Executive Summary / Key Takeaways

• PEDEVCO is executing a focused strategy targeting oil and gas development in the Permian and D-J Basins, leveraging modern techniques on legacy assets and optimizing its portfolio through strategic partnerships and divestitures.
• Recent performance in Q1 2025 shows an 8% increase in total revenue driven by a 15% rise in production volumes, primarily from new non-operated wells in the D-J Basin, despite a decrease in net income due to higher operating expenses and an impairment charge.
• The company has outlined a substantial 2025 capital expenditure program of $27 million to $33 million, with 70-75% allocated to joint development initiatives in the D-J Basin, signaling a clear intent to accelerate growth through collaboration.
• PED maintains financial flexibility with an undrawn $20 million initial borrowing base on a $250 million RBL facility and $8 million available via an ATM offering, providing resources to fund its development program and pursue opportunistic acquisitions.
• Key factors for investors to monitor include the execution of the D-J Basin joint development projects, the resolution of the Tilloo Note default, and the impact of commodity price volatility on profitability and capital allocation decisions.

A Focused Pursuit in Proven Basins

PEDEVCO Corp. is an energy company strategically centered on the acquisition, development, and production of oil and natural gas assets exclusively within the United States. The company's core approach involves applying modern drilling and completion techniques to legacy, proven properties characterized by extensive production history, well-defined geology, and existing infrastructure. This strategy is currently concentrated in two key onshore basins: the San Andres formation of the Permian Basin in West Texas and eastern New Mexico, and the Denver-Julesberg (D-J) Basin spanning Colorado and Wyoming.

The company's strategic journey has seen a deliberate pivot towards this focused U.S. onshore model. Historically, this involved shedding non-core international interests, such as the restructuring of its Kazakhstan asset, explicitly aimed at allowing the company to remain "laser focused on the USA" and direct capital expenditures towards its domestic opportunities. This strategic clarity is foundational to PEDEVCO's current operations and future plans.

Within the competitive U.S. onshore E&P landscape, PEDEVCO operates alongside significantly larger players like Occidental Petroleum (OXY), Devon Energy (DVN), ConocoPhillips (COP), and EOG Resources (EOG). While these major competitors boast vast scale and often lower operating costs per barrel equivalent (estimated 20-25% lower than PED due to advanced technologies and infrastructure), PED seeks to differentiate itself through targeted development and operational agility in specific niche areas within its core basins. Its approach to applying modern techniques to historically underdeveloped legacy assets provides a unique value proposition, aiming to unlock value where larger players might focus on broader, more capital-intensive programs.

PEDEVCO's technological approach centers on the effective application of the latest industry advancements in horizontal drilling, completions design, frac intensity, and locally optimal frac fluids. While the company does not detail proprietary technology, its competitive edge lies in its ability to utilize extensive geological, petrophysical, and production data from legacy properties to optimize well spacing and configuration. This operational expertise, historically demonstrated by setting speed records in drilling in the Niobrara Play, is directly linked to cost control and efficiency. By leveraging existing infrastructure and well-understood geology, the company aims for more predictable development and potentially better capital efficiency in its targeted plays compared to frontier exploration. This operational focus is critical in a competitive environment where cost advantages are paramount, particularly against larger, more technologically advanced rivals.

Strategic Asset Optimization and Recent Performance

PEDEVCO's strategy of optimizing its asset base through targeted transactions is evident in recent activities. In August 2024, the company entered into a Participation Agreement and Area of Mutual Interest in the D-J Basin's SW Pony Prospect, involving acreage swaps and joint participation with a large private equity-backed partner who assumed operatorship. This collaboration included PEDEVCO paying $8.6 million for a working interest in six existing wells. Building on this, in February 2025, the company signed a joint development agreement with another large private equity-backed D-J Basin operator to expand and develop the Roth and Amber DSUs. This agreement involved a $1.7 million payment to PEDEVCO, the transfer of operatorship to the partner, and joint participation with PEDEVCO retaining at least a 40% working interest. These partnerships allow PEDEVCO to participate in accelerated development programs leveraging its partners' operational scale and expertise while managing its capital exposure.

Further portfolio optimization occurred in April 2025 (effective January 1, 2025) with the sale of wellbore and surface equipment for 17 legacy operated wells in the D-J Basin for $606,000. Crucially, the company retained ownership of the underlying leasehold. This move was specifically aimed at reducing plugging and abandonment liabilities and recurring operational expenses associated with wells that were no longer providing meaningful production, allowing resources to be redirected to more prospective opportunities.

