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What changed in PEDEVCO CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PEDEVCO CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+561 added−333 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-18)

Top changes in PEDEVCO CORP's 2024 10-K

561 paragraphs added · 333 removed · 125 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

6 edited+371 added−138 removed0 unchanged
Biggest changeThe environmental laws and regulations to which we are subject may, among other things: · require us to apply for and receive a permit before drilling commences or certain associated facilities are developed; · restrict the types, quantities, and concentrations of substances that can be released into the environment in connection with drilling, hydraulic fracturing, and production activities; · limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other “ waters of the United States , ” threatened and endangered species habitat, and other protected areas; · require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells; · require us to add procedures and/or staff in order to comply with applicable laws and regulations; and · impose substantial liabilities for pollution resulting from our operations.
Biggest changeThese laws and regulations may, among other things (i) require the acquisition of permits to conduct drilling and other regulated activities; (ii) restrict the types, quantities and concentration of various substances that can be released into the environment or injected into formations in connection with oil and natural gas drilling and production activities; (iii) limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas; (iv) require remedial measures to mitigate pollution from former and ongoing operations, such as requirements to close pits and plug abandoned wells; (v) apply specific health and safety criteria addressing worker protection; and (vi) impose substantial liabilities for pollution resulting from drilling and production operations.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the incurrence of investigatory or remedial obligations, or the issuance of cease and desist orders.
Any failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of corrective or remedial obligations, the occurrence of delays or restrictions in permitting or performance of projects, and the issuance of orders enjoining performance of some or all of our operations.
The potential for such security threats subjects our operations to increased risks that could have a material adverse effect on our business, financial condition and results of operations.
Any such increased costs, delays, cessations, restrictions or prohibitions could have a material adverse effect on our business, prospects, results of operations, financial condition, and liquidity.
We may have difficulty managing growth in our business, which could have a material adverse effect on our business, financial condition and results of operations and our ability to execute our business plan in a timely fashion.
Any such increased costs, delays, cessations, restrictions or prohibitions could have a material adverse effect on our business, prospects, results of operations, financial condition, and liquidity.
The occurrence of a significant incident, series of events, or unforeseen liability for which the Company is self-insured, not fully insured or for which insurance recovery is significantly delayed could have a material adverse effect on the Company’s results of operations or financial condition. Increasing attention to environmental, social, and governance (“ ESG ”) matters may impact our business.
The occurrence of a significant event or adverse claim in excess of the insurance coverage that we maintain or that is not covered by insurance could have a material adverse effect on our financial condition and results of operations.
We are currently required to file annual and quarterly information and other reports with the Securities and Exchange Commission that are specified in Sections 13 and 15(d) of the Exchange Act.
Available Information The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act.
Removed
Item 1. Business” — “Regulation of the Oil and Gas Industry” and “Regulation of Environmental and Occupational Safety and Health Matters ”. Compliance with such laws and regulations often increases our cost of doing business and thereby decreases our profitability.
Added
ITEM 1. BUSINESS. History We were originally incorporated in September 2000 as Rocker & Spike Entertainment, Inc. In January 2001 we changed our name to Reconstruction Data Group, Inc., and in April 2003 we changed our name to Verdisys, Inc. and were engaged in the business of providing satellite services to agribusiness.
Removed
In addition, we could face liability under applicable environmental laws and regulations as a result of the activities of previous owners of our properties or other third parties.
Added
In June 2005, we changed our name to Blast Energy Services, Inc. (“ Blast ”) to reflect our new focus on the energy services business, and in 2010 we changed the direction of the Company to focus on the acquisition of oil and gas producing properties.
Removed
For example, over the years, we have owned or leased numerous properties for oil and natural gas activities upon which petroleum hydrocarbons or other materials may have been released by us or by predecessor property owners or lessees who were not under our control.
Added
On July 27, 2012, we acquired, through a reverse acquisition, Pacific Energy Development Corp., a privately held Nevada corporation, which we refer to as Pacific Energy Development. As described below, pursuant to the acquisition, the stockholders of Pacific Energy Development gained control of approximately 95% of the then voting securities of our company.
Removed
Under applicable environmental laws and regulations, including The Comprehensive Environmental Response, Compensation, and Liability Act - otherwise known as CERCLA or Superfund, and state laws, we could be held liable for the removal or remediation of previously released materials or property contamination at such locations, or at third-party locations to which we have sent waste, regardless of our fault, whether we were responsible for the release or whether the operations at the time of the release were lawful. 58 Table of Contents Compliance with, or liabilities associated with violations of or remediation obligations under, environmental laws and regulations could have a material adverse effect on our results of operations and financial condition.
Added
Since the transaction resulted in a change of control, Pacific Energy Development was the acquirer for accounting purposes. In connection with the merger, which we refer to as the Pacific Energy Development merger, Pacific Energy Development became our wholly-owned subsidiary and we changed our name from Blast Energy Services, Inc. to PEDEVCO Corp.
Removed
Regulations could adversely affect our ability to hedge risks associated with our business and our operating results and cash flows. Rules adopted by federal regulators establishing federal regulation of the over-the-counter (“ OTC ”) derivatives market and entities that participate in that market may adversely affect our ability to manage certain of our risks on a cost-effective basis.
Added
Following the merger, we refocused our business plan on the acquisition, exploration, development and production of oil and natural gas resources in the United States. Our corporate headquarters are located in approximately 5,200 square feet of office space at 575 N. Dairy Ashford, Suite 210, Houston, Texas 77079.
Removed
Such laws and regulations may also adversely affect our ability to execute our strategies with respect to hedging our exposure to variability in expected future cash flows attributable to the future sale of our oil and gas. We expect that our potential future hedging activities will remain subject to significant and developing regulations and regulatory oversight.
Added
We lease that space pursuant to a lease that expires in February 2027. Business Operations Overview We are an oil and gas company focused on the acquisition and development of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied.
Removed
However, the full impact of the various U.S. regulatory developments in connection with these activities will not be known with certainty until such derivatives market regulations are fully implemented and related market practices and structures are fully developed. We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting.
Added
In particular, we focus on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies.
Removed
If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Added
Our current properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the “ Permian Basin ”) and in the Denver-Julesberg Basin (“ D-J Basin ”) in Colorado and Wyoming.
Removed
Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. As reported under “ Part II ” - “ Item 9 A .
Added
As of December 31, 2024, we held approximately 14,105 net Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through our wholly-owned subsidiary, Pacific Energy Development Corp. (“ PEDCO ”), and which are operated by our wholly-owned operating subsidiary, Ridgeway Arizona Oil Corp.
Removed
Controls and Procedures ” , as of December 31, 2023, our Chief Executive Officer (“ CEO ”) and Chief Accounting Officer (“ CAO ”) have determined that our disclosure controls and procedures were not effective.
Added
(“ RAZO ”), which asset we refer to as our “ Permian Basin Asset .” Also as of December 31, 2024, we held approximately 18,669 net D-J Basin acres located in Weld and Morgan Counties, Colorado, and Laramie County, Wyoming, through our wholly-owned subsidiary, PRH Holdings LLC (“ PRH ”), and which are operated by our wholly-owned operating subsidiary, Red Hawk Petroleum, LLC (“ Red Hawk ”), which asset we refer to as our “ D-J Basin Asset .” As of December 31, 2024, we held interests in 35 gross (33.5 net) wells in our Permian Basin Asset, of which 28 gross (26.5 net) wells are active producers, five gross (five net) wells are inactive, and two gross (two net) wells are active salt water disposal wells (“ SWD’ s”), all of which are held by PEDCO and operated by RAZO, and interests in 82 gross (21.9 net) wells in our D-J Basin Asset held by PRH, all of which 17 gross (15.4 net) wells are operated by Red Hawk and currently producing, 48 gross (6.5 net) wells are non-operated, and 17 wells have an after-payout interest.
Removed
Separately, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 and determined that such internal control over financial reporting was not effective as a result of such assessment, and such internal control over financial reporting.
Added
Business Strategy We believe that horizontal development and exploitation of conventional assets in the Permian Basin and development of the Wattenberg and Wattenberg Extension in the D-J Basin, represent among the most economic oil and natural gas plays in the U.S.
Removed
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
Added
We plan to optimize our existing assets and opportunistically seek additional acreage proximate to our currently held core acreage, as well as other attractive onshore U.S. oil and gas assets that fit our acquisition criteria, that Company management believes can be developed using our technical and operating expertise and be accretive to stockholder value. 10 Table of Contents Specifically, we seek to increase stockholder value through the following strategies: · Grow production, cash flow and reserves by developing our operated drilling inventory and participating opportunistically in non-operated projects.
Removed
A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
Added
We believe our extensive inventory of drilling locations in the Permian Basin and the D-J Basin, combined with our operating expertise, will enable us to continue to deliver accretive production, cash flow and reserves growth.
Removed
As of December 31, 2023, the material weakness in our internal control over financial reporting related to the review of the inputs to the calculation of depreciation, depletion, and amortization of our reserves, including the review over the proper inclusion of all developed reserves and the review of proper exclusion of certain segments of certain wells towards the end of the life in the reserve quantity estimates.
Added
We believe the location, concentration and scale of our core leasehold positions, coupled with our technical understanding of the reservoirs will allow us to efficiently develop our core areas and to allocate capital to maximize the value of our resource base. · Apply modern drilling and completion techniques and technologies.
Removed
The error was identified through the course of the Company’s preparation of its year-ended December 31, 2023 financial statements. The Company has already developed a plan to implement new controls and procedures designed to address the identified material weakness. The Company believes these new controls and procedures will remediate the material weaknesses in a future period.
Added
We own and intend to acquire additional properties that have been historically underdeveloped and underexploited. We believe our attention to detail and application of the latest industry advances in horizontal drilling, completions design, frac intensity and locally optimal frac fluids will allow us to successfully develop our properties. · Optimization of well density and configuration.
Removed
However, there is the potential that the Company’s already implemented efforts to remedy the material weakness will be ineffective and/or that additional material weaknesses could occur regardless of the remediation or additional controls implemented by the Company.
Added
We own properties that are legacy oil fields characterized by widespread vertical and horizontal development and geological well control.
Removed
Maintaining effective disclosure controls and procedures and effective internal control over financial reporting are necessary for us to produce reliable financial statements and the Company is committed to remediating its material weaknesses in such controls as promptly as possible.
Added
We utilize the extensive geological, petrophysical and production data of such legacy properties to confirm optimal well spacing and configuration using modern reservoir evaluation methodologies. · Maintain a high degree of operational control and/or form partnerships which allow for a high degree of control over non-operated properties.
Removed
However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future.
Added
We believe that by retaining operational control and/or by forming partnerships which require consent and input by all partners in major development projects, we can efficiently manage the timing and amount of our capital expenditures and operating costs, and thus key in on the optimal drilling and completions strategies, which we believe will generate higher recoveries and greater rates of return per well. · Leverage extensive deal flow, technical and operational experience to evaluate and execute accretive acquisition opportunities.
Removed
Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock, and/or result in litigation against us or our management.
Added
Our management and technical teams have an extensive track record of forming and building oil and gas businesses. We also have significant expertise in successfully sourcing, evaluating and executing acquisition opportunities.
Removed
In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or our periodic reports filed with the SEC.
Added
We believe our understanding of the geology, geophysics and reservoir properties of potential acquisition targets will allow us to identify and acquire highly prospective acreage in order to grow our reserve base and maximize stockholder value. · Preserve financial flexibility to pursue organic and external growth opportunities.
Removed
Risks Related to Our Common Stock We currently have a sporadic and volatile market for our common stock, and the market for our common stock is and may remain sporadic and volatile in the future. We currently have a highly sporadic and volatile market for our common stock, which market is anticipated to remain sporadic and volatile in the future.
Added
We intend to maintain a disciplined financial profile in order to provide flexibility across various commodity and market cycles.
