Full Transcript: Pedevco Q1 2026 Earnings Call

On Thursday, Pedevco (AMEX:PED) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.

Access the full call at https://edge.media-server.com/mmc/p/ftnk9not/

Summary

Pedevco reported Q1 2026 production of 8,091 boe per day, revenue of $40.2 million, and adjusted EBITDA of $21.5 million, exceeding internal expectations.

The company completed a 1 for 20 reverse stock split and is focused on optimizing its development inventory, particularly in the DJ and Powder River Basins.

Pedevco addressed a net loss of $25.6 million, primarily due to a $31.3 million net loss on derivative contracts, with a significant portion being non-cash.

The company improved its working capital deficit by $27.1 million, resulting in a net debt of approximately $87 million at quarter-end.

Management reiterated full-year guidance for average production of 6,500 to 7,000 boe per day and adjusted EBITDA of $60 to $70 million, with capital expenditures of $16 to $20 million.

Full Transcript

OPERATOR

Good afternoon and welcome to Padevco Corp's first quarter 2026 earnings conference call. All participants are in listen only mode. After the prepared remarks, we will open the call for questions. I would now like to turn the call over to Laurent Weil of Elevate ir. Please go ahead.

Laurent Weil

Thank you Operator and good afternoon everyone. Welcome to Pedevco's first quarter 2026 earnings call. With me today are Doug Schick, President and Chief Executive Officer, R.T. Dukes, Chief Operating Officer and Bobby Long, Chief Financial Officer. Before we begin, I'd like to remind everyone that today's discussion includes forward looking statements within the meaning of the federal securities laws subject to risks and uncertainties that could cause actual results to differ materially from expectations. For more information, please Refer to our first quarter 2026 form, 10-Q and other SEC filings. The Company undertakes no obligation to update or revise any forward looking statements. During today's call we will discuss certain non GAAP financial measures including adjusted EBITDA and working capital, excluding derivative contract assets and liabilities. Reconciliations to the most directly comparable GAAP measures are available in our earnings release and 10-Q. These non GAAP measures should not be considered in isolation or as a substitute for GAAP results. I would also like to note that all per share and share count figures referenced today reflect the Company's 1-for-20 reverse stock split effective March 13, 2026 applied retroactively to all periods presented. As of March 31, 2026, the Company had approximately 13.3 million shares of common stock outstanding. Here is today's agenda. Doug will begin with opening remarks followed by RT with an operational update and then Bobby will walk through our financial performance. After our prepared remarks, the management team will open the call for questions. With that I will turn it over to Doug.

Doug Schick (President and Chief Executive Officer)