Financially, the first quarter of 2025 reflects the impact of these strategic shifts and ongoing operations. Total revenue from oil and gas sales increased by 8%, rising from $8.116 million in Q1 2024 to $8.736 million in Q1 2025. This growth was primarily volume-driven, with average daily production increasing by 15% to 1,707 BOEPD (82% liquids) in Q1 2025, largely attributable to production from new non-operated wells in the D-J Basin brought online in late 2024.

However, profitability saw a decline, with net income falling from $0.773 million in Q1 2024 to $0.140 million in Q1 2025. This was primarily due to a $1.1 million increase in total operating expenses, which included a $0.232 million impairment charge related to undeveloped D-J Basin leases allowed to expire. Lease operating expenses increased by 35%, driven by higher volumes and associated costs from the increased number of producing wells, particularly the new non-operated D-J wells. General and administrative expenses also saw a modest increase. The effective tax rate also rose significantly in Q1 2025 compared to the prior year, contributing to the lower net income.

Capital Program and Outlook

Looking ahead, PEDEVCO has outlined a significant capital expenditure program for 2025, estimated to range between $27 million and $33 million. The vast majority of this capital, approximately 70% to 75%, is slated for development activities in the D-J Basin, specifically under the joint development agreements entered into in August 2024 and February 2025. This allocation underscores the company's commitment to accelerating development in this key basin through strategic partnerships. The planned expenditures include $24.5 million to $30.5 million for drilling and completion costs and about $2.5 million for other capital items like facilities and remediation. As of March 31, 2025, the company had incurred $5.7 million for D&C and $0.3 million for other capital costs, indicating the bulk of the spending is yet to come.

The company's liquidity position appears sufficient to fund this program. As of March 31, 2025, PEDEVCO held $10.413 million in cash and cash equivalents, contributing to a working capital surplus of $6.7 million.

The company has access to a $250 million reserve-based lending facility with an initial borrowing base of $20 million, which remains undrawn. Additionally, it has $8 million available under an at-the-market equity offering facility, though no shares have been sold to date. Management anticipates funding the 2025 program through projected cash flow from operations, existing cash, potential RBL borrowings, and other financing avenues.

A notable challenge impacting liquidity, though management believes it is manageable due to the secured nature of the asset, is the default by Tilloo Exploration and Production LLC on the promissory note related to the August 2023 sale of the Milnesand and Sawyer fields. Tilloo failed to make the initial payment due in January 2025 and subsequent payments, citing alleged misrepresentations which the company denies. PEDEVCO is pursuing all available remedies, including potential foreclosure.

The outlook is tied to the successful execution of the planned capital program, particularly the joint development projects in the D-J Basin. These initiatives are expected to drive future production, cash flow, and reserves growth. The company continues to evaluate opportunistic acquisitions and D-J Basin well proposals from third-party operators, maintaining flexibility to adjust capital allocation between its Permian and D-J assets based on economic thresholds and market conditions. The potential for increased well density through down spacing and the development of additional stack pay zones in the D-J Basin represent potential future growth drivers, though these are subject to regulatory approvals and economic viability.

Risks and Considerations

Investing in PEDEVCO involves exposure to inherent risks within the oil and gas industry. Commodity price volatility remains a primary concern, directly impacting revenues and the economic viability of drilling projects. Operational risks include the successful execution of drilling and completion programs, access to necessary services and labor, and potential environmental liabilities. Regulatory and permitting challenges, particularly in areas like Colorado, can impact development timelines and costs. Counterparty risk is highlighted by the Tilloo Note default. Furthermore, leasehold acreage is subject to expiration if not developed or extended, requiring ongoing capital commitment or risking loss of assets. While the company has implemented policies to mitigate environmental risks and is actively addressing the Tilloo default, these factors warrant careful consideration by investors.

Conclusion

PEDEVCO is actively pursuing a focused U.S. onshore E&P strategy, leveraging its position in the Permian and D-J Basins and employing modern techniques to enhance value from legacy assets. The recent Q1 2025 results demonstrate production growth driven by strategic partnerships, although profitability was impacted by operational costs and non-recurring items. The planned 2025 capital program, heavily weighted towards D-J Basin joint ventures, signals a clear path for accelerated development and future growth. With access to liquidity and a stated commitment to operational efficiency and asset optimization, PEDEVCO is positioning itself to capitalize on opportunities within its core basins. Investors should closely monitor the execution of the D-J Basin development plan, the resolution of the Tilloo Note situation, and the company's ability to manage costs and adapt to the dynamic commodity price environment as key indicators of its potential to deliver long-term value.