Removed
Factors that could affect our stock price or result in fluctuations in the market price or trading volume of our common stock include: ● our actual or anticipated operating and financial performance and drilling locations, including reserves estimates; ● quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and cash flows, or those of companies that are perceived to be similar to us; ● changes in revenue, cash flows or earnings estimates or publication of reports by equity research analysts; 59 Table of Contents ● speculation in the press or investment community; ● public reaction to our press releases, announcements and filings with the SEC; ● sales of our common stock by us or other stockholders, or the perception that such sales may occur; ● the limited amount of our freely tradable common stock available in the public marketplace; ● general financial market conditions and oil and natural gas industry market conditions, including fluctuations in commodity prices; ● the realization of any of the risk factors presented in this Annual Report; ● the recruitment or departure of key personnel; ● commencement of, or involvement in, litigation; ● the prices of oil and natural gas; ● the success of our exploration and development operations, and the marketing of any oil and natural gas we produce; ● changes in market valuations of companies similar to ours; and ● domestic and international economic, health, legal and regulatory factors unrelated to our performance.
Added
We also are committed to developing and monitoring environmental, social and governance (“ ESG ”) initiatives and the Board of Directors plans to evaluate the potential adoption of ESG initiatives from time to time, provided that no definitive ESG plans have been adopted to date.
Removed
Our common stock is listed on the NYSE American under the symbol “ PED .” Our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.
Added
Our strategy is to be the operator and/or a significant working interest owner, directly or through our subsidiaries and joint ventures, in the majority of our Permian Basin acreage so we can dictate the pace of development in order to execute our business plan.
Removed
These broad market fluctuations may adversely affect the trading price of our common stock. Additionally, general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.
Added
Our D-J Basin strategy is to participate in projects we deem highly economic on an operated or non-operated basis as our acreage position does not always allow for us to serve as operator in the D-J Basin. Our net capital expenditures for 2025 are estimated at the time of this Annual Report to range between $27 million to $33 million.
Removed
Due to the limited volume of our shares which trade, we believe that our stock prices (bid, ask and closing prices) may not be related to our actual value, and not reflect the actual value of our common stock. Stockholders and potential investors in our common stock should exercise caution before making an investment in us.
Added
This estimate includes a range of $24.5 million to $30.5 million for drilling and completion costs on our Permian Basin and D-J Basin Assets and approximately $2.5 million in estimated capital expenditures for ESP purchases, rod pump conversions, recompletions, well cleanouts, leasing, facilities, remediation and other miscellaneous capital expenses.
Removed
Additionally, as a result of the potential illiquidity and sporadic trading of our common stock, investors may not be interested in owning our common stock because of the inability to acquire or sell a substantial block of our common stock at one time. This may have an adverse effect on the market price of our common stock.
Added
We anticipate that approximately 70% to 75% of our expected capital expenditures for 2025 will be allocated to development in the D-J Basin under our February 2025 joint development agreement entered into with a large private equity-backed D-J Basin operator and our Participation Agreement and Area of Mutual Interest (“ AMI ”) entered into in August 2024 with a private operator.
Removed
In addition, a stockholder may not be able to borrow funds using our common stock as collateral because lenders may be unwilling to accept the pledge of securities having such a limited market. We cannot assure you that an active trading market for our common stock will develop or, if one develops, that it will be sustained.
Added
This estimate does not include expenditures for acquisitions or other projects that may arise but are not currently anticipated.
Removed
An active and sustained trading market for our common stock may not develop in the future. Our common stock currently trades on the NYSE American, although our common stock’s trading volume has been low from time to time and trading in our common stock has historically been sporadic.
Added
We periodically review our capital expenditures and adjust our capital forecasts and allocations based on liquidity, drilling results, leasehold acquisition opportunities, partner non-consents, proposals from third party operators, and commodity prices, while prioritizing our financial strength and liquidity (see “ Part I ” – “ Item 1A.
Removed
Liquid and active trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders.
Added
Risk Factors ”). 11 Table of Contents We plan to continue to evaluate D-J Basin well proposals as received from third party operators and participate in those we deem most economic and prospective.
Removed
However, our common stock may continue to have a sporadic trading volume, and investors may not be interested in owning our common stock because of the inability to acquire or sell a substantial block of our common stock at one time. This could have an adverse effect on the market price of our common stock.
Added
If new proposals are received that meet our economic thresholds and require material capital expenditures, we have flexibility to move capital from our Permian Asset to our D-J Basin Asset, or vice versa, as our Permian Asset is 100% operated and nearly all held by production (“ HBP ”), allowing for flexibility of timing on development.
Removed
In addition, a stockholder may not be able to borrow funds using our common stock as collateral because lenders may be unwilling to accept the pledge of securities having such a limited market. We cannot assure you that an active trading market for our common stock will develop or, if one develops, be sustained.
Added
Our 2025 development program is based upon our current outlook for the year and is subject to revision, if and as necessary, to react to market conditions, product pricing, contractor availability, requisite permitting, capital availability, partner non-consents, capital allocation changes between assets, acquisitions, divestitures and other adjustments determined by the Company in the best interest of its shareholders while prioritizing our financial strength and liquidity.
Removed
Our outstanding options may adversely affect the trading price of our common stock. As of December 31, 2023, there are outstanding stock options to purchase 1,632,334 shares of our common stock at a weighted average price per share of $1.28.
Added
We expect that we will have sufficient cash available to meet our needs over the next 12 months after the filing of this report and in the foreseeable future, including to fund our 2025 development program, discussed above, which cash we anticipate being available from (i) projected cash flow from our operations, (ii) existing cash on hand, (iii) equity infusions or loans (which may be convertible) made available from Dr.
Removed
For the life of the options, the holders have the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding securities will also dilute the ownership interests of our existing stockholders.
Added
Simon G. Kukes, our former CEO and newly appointed Executive Chairman of the Company's Board of Directors, which funding Dr.
Removed
The availability of these shares for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock.
Added
Kukes is under no obligation to provide, (iv) public or private debt or equity financings, including up to $8.0 million in securities which we may sell in the future in “at the market offerings”, pursuant to a Sales Agreement entered into on December 20, 2024, with Roth Capital Partners, LLC (the “ Lead Agent ”), and A.G.P./Alliance Global Partners (“ AGP ” and, together with the Lead Agent, the “ Agents ”)(discussed in greater detail below under “ Item 7.
Removed
We previously filed registration statements with the SEC on Form S-8 providing for the registration of an aggregate of approximately 16,134,915 shares of our common stock, issued, issuable or reserved for issuance under our equity incentive plans.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing ” (under which we have sold no shares to date), and (v) funding through credit or loan facilities, including under the Company’s reserve-based lending facility (“ RBL ”) with Citibank, N.A., as administrative agent, which provides for an initial borrowing base of $20 million and an aggregate maximum revolving credit amount of $250 million (of which none has been drawn down by the Company to date).
Removed
Subject to the satisfaction of vesting conditions, the expiration of lockup agreements, any management 10b5-1 plans and certain restrictions on sales by affiliates, shares registered under registration statements on Form S-8 will be available for resale immediately in the public market without restriction.
Added
In addition, we may seek additional funding through asset sales, farm-out arrangements, and credit facilities to fund potential acquisitions during the remainder of 2025. 12 Table of Contents The following chart reflects our current organizational structure: *Represents percentage of total voting power based on 91,339,385 shares of common stock outstanding as of March 28, 2025, with beneficial ownership calculated in accordance with Rule 13d-3 of the Exchange Act.
Removed
We cannot predict the size of future issuances of our common stock pursuant to the exercise of outstanding options or conversion of other securities, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock.
Added
Holdings of The SGK 2018 Revocable Trust are also included in holdings of Senior Management and the Board – See “ Part III ” — “ Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .” Competition The oil and natural gas industry is highly competitive.

… 435 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

95 edited+53 added−10 removed215 unchanged
Biggest changeWe have entered into a Stipulated Final Order (“ SFO ”) with the Director of the Oil and Gas Conservation Division of the State of New Mexico Energy (“ OCD ”) which requires that the Company fund the plugging and abandonment of an aggregate of approximately 299 legacy vertical wells in our Permian Basin Asset, with any failure by us to comply with the SFO likely to materially and adversely affect our business, results of operations and cash flows. 38 Table of Contents The Company has entered into an SFO with the OCD through RAZO, the Company’s New Mexico operating subsidiary, which requires, among other things, that the Company reimburse the OCD for actual costs incurred by the OCD for plugging and abandoning approximately 299 inactive legacy wells in the Permian Basin Asset at a rate of $2.00 per gross barrel of oil sold by RAZO during any production reporting period, subject to a minimum payment of $30,000 per month by RAZO.
Biggest changeThe Company has entered into an SFO with the OCD through RAZO, the Company’s New Mexico operating subsidiary, which requires, among other things, that the Company reimburse the OCD for actual costs incurred by the OCD for plugging and abandoning approximately 299 inactive legacy wells in the Permian Basin Asset at a rate of $2.00 per gross barrel of oil sold by RAZO during any production reporting period, subject to a minimum payment of $30,000 per month by RAZO. .RAZO has been timely paying each reimbursement invoice received from the OCD in accordance with the SFO and is in full compliance with the SFO.
Kukes fails to provide us future funding, when and if needed, it could have a material adverse effect on our liquidity, results of operations and could force us to borrow funds from outside sources on less favorable terms than our prior debt or sell equity to outside investors on less favorable terms than the equity we issued to Dr. Kukes.
Kukes fails to provide us future funding, when and if needed, it could have a material adverse effect on our liquidity, results of operations and could force us to borrow funds from outside sources on less favorable terms than our prior debt or sell equity to outside investors on less favorable terms than the equity we issued to Dr.
In particular, risks associated with our business include: · The future price of oil, natural gas and NGL; · The impact of public health crises, similar to COVID-19, on the Company’s operations, future prospects, the value of its properties, and the economy in general, including the related effect on the supply and demand, and ultimate price of oil and natural gas; · Current and future declines in economic activity and recessions, changes in inflation and interest rates, and their effect on the Company, its property, prospects and the supply and demand, and ultimate price of oil and natural gas; · The status and availability of oil and natural gas gathering, transportation, and storage facilities owned and operated by third parties; · An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production may adversely affect our business, financial condition, and results of operations; · New or amended environmental legislation or regulatory initiatives which could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us; · The effect of future shut-ins of our operated production, should market conditions significantly deteriorate; · Declines in the value of our crude oil, natural gas and NGL properties resulting in impairments; · Our need for additional capital to complete future acquisitions, conduct our operations and fund our business, and our ability to obtain such necessary funding on favorable terms, if at all; · Our ability to generate sufficient cash flow to meet any future debt service and other obligations due to events beyond our control; · The fact that all of our assets and operations are located in the Permian Basin and the D-J Basin, making us vulnerable to risks associated with operating in only two geographic areas; · The speculative nature of our oil and gas operations, and general risks associated with the exploration for, and production of oil and gas; including accidents, equipment failures or mechanical problems which may occur while drilling or completing wells or in production activities; operational hazards and unforeseen interruptions for which we may not be adequately insured; the threat and impact of terrorist attacks, cyber-attacks or similar hostilities; declining reserves and production; and losses or costs we may incur as a result of title deficiencies or environmental issues in the properties in which we invest, any one of which may adversely impact our operations; · Potential conflicts of interest that could arise for certain members of our management team and board of directors that hold management positions with other entities and our largest stockholder; 35 Table of Contents · The limited control we have over activities on properties we do not operate; · The estimates of the value of our oil and gas properties and accounting in connection therewith; · Intense competition in the oil and natural gas industry; · Our competitors use of superior technology and data resources that we may be unable to afford or obtain the use of; · Changes in the legal and regulatory environment governing the oil and natural gas industry, including new or amended environmental legislation or regulatory initiatives which could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us; · Uncertainties associated with enhanced recovery methods which may result in us not realizing an acceptable return on our investments in such projects or suffering losses; · Requirements that we must drill on certain of acreage in order to hold such acreage by production; · Improvements in or new discoveries of alternative energy technologies that could have a material adverse effect on our financial condition and results of operations; · Future litigation or governmental proceedings which could result in material adverse consequences, including judgments or settlements; · The currently sporadic and volatile market for our common stock; · Our dependence on the continued involvement of our present management; · The fact that Dr.
