PEDEVCO Corp. Q2 FY2026 earnings call

Post-Merger Scale and Performance Progress

• The October 2025 merger with Juniper portfolio companies expanded Devco's footprint to over 300,000 net acres across three basins, growing quarterly revenue from ~$7 million in Q2 2025 to $46.1 million in Q2 2026 (a more than fivefold year-over-year increase).
• Q2 2026 results exceeded management's original expectations, driven by stronger realized oil prices and the expanded post-merger production base.
• The 16% sequential Q2 2026 production decline from Q1 2026 was fully expected, as late 2025 DJ Basin wells that peaked in early 2026 followed natural decline curves, consistent with prior guidance.

Balance Sheet Improvement and Capital Discipline

• Strong cash generation allowed Devco to repay $13 million of revolving credit debt in Q2 2026, reducing outstanding debt to $85 million from $98 million and lowering net debt (adjusted for cash) to ~$73 million, better than prior forecasts.
• Debt-to-EBITDA has been reduced to ~1x, down from 1.6x immediately post-merger, a level management considers comfortable.
• Management maintains a disciplined capital allocation framework: prioritizing a strong balance sheet and operating asset integrity first, then investing in high-return projects while retaining flexibility for strategic acquisitions and leasehold opportunities, with no plans to rely on sustained elevated commodity prices.

Operational Optimization

• A field optimization program focused on pump conversions, recompletions, well cleanouts, and compression projects to reduce recurring per-unit operating expenses was pulled forward to summer 2026 to avoid winter weather disruptions.
• Cost improvements from optimization are expected to build through H2 2026 and be fully reflected in the 2027 operating cost run rate, with durable recurring savings.

Updated Development Planning

• Resolution of BLM litigation in Wyoming and a stronger balance sheet allow management to launch a more active development program for H2 2026 and early 2027.
• Extensive asset evaluation identified actionable high-return near-term development projects; over 20 gross wells are planned for drilling and participation over the coming months, with full program details to be announced in the coming weeks.

Devco reports production and financial results across three operating basins, with no formal segmented revenue breakdown provided in the transcript: 1. DJ Basin: Devco holds ~88,000 net acres, with interests in 74 gross (nearly 67 net) operated wells and 110 gross (12.5 net) non-operated wells. All planned 10 non-operated wells for H1 2026 were completed in Q1 2026. A previously drilled but uncompleted well was completed after Q2 2026, and is expected to contribute production in Q3 2026. 2. Powder River Basin: Devco holds ~202,000 net acres, with interests in over 150 gross wells (130 net wells), 16 gross (1.4 net) of which are non-operated. Pending BLM environmental litigation was resolved during Q2 2026, unlocking permitting for high-priority development projects. 3. Permian Basin: Devco holds 14,505 net acres, with interests in 38 gross (34.5 net) all-operated wells. The basin provides a stable production base, with ongoing optimization projects to improve operating cost structures and margins. Total company-wide Q2 2026 production was 618,912 BOE (6,800 BOE per day), with total revenue of $46.1 million, adjusted EBITDA of $18.7 million, and operating income of $15.4 million.

• Management reaffirms its full year 2026 adjusted EBITDA guidance range of $60 million to $70 million. The expanded H2 2026 development program is not expected to contribute meaningful production until late 2026 or early 2027, so the full-year guidance remains aligned with prior production outlooks.

• Permitting delays remain a key bottleneck for development in the DJ Basin (Colorado).
• Seasonal drilling restrictions limit development activity timelines in Wyoming's Powder River Basin.
• Commodity price volatility creates cash flow uncertainty, which management mitigates through a hedge program and disciplined capital planning that does not rely on sustained elevated prices.
• GAAP accounting for derivative hedging contracts creates non-cash mark-to-market volatility that does not reflect underlying operating cash flow performance.

Q: What drove the expansion of the 2026 development program to include over 20 new gross wells? Is the expansion mostly driven by higher commodity prices, and what are the current key development bottlenecks by basin? / A: Higher commodity prices are only a partial driver; the main driver is the completion of a comprehensive post-merger deep-dive evaluation of all assets that prioritized high-return near-term development projects. Resolution of BLM litigation in Wyoming also unlocked new projects that were not available earlier in the year. Permitting is the primary bottleneck in the DJ Basin, seasonal drilling restrictions are the main constraint in Wyoming, and there are no meaningful bottlenecks in the Permian Basin.

Q: How does the expanded development program align with management's focus on maintaining a strong balance sheet? / A: After paying down debt over the first half of 2026, Devco's debt-to-EBITDA has fallen to 1x, a level management is comfortable with. The entire expanded H2 2026 development program can be fully funded within existing operating cash flow, so it does not require adding leverage or compromising balance sheet strength.

Q: Why was the operating cost optimization program pulled forward to summer 2026, and are the expected LOE improvements on track? / A: Strong execution of optimization projects through Q2 2026 gave management the confidence to accelerate the program, and completing projects before winter avoids weather-related disruptions. The accelerated schedule also allows cost savings to be realized earlier in the year without increasing total annual spending on optimization, creating a win-win outcome that supports higher margins starting sooner.