10-Q: PEDEVCO Reports Q3 Loss, Announces Major Merger & Capital Raise

PEDEVCO Corp. reported a net loss for Q3 2025 and the nine months ended September 30, 2025, while announcing a significant merger with North Peak and Century Oil & Gas, a $35 million PIPE financing, and a new $120 million credit facility.

Summary

• Reported a net loss of $0.3 million for the three months ended September 30, 2025, compared to a net income of $2.9 million in the prior year period.
• Reported a net loss of $1.9 million for the nine months ended September 30, 2025, compared to a net income of $6.4 million in the prior year period.
• Total revenues decreased by 23% to $7.0 million for Q3 2025 and by 22% to $22.7 million for the nine months ended September 30, 2025, primarily due to lower crude oil and NGL sales volumes and prices.
• The company completed a significant merger with North Peak Oil & Gas, LLC and Century Oil and Gas Sub-Holdings, LLC on October 31, 2025, transforming it into a Rockies-focused operator with approximately 320,000 net acres.
• Concurrently with the merger, PEDEVCO raised $35,000,004 through a PIPE offering of Series A Convertible Preferred Stock, with significant insider participation.
• Entered into an Amended and Restated Credit Agreement on October 31, 2025, providing an initial borrowing base of $120 million and a maximum revolving credit of $250 million, with $87 million drawn to fund the merger.
• The December 31, 2024, consolidated balance sheet was restated to correct an overstatement of income tax benefit and deferred income taxes asset by approximately $5,496,000.
• Recognized a $1,378,000 note receivable credit loss for the nine months ended September 30, 2025, due to Tilloo Exploration and Production LLC's default on a promissory note and related litigation.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to material weaknesses.

Sentiment

Score: 5

Explanation: While the company reported significant losses and revenue declines for the quarter and nine-month period, and faced a restatement and credit loss, the strategic merger and associated capital raise and credit facility represent a transformative event. The future outlook is positive regarding growth and financial flexibility, but the immediate financial results are poor, and significant risks related to integration and governance are highlighted. The insider participation in the PIPE offering is a positive signal.

Positives

• Successful closing of the merger with North Peak and Century Oil & Gas, positioning PEDEVCO as a premier Rockies-focused operator with approximately 320,000 net acres.
• Secured $35,000,004 in capital through a PIPE offering, demonstrating investor confidence, including significant insider participation.
• Established a new $120 million initial borrowing base under an Amended and Restated Credit Agreement, providing substantial liquidity and financial flexibility.
• Increased cash and cash equivalents to $10,922,000 as of September 30, 2025, from $4,010,000 at December 31, 2024.
• Net cash provided by operating activities increased to $12,905,000 for the nine months ended September 30, 2025, from $8,547,000 in the prior year period.
• Reduced cash used in investing activities to $5,982,000 for the nine months ended September 30, 2025, from $22,098,000 in the prior year period.
• Natural gas sales increased by 114% for Q3 2025 and 93% for the nine months ended September 30, 2025, driven by higher average sale prices.
• Lease operating expenses decreased by 18% for Q3 2025 and 4% for the nine months ended September 30, 2025, due to lower production volumes and the sale of 17 operated wells in the D-J Basin.
• Recognized a gain on sale of oil and gas properties of $1,021,000 for the nine months ended September 30, 2025, from the sale of D-J Basin operated wells.

Negatives

• Reported a net loss of $0.3 million for Q3 2025 and $1.9 million for the nine months ended September 30, 2025, a significant decline from net income in the prior year periods.
• Total revenues decreased by 23% in Q3 2025 and 22% for the nine months ended September 30, 2025, primarily due to lower crude oil prices and production volumes.
• Crude oil production volumes decreased by 11% in Q3 2025 and 14% for the nine months ended September 30, 2025.
• Average crude oil sales price decreased by 16% in Q3 2025 and 15% for the nine months ended September 30, 2025.
• Incurred an impairment of oil and gas properties totaling $907,000 for the nine months ended September 30, 2025, related to undeveloped leases.
• Recognized a $1,378,000 note receivable credit loss for the nine months ended September 30, 2025, due to Tilloo Exploration and Production LLC's default and ongoing litigation.
• Working capital surplus decreased from $6.3 million at December 31, 2024, to $1.5 million at September 30, 2025.
• General and administrative expenses increased by 14% for both the three and nine months ended September 30, 2025.
• The December 31, 2024, balance sheet was restated due to a $5,496,000 overstatement of income tax benefit and deferred income taxes asset.