In particular, risks associated with our business include: · The future price of oil, natural gas and NGL; · The impact of public health crises, similar to COVID-19, on the Company’s operations, future prospects, the value of its properties, and the economy in general, including the related effect on the supply and demand, and ultimate price of oil and natural gas; · Current and future declines in economic activity and recessions, changes in inflation and interest rates, and their effect on the Company, its property, prospects and the supply and demand, and ultimate price of oil and natural gas; · The status and availability of oil and natural gas gathering, transportation, and storage facilities owned and operated by third parties; · An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production may adversely affect our business, financial condition, and results of operations; · New or amended environmental legislation or regulatory initiatives which could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us; · The effect of future shut-ins of our operated production, should market conditions significantly deteriorate; · Declines in the value of our crude oil, natural gas and NGL properties resulting in impairments; · Our need for additional capital to complete future acquisitions, conduct our operations and fund our business, and our ability to obtain such necessary funding on favorable terms, if at all; · Our ability to generate sufficient cash flow to meet any future debt service and other obligations due to events beyond our control; · The fact that all of our assets and operations are located in the Permian Basin and the D-J Basin, making us vulnerable to risks associated with operating in only two geographic areas; · The speculative nature of our oil and gas operations, and general risks associated with the exploration for, and production of oil and gas; including accidents, equipment failures or mechanical problems which may occur while drilling or completing wells or in production activities; operational hazards and unforeseen interruptions for which we may not be adequately insured; the threat and impact of terrorist attacks, cyber-attacks or similar hostilities; declining reserves and production; and losses or costs we may incur as a result of title deficiencies or environmental issues in the properties in which we invest, any one of which may adversely impact our operations; · Potential conflicts of interest that could arise for certain members of our management team and Board of Directors that hold management positions with other entities and our largest stockholder; 38 Table of Contents · The limited control we have over activities on properties we do not operate; · The estimates of the value of our oil and gas properties and accounting in connection therewith; · Intense competition in the oil and natural gas industry; · Our competitors use of superior technology and data resources that we may be unable to afford or obtain the use of; · Changes in the legal and regulatory environment governing the oil and natural gas industry, including new or amended environmental legislation or regulatory initiatives which could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us; · Uncertainties associated with enhanced recovery methods which may result in us not realizing an acceptable return on our investments in such projects or suffering losses; · Requirements that we must drill on certain of acreage in order to hold such acreage by production; · Improvements in or new discoveries of alternative energy technologies that could have a material adverse effect on our financial condition and results of operations; · Future litigation or governmental proceedings which could result in material adverse consequences, including judgments or settlements; · The currently sporadic and volatile market for our common stock; · Our dependence on the continued involvement of our present management; · The fact that Dr.
The prices we receive for our production, and the levels of our production, will continue to depend on numerous factors, including the following: ● the domestic and foreign supply of oil, NGLs and natural gas; ● the domestic and foreign demand for oil, NGLs and natural gas; ● the prices and availability of competitors’ supplies of oil, NGLs and natural gas; ● the actions of the Organization of Petroleum Exporting Countries, or OPEC, and state-controlled oil companies relating to oil price and production controls; ● the price and quantity of foreign imports of oil, NGLs and natural gas; ● the impact of U.S. dollar exchange rates on oil, NGLs and natural gas prices; ● domestic and foreign governmental regulations and taxes; ● speculative trading of oil, NGLs and natural gas futures contracts; ● localized supply and demand fundamentals, including the availability, proximity and capacity of gathering and transportation systems for natural gas; ● the availability of refining capacity; ● the prices and availability of alternative fuel sources; ● the threat, or perceived threat, or results, of viral pandemics, for example, as experienced with the COVID-19 pandemic in 2020 and 2021; ● weather conditions and natural disasters; ● political conditions in or affecting oil, NGLs and natural gas producing regions and/or pipelines, including in Eastern Europe, the Middle East and South America, for example, as experienced with the Russian invasion of the Ukraine in February 2022, and the current armed conflict in Israel and the Gaza Strip, which conflicts are ongoing; 41 Table of Contents ● the continued threat of terrorism and the impact of military action and civil unrest; ● public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate hydraulic fracturing activities; ● the level of global oil, NGL and natural gas inventories and exploration and production activity; ● authorization of exports from the Unites States of liquefied natural gas; ● the impact of energy conservation efforts; ● technological advances affecting energy consumption; and ● overall worldwide economic conditions.
The prices we receive for our production, and the levels of our production, will continue to depend on numerous factors, including the following: · the domestic and foreign supply of oil, NGLs and natural gas; · the domestic and foreign demand for oil, NGLs and natural gas; · the prices and availability of competitors’ supplies of oil, NGLs and natural gas; · the actions of the Organization of Petroleum Exporting Countries, or OPEC, and state-controlled oil companies relating to oil price and production controls; · the price and quantity of foreign imports of oil, NGLs and natural gas; · the impact of U.S. dollar exchange rates on oil, NGLs and natural gas prices; · domestic and foreign governmental regulations and taxes; 44 Table of Contents · speculative trading of oil, NGLs and natural gas futures contracts; · localized supply and demand fundamentals, including the availability, proximity and capacity of gathering and transportation systems for natural gas; · the availability of refining capacity; · the prices and availability of alternative fuel sources; · the threat, or perceived threat, or results, of viral pandemics, for example, as experienced with the COVID-19 pandemic in 2020 and 2021; · weather conditions and natural disasters; · political conditions in or affecting oil, NGLs and natural gas producing regions and/or pipelines, including in Eastern Europe, the Middle East and South America, for example, as experienced with the Russian invasion of the Ukraine in February 2022, and the current armed conflict in Israel and the Gaza Strip, which conflicts are ongoing; · the continued threat of terrorism and the impact of military action and civil unrest; · public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate hydraulic fracturing activities; · the level of global oil, NGL and natural gas inventories and exploration and production activity; · authorization of exports from the Unites States of liquefied natural gas; · the impact of energy conservation efforts; · technological advances affecting energy consumption; and · overall worldwide economic conditions.
In the event the Company is unable to fully comply with the terms of the SFO, then the Company could be subject to significant civil penalties and sanctions, which would likely have a material adverse effect on our business, financial condition and results of operations, could require us to raise additional funding which may not be available on commercially reasonable terms, if at all, and may negatively affect our drilling plans in the future, and may cause the value of our securities to decline in value.
Additionally, in the event the Company is unable to fully comply with the terms of the SFO, then the Company could be subject to significant civil penalties and sanctions, which would likely have a material adverse effect on our business, financial condition and results of operations, could require us to raise additional funding which may not be available on commercially reasonable terms, if at all, and may negatively affect our drilling plans in the future, and may cause the value of our securities to decline in value.
If funding is insufficient at any time in the future and we are unable to generate sufficient revenue from new business arrangements, to complete planned acquisitions or operations, our results of operations and the value of our securities could be adversely affected. 37 Table of Contents Additionally, due to the nature of oil and gas interests, i.e., that rates of production generally decline over time as oil and gas reserves are depleted, if we are unable to drill additional wells and develop our reserves, either because we are unable to raise sufficient funding for such development activities, or otherwise, or in the event we are unable to acquire additional operating properties, we believe that our revenues will continue to decline over time.
If funding is insufficient at any time in the future and we are unable to generate sufficient revenue from new business arrangements, to complete planned acquisitions or operations, our results of operations and the value of our securities could be adversely affected. 40 Table of Contents Additionally, due to the nature of oil and gas interests, i.e., that rates of production generally decline over time as oil and gas reserves are depleted, if we are unable to drill additional wells and develop our reserves, either because we are unable to raise sufficient funding for such development activities, or otherwise, or in the event we are unable to acquire additional operating properties, we believe that our revenues will continue to decline over time.
For example, in 2019, the EPA increased the state of Colorado’s non-attainment ozone classification for the Denver Metro North Front Range Ozone Eight-Hour Non-Attainment (“ Denver Metro/North Front Range NAA ”) area from “moderate” to “serious” under the 2008 national ambient air quality standard (“ NAAQS ”).
For example, in 2019, the EPA increased the state of Colorado’s non-attainment ozone classification for the Denver Metro North Front Range Ozone Eight-Hour Non-Attainment (“ Denver Metro/North Front Range NAA ”) area from “moderate” to “serious” under the 2008 national ambient air quality standard.
This Bill, among other things, gives more power to local government entities in making land use decisions about oil and gas development and regulation, and directs the Energy & Carbon Management Commission (“ ECMC ”) (formally the Colorado Oil & Gas Conservation Commission (“ COGCC ”)) to promulgate rules to ensure, among other things, proper wellbore integrity, allow public disclosure of flowline information, and evaluate when inactive or shut-in wells must be inspected before being put into production or used for injection.
This Bill, among other things, gives more power to local government entities in making land use decisions about oil and gas development and regulation, and directs the Energy & Carbon Management Commission (“ ECMC ”) (formerly the Colorado Oil & Gas Conservation Commission (“ COGCC ”)) to promulgate rules to ensure, among other things, proper wellbore integrity, allow public disclosure of flowline information, and evaluate when inactive or shut-in wells must be inspected before being put into production or used for injection.
Because a substantial percentage of our New Mexico properties, and all of our Wyoming properties, are undeveloped, we will require significant additional capital to develop such properties before they may become productive.
Because a substantial percentage of our Colorado and New Mexico properties, and all of our Wyoming properties, are undeveloped, we will require significant additional capital to develop such properties before they may become productive.
Service and materials costs also increased accordingly through 2022, stabilizing in 2023, with general supply chain and inflation issues seen throughout the industry leading to increased operating costs.
Service and materials costs also increased accordingly through 2022, stabilizing in 2023 in 2024, with general supply chain and inflation issues seen throughout the industry leading to increased operating costs.
We cannot assure you that the analogies we draw from available data obtained by analyzing other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects. 52 Table of Contents Negative public perception regarding us and/or our industry could have an adverse effect on our operations.
We cannot assure you that the analogies we draw from available data obtained by analyzing other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects. 55 Table of Contents Negative public perception regarding us and/or our industry could have an adverse effect on our operations.
We are affected significantly by a substantial number of governmental regulations relating to, among other things, the release or disposal of materials into the environment, health and safety, land use, and other matters. A summary of the principal environmental rules and regulations to which we are currently subject is set forth in “ Part I ” – “
We are affected significantly by a substantial number of governmental regulations relating to, among other things, the release or disposal of materials into the environment, health and safety, land use, and other matters. A summary of the principal environmental rules and regulations to which we are currently subject is set forth in “ Part I ” – “ Item 1.
Global economic conditions continue to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions, fears of recession and trade wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the availability and timing of government stimulus programs, levels of unemployment, increased inflation, and tax rates.
Global economic conditions continue to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions, fears of recession and trade wars, the effect of tariffs, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the availability and timing of government stimulus programs, levels of unemployment, increased inflation, and tax rates.
One or more of the technologies that we will use or that we may implement in the future may become obsolete, and we may be adversely affected. 49 Table of Contents If we do not hedge our exposure to reductions in oil and natural gas prices, we may be subject to significant reductions in prices.
One or more of the technologies that we will use or that we may implement in the future may become obsolete, and we may be adversely affected. 52 Table of Contents If we do not hedge our exposure to reductions in oil and natural gas prices, we may be subject to significant reductions in prices.
These could result in a material adverse effect on our prospects, business, financial condition and our results of operations. 51 Table of Contents A substantial percentage of our New Mexico properties, and all of our Wyoming properties, are undeveloped; therefore, the risk associated with our success is greater than would be the case if the majority of such properties were categorized as proved developed producing.
These could result in a material adverse effect on our prospects, business, financial condition and our results of operations. 54 Table of Contents A substantial percentage of our Colorado and New Mexico properties, and all of our Wyoming properties, are undeveloped; therefore, the risk associated with our success is greater than would be the case if the majority of such properties were categorized as proved developed producing.
We may need to raise additional funding to complete future potential acquisitions and may be required to raise additional funds through public or private debt or equity financing or other various means to fund our operations and complete exploration and drilling operations beyond 2024 and acquire assets.
