PEDEVCO Corp. Q1 FY2026 earnings call

• Post-Merger Integration & Core Performance

  • This was the first full quarter following the Juniper merger, with results exceeding internal expectations across all key metrics: average production of 8,091 BOE per day, adjusted EBITDA of $21.5 million (a 404% increase from Q1 2025's $4.3 million).
  • The reported GAAP net loss of $25.6 million was driven almost entirely by a $31.3 million net loss on derivative contracts, $27.9 million of which was a noncash mark-to-market adjustment. Excluding noncash items, the business generated $6.7 million of operating income.
  • Merger integration is progressing efficiently: all capital expenditures for the 31 wells in process at merger close came in at or under budget, and residual merger integration costs in G&A are expected to roll off through the rest of 2026.

• Balance Sheet & Cash Flow Improvements

  • Working capital deficit (excluding derivative assets/liabilities) improved by $27.1 million quarter-over-quarter, falling from $34.1 million at year-end 2025 to $7 million at March 31, 2026.
  • At quarter-end, total cash and restricted cash was $11.3 million, with $98 million outstanding on a $120 million revolving credit facility, leaving $22 million of availability. Net debt totaled approximately $87 million, with total liquidity of approximately $33 million. $3.6 million in restricted cash is expected to be released to unrestricted status within 90 days.
  • Per unit lease operating expense (LOE) came in at $22.46 per BOE, essentially flat year-over-year. Total G&A was $3.1 million for the quarter, with cash G&A of $2.6 million ($3.59 per BOE).

• 2026 Operational Optimization Program

  • A total of $10 million to $13 million is earmarked for 2026 optimization, focused on converting wells from higher-cost jet pumps/ESPs to lower-cost rod pumps, and conducting low-cost well interventions and cleanouts to capture incremental production.
  • The program targets cumulative LOE reductions of up to $1 million per month by 2027, with durable recurring cost savings that will impact LOE in all future periods. Activity ramped up in spring 2026, with most work completed in Q3 and Q4, and full cost benefits becoming visible in 2027.

• Capital Discipline Framework

  • Any incremental capital commitments across all basins will be evaluated against strict return thresholds, the company's liquidity position, and balance sheet strength. Higher sustained commodity prices improve return profiles but do not change the company's disciplined capital approach.

PEDEVCO reports financial performance across three operating basins, with aggregated total Q1 2026 revenue of $40.2 million, up 360% from $8.7 million in Q1 2025. Of total revenue: 91% ($36.6 million) comes from oil, 4.7% ($1.9 million) from natural gas, and 4.5% ($1.8 million) from NGLs. 1) D-J Basin: 31 wells brought online in late 2025 performed ahead of type curves, driving Q1 2026 production outperformance. 10 nonoperated wells with 1-6.3% working interest were completed and brought online during the quarter at a total capital cost of $3.8 million. A $1.6 million noncash impairment was recorded for expired D-J Basin acreage. 2) Powder River Basin (PRB): PEDEVCO holds 202,000 net acres of early-stage multi-formation inventory. No operated drilling or completion activity occurred in Q1 2026, but production outperformed internal projections due to a mild winter with no major downtime or operational issues. 3) Permian Basin: PEDEVCO holds 14,505 net acres. No development activity occurred in Q1 2026, and production met internal expectations. Operational efficiency improvements via accelerated lift conversions reduced operating costs ahead of schedule.

• Management maintained full-year 2026 guidance, reaffirming expectations for average production of 6,500 to 7,000 BOE per day, adjusted EBITDA of $60 million to $70 million, and net capital expenditures of $16 million to $20 million.
  • Q1 2026 production was expected to be the full-year high watermark, as the 31 D-J Basin wells brought online in late 2025 reached peak production in Q1. Production is expected to moderately decline through the middle quarters of 2026 due to natural decline curves, with second half volumes supported by new development and optimization activity heading into 2027. This production cadence matches the original plan communicated at merger close.
  • If development and capital plans are revised in the future, management will update production and adjusted EBITDA guidance accordingly.

• Commodity price volatility creates uncertainty for future development returns and cash flow projections, and mark-to-market adjustments for open derivative positions can create large swings in quarterly GAAP net income that do not reflect underlying operating performance.
  • Longer permitting lead times in the Powder River Basin could slow the pace of new development in that basin relative to D-J and Permian assets.
  • The company is required by its credit facility to maintain a minimum level of hedging, which caps some upside participation if commodity prices rise above hedge strike prices.

Q: How much of the 2026 optimization capital expenditure has been completed so far, and why was Q1 workover expense lower than Q4 2025?

A: Only minimal optimization work was completed in Q1: just 2 rod pump conversions completed under budget and performing to plan. Most optimization activity began in earnest in Q2, intentionally scheduled for milder weather to avoid winter operational disruptions. Lower Q1 workover expense stemmed from a mild winter and pre-winter preventative maintenance completed in Q4 2025, which kept wells online reliably with fewer unplanned interventions.

Q: With the only confirmed 2026 development activity being completion of the D-J Basin DUC, what is the split of planned second half development between D-J Basin and Powder River Basin?

A: The only confirmed new development for the first half of 2026 is completion of the 90% working interest D-J Basin DUC, planned for mid-2026. Optimization projects (the main near-term activity) are distributed across all three basins (D-J, Powder River, Permian) and no detailed geographic split has been published. Management is evaluating additional development options for late 2026 and will announce plans once finalized.

Q: Are optimization activities (pump conversions, well interventions) applied across PEDEVCO's entire portfolio, or only a subset of assets?

A: Pump conversion optimization is applicable across the large majority of PEDEVCO's portfolio, as the company uses ESP and jet pump lift systems across all basins. As wells mature and fluid production levels decline, shifting to more efficient rod pumps becomes economically logical. The program was originally planned over multiple years, but strong early execution allowed management to accelerate the timeline, with most conversions completed in 2026 and 2027.

Q: If commodity prices remain at current constructive levels, how quickly can PEDEVCO ramp up development activity, and what is the company's current hedging philosophy beyond regulatory requirements?

A: Permian and most D-J Basin assets can be developed very quickly if the company approves expanded activity, while Powder River Basin has longer lead times due to permitting timelines. Nonoperated positions in D-J Basin can also move quickly once partner plans are finalized. Regarding hedging, the company currently has ~68% of production hedged (per credit facility requirements), with 3-way collars that allow participation in upside up to $80 per barrel. As oil curve backwardation eases, management expects attractive new hedging opportunities for late 2026 and 2027 production.