Risks

• Current PEDEVCO stockholders will have a reduced ownership and voting interest (approximately 47%) in the combined company after the Automatic Conversion Date, with Juniper affiliates expected to own approximately 53%.
• Potential securities class action and derivative lawsuits may be filed against the company or its directors challenging the Mergers.
• Combining the businesses of PEDEVCO and the Acquired Companies may be more difficult, costly, or time-consuming than expected, potentially failing to realize anticipated synergies and benefits.
• The combined company may inherit legal, regulatory, and other risks from the Acquired Companies that occurred prior to the Mergers, whether known or unknown.
• The combined company may not be able to retain suppliers or distributors, or they may seek to modify contractual relationships, adversely affecting business and operations.
• Hedging activities may prevent the company from fully benefiting from increases in crude oil, natural gas, and NGLs prices and may expose it to counterparty risk.
• Affiliates of Juniper will have the ability to control or significantly influence all matters submitted to the combined company's stockholders for approval after the Automatic Conversion Date.
• The PEDEVCO Series A Preferred Stock provides holders with certain protective provisions, including approval rights over significant corporate actions and the right to appoint one board member, which may adversely affect the common stock price and operations.
• The combined company may be exposed to increased litigation, including stockholder litigation, which could have an adverse effect on its business and operations.
• A future reverse stock split, for which the Board has discretionary authority, may decrease the liquidity of common stock shares and may not result in a proportional increase in the per-share price.

Future Outlook

The company plans to optimize existing assets and opportunistically seek additional acreage in the Rockies region, targeting organic growth and strategic consolidation. It expects to generate material production growth from 32 wells recently completed or scheduled for completion in Q4 2025 and early Q1 2026. Estimated capital expenditures for 2025 range from $42 million to $45 million, with 78% to 80% allocated to the D-J Basin. The company anticipates sufficient cash flow from operations, existing cash, ATM offerings, and its new $120 million reserve-based lending facility to meet needs over the next 12 months and in the foreseeable future, potentially seeking additional funding for acquisitions.

Management Comments

• We believe that horizontal development and exploitation of conventional and unconventional oil and gas assets in the Rockies region including the D-J and Powder River Basins, represent among the most economic oil and natural gas plays in the U.S.
• We plan to optimize our existing assets and opportunistically seek additional acreage proximate to our currently held core acreage, as well as target other acquisitions in the Rockies region that fit our acquisition criteria.
• We believe there is a significant opportunity to build a leading oil and gas company in the Rockies region through both organic growth and acquisitions on terms that are more attractive than what we see in other oil and gas producing basins.
• We expect that we will have sufficient cash available to meet our needs over the next 12 months after the filing of this report and in the foreseeable future, including to fund the remainder of our 2025 development program.
• Management's conclusion was the result of the material weaknesses identified during the preparation of the Company's year-end consolidated financial statements and reported in Item 9A of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, that have not yet been remediated as of September 30, 2025.

Industry Context

The company is strategically repositioning itself as a 'Rockies-focused operator' through a major merger, aiming to capitalize on what it believes are among the most economic oil and natural gas plays in the U.S. This move aligns with a trend of consolidation and regional specialization within the energy sector, particularly in basins with established infrastructure and potential for modern drilling techniques. The company's focus on organic growth and accretive acquisitions, coupled with a conservative capital structure, reflects a common industry strategy to enhance shareholder value amidst volatile commodity prices, as evidenced by its hedging requirements under the new credit facility.

Management Changes

Corporate Governance

Legal Proceedings

• Tilloo Note Default and Litigation: Tilloo Exploration and Production LLC failed to make payments on a $1,122,436 secured promissory note from the Milnesand Sale (effective August 1, 2023). PEDEVCO issued a default notice in mid-January 2025 and wrote off $1,378,000 (note, accrued interest, post-closing adjustments) in Q2 2025. Tilloo filed a civil lawsuit against PEDEVCO on September 18, 2025, alleging breach of contract, fraudulent inducement, and negligent misrepresentation. PEDEVCO intends to vigorously defend and counterclaim.
• Phoenix Litigation: On September 10, 2025, NPRLLC (a wholly-owned subsidiary of acquired NPOG) filed a Petition against Phoenix Energy One, LLC in the Business Court of Texas, alleging breach of contract for failure to consummate a property sale. The potential loss is approximately $7.7 million (the purchase price consideration) if the matter is not resolved in the company's favor, though NPRLLC would retain the oil and gas properties.