We may need to raise additional funding to complete future potential acquisitions and may be required to raise additional funds through public or private debt or equity financing or other various means to fund our operations and complete exploration and drilling operations beyond 2025 and acquire assets.
For example, on January 20, 2021, the Acting Secretary of the Interior issued Order Number 3395 (“ Order No. 3395 ”) which contained a directive to temporarily halt all federal permitting activity for 60 days in an effort to study environmental impacts of oil and gas drilling and development, which a federal court blocked with a preliminary injunction in June 2021, which injunction is being appealed.
For example, on January 20, 2021, the Acting Secretary of the Interior issued Order Number 3395 (“ Order No. 3395 ”) which contained a directive to temporarily halt all federal permitting activity for 60 days in an effort to study environmental impacts of oil and gas drilling and development, which a federal court blocked with a preliminary injunction in June 2021.
Although we believe there is currently sufficient supply of hydraulic fracturing services, if demand for fracturing services increases or the supply of fracturing equipment and crews decreases, then higher costs could result and could adversely affect our business, financial condition and results of operations. We have limited control over activities on properties we do not operate.
Although we believe there is currently sufficient supply of hydraulic fracturing services, if demand for fracturing services increases or the supply of fracturing equipment and crews decreases, then higher costs could result and could adversely affect our business, financial condition and results of operations. 50 Table of Contents We have limited control over activities on properties we do not operate.
In addition, a decline in consumer confidence or changing patterns in the availability and use of disposable income by consumers can negatively affect the demand for oil and gas and as a result our results of operations. Improvements in or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations.
In addition, a decline in consumer confidence or changing patterns in the availability and use of disposable income by consumers can negatively affect the demand for oil and gas and as a result our results of operations. 53 Table of Contents Improvements in or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations.
Our actual drilling activities may be materially different from our current expectations, which could adversely affect our business, financial condition and results of operations. 46 Table of Contents We currently license only a limited amount of seismic and other geological data and may have difficulty obtaining additional data at a reasonable cost, which could adversely affect our future results of operations.
Our actual drilling activities may be materially different from our current expectations, which could adversely affect our business, financial condition and results of operations. We currently license only a limited amount of seismic and other geological data and may have difficulty obtaining additional data at a reasonable cost, which could adversely affect our future results of operations.
Any such outcome could have a material and adverse impact on our cash flows and results of operations. 56 Table of Contents For example, in 2014, 2016 and 2018, opponents of hydraulic fracturing sought statewide ballot initiatives in Colorado that would have restricted oil and gas development in Colorado and could have had materially adverse impacts on us.
Any such outcome could have a material and adverse impact on our cash flows and results of operations. For example, in 2014, 2016 and 2018, opponents of hydraulic fracturing sought statewide ballot initiatives in Colorado that would have restricted oil and gas development in Colorado and could have had materially adverse impacts on us.
While the Company is cautiously optimistic that such costs have plateaued and will hold at current levels as we have not seen significant cost increases in 2023 and thus far in 2024, supply chain constraints and inflationary pressures may continue to adversely impact our operating costs and may negatively impact our ability to procure materials and equipment in a timely and cost-effective manner, if at all, which could result in reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
While the Company is cautiously optimistic that such costs have plateaued and will hold at current levels as we have not seen significant cost increases in 2024 and thus far in 2025, supply chain constraints, the effect of tariffs, and inflationary pressures may adversely impact our operating costs and may negatively impact our ability to procure materials and equipment in a timely and cost-effective manner, if at all, which could result in reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
If any of our directors resign or become unable to continue in their present role, it may be difficult to find replacements with the same knowledge and experience and as a result, our operations may be adversely affected. 54 Table of Contents Dr. Simon G.
If any of our directors resign or become unable to continue in their present role, it may be difficult to find replacements with the same knowledge and experience and as a result, our operations may be adversely affected. Dr. Simon G.
We may need additional capital to complete future acquisitions, conduct our operations and fund our business beyond 2024, and our ability to obtain the necessary funding is uncertain.
We may need additional capital to complete future acquisitions, conduct our operations and fund our business beyond 2025, and our ability to obtain the necessary funding is uncertain.
Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflict between the Ukraine and Russia and the current armed conflict in Israel and the Gaza Strip.
Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflict between the Ukraine and Russia and the current armed conflict in Israel and the Gaza Strip, and the effect of tariffs.
The accuracy of a reserves estimate is a function of: ● the quality and quantity of available data; ● the interpretation of that data; ● the judgment of the persons preparing the estimate; and ● the accuracy of the assumptions. 43 Table of Contents The accuracy of any estimates of proved reserves generally increases with the length of the production history.
The accuracy of a reserves estimate is a function of: · the quality and quantity of available data; · the interpretation of that data; · the judgment of the persons preparing the estimate; and · the accuracy of the assumptions. The accuracy of any estimates of proved reserves generally increases with the length of the production history.
Further, oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other. Because approximately 67% of our estimated proved reserves as of December 31, 2023 were oil, our financial results are more sensitive to movements in oil prices.
Further, oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other. Because approximately 60% of our estimated proved reserves as of December 31, 2024 were oil, our financial results are more sensitive to movements in oil prices.
In addition, approximately 16% of the Company’s acreage in New Mexico, 1% of the Company’s acreage in Colorado, and 3% of the Company’s acreage in Wyoming is located on federal lands, which may be subject to federal laws, regulations and orders that could limit our ability to operate.
In addition, approximately 17% of the Company’s acreage in New Mexico, 1% of the Company’s acreage in Colorado, and 4% of the Company’s acreage in Wyoming is located on federal lands, which may be subject to federal laws, regulations and orders that could limit our ability to operate.
In considering an investment in our common stock, you should consider that there is only limited historical and financial operating information available upon which to base your evaluation of our performance. We have incurred net losses of $126,477,000 from the date of inception (February 9, 2011) through December 31, 2023.
In considering an investment in our common stock, you should consider that there is only limited historical and financial operating information available upon which to base your evaluation of our performance. We have incurred net losses of $106,002,000 from the date of inception (February 9, 2011) through December 31, 2024.
Inflation has also resulted in higher interest rates, which in turn raises our cost of debt borrowing. Economic uncertainty may affect our access to capital and/or increase the costs of such capital.
Inflation has also resulted in higher interest rates in the past, which in turn raises our cost of debt borrowing. 41 Table of Contents Economic uncertainty may affect our access to capital and/or increase the costs of such capital.
Kukes, the Company’s Chief Executive Officer and director, loaned us an aggregate of $51.7 million to support our operations and for acquisitions through an entity owned and controlled by him, all of which loans were evidenced by promissory notes.
Kukes, the Company’s former Chief Executive Officer and director and current Executive Chairman of the Company's Board of Directors, loaned us an aggregate of $51.7 million to support our operations and for acquisitions through an entity owned and controlled by him, all of which loans were evidenced by promissory notes.
Our success is dependent on the prices of oil, NGLs and natural gas. Low oil or natural gas prices and the substantial volatility in these prices have adversely affected, and are expected to continue to adversely affect, our business, financial condition and results of operations and our ability to meet our capital expenditure requirements and financial obligations.
Low oil or natural gas prices and the substantial volatility in these prices have adversely affected, and are expected to continue to adversely affect, our business, financial condition and results of operations and our ability to meet our capital expenditure requirements and financial obligations.
Kukes differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance standards.
Notwithstanding that, should the interests of Dr. Kukes differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance standards.
We may drill wells that are productive, but that do not produce sufficient net revenues to return a profit after drilling, operating and other costs.
We may drill or participate in new wells that are not productive. We may drill wells that are productive, but that do not produce sufficient net revenues to return a profit after drilling, operating and other costs.
No impairment was incurred for the years ended December 31, 2023 and 2022.
No impairment was incurred for the years ended December 31, 2024 and 2023.
Kukes, together with the ownership of The SGK 2018 Revocable Trust, beneficially owns approximately 66.5% of our issued and outstanding common stock. As such, Dr.
Kukes, together with the ownership of The SGK 2018 Revocable Trust, beneficially owns approximately 65.4% of our issued and outstanding common stock. As such, Dr.
The below table highlights the recent volatility in oil and gas prices by summarizing the high and low daily NYMEX WTI oil spot price and daily NYMEX natural gas Henry Hub spot price for the periods presented: 36 Table of Contents Daily NYMEX WTI oil spot price (per Bbl) Daily NYMEX natural gas Henry Hub spot price (per MMBtu) High Low High Low Year ended December 31, 2019 $ 66.24 $ 46.31 $ 4.25 $ 1.75 Year ended December 31, 2020 $ 63.27 $ (36.98 ) $ 3.14 $ 1.33 Year ended December 31, 2021 $ 85.64 $ 47.47 $ 23.86 $ 2.43 Year ended December 31, 2022 $ 123.64 $ 71.05 $ 9.85 $ 3.46 Year ended December 31, 2023 $ 93.67 $ 66.61 $ 3.78 $ 1.74 We have a limited operating history, have incurred net losses in the past and may incur net losses in the future.
The below table highlights the recent volatility in oil and gas prices by summarizing the high and low daily NYMEX WTI oil spot price and daily NYMEX natural gas Henry Hub spot price for the periods presented: Daily NYMEX WTI oil spot price (per Bbl) Daily NYMEX natural gas Henry Hub spot price (per MMBtu) High Low High Low Year ended December 31, 2020 $ 63.27 $ (36.98 ) $ 3.14 $ 1.33 Year ended December 31, 2021 $ 85.64 $ 47.47 $ 23.86 $ 2.43 Year ended December 31, 2022 $ 123.64 $ 71.05 $ 9.85 $ 3.46 Year ended December 31, 2023 $ 93.67 $ 66.61 $ 3.78 $ 1.74 Year ended December 31, 2024 $ 87.69 $ 66.73 $ 13.20 $ 1.21 We have a limited operating history, have incurred net losses in the past and may incur net losses in the future.
Whether a well is ultimately productive and profitable depends on a number of additional factors, including the following: ● general economic and industry conditions, including the prices received for oil and natural gas; ● shortages of, or delays in, obtaining equipment, including hydraulic fracturing equipment, and qualified personnel; ● potential significant water production which could make a producing well uneconomic, particularly in the Permian Basin Asset, where abundant water production is a known risk; ● potential drainage by operators on adjacent properties; ● loss of, or damage to, oilfield development and service tools; ● problems with title to the underlying properties; ● increases in severance taxes; ● adverse weather conditions that delay drilling activities or cause producing wells to be shut down; ● domestic and foreign governmental regulations; and ● proximity to and capacity of transportation facilities. 40 Table of Contents If we do not drill productive and profitable wells in the future, our business, financial condition and results of operations could be materially and adversely affected.
Whether a well is ultimately productive and profitable depends on a number of additional factors, including the following: · general economic and industry conditions, including the prices received for oil and natural gas; · shortages of, or delays in, obtaining equipment, including hydraulic fracturing equipment, and qualified personnel; · potential significant water production which could make a producing well uneconomic, particularly in the Permian Basin Asset, where abundant water production is a known risk; · potential drainage by operators on adjacent properties; · loss of, or damage to, oilfield development and service tools; · problems with title to the underlying properties; · increases in severance taxes; · adverse weather conditions that delay drilling activities or cause producing wells to be shut down; · domestic and foreign governmental regulations; and · proximity to and capacity of transportation facilities.
We may engage in bidding and negotiating to complete successful acquisitions. We may be required to alter or increase substantially our capitalization to finance these acquisitions through the use of cash on hand, the issuance of debt or equity securities, the sale of production payments, the sale of non-strategic assets, the borrowing of funds or otherwise.
We may be required to alter or increase substantially our capitalization to finance these acquisitions through the use of cash on hand, the issuance of debt or equity securities, the sale of production payments, the sale of non-strategic assets, the borrowing of funds or otherwise.
A total of approximately 16% of the Company’s acreage in New Mexico, 1% of the Company’s acreage in Colorado, and 3% of the Company’s acreage in Wyoming is located on federal lands.