Thanks Laurent and good afternoon everyone. Thank you for joining us. In our first full quarter as a combined company following the Juniper merger, our results results exceeded our internal expectations across all key Metrics. Production averaged 8,091 boe per day, revenue was 40.2 million and adjusted EBITDA was 21.5 million. The 31 DJ basin wells that came online in late 2025 mostly performed ahead of their type curves which drove the production outperformance relative to our internal projections. Costs were in line with our expectations and we made meaningful progress reducing the working capital deficit that existed at year end. Taken together, Q1 reflected a business that is executing on the plan we laid out at the merger close. Now, before diving further into the quarter, I'd like to spend a moment on our development inventory review because I think it speaks to the depth and optionality this platform provides. Since the beginning of 2026, our team has been working through in-depth asset reviews to plan our future developments in late 2026 and 27 and beyond, with a focus on creating substantial value for our shareholders for the remainder of 2026. In the DJ basin we have one drilled uncompleted well in which we hold over a 90% working interest that we plan to complete and bring online mid summer 2026. Additionally, we are in constant communication with our partners about further 2026 development options in the DJ Basin. In the Powder River Basin we hold over 200,000 net acres of early-stage multiformation inventory that we are advancing through technical with development decisions to follow as we gain further confidence in the highest return targets in the Permian. Our San Andres wells continue to produce in line with expectations and we are evaluating additional activity for the back half of the year across all three basins. Any incremental capital commitments will be evaluated against our return thresholds and our liquidity position and the strength of our balance sheet. Higher commodity prices, when sustained, change the return profile of our inventory, but they do not change the discipline of our framework. The commodity price environment is constructed as it stands today and if it remains so, we have both the inventory and the operational capacity to respond. We will not deploy capital ahead of returns that justify it. However, we are focused on creating value for our shareholders and we have many ways to do so. We believe we have one of the deepest inventories relative to our size of any publicly traded oil and gas company, and we plan to demonstrate that over the coming quarters and years relating to our first quarter results. I want to first address our net reported loss of 25.6 million. That figure was driven almost entirely by $31.3 million net loss on derivative contracts, of which 27.9 million was a non cash mark to market adjustment, reflecting the movement of commodity prices above our hedge strike prices during the quarter. Excluding that item and other non cash charges, the business generated $6.7 million of operating income and more importantly $21.5 million of adjusted EBITDA. The EBITDA number is what we believe most accurately reflects the operating performance of the business in the quarter and it represents a 404% increase over the $4.3 million we reported in Q1 2025. The full reconciliation from GAAP net loss to adjusted EBITDA is included in the press release. The balance sheet moved decisively in the right direction. During the quarter, our working capital deficit, excluding current assets and liabilities related to derivative contracts improved by $27.1 million from 34.1 million at year end to 7 million at March 31. That improvement reflects the settlement of development capital and merger related payables that were outstanding at year end and illustrates the strong cash generation of the expanded asset base adjusted for our cash on hand, including approximately 3.6 million of restricted cash that we expect to return to unrestricted status in the coming months. Net debt at quarter end was approximately $87 million, 11 million below our funded debt of 98 million. We view this as an important milestone. Coming out of the merger, we carried a meaningful working capital deficit that was a function of the transaction and the development program underway at closing and that hangover that hangover has been largely resolved resulting in strong liquidity and WTI prices over the past couple of months have resulted in continued strong cash generation for the company. Our cost came in as expected across the board, demonstrating efficient integration of the combined asset base per unit lease operating expense inclusive of recurring and non recurring lease operating expense, workovers, gathering, processing and transportation expense, and severance and ad valorem taxes came in at $$22.46 per boe, essentially flat with the $22.21 per boe in the prior year. Total G&A was $3.1 million for the quarter and cash G&A A was $2.6 million for the quarter, which equates to a cash G&A of $3.59 per boe. Q1G&A included some residual merger integration costs. As those costs roll off throughout the balance of the year, we expect further improvement. I'm also happy to report that all of our capital expenditures incurred in Q4, 2025 and Padevco relating to the 31 wells that were in process at the time of the merger were within or under our expectations. Turning to production cadence, I want to be clear about what to expect for the remainder of 2026 because I think the context is important. Q1 benefited from the timing of the 31 DJ basin wells that came online in late 2025, all which reached reached peak production in Q1 2026. Production is expected to moderate through the middle quarters of the year as those wells follow their natural decline curves. Our second half development activity and optimization work are then expected to support incremental volumes heading into 2027. The first quarter of this year was expected to be a relatively high production quarter and we want to make sure investors appreciate that our production for the balance of the year is expected to show some decline over the next quarter or two and our second half production is likely to be impacted by our development spending and results over the next several months. Based on the 16 to 20 million dollars of currently approved net capital expenditures, we continue to expect full year average production of 6,500 to 7,000 boe per day and 60 to $70 million of adjusted EBITDA. If we revise our development and capital plans in the future, we will communicate the revised production and adjusted EBITDA expectations as well. Looking ahead, we remain focused on executing the optimization program, planning our future development plans while maintaining capital discipline and converting the platform we have built into a durable, Rockies focused energy company while improving cash flow and returns for our shareholders. With that I will turn it over

RT Dukes

to RT Dukes Thanks Doug and good afternoon everyone. I'll keep my remarks focused on where we are operationally and where we are headed. The story I want to tell this quarter is really about two things, what we completed and what we're building towards. On the completion side, we incurred 3.8 million of capital expenses during the quarter on 10 non operated DJ basin wells with working interests that range from around 1% to 6.3%. All 10 are online and producing. More broadly, we continue to be disciplined in how we manage our acreage position. We have a considerable Runway in our portfolio and we will continue to concentrate our attention and resources on the inventory we intend to develop in the near future. Looking ahead within the dj, we're planning completion operations on a drilled but uncompleted well in Wyoming in which we hold over a 90% working interest. First production is expected in early Q3 which will be a clean contribution to second half volumes. We continue to evaluate non operator proposals from offset operators on an ongoing basis and will participate where the economics make sense. In the Powder River Basin we hold approximately 202,000 acres. There was no operated drilling and completion activity during the first quarter and production outperformed the Company's internal plan with no major downtime or operational issues during the quarter as the asset benefited from a relatively mild winter, the Company continues to evaluate its inventory development opportunities across its substantial PRB position. Additionally, the company holds approximately 14,505 net acres in the Permian Basin. In the first quarter there was no development activity and the asset performed in line with internal expectations. The Company continued to improve operational efficiency by accelerating lift conversions thereby reducing operating costs ahead of schedule. The Company continues to evaluate optimization and development opportunities for the back half of 2026. Now the part of the operational story I want to spend the rest of my time on is our optimization program because I think it's crucial to what it can do for our cost structure over time. Our 10 to 13 million dollars that's earmarked for our operational optimization budget for 2026 is focused on a few things. First, pump conversions, moving wells from jet pump and ESP to rod pumps, which carry meaningfully lower operating costs and lower ongoing workover commitments. Additionally, we are focused on well interventions and well clean outs on wells where we believe there's incremental production to be captured at low incremental cost. In plain terms, we're converting wells to lower cost lift systems and selectively intervening in wells where we believe more production is recoverable at low incremental cost. The recurring cost savings, when achieved, are durable. They show up in LOE every period thereafter. The goal across all of it is to reduce the total lease operating costs on the combined asset base. Through our 2026 and 2027 optimization programs, we are targeting LOE reductions that can reach up to $1 million per month in cost savings. As this program ramps through Q3 and Q4, we expect to see measurable improvement in total lease operating expenses, with the full benefit more visible in 2027. In terms of timeline, we initiated this work and built the proof of concept in late 2025, continue to advance and plan through the first quarter and have ramped activity further this spring as field conditions have allowed. The majority of the work will be completed through the third and fourth quarters, with the LOE benefit building through the back half and more fully reflected in 2027. The sequencing is intentional, not a delay. Our team has worked hard to scale and maximize efficiencies of our program, and that work is now increasingly reflected in the cadence of activity we expect through the balance of the year. The bottom line in operations, the asset base is performing at or above expectations across the board. The integration is progressing and we have clear line of sight to a lower cost, higher margin operating profile as the year develops. Our optimization activity is designed to compound through the back half and the cost benefit will be the proof point. We can hand investors over the next several quarters with that. I'll hand it over to Bobby.

