What Pedevco (PED) Said on Its Q3 Earnings Call

Key Points

• Q3 results were mixed: Revenue rose to $35.5 million year over year, but fell about 23% sequentially; Pedevco posted a $9.2 million net loss, weighed by $16.6 million in derivative losses. Adjusted EBITDA was $14.7 million, down from $18.7 million in Q2.
• Production dipped 14% from Q2 to 5,850 barrels of oil equivalent per day, due to temporary shut-ins, well work, and non-core asset sales. The company expects a higher year-end exit rate as wells return or come online, while reiterating full-year production guidance of 6,500–7,000 boe/d.
• Pedevco raised full-year net capital expenditure guidance to $37 million–$42 million, partly reflecting a $5.9 million Mowry lease acquisition, and maintained adjusted EBITDA guidance of $60 million–$70 million. It is targeting more than $10 million in annualized operating-cost savings and plans to outline longer-term Rocky Mountain development plans after its CEO search concludes.

Pedevco NYSEAMERICAN: PED reported a third-quarter net loss of $9.2 million as derivative losses offset higher operating income, while production declined from the previous quarter amid temporary shut-ins and well work.

Revenue rose to $35.5 million from $7 million a year earlier, reflecting a larger asset base and higher realized oil prices, but fell approximately 23% from the second quarter. Adjusted EBITDA was $14.7 million, up from $4.3 million a year earlier and down from $18.7 million in the preceding quarter.

Interim President, CEO and COO R.T. Dukes said the company is planning to use its Rocky Mountain inventory to support production growth in 2027 and beyond. More details are expected after the board completes its search for a permanent CEO and development plans are finalized in early 2027, he said.

Derivative Losses Weigh on Results

The third-quarter net loss amounted to $0.70 per share, compared with a loss of $0.3 million a year earlier. CFO Bobby Long said the quarter included a $16.6 million net loss on derivative contracts, comprising $4.6 million in realized settlement losses and a $12 million non-cash unrealized loss.

Long said the unrealized loss primarily reflected an increase in commodity prices between June 30 and September 30 on open positions. Realized settlement losses are included in adjusted EBITDA, while unrealized losses are excluded.

Beginning in the third quarter, Pedevco also excluded severance costs from adjusted EBITDA. Those costs totaled $2.1 million, and there were none in the comparative periods presented, Long said.

Operating income was $8.9 million, including a $4.7 million net gain on oil and gas property sales. The company recorded $2.4 million in impairment expense related to undeveloped D-J Basin leases it allowed to expire and does not plan to drill.

Production and Development Plans

Third-quarter production averaged 5,850 barrels of oil equivalent per day, down 14% from the second quarter. Dukes said temporary shut-ins associated with drilling and completion activity, along with rod conversions brought forward from the fourth quarter, curtailed almost 200 barrels of oil equivalent per day during the period. Sales of non-core assets reduced production by approximately another 150 barrels of oil equivalent per day.

The affected shut-in wells have returned to production, Dukes said. In prepared remarks, he said the company expected sequentially stronger fourth-quarter production. During the question-and-answer session, however, he said the guidance implied relatively flat average production from the third quarter to the fourth, with growth in the year-end exit rate as wells return or come online.

In the D-J Basin, Pedevco completed the previously drilled Hastings well and is evaluating its early flowback results and the response of an offset parent well. In the Powder River Basin, the company drilled an operated Parkman well that Dukes said it hopes to complete over the holidays, with flowback expected in early 2027.

Pedevco also acquired approximately 5,678 net acres in a Bureau of Land Management lease sale for about $5.9 million, nearly doubling its Mowry position in that prospect area to approximately 12,000 net acres. Three completed non-operated Powder River wells began contributing production in early November, Dukes said.

The company’s second-half program, which extends into early 2027, covers approximately 15 gross wells. Dukes clarified during the call that six are in the Powder River Basin and nine are in the D-J Basin.

Spending and Cost Targets

Pedevco updated its full-year net capital expenditure guidance to $37 million to $42 million, reflecting the Mowry lease acquisition and development activity. It reiterated full-year adjusted EBITDA guidance of $60 million to $70 million and production guidance of 6,500 to 7,000 barrels of oil equivalent per day.

Dukes said the company expects to reinvest cash flow “at a pretty aggressive rate” and wants to put more capital into the ground going forward, though he did not provide a 2027 spending forecast.

The company is approximately halfway through an optimization program intended to reduce operating costs and, where appropriate, add production. It continues to target more than $10 million in annualized lease operating expense savings once the program is complete, with the remaining work expected in 2027.

At September 30, Pedevco had $4.7 million in cash and $80 million outstanding under its revolving credit facility, down from $85 million at the end of June. Long said the company had $45 million of available funding under the facility at quarter-end, and its $125 million borrowing base and elected commitments were reaffirmed in October.

About Pedevco (NYSEAMERICAN:PED)

PEDEVCO Corp. is an independent energy company focused on acquiring, developing and producing oil and natural gas resources in the United States. Its operations are concentrated in the Permian Basin, including areas of southeastern New Mexico and West Texas. The company's activities include drilling and operating wells and managing oil and gas properties. Its production includes crude oil, natural gas and natural gas liquids. PEDEVCO is headquartered in Houston, Texas. Its chief executive officer is Simon Kukes.

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