A total of approximately 17% of the Company’s acreage in New Mexico, 1% of the Company’s acreage in Colorado, and 4% of the Company’s acreage in Wyoming is located on federal lands.
Interior Secretary, instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which a federal court blocked with a preliminary injunction in June 2021, which injunction is being appealed. President Biden subsequently announced that his administration will resume onshore oil and gas lease sales on federal lands effective April 18, 2022.
On January 20, 2021, the Acting U.S. Interior Secretary, instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which a federal court blocked with a preliminary injunction in June 2021. President Biden subsequently announced that his administration will resume onshore oil and gas lease sales on federal lands effective April 18, 2022.
If we succeed in selling additional equity securities to raise funds, at such time the ownership percentage of our existing stockholders would be diluted, and new investors may demand rights, preferences or privileges senior to those of existing stockholders. If we choose to farm-out interests in our prospects, we may lose operating control over such prospects.
If we succeed in selling additional equity securities to raise funds, at such time the ownership percentage of our existing stockholders would be diluted, and new investors may demand rights, preferences or privileges senior to those of existing stockholders.
Because our operations are not as diversified geographically as many of our competitors, the success of our operations and our profitability may be disproportionately exposed to the effect of any regional events, including: ● fluctuations in prices of crude oil, natural gas and NGLs produced from the wells in these areas; ● natural disasters such as the flooding that occurred in the D-J Basin area in September 2013; ● the effects of local quarantines; ● restrictive governmental regulations; and ● curtailment of production or interruption in the availability of gathering, processing or transportation infrastructure and services, and any resulting delays or interruptions of production from existing or planned new wells. 39 Table of Contents For example, bottlenecks in processing and transportation that have occurred in some recent periods in the Permian Basin and D-J Basin may negatively affect our results of operations, and these adverse effects may be disproportionately severe to us compared to our more geographically diverse competitors.
Because our operations are not as diversified geographically as many of our competitors, the success of our operations and our profitability may be disproportionately exposed to the effect of any regional events, including: · fluctuations in prices of crude oil, natural gas and NGLs produced from the wells in these areas; · natural disasters such as the flooding that occurred in the D-J Basin area in September 2013; · the effects of local quarantines; · restrictive governmental regulations; and · curtailment of production or interruption in the availability of gathering, processing or transportation infrastructure and services, and any resulting delays or interruptions of production from existing or planned new wells.
Business” — “Regulation of the Oil and Gas Industry” and “Regulation of Environmental and Occupational Safety and Health Matters ” for a further description of the laws and regulations that affect us.
Business ” — “ Regulation of the Oil and Gas Industry ” and “ Regulation of Environmental and Occupational Safety and Health Matters ” for a further description of the laws and regulations that affect us.
If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we operate, including, for example, on federal and American Indian lands, we could incur potentially significant added cost to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development or production activities, and perhaps even be precluded from drilling wells.
If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we operate, including, for example, on federal and American Indian lands, we could incur potentially significant added cost to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development or production activities, and perhaps even be precluded from drilling wells. 60 Table of Contents New or amended environmental legislation or regulatory initiatives could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us.
Kukes, our Chief Executive Officer and a member of board of directors, beneficially owns 66.5% of our common stock, which gives him majority voting control over stockholder matters and his interests may be different from your interests; and as a result of such ownership, we are a “ controlled company ” under applicable NYSE American rules. Dr. Simon G.
Kukes, our former Chief Executive Officer and newly appointed Executive Chairman of the Company's Board of Directors, beneficially owns 65.4% of our common stock, which gives him majority voting control over stockholder matters and his interests may be different from your interests; and as a result of such ownership, we are a “ controlled company ” under applicable NYSE American rules.
If we are unable to obtain water to use in our operations from local sources or dispose of or recycle water used in operations, or if the price of water or water disposal increases significantly, we may be unable to produce oil and natural gas economically, which could have a material adverse effect on our financial condition, results of operations, and cash flows. 50 Table of Contents Downturns and volatility in global economies and commodity and credit markets have, and in the future may, materially adversely affect our business, results of operations and financial condition.
If we are unable to obtain water to use in our operations from local sources or dispose of or recycle water used in operations, or if the price of water or water disposal increases significantly, we may be unable to produce oil and natural gas economically, which could have a material adverse effect on our financial condition, results of operations, and cash flows.
The rate of our future growth may be dependent, at least in part, on our ability to access capital at rates and on terms we determine to be acceptable. 42 Table of Contents Our cash flows from operations and access to capital are subject to a number of variables, including: ● our estimated proved oil and natural gas reserves; ● the amount of oil and natural gas we produce from existing wells; ● the prices at which we sell our production; ● the costs of developing and producing our oil and natural gas reserves; ● our ability to acquire, locate and produce new reserves; ● the general state of the economy; ● the ability and willingness of banks to lend to us; and ● our ability to access the equity and debt capital markets.
Our cash flows from operations and access to capital are subject to a number of variables, including: · our estimated proved oil and natural gas reserves; · the amount of oil and natural gas we produce from existing wells; · the prices at which we sell our production; · the costs of developing and producing our oil and natural gas reserves; · our ability to acquire, locate and produce new reserves; · the general state of the economy; · the ability and willingness of banks to lend to us; and · our ability to access the equity and debt capital markets.
Kukes may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders. 55 Table of Contents Risks Relating to Government Regulations Changes in the legal and regulatory environment governing the oil and natural gas industry, particularly changes in the current Colorado forced pooling system and drilling operation set-back rules, salt water disposal permitting regulations in New Mexico or Wyoming, and new federal orders restricting operations on federal lands, could have a material adverse effect on our business.
Risks Relating to Government Regulations Changes in the legal and regulatory environment governing the oil and natural gas industry, particularly changes in the current Colorado forced pooling system and drilling operation set-back rules, salt water disposal permitting regulations in New Mexico or Wyoming, and new federal orders restricting operations on federal lands, could have a material adverse effect on our business.
Kukes, our Chief Executive Officer and member of the board of directors, through his individual ownership of the Company and through his position as trustee and beneficiary of The SGK 2018 Revocable Trust, which beneficially owns approximately 58% of our issued and outstanding common stock and Dr.
Dr. Simon G. Kukes, our former Chief Executive Officer and newly appointed Executive Chairman of the Company's Board of Directors, through his individual ownership of the Company and through his position as trustee and beneficiary of The SGK 2018 Revocable Trust, which beneficially owns approximately 56.7% of our issued and outstanding common stock and Dr.
Our ability to drill and develop these locations depends on a number of factors, including the availability of equipment and capital, approval by regulators, seasonal conditions, oil and natural gas prices, assessment of risks, costs and drilling results.
Our management team has identified and scheduled drilling locations in our operating areas over a multi-year period. Our ability to drill and develop these locations depends on a number of factors, including the availability of equipment and capital, approval by regulators, seasonal conditions, oil and natural gas prices, assessment of risks, costs and drilling results.
Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “ controlled company ” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that: ● a majority of the Board of Directors consist of independent directors (or 50% in the case of a smaller reporting company such as the Company); ● the board maintain a nominations committee with prescribed duties and a written charter; and ● the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “ controlled company ” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that: ● a majority of the Board of Directors consist of independent directors (or 50% in the case of a smaller reporting company such as the Company); ● the board maintain a nominations committee with prescribed duties and a written charter; and ● the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors. 59 Table of Contents As a “ controlled company, ” we may elect to rely on some or all of these exemptions, provided that we have to date not taken advantage of any of these exemptions and do not currently intend to take advantage of any of these exemptions moving forward.
On November 9, 2023, in accordance with the sale of our wholly-owned subsidiary EOR to Tilloo Exploration, the Company entered into a five-year secured promissory note (the “ Note ”) with Tilloo Exploration, bearing interest at 10% per annum, with no payments due during the first twelve months, and fully-amortized payments due monthly over the remaining four years of the term thereafter until maturity.
On November 9, 2023, pursuant to the terms of the Milnesand Sale, the Company entered into a five-year secured promissory note (the “ Note ”) with Tilloo, bearing interest at 10% per annum, with no payments due until January 8, 2025, and fully-amortized payments due monthly over the remaining four years of the term thereafter until maturity.
Risks Related to Management, Employees and Directors Potential conflicts of interest could arise for certain members of our management team that hold management positions with other entities and our largest stockholder. Dr. Simon G. Kukes, our Chief Executive Officer and member of our board of directors, J. Douglas Schick, our President, and Clark R.
Risks Related to Management, Employees and Directors Potential conflicts of interest could arise for certain members of our management team that hold management positions with other entities and our largest stockholder. Dr. Simon G. Kukes, our former CEO and newly appointed Executive Chairman of the Company's Board of Directors, J.
Our oil and natural gas reserves are estimated and may not reflect the actual volumes of oil and natural gas we will receive, and significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
If we choose to farm-out interests in our prospects, we may lose operating control over such prospects. 46 Table of Contents Our oil and natural gas reserves are estimated and may not reflect the actual volumes of oil and natural gas we will receive, and significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
Schick, or any of our other key personnel resign or become unable to continue in their present roles and if they are not adequately replaced, our business operations could be adversely affected. We have no employment or similar agreement in place with Dr. Kukes. Mr.
Schick could be quickly replaced with personnel of equal experience and capabilities, and their successor(s) may not be as effective. If Dr. Kukes, Mr. Schick, or any of our other key personnel resign or become unable to continue in their present roles and if they are not adequately replaced, our business operations could be adversely affected.
Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.
Prior write-offs have adversely affected our balance sheet and results of operations and any future significant write-offs would similarly adversely affect our balance sheet and results of operations. 45 Table of Contents Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.
Similarly, increased demand for low-carbon or renewable energy sources from consumers could reduce the demand for, and the price of, the products we produce.
Similarly, increased demand for low-carbon or renewable energy sources from consumers could reduce the demand for, and the price of, the products we produce. Technological changes, such as developments in renewable energy and low-carbon transportation, could also adversely affect demand for our products.
In the future, we may have difficulty acquiring new properties. During periods of low oil and/or natural gas prices, it will become more difficult to raise the capital necessary to finance expansion activities. If we are unable to replace our production, our reserves will decrease, and our business, financial condition and results of operations would be adversely affected.
In the future, we may have difficulty acquiring new properties. During periods of low oil and/or natural gas prices, it will become more difficult to raise the capital necessary to finance expansion activities.
SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking. This requirement has limited and may continue to limit our ability to book additional PUDs as we pursue our drilling program.
SEC rules could limit our ability to book additional proved undeveloped reserves (“ PUDs ”) in the future. SEC rules require that, subject to limited exceptions, PUDs may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.
In the case of a farmout party, we would have to find a new farmout party or obtain alternative funding in order to complete the exploration and development of the prospects subject to a farmout agreement. In the case of a working interest owner, we could be required to pay the working interest owner’s share of the project costs.
Our working interest co-owners may be unwilling or unable to pay their share of the costs of projects as they become due. In the case of a farmout party, we would have to find a new farmout party or obtain alternative funding in order to complete the exploration and development of the prospects subject to a farmout agreement.
The moratorium does not affect the Company, as the Company has no plans to drill new wells on any leases held on federal lands; however, if such prior moratorium was to become permanent, or the federal government in the future were to grant less permits on federal lands, make such permitting process more difficult, costly, or to institute more stringent rules relating to such permitting process, it could have a material adverse effect on the value of the Company’s leases and/or its ability to undertake oil and gas operations on such the portion of its leases on federal lands. 57 Table of Contents SEC rules could limit our ability to book additional proved undeveloped reserves (“ PUDs ”) in the future.
If such prior moratorium was to become permanent, or the federal government in the future were to grant less permits on federal lands, make such permitting process more difficult, costly, or to institute more stringent rules relating to such permitting process, it could have a material adverse effect on the value of the Company’s leases and/or its ability to undertake oil and gas operations on such the portion of its leases on federal lands.
