright, anticipating significant improvement in results in coming quarters due to participation in 18 non-operated wells in the D-J Basin and four operated wells in the Permian that recently came online. An additional four non-operated wells are planned for drilling in late Q4 2025 in the D-J Basin. The company plans to continue disciplined growth, focus on developing its Permian Basin Asset, grow operated and non-operated production in its D-J Basin Asset, control lease operating and G&A expenses, and seek accretive M&A opportunities. However, forward-looking statements are subject to known and unknown risks, including commodity price volatility, operational uncertainties, and the need for future capital.

Management Comments

• "We believe the outlook for PEDEVCO is bright with our participation in 18 non-operated wells in the D-J Basin currently under various stages of development and four operated wells in the Permian turned-in-line in May 2025, together with another four non-operated wells planned to be drilled in late Q4 2025 in the D-J Basin in which we hold interests."
• "However, in Q2 2025 our production was hampered by several factors, including a large non-operated D-J Basin pad being offline for a week and various Permian Basin wells being shut-in to accommodate offset frac operations and natural declines from flush production that came online in Q4 2024."
• "This temporary production decline, coupled with a challenging commodity price environment and a credit loss write-off from a note receivable related to an asset sale that occurred in 2023, contributed to results that should significantly improve in the coming quarters."
• "We believe that we remain well-positioned to continue disciplined growth, with over $10 million of cash on our balance sheet, zero debt, and an untouched $250 million RBL in place with Citibank."
• "We will continue to focus on developing our Permian Basin Asset and growing operated and non-operated production in our D-J Basin Asset, while continuing to control lease operating and G&A expenses and seeking accretive M&A opportunities."

Industry Context

The energy sector, particularly oil and gas, is highly susceptible to commodity price fluctuations and operational disruptions. PEDEVCO's Q2 2025 results reflect these challenges, with lower realized prices and operational issues contributing to revenue and production declines. The company's strategy of focusing on Permian and D-J Basin assets aligns with common industry practices for onshore U.S. unconventional plays. The emphasis on non-operated wells indicates a strategy to leverage partners' expertise and capital while maintaining exposure to high-growth areas. The current environment of increased interest rates and inflationary pressures, as noted in the risks, is a broader industry concern impacting capital costs and operational expenses.

Comparison to Industry Standards

• No specific comparable companies, projects, or results were mentioned in the filing for direct assessment against global benchmarks.

Related Party Transactions

• A note receivable credit loss of $1.378 million was recognized related to the full write-off of a note receivable, corresponding accrued interest, and post-closing adjustments owed to the Company related to the sale of its EOR Operating Company subsidiary, which occurred in 2023.

Stakeholder Impact

• Shareholders: Negative impact due to net loss, decreased revenue, and production, potentially affecting share price. Future production increases from new wells could offer positive long-term prospects.
• Employees: General and administrative expenses increased due to additional payroll, suggesting stable or potentially increased employment costs.
• Creditors: Positive impact due to zero debt and an untouched $250 million RBL facility, indicating strong liquidity and ability to meet obligations.
• Customers: No direct impact mentioned, but lower production volumes could theoretically affect supply, though the company's scale likely means this is not a significant concern for individual customers.

Next Steps

• Completion of eight 2.5 mile lateral non-operated wells in the D-J Basin expected in mid-August 2025, with initial production in early Q4 2025.
• Completion of three 2.5 mile lateral and one 3 mile U-shaped lateral non-operated wells in the D-J Basin expected in early September 2025, with initial production in mid-Q4 2025.
• Drilling of six 1.5 mile lateral non-operated wells in the D-J Basin, with timing of completion operations currently unknown.
• Drilling of four non-operated wells in the D-J Basin planned for late Q4 2025.
• Continue disciplined growth.
• Focus on developing the Permian Basin Asset.
• Grow operated and non-operated production in the D-J Basin Asset.
• Continue to control lease operating and general and administrative expenses.
• Seek accretive merger and acquisition opportunities.

Key Dates

Recommendation

While Q2 2025 results show significant declines in revenue, production, and a shift to a net loss, the company maintains a strong balance sheet with zero debt and substantial cash reserves, along with an untouched $250 million RBL facility. Management attributes the poor performance to temporary factors and outlines clear plans for future production increases from new wells coming online in Q4 2025. The long-term potential from these new wells and the company's financial stability suggest a 'hold' rather than a 'sell,' but the current operational and financial setbacks prevent a 'buy' recommendation.

Keywords

Energy, Oil and Gas, Permian Basin, D-J Basin, Exploration and Production, Financial Results, SEC Filing, EBITDA, Production, Revenue, Net Loss, Oil Prices, Natural Gas, NGLs, Drilling, Wells, Non-operated, Working Interest, Cash Flow, Debt Free, Asset Sales, Impairment, Credit Loss