PEDEVCO (PED) Q2 FY26 earnings call: guidance and Q&A

Is the expanded development plan primarily commodity price-driven, or are there other factors influencing this decision?

The expanded development plan is driven more by extensive asset analysis post-merger to prioritize high-return projects and the resolution of BLM litigation in Wyoming, which opened up new development opportunities. Commodity prices are a contributing factor but not the main driver.

“No, it's partially commodity price driven, but really it's more a function of after the merger, we wanted to evaluate and do a deep dive on all of our assets and kind of prioritize what's available for development near term, what the returns are of all of our assets. So we were kind of ranking projects and prioritizing everything based on what's developed, what can be developed over the next six months. So that's kind of how we came up with the development program. It expanded significantly because some of the BLM litigation issues in Wyoming opened up, which brought in a few projects that we didn't have the ability to do earlier in the year. So that's really the reason for the expansion.”

asked by David Storms · answered by John Schick

How does the current balance sheet strength compare to the capital needs of the expanded development program, particularly regarding competing uses of capital?

The company has reduced its debt-to-EBITDA ratio to approximately 1x and resolved working capital deficits post-merger. This strong financial position allows them to fund the enhanced development program for the remainder of the year entirely within cash flow, without compromising balance sheet strength.

“Well, so over the first and second quarter, we've been able to get a debt to EBITDA down to about 1x, which is a level we're comfortable at after the merger, I think we came out at about 1.6x and had some negative working capital associated too. That's all been -- that's all really been paid down and taken into account. So now we're at a place where we can really fund our remaining -- our enhanced development program for the remaining portion of the year within cash flow.”

asked by David Storms · answered by John Schick

What are the biggest hurdles or bottlenecks currently facing the development program, such as permitting or labor constraints?

Bottlenecks vary by basin: permitting is the biggest challenge in the D-J Basin, while in Wyoming (Powder River Basin), it's primarily stipulations (stips) that limit drilling times. The Permian Basin currently presents very few bottlenecks. The resolution of BLM litigation in Wyoming has significantly improved the permitting situation there.

“It really depends on the basin, right? I mean, so in the Colorado D-J Basin, permitting is the biggest bottleneck. In Wyoming, it's really stips and things like that to where you can only drill at certain times of the year. And in the Permian, we don't have really very many bottlenecks at all. So R.T., do you have any further comment on what would be some of the bottlenecks to development?”

asked by David Storms · answered by John Schick

Are the LOE improvements from the optimization program exceeding expectations, leading to its acceleration, or is it to get ahead of demand?

The strong execution and success of the optimization program in Q2 provided the confidence to pull it forward. This allows for earlier realization of LOE savings and aligns well with the planned development program in the second half of the year, creating a 'win-win' scenario rather than delaying proven execution.

“Yes, we've got a great team that's executed really well. We were having great execution success through Q2, and that gave us the confidence to pull some of that forward for the reasons that Doug mentioned as well. We're a lean team that's very effective and very efficient. We're proud of the people that work for us. But we would prefer to knock those out for drilling wells too. So as we knew we had confidence in a development program in the second half of the year, we could pull some of that LOE savings into this year as well, spending a similar amount of dollars across the whole year. So it looks like a win-win to us, not something you delay when you have real confidence in execution. So why spread it out over time when you're having success?”

asked by David Storms · answered by Reagan Dukes