There are numerous operational hazards inherent in oil and natural gas exploration, development, production and gathering, including: ● unusual or unexpected geologic formations; ● natural disasters; ● adverse weather conditions; ● unanticipated pressures; ● loss of drilling fluid circulation; ● blowouts where oil or natural gas flows uncontrolled at a wellhead; ● cratering or collapse of the formation; ● pipe or cement leaks, failures or casing collapses; ● fires or explosions; ● releases of hazardous substances or other waste materials that cause environmental damage; ● pressures or irregularities in formations; and ● equipment failures or accidents.
There are numerous operational hazards inherent in oil and natural gas exploration, development, production and gathering, including: · unusual or unexpected geologic formations; · natural disasters; · adverse weather conditions; · unanticipated pressures; · loss of drilling fluid circulation; · blowouts where oil or natural gas flows uncontrolled at a wellhead; · cratering or collapse of the formation; · pipe or cement leaks, failures or casing collapses; · fires or explosions; · releases of hazardous substances or other waste materials that cause environmental damage; · pressures or irregularities in formations; and · equipment failures or accidents. 47 Table of Contents In addition, there is an inherent risk of incurring significant environmental costs and liabilities in the performance of our operations, some of which may be material, due to our handling of petroleum hydrocarbons and wastes, our emissions to air and water, the underground injection or other disposal of our wastes, the use of hydraulic fracturing fluids and historical industry operations and waste disposal practices.
Our results of operations have been, and in the future may be, materially adversely affected by the conditions of the global economies and the credit, commodities and stock markets. Among other things, in 2020 we were adversely impacted, and may be adversely impacted in the future, due to a global reduction in consumer demand for oil and gas.
Among other things, in 2020 we were adversely impacted, and may be adversely impacted in the future, due to a global reduction in consumer demand for oil and gas.
The Note contains customary events of default and is secured by a lien over all the assets and capital shares of EOR created under a Security Agreement, a Security Agreement (Pledge of Corporate Securities), and a Mortgage entered into by and between the Company and Tilloo Exploration. Tilloo Exploration may not timely pay the Note when due, if at all.
The Note contains customary events of default and is secured by a lien over all the assets and capital shares of EOR Operating Company (“ EOR ”), our prior wholly-owned subsidiary which was sold to Tilloo, created under a Security Agreement, a Security Agreement (Pledge of Corporate Securities), and a Mortgage entered into by and between the Company and Tilloo.
We derive and will derive in the future, substantially all of our revenues from the sale of our oil and natural gas to unaffiliated third-party purchasers, independent marketing companies and mid-stream companies. Any delays in payments from our purchasers caused by financial problems encountered by them will have an immediate negative effect on our results of operations.
We derive and will derive in the future, substantially all of our revenues from the sale of our oil and natural gas to unaffiliated third-party purchasers, independent marketing companies and mid-stream companies.
There are many assumptions related to the projection of the revenues of future acquisitions including, but not limited to, drilling success, oil and natural gas prices, production decline curves and other data. If revenues from future acquisitions do not meet projections, this could adversely affect our business and financial condition.
We may not be able to produce the projected revenues related to future acquisitions. There are many assumptions related to the projection of the revenues of future acquisitions including, but not limited to, drilling success, oil and natural gas prices, production decline curves and other data.
If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we will suffer a financial loss which could adversely affect our business, financial condition and results of operations.
If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we will suffer a financial loss which could adversely affect our business, financial condition and results of operations. 49 Table of Contents Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.
The success and timing of our drilling and development activities on properties operated by others therefore depends upon a number of factors, including: ● timing and amount of capital expenditures; ● the operator’s expertise and financial resources; ● the rate of production of reserves, if any; ● approval of other participants in drilling wells; and ● selection of technology. 47 Table of Contents The marketability of our production is dependent upon oil and natural gas gathering and transportation and storage facilities owned and operated by third parties, and the unavailability of satisfactory oil and natural gas transportation arrangements have had a material adverse effect on our revenue in the past and may again in the future.
The success and timing of our drilling and development activities on properties operated by others therefore depends upon a number of factors, including: · timing and amount of capital expenditures; · the operator’s expertise and financial resources; · the rate of production of reserves, if any; · approval of other participants in drilling wells; and · selection of technology.
We anticipate that the Bill may make it more difficult and more costly for us to undertake oil and gas development activities in Colorado.
We anticipate that the Bill may make it more difficult and more costly for us to undertake oil and gas development activities in Colorado, although the Company has not experienced any significant additional difficulties or costs to date as a result of the Bill.
We depend significantly upon the continued involvement of our present management. We depend to a significant degree upon the involvement of our management, specifically, our Chief Executive Officer, Dr. Simon G. Kukes and our President, Mr. J. Douglas Schick. Our performance and success are dependent to a large extent on the efforts and continued employment of Dr. Kukes and Mr.
Kukes and our President and newly appointed Chief Executive Officer and a member of the board, Mr. J. Douglas Schick. Our performance and success are dependent to a large extent on the efforts and continued employment of Dr. Kukes and Mr. Schick. We do not believe that Dr. Kukes or Mr.
If the amounts outstanding under such indebtedness were to be accelerated, or were the subject of foreclosure actions, our assets may not be sufficient to repay in full the money owed to the lenders or to our other debt holders.
If amounts outstanding under such RBL or future debt facilities were to be accelerated, our assets might not be sufficient to repay in full that indebtedness and our other indebtedness.
Furthermore, our decision to acquire properties that are substantially different in operating or geologic characteristics or geographic locations from areas with which our staff is familiar may impact our productivity in such areas. 45 Table of Contents We may not be able to produce the projected revenues related to future acquisitions.
If we were to proceed with one or more acquisitions involving the issuance of our common stock, our stockholders would suffer dilution of their interests. Furthermore, our decision to acquire properties that are substantially different in operating or geologic characteristics or geographic locations from areas with which our staff is familiar may impact our productivity in such areas.
The analogies we draw from available data from other wells, more fully explored locations or producing fields may not be applicable to our drilling locations. If our actual drilling and development costs are significantly more than our estimated costs, we may not be able to continue our operations as proposed and could be forced to modify our drilling plans accordingly.
The analogies we draw from available data from other wells, more fully explored locations or producing fields may not be applicable to our drilling locations.
We believe these positions require only an immaterial amount of each officer’s time and will not conflict with their roles or responsibilities with our company.
Kukes is the trustee and beneficiary of The SGK 2018 Revocable Trust, the Company’s largest stockholder. Dr. Kukes also beneficially owns 65.4% of our voting securities. We believe these positions require only an immaterial amount of each officer’s time and will not conflict with their roles or responsibilities with our company.
New or amended environmental legislation or regulatory initiatives could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us. The environmental laws and regulations to which we are subject change frequently, often to become more burdensome and/or to increase the risk that we will be subject to significant liabilities.
The environmental laws and regulations to which we are subject change frequently, often to become more burdensome and/or to increase the risk that we will be subject to significant liabilities.
Moreover, we may be required to write down our PUDs if we do not drill or plan on delaying those wells within the required five-year timeframe. Proposed changes to U.S. tax laws, if adopted, could have an adverse effect on our business, financial condition, results of operations, and cash flows.
Proposed changes to U.S. tax laws, if adopted, could have an adverse effect on our business, financial condition, results of operations, and cash flows.
It is possible that future ballot initiatives will be proposed that could limit the areas of the state in which drilling would be permitted to occur or otherwise impose increased regulations on our industry.
It is possible that future ballot initiatives will be proposed that could limit the areas of the state in which drilling would be permitted to occur or otherwise impose increased regulations on our industry. 61 Table of Contents The Federal Government previously instituted a moratorium on new oil and gas leases and permits on federal onshore and offshore lands, which may have a material adverse effect on the Company and its results of operations.
Our strategy includes acquisitions of oil and natural gas properties, and our failure to identify or complete future acquisitions successfully, or not produce projected revenues associated with the future acquisitions could reduce our earnings and hamper our growth. We may be unable to identify properties for acquisition or to make acquisitions on terms that we consider economically acceptable.
If we are unable to replace our production, our reserves will decrease, and our business, financial condition and results of operations would be adversely affected. 48 Table of Contents Our strategy includes acquisitions of oil and natural gas properties, and our failure to identify or complete future acquisitions successfully, or not produce projected revenues associated with the future acquisitions could reduce our earnings and hamper our growth.
Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist our business, results of operations and cash flows could be materially and adversely affected.
Any of the foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business, both of which could harm our business and financial results. Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Board will also be provided updates on any material incidents relating to information systems security and cybersecurity incidents.
Biggest changeThe Board will also be provided updates on any material incidents relating to information systems security and cybersecurity incidents. As of and for the year ended December 31, 2024, there have been no cybersecurity incidents that have materially affected the Company’s business strategy, results of operations, or financial condition.
To defend, detect and respond to cybersecurity incidents, we, among other things, implemented (i) multi-factor authentication and password protection requirements for accessing all Company systems and applications such as Company electronic mail and the Company’s banking and accounting environments, (ii) a secure email gateway using GoSecure that combines machine learning, behavioral scanning, exploit detection, signature-based detection and structure heuristics to provide defense against phishing and business electronic mail compromise attacks, spam, polymorphic malware, theft and other dangerous offensive content, (iii) endpoint protection using Microsoft Defender on Company and employee computers and Company-provided devices, (iii) a physical networking room with restricted access to only authorized personnel, (iv) regular cybersecurity training, awareness, and threat updates programs to keep all Company personnel updated and informed regarding emerging threats and best practices, and (v) daily cloud backups of the Company’s accounting environment. 68 Table of Contents Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.
To defend, detect and respond to cybersecurity incidents, we, among other things, implemented (i) multi-factor authentication and password protection requirements for accessing all Company systems and applications such as Company electronic mail and the Company’s banking and accounting environments, (ii) a secure email gateway using GoSecure that combines machine learning, behavioral scanning, exploit detection, signature-based detection and structure heuristics to provide defense against phishing and business electronic mail compromise attacks, spam, polymorphic malware, theft and other dangerous offensive content, (iii) endpoint protection using Microsoft Defender on Company and employee computers and Company-provided devices, (iii) a physical networking room with restricted access to only authorized personnel, (iv) regular cybersecurity training, awareness, and threat updates programs to keep all Company personnel updated and informed regarding emerging threats and best practices, and (v) daily cloud backups of the Company’s accounting environment. 73 Table of Contents Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Failure of our information technology systems, including cybersecurity attacks or other data security incidents, could significantly disrupt the operation of our business.” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “ Failure of our information technology systems, including cybersecurity attacks or other data security incidents, could significantly disrupt the operation of our business .” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
Added
Although we have designed our cybersecurity program and governance procedures discussed above to mitigate cybersecurity risks, we may in the future experience cybersecurity risks, threats and attacks.
Added
To date, no risks, threats or attacks have had a material impact on our operations, business strategy or financial results, but we cannot provide assurance that they will not have a material impact on us in the future. See the section entitled “Risk Factors” included elsewhere in this Annual Report for further information.
Added
We continuously work to enhance our cybersecurity risk management program. ITEM 2. PROPERTIES. The information regarding the Company’s oil and gas properties as required by Item 102 of Regulation S-K is included in “ Item 1. Business ”, above and incorporated in this Item 2 by reference.
Added
Additional information regarding our oil and gas properties can be found in “ Part II ” - “ Item 8 Financial Statements and Supplementary Data ” – “ Supplemental Oil and Gas Disclosures (Unaudited) ”.
Added
Office Leases The Company had a lease for its corporate offices in Houston, Texas on approximately 5,200 square feet of office space that expired on August 31, 2023 and had a base monthly rent of approximately $10,000.
Added
In December 2022, the Company entered into a lease agreement for its existing office space that commenced on September 1, 2023, and expires on February 28, 2027. The base monthly rent is approximately $9,200 for the first 18 months and increases to approximately $9,500 thereafter. The Company paid both a security deposit and prepaid rent for $14,700, respectively.