Bobby Long (Chief Financial Officer)

Thank you RT and good afternoon everyone. I'll walk through the key financial items for the quarter, focusing on the drivers behind the numbers rather than repeating figures Doug and RT have already covered. Starting with our first quarter results. Revenue for the quarter was 40.2 million, up 360% from 8.7 million in Q1 2025, that increase is almost entirely a volume story.

Bobby Long (Chief Financial Officer)

This was the first full quarter with the combined asset base and the production outperformance RT described flowed directly through to the top line. Oil accounted for 36.6 million of total revenue or approximately 91%, with a balance split between natural gas at 1.9 million and NGLs at 1.8 million. Realized oil price was $68.39 per barrel, roughly flat year over year. Gas and NGL realizations were lower than the prior year period, reflecting the broader commodity price environment for those products, though their contribution to total revenue is modest. Total operating expenses were 33.5 million, resulting in operating income of 6.7 million. Within that LOE was 16.4 million and GNA was 3.1 million, both of which RT and Doug have addressed. DDA was 12.5 million, driven by the higher production volumes on the expanded asset base. We also recorded a 1.6 million non cash impairment on the DJ Basin acreage that expired. No surprises in the operating cost structure below the operating line. The significant Item was a 31.3 million net loss on derivative contracts. I want to separate this clearly into two components because they are very different in nature. The realized portion corresponding to positions that settled in the quarter on an income statement basis was a loss of 3.4 million as a result of realized crude oil prices exceeding fixed prices in our contracts on a net cash basis. Derivative settlements during the quarter were a small inflow as not all settled positions have cleared cash by quarter end. The difference between income statement timing and cash settlement timing is reflected in our balance sheet and will normalize over the next several periods. The unrealized portion corresponding to non cash mark to market on our open positions was a loss of 27.9 million, reflecting the movement of oil prices above our hedge strike prices during the latter part of Q1. That 27.9 million is an accounting entry, not a cash outlay as our hedge positions are mark to market each quarter. Adjusted EBITDA of 21.5 million, which adds back the non cash derivative loss along with other non cash and nonrecurring items, is the measure we believe best reflects how the business actually performed on the structure of our hedge book. Our position is balanced across swaps, costless collars and three way collars. The purpose of the program is to reduce cash flow volatility, protect the capital plan and ensure project economics. While our credit facility requires us to maintain a certain level of hedging, we would expect to carry a PRUDENT hedge position even without funded debt given the importance of protecting cash flow and maintaining flexibility around our development activity. Turning to cash flow, net cash provided by operating activities was 10.5 million for the quarter. That reflects strong cash margins from the expanded production base, partially offset by an approximately 10.7 million use of cash from working capital, primarily reflecting the settlement of accounts payable carried from year end 2025. Cash paid for drilling and completion costs were 16.5 million, which includes approximately 3 million of carryover payments from the 2025 program on an accrual basis. Our 2026 capital spend is tracking within the guidance range. We drew 11 million under revolving credit facility to fund non operated wealth participation and other obligations during the quarter. At March 31, we had total cash and restricted cash of 11.3 million and 98 million outstanding under our revolving credit facility against 120 million borrowing base, leaving approximately 22 million of the availability. The 3.6 million of restricted cash relates to bonding requirements that are expected to be released within the next 90 days. Specifically, that 3.6 million is a remnant of pre merger surety bonding requirements that were cash collateralized. Following the merger, we entered into a new surety program that does not require cash collateral. Adjusting for total cash and restricted cash, net debt at quarter end was approximately 87 million and total liquidity was approximately 33 million. Thank you for your attention. I will turn it back to the operator for questions.

OPERATOR

Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Nicholas Pope with Roth Capital.