Related Party Transactions

• PIPE Offering: Insiders participated in the $35,000,004 PIPE financing, including Dr. Simon Kukes ($15,409,977), J. Douglas Schick ($250,003), Clark R. Moore ($25,003), John J. Scelfo ($550,000), Jody D. Crook ($25,003), J PED, LLC (affiliated with Juniper Capital Advisors, L.P.) ($18,550,004), Reagan T. Dukes ($52,503), and Robert J. Long ($52,503).
• Shareholder Agreement: Entered into with Century, North Peak (Juniper Shareholder), and Dr. Simon G. Kukes, granting board nomination rights and registration rights.
• Support Agreements: Entered into with North Peak and certain officers, directors, and employees (including Dr. Kukes, Mr. Schick, Mr. Moore, Mr. Pinkston, Mr. Crook, Mr. Howie, Mr. Scelfo, Mr. Evans).
• Executive Employment Agreements: New agreements with J. Douglas Schick (President and CEO), Clark R. Moore (EVP, General Counsel and Secretary), and Jody D. Crook (Chief Commercial Officer) with specified salaries, bonuses, and severance.
• Executive Offer Letters: New offer letters with Reagan T. Dukes (Chief Operating Officer) and Robert J. Long (Chief Financial Officer) with specified salaries, bonuses, and severance.
• Restricted Stock Awards: Granted to J. Douglas Schick (2,000,000 shares), Clark R. Moore (500,000 shares), Jody D. Crook (300,000 shares), and two other employees (200,000 shares total) contingent on merger closing.

Stakeholder Impact

• Shareholders: Current common shareholders will experience significant dilution (expected to own ~47% post-conversion) and reduced voting influence due to the merger and Series A Preferred Stock. The potential for a reverse stock split could impact liquidity and perception. The merger aims for long-term value creation through increased scale and growth opportunities.
• Employees: New employment agreements and restricted stock awards for key executives and employees provide incentives and stability. The integration process post-merger could lead to changes in roles or organizational structure.
• Customers/Suppliers: The combined company aims to maintain existing relationships and leverage them for future growth, but there's a risk of termination or modification of contracts post-merger.
• Creditors: The new A&R Credit Agreement provides a substantial credit facility but also imposes restrictive covenants and hedging requirements, impacting the company's financial flexibility and risk profile.
• Regulatory Authorities: The company is subject to ongoing regulatory scrutiny, including environmental risks and compliance with the New Mexico OCD regarding asset retirement obligations.

Next Steps

• Prepare and file an information statement (Schedule 14C) with the SEC regarding the merger, as soon as reasonably practicable.
• Resolve any SEC comments on the information statement.
• Distribute the information statement to shareholders, after which the Series A Preferred Stock will automatically convert to common stock.
• File a registration statement covering the resale of common stock issuable upon conversion of Series A Preferred Stock within 45 days of the Automatic Conversion Date.
• Redetermine the borrowing base under the A&R Credit Agreement on December 1, 2025, and semiannually thereafter.
• Hedge at least 75% of projected proved developed producing (PDP) oil and gas production for the first 24 months of the A&R Credit Agreement, and 50% for months 25-36, then 50% for the next 18 months quarterly.
• Continue to evaluate D-J Basin well proposals from third-party operators and participate in economic and prospective projects.
• Complete 32 wells of varying working interest in Q4 2025 and early Q1 2026, expected to generate material production growth.
• Potentially effect a reverse stock split (1-for-10 to 1-for-20) by October 30, 2026, at the Board's discretion.
• Robert J. Long will be re-appointed as Principal Accounting Officer and Principal Financial Officer of the Company, effective the business day following the filing date of this report.

Key Dates

Recommendation

While the company reported a net loss and revenue decline for the quarter and nine-month period, and faced a significant write-off and restatement, these are largely overshadowed by the transformative merger with North Peak and Century Oil & Gas. The merger significantly expands the company's acreage and production potential, positioning it as a major Rockies-focused operator. The successful $35 million PIPE financing, with strong insider participation, and the establishment of a $120 million credit facility demonstrate confidence and provide crucial capital for future development. However, the immediate financial performance is weak, and there are substantial integration risks, potential litigation, and governance concerns related to the Series A Preferred Stock and Juniper's influence. A 'hold' recommendation is appropriate as investors should monitor the integration process, the realization of synergies, and the impact of the new capital structure and governance changes before making further investment decisions. The potential for a reverse stock split also adds uncertainty.

Keywords

oil and gas, energy, exploration and production, Permian Basin, D-J Basin, Powder River Basin, merger, acquisition, capital raise, PIPE financing, credit facility, SEC filing, 10-Q, financial results, oil production, natural gas production, hedging, corporate governance, risk factors, stock split