Added
For the years ended December 31, 2024 and 2023, the Company incurred lease expense of $110,000, for the lease. The Company believes its existing leased office space is suitable for the conduct of its business. We believe that this arrangement is suitable for the conduct of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently involved in any legal proceedings that we believe could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
Biggest changeWe are not currently involved in any legal proceedings that we believe could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 74 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket Information Since September 10, 2013, the Company’s shares of common stock have traded on the NYSE American under the ticker symbol “ PED. ” Stockholders As of March 15, 2024, there were 89,355,267 shares of our common stock issued and outstanding held by approximately 643 holders of record of our common stock, not including any persons who hold their stock in “ street name ”.
Biggest changeMarket Information Since September 10, 2013, the Company’s shares of common stock have traded on the NYSE American under the ticker symbol “ PED. ” Stockholders As of March 28, 2025, there were 91,339,385 shares of our common stock issued and outstanding held by approximately 614 holders of record of our common stock, not including any persons who hold their stock in “ street name ”.
As of December 31, 2023, and 2022, there were no shares of the Company’s Series A Convertible Preferred Stock outstanding, respectively, and there are no outstanding shares of preferred stock as of the date of this filing. Stock Transfer Agent Our stock transfer agent is Equiniti Trust Company, LLC located at 48 Wall Street, Floor 23 New York, NY 10005.
As of December 31, 2024, and 2023, there were no shares of the Company’s Series A Convertible Preferred Stock outstanding, respectively, and there are no outstanding shares of preferred stock as of the date of this filing. Stock Transfer Agent Our stock transfer agent is Equiniti Trust Company, LLC located at 48 Wall Street, Floor 23 New York, NY 10005.
Recent Sales of Unregistered Securities There have been no sales of unregistered securities during the quarter ended December 31, 2023 and from the period from January 1, 2024 to the filing date of this report, which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Recent Sales of Unregistered Securities There have been no sales of unregistered securities during the quarter ended December 31, 2024 and from the period from January 1, 2025 to the filing date of this report, which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Preferred Stock At December 31, 2023, and as of the date of this filing, the Company was authorized to issue 100,000,000 shares of preferred stock with a par value of $0.001 per share, of which 25,000,000 shares have been designated “Series A Convertible Preferred Stock”.
Preferred Stock At December 31, 2024, and as of the date of this filing, the Company was authorized to issue 100,000,000 shares of preferred stock with a par value of $0.001 per share, of which 25,000,000 shares have been designated “Series A Convertible Preferred Stock”.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur net income for the period also decreased by $2.6 million when compared to the prior period, additional decreases were primarily from a $0.3 million decrease in depreciation, depletion, amortization and accretion (due to increased sales production and a reduction in accretion expense from our sale of our wholly owned EOR subsidiary), and by a $5.7 million net increase to our other components of working capital in the current period (due to increased drilling and completion activity).
Biggest changeNet cash provided by operating activities decreased by $10.7 million for the current year’s period, when compared to the prior year’s period, primarily due to our net income for the current period increasing by $5.6 million and from a $4.2 million increase in depreciation, depletion, amortization and accretion (primarily due to increased sales production, noted above), offset by a $4.2 million net loss on sale of oil and gas properties (primarily from a $4.3 million loss on the sale of our EOR Operating Company subsidiary and its corresponding assets in the prior period) and by a $16.3 million net decrease to our other components of working capital in the current period (due to increased cash payments and decreased payables and expenses outstanding from our drilling and completion activity) when comparing periods. 81 Table of Contents Cash used in investing activities.
For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned.
For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise, the related well costs are expensed as dry holes.
Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues. Stock-Based Compensation.
Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues. 83 Table of Contents Stock-Based Compensation.
Costs specific to developmental wells for which drilling is in progress or uncompleted are capitalized as wells in progress and not subject to amortization until completion and production commences, at which time amortization on the basis of production will begin. Revenue Recognition. The Company’s revenue is comprised entirely of revenue from exploration and production activities.
Costs specific to developmental wells for which drilling is in progress or uncompleted are capitalized as wells in progress and not subject to amortization until completion and production commences, at which time amortization on the basis of production will begin. Asset Retirement Obligations.
The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDA (in thousands): 76 Table of Contents Years Ended December 31, 2023 2022 Net income (loss) $ 264 $ 2,844 Add (deduct) Depreciation, depletion, amortization and accretion 10,875 11,153 EBITDA 11,139 13,997 Add (deduct) Share-based compensation 2,043 2,097 Loss on sale of oil and gas properties 4,268 - Adjusted EBITDA $ 17,450 $ 16,094 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDA (in thousands): Years Ended December 31, 2023 2024 (As Restated) Net income $ 17,789 $ 1,699 Add (deduct) Income tax benefit (12,751 ) - Depreciation, depletion, amortization and accretion 15,920 9,440 EBITDA 20,958 11,139 Add (deduct) Share-based compensation 1,859 2,043 Loss on sale of oil and gas properties, net 76 4,268 Gain on sale of fixed assets (12 ) - Adjusted EBITDA $ 22,881 $ 17,450 82 Table of Contents Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Cash Flows (in thousands) Year Ended December 31, 2023 2022 Cash flows provided by operating activities $ 23,481 $ 15,981 Cash flows used in investing activities (35,743 ) (12,266 ) Cash flows provided by financing activities - 35 Net (decrease) increase in cash and restricted cash $ (12,262 ) $ 3,750 Cash provided by operating activities.
Cash Flows (in thousands) Year Ended December 31, 2024 2023 Cash flows provided by operating activities $ 12,766 $ 23,481 Cash flows used in investing activities (26,874 ) (35,743 ) Cash flows provided by financing activities - - Net decrease in cash and restricted cash $ (14,108 ) $ (12,262 ) Cash provided by operating activities.
Cash used in investing activities. Net cash used in investing activities increased by $23.5 million for the current year’s period, when compared to the prior year’s period, primarily due to increased capital spending relating to our drilling and completion activities. Cash provided by financing activities.
Net cash used in investing activities decreased by $8.9 million for the current year’s period, when compared to the prior year’s period, primarily due to decreased cash outlays from our capital spending relating to our drilling and completion activities. Cash financing activities. There were no cash flow financing activities in the current or prior period.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.
EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.
This standard established the current expected credit loss model, a new impairment model for certain financial instruments, based on expected rather than incurred losses. Adoption of this standard is on a modified retrospective basis and had no impact on the Company’s financial position, results of operations, cash flows or net income per share.
Adoption of this standard is on a modified retrospective basis and had no impact on the Company’s financial position, results of operations, cash flows or net income per share. Recently Issued Accounting Pronouncements .
Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed.
The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed.
We have opted to use the simplified method for estimating expected term, which is equal to the midpoint between the vesting period and the contractual term. Recently Adopted Accounting Pronouncements. On January 1, 2023, we adopted Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments , as issued by the FASB.
We have opted to use the simplified method for estimating expected term, which is equal to the midpoint between the vesting period and the contractual term. Recently Adopted Accounting Pronouncements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).
The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.
Accretion expense is included in DD&A expense in the Consolidated Statement of Operations. Revenue Recognition. The Company’s revenue is comprised entirely of revenue from exploration and production activities. The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers.
Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field-by-field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves.
Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves.
“EBITDA” represents net income before interest, taxes, depreciation and amortization. “Adjusted EBITDA” represents EBITDA, less share-based compensation and loss on sale of oil and gas properties. Adjusted EBITDA excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated.
Adjusted EBITDA excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period.
Otherwise, the related well costs are expensed as dry holes. 77 Table of Contents Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above.
Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above. Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field-by-field basis using the unit of production method.
Simon G, Kukes, our Chief Executive Officer and director, which funding Dr. Kukes under no obligation to provide, and (iv) funding through credit or loan facilities. In addition, we may seek additional funding through asset sales, farm-out arrangements, and credit facilities to fund potential acquisitions during the remainder of 2024.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing ” (under which we have sold no shares to date), and (vi) funding through other credit or loan facilities. In addition, we may seek additional funding through asset sales, farm-out arrangements, and partnerships to fund potential acquisitions during the remainder of 2025.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Annual Report.
Added
“EBITDA” represents net income before interest, taxes, depreciation and amortization. “Adjusted EBITDA” represents EBITDA, less share-based compensation, loss on sale of oil and gas properties, net, and gain on sale of fixed assets.
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The following discussion contains “ forward-looking statements ” that reflect our future plans, estimates, beliefs and expected performance. We caution you that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material.
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The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset.
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See “ Risk Factors ” and “ Forward-Looking Statements . ” Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows.
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Asset retirement costs for oil and gas properties are depreciated using the unit-of-production method, while asset retirement costs for other assets are depreciated using the straight-line method over estimated useful lives. Additional retirement obligations increase the liability associated with new oil and gas wells and other facilities as these obligations are incurred.
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Our MD&A is organized as follows: ● Overview . Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of our MD&A. ● Results of Operations . An analysis of our financial results comparing the years ended December 31, 2023 and 2022. ● Liquidity and Capital Resources .
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NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery. Contracts with customers have varying terms, including month-to-month contracts, and contracts with a finite term.
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An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition. ● Critical Accounting Policies and Estimates . Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
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The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
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Overview We are an oil and gas company focused on the acquisition and development of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied.
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In particular, we focus on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies.
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Our current properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico and in the Denver-Julesberg Basin in Colorado and Wyoming.
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As of December 31, 2023, we held approximately 22,721 net Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through our wholly-owned subsidiary, PEDCO, and which are operated by our wholly-owned operating subsidiary, RAZO, which asset we refer to as our “ Permian Basin Asset .” Also as of December 31, 2023, we held approximately 14,282 net D-J Basin acres located in Weld and Morgan Counties, Colorado, and 4,931 net D-J Basin acres located in Laramie County, Wyoming, through our wholly-owned subsidiary, PRH, and which are operated by our wholly-owned operating subsidiary, Red Hawk, which asset we refer to as our “ D-J Basin Asset .” As of December 31, 2023, we held interests in 300 gross and net wells in our Permian Basin Asset, of which 25 are active producers, two are active injectors and two are active salt water disposal wells, all of which are held by PEDCO and operated by RAZO, and interests in 98 gross (24.6 net) wells in our D-J Basin Asset held by PRH, all of which 18 gross (16.2 net) wells are operated by Red Hawk and currently producing, 63 gross (8.4 net) wells are non-operated, and 17 wells have an after-payout interest.
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Detailed information about our business plans and operations, including our core D-J Basin and Permian Basin Assets, is contained under “ Part 1 ” — “ Item 1. Business ” above.
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How We Conduct Our Business and Evaluate Our Operations Our use of capital for acquisitions and development allows us to direct our capital resources to what we believe to be the most attractive opportunities as market conditions evolve. We have historically acquired properties that we believe have significant appreciation potential.
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We intend to continue to acquire both operated and non-operated properties to the extent we believe they meet our return objectives. 71 Table of Contents We will use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including: · production volumes; · realized prices on the sale of oil and natural gas; · oil and natural gas production and operating expenses; · capital expenditures; · general and administrative expenses; · net cash provided by operating activities; and · net income.
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Reserves Our estimated net proved crude oil and natural gas reserves at December 31, 2023 and 2022 were approximately 17.0 MMBoe and 16.1 MMBoe, respectively. The 0.9 MMBoe increase was primarily due to the addition of proved undeveloped reserves in our D-J Basin Asset as a result of increased activity around our acreage and favorable pricing.
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Using the average monthly crude oil price of $78.22 per Bbl and natural gas price of $2.64 per thousand cubic feet (“ Mcf ”) for the twelve months ended December 31, 2023, our estimated discounted future net cash flow (“ PV-10 ”) for our proved reserves was approximately $231.7 million, of which approximately $149.0 million are proved undeveloped reserves.
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Total reserve value at December 31, 2023, represents a decrease of approximately $142.8 million or 38% from approximately $374.5 million a year earlier using the same SEC pricing and reserves methodology.
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The decrease is primarily attributable to commodity pricing, as the average pricing for 2023, noted above, was significantly lower than the 2022 average pricing of $93.67 per Bbl for crude oil and $6.36 per Mcf for natural gas.
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The reserves as of December 31, 2023 were determined in accordance with standard industry practices and SEC regulations by the licensed independent petroleum engineering firm of Cawley, Gillespie & Associates, Inc. A large portion of the proved undeveloped crude oil reserves are associated with our Permian Basin Asset.
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Although these hydrocarbon quantities have been determined in accordance with industry standards, they are prepared using the subjective judgments of the independent engineers and may actually be more or less.
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Oil and Natural Gas Sales Volumes During the year ended December 31, 2023, our net crude oil, natural gas, and NGLs sales volumes increased to 520,886 Bbls, or 1,427 Bopd, from 364,771 Bbls, or 999 Bopd, a 43% increase over the previous fiscal year.
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The increase in production volume is related to the positive performance from our participation in 14 non-operated wells in the D-J Basin Asset (six of which began producing in late 2022 and eight of which began producing in the first quarter of 2023), combined with maintaining relatively flat production declines from the existing operated Permian Basin and D-J Basin Assets (see additional detail below).
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Significant Capital Expenditures The table below sets out the significant components of capital expenditures for the year ended December 31, 2023 (in thousands): Capital Expenditures Leasehold Acquisitions $ 5,211 Mineral Acquisitions 493 Drilling and Facilities 21,573 Total* $ 27,277 *see “ Item 8.
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Financial Statements and Supplementary Data ” - “ Note 6 - Oil and Gas Properties ”. 72 Table of Contents Market Conditions and Commodity Prices Our financial results depend on many factors, particularly the price of crude oil and natural gas and our ability to market our production on economically attractive terms.
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Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by weather conditions, inventory storage levels, basis differentials and other factors.
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As a result, we cannot accurately predict future commodity prices and, therefore, we cannot determine with any degree of certainty what effect increases or decreases in these prices will have on our production volumes or revenues.
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In addition to production volumes and commodity prices, finding and developing sufficient amounts of crude oil and natural gas reserves at economical costs are critical to our long-term success. We expect prices to remain volatile for the remainder of the year.
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For information about the impact of realized commodity prices on our crude oil and natural gas and condensate revenues, refer to “ Results of Operations ” below.
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Results of Operations The following discussion and analysis of the results of operations for each of the two fiscal years in the years ended December 31, 2023 and 2022 should be read in conjunction with the consolidated financial statements of PEDEVCO Corp. and notes thereto included herein (see “ Item 8. Financial Statements and Supplementary Data ”).
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Net Income We reported net income for the year ended December 31, 2023 of $0.3 million, or $0.00 per share, compared to net income for the year ended December 31, 2022 of $2.8 million or $0.03 per share.
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The decrease in net income of $2.5 million was primarily due to a $4.3 million loss on the sale of our EOR subsidiary, offset by a $0.8 million increase in revenue and by a decrease of $0.7 million in total operating expenses in the current period, offset further by a $0.3 million increase in other income (all of which are discussed in more detail below).
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Net Revenues The following table sets forth the revenue and production data for the years ended December 31, 2023 and 2022: 2023 2022 Increase (Decrease) Increase (Decrease) Sale Volumes: Crude Oil (Bbls) 382,794 304,507 78,287 26 % Natural Gas (Mcf) 479,533 245,923 233,610 95 % NGL (Bbls) 58,170 19,277 38,893 202 % Total (Boe) (1) 520,886 364,771 156,115 43 % Crude Oil (Bbls per day) 1,049 834 215 26 % Natural Gas (Mcf per day) 1,314 674 640 95 % NGL (Bbls per day) 159 53 106 200 % Total (Boe per day) (1) 1,427 999 428 43 % Average Sale Price: Crude Oil ($/Bbl) $ 72.95 $ 90.86 $ (17.91 ) (20%) Natural Gas($/Mcf) 3.00 6.41 (3.41 ) (53%) NGL ($/Bbl) 24.43 40.87 (16.44 ) (40%) Net Operating Revenues (In thousands): Crude Oil $ 27,925 $ 27,669 $ 256 1 % Natural Gas 1,438 1,577 (139 ) (9%) NGL 1,421 788 633 80 % Total Revenues $ 30,784 $ 30,034 $ 750 2 % (1) Assumes 6 Mcf of natural gas equivalents to 1 barrel of oil. 73 Table of Contents Total crude oil, natural gas and NGL revenues for the year ended December 31, 2023, increased $0.8 million, or 2%, to $30.8 million, compared to $30.0 million for the same period a year ago.
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Although production increased resulting in a favorable volume variance of $7.4 million, the average sales prices for crude oil, natural gas and NGLs realized by the Company decreased considerably from the year ended December 31, 2022, resulting in an unfavorable price variance of $6.6 million.
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The increase in production volume is related to the positive performance from our participation in 14 non-operated wells in the D-J Basin Asset (six of which began producing in late 2022 and eight of which began producing in the first quarter of 2023), combined with maintaining relatively flat production declines from the existing operated Permian Basin and D-J Basin Assets.
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Net Operating and Other (Income) Expenses The following table sets forth operating and other expenses for the years ended December 31, 2023 and 2022 (in thousands): 2023 2022 Increase (Decrease) % Increase (Decrease) Direct Lease Operating Expense $ 4,679 $ 4,787 $ (108 ) (2%) Workovers 1,460 2,704 (1,244 ) (46%) Other* 3,571 2,912 659 23 % Loss (gain) on settlement of ARO 121 (6 ) 127 2,117 % Lease Operating Expenses $ 9,831 $ 10,397 $ (566 ) (5%) Depreciation, Depletion, Amortization and Accretion 10,875 11,153 (278 ) (2%) General and Administrative (Cash) $ 3,965 $ 3,757 $ 208 6 % Share-Based Compensation (Non-Cash) 2,043 2,097 (54 ) (3%) Total General and Administrative Expense $ 6,008 $ 5,854 $ 154 3 % Loss on Sale of Oil and Gas Properties 4,268 - 4,268 100 % Interest Income $ 422 $ 117 $ 305 261 % Other Income $ 40 $ 97 $ (57 ) (59%) *Includes severance, ad valorem taxes and marketing costs.
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Expense reduction measures to control costs have been implemented on our operated properties in our Permian Basin and D-J Basin Assets, such as operation and lift efficiency improvements, resulting in a reduction in direct operating expenses, offset by a corresponding increase in direct operating expenses from our participation in non-operated wells (noted above) when comparing the current period to the prior period.
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Other expenses have also increased due to production increases, coupled with a loss related to our plugging of 11 wells in our Permian Basin Asset, offset by a corresponding decrease in workovers when comparing the current period to the prior period. Taken together, there was a $0.6 million decrease in overall lease operating expenses when comparing periods.
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The $0.3 million decrease was primarily the result of a $0.5 million decrease in accretion expense from the sale of our wholly owned subsidiary EOR Operating Company and related assets, (noted below) offset by a $0.2 million increase in depletion expense from increased production (noted above) in the current period when compared to the prior period.
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The increase of $0.2 million in general and administrative expenses (excluding share-based compensation) was primarily due to the addition of a new employee, an increase in accrued bonuses, which were subsequently paid in January 2023, and general increases in accounting and professional services when comparing the prior period to the current period. 74 Table of Contents Share-Based Compensation.
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Share-based compensation, which is included in general and administrative expenses in the Statements of Operations, decreased nominally due to the forfeiture of certain employee stock-based options due to certain voluntary employee terminations in the prior period, offset by the issuance of restricted shares of common stock to board members in the current period.
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Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations. Loss on Sale of Oil and Gas Properties. The Company sold its wholly owned subsidiary EOR Operating Company and related assets in November 2023 and recognized the corresponding loss of $4.3 million (see “ Item 8.
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Financial Statements and Supplementary Data ” - “ Note 6 - Oil and Gas Properties ”). Interest Income and Other Expense. Includes interest earned from our interest-bearing cash accounts, for which interest rates have increased significantly in the current period, compared to the prior period.
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Other income in the current period is primarily related to the sale of used pipe while other income in the prior period is primarily related to an $80,000 vendor dispute settlement, coupled with a $24,000 non-refundable two-year rent payment made in September 2022 to the Company for office space leased by SK Energy, which was 100% owned and controlled by Dr.
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Simon G. Kukes, our Chief Executive Officer and director, at the time (which has since been dissolved), offset by a $15,000 royalty adjustment. Liquidity and Capital Resources The primary sources of cash for the Company during the year ended December 31, 2023 were from $30.8 million in sales of crude oil and natural gas.
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The primary uses of cash were funds used for drilling, completion, acquisition and operating costs.
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Working Capital At December 31, 2023, the Company’s total current assets of $24.6 million exceeded its total current liabilities of $18.9 million, resulting in a working capital surplus of $5.7 million, while at December 31, 2022, the Company’s total current assets of $32.1 million exceeded its total current liabilities of $17.0 million, resulting in a working capital surplus of $15.1 million.
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The $9.4 million decrease in our working capital surplus is primarily related to decreases in our cash balance related to capital expenditures from our drilling, as operator, three wells in our Permian Basin Asset and our participation in the drilling and completion of 13 wells in our D-J Basin Asset by a third-party operator (see “ Item 8.
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Financial Statements and Supplementary Data ” - “ Note 6 - Oil and Gas Properties ”) offset by increases in revenue receivables as a result of our oil and gas sales (described above). Financing Our net capital expenditures for 2024 are estimated at the time of this Annual Report to range between $20 million to $30 million.
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This estimate includes a range of $17 million to $27 million for drilling and completion costs on our Permian Basin and D-J Basin Asset and approximately $3 million in estimated capital expenditures for ESP purchases, rod pump conversions, recompletions, well cleanouts, leasing, facilities, remediation and other miscellaneous capital expenses.
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This estimate does not include expenditures for acquisitions or other projects that may arise but are not currently anticipated.
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We periodically review our capital expenditures and adjust our capital forecasts and allocations based on liquidity, drilling results, leasehold acquisition opportunities, partner non-consents, proposals from third party operators, and commodity prices, while prioritizing our financial strength and liquidity (see “ Part I ” – “ Item 1A. Risk Factors ”).
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We plan to continue to evaluate D-J Basin well proposals as received from third party operators and participate in those we deem most economic and prospective.
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If new proposals are received that meet our economic thresholds and require material capital expenditures, we have flexibility to move capital from our Permian Asset to our D-J Basin Asset, or vice versa, as our Permian Asset is 100% operated and held by production (“ HBP ”), allowing for flexibility of timing on development.
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Our 2024 development program is based upon our current outlook for the year and is subject to revision, if and as necessary, to react to market conditions, product pricing, contractor availability, requisite permitting, capital availability, partner non-consents, capital allocation changes between assets, acquisitions, divestitures and other adjustments determined by the Company in the best interest of its shareholders while prioritizing our financial strength and liquidity. 75 Table of Contents We expect that we will have sufficient cash available to meet our needs over the next 12 months after the filing of this report and in the foreseeable future, including to fund our 2024 development program, discussed above, which cash we anticipate being available from (i) projected cash flow from our operations, (ii) existing cash on hand, (iii) equity infusions or loans (which may be convertible) made available from Dr.
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Net cash provided by operating activities increased by $7.5 million for the current year’s period, when compared to the prior year’s period, primarily due to a $4.3 million loss on the sale of our EOR subsidiary and its corresponding assets.
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In the prior period, we sold our common stock via an “at the market offering” (“ ATM Offering ”), raising net proceeds of $141,000 less commissions, legal and audit fees for registrations and placement of the ATM Offering.
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The ATM Offering was made pursuant to the terms of that certain November 17, 2021, Sales Agreement (the “ Sales Agreement ”) with Roth Capital Partners, LLC (“ Roth Capital ”, or the “ Agent ”).
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Pursuant to the Sales Agreement the Company agreed to pay the sales agent a commission of 3.0% of the gross sales price of any shares sold under the Sales Agreement, less reimbursement of the first $40,000 of such gross proceeds.
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The Company also provided the Agent with customary indemnification rights and has agreed to reimburse the sales agent for certain specified expenses up to $25,000.
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Sales under the Sales Agreement were to be made under the Company’s Form S-3 shelf registration statement, which has now expired, and as such, the Company is not currently eligible to sell any additional securities under the Sales Agreement, and, accordingly, was terminated by the Company effective March 15, 2024.
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EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

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