Pedevco Corp Highlights Strong Q1 Amid Hedge Noise

Pedevco Corp ((PED)) has held its Q1 earnings call. Read on for the main highlights of the call.

Pedevco Corp’s latest earnings call painted a largely upbeat picture, with management stressing strong production growth, surging revenue, and sharply higher adjusted EBITDA despite a headline GAAP loss. Executives framed the quarter as evidence that the merged portfolio can generate solid cash flow and balance sheet progress, even as hedges, timing issues, and planned production moderation weigh on near‑term optics.

Strong Production Performance

Q1 production averaged 8,091 BOE per day, fueled by 31 D‑J Basin wells brought online late last year that mostly outperformed type curves. Management emphasized that this high level of output demonstrates the quality of the new asset base and underpins both current cash generation and confidence in future development.

Revenue Surge

Quarterly revenue jumped to $40.2 million from $8.7 million a year earlier, a roughly 360% increase driven primarily by higher volumes. Oil remained the core value driver at about $36.6 million, or approximately 91% of total revenue, underscoring the company’s leverage to liquids pricing.

Material Adjusted EBITDA Improvement

Adjusted EBITDA soared to $21.5 million versus $4.3 million in the prior‑year quarter, a 404% increase reflecting significantly improved operations. Management highlighted this metric as a better indicator of underlying performance than GAAP earnings, given large noncash derivative adjustments.

Working Capital and Balance Sheet Progress

The company’s working capital deficit, excluding derivatives, narrowed to $7.0 million from $34.1 million at year‑end, marking a $27.1 million improvement. Net debt stood at roughly $87 million, about $11 million below the $98 million of funded debt, supporting the narrative of gradual balance sheet strengthening.

Clear Full-Year Guidance and Capital Discipline

Executives reaffirmed full‑year 2026 guidance of 6,500 to 7,000 BOE per day and $60 million to $70 million of adjusted EBITDA on $16 million to $20 million of net capex. They stressed strict capital discipline and return thresholds, signaling that new projects must compete for limited dollars and align with deleveraging and efficiency goals.

Operational Optimization Program

A 2026 optimization program of $10 million to $13 million is underway, focused on pump conversions and targeted well interventions. The initiative aims to cut lease operating expense by up to roughly $1 million per month, with most benefits expected to show up in 2027 and beyond rather than in the current year.

Large Inventory and Multi-Basin Footprint

Pedevco highlighted its roughly 202,000 net acres in the Powder River Basin and more than 200,000 net acres of early‑stage inventory overall, plus about 14,505 net acres in the Permian. Management framed this multi‑basin position as a long‑term growth option set, giving the company flexibility to scale drilling if commodity prices remain supportive.

Cash Flow from Operations and Capital Activity

Net cash provided by operating activities reached $10.5 million in the quarter, reflecting stronger margins on higher volumes. Cash spending on drilling and completion totaled $16.5 million, including about $3.0 million carried over from 2025, illustrating a still‑active development program despite an emphasis on discipline.

Net Reported Loss Driven by Derivative Mark-to-Market

Pedevco reported a GAAP net loss of $25.6 million, largely due to a $31.3 million net loss on derivative contracts. Of that, $27.9 million was a noncash unrealized mark‑to‑market loss tied to commodity prices moving above hedge levels, highlighting how accounting volatility can obscure operating gains.

Realized Hedging Losses and Hedge Positioning

Realized losses on settled derivatives were $3.4 million during the quarter, trimming some benefit from strong oil prices. Management noted that credit facility terms require substantial hedging, historically around 75% and currently in the high‑60s percent range, which protects downside but caps some upside exposure.

Front-Loaded Production with Near-Term Decline

Executives cautioned that Q1 represented a high production watermark, and volumes are expected to ease in coming quarters as the new D‑J wells follow normal decline curves. As a result, the full‑year average production target of 6,500 to 7,000 BOE per day sits below the Q1 run‑rate of 8,091 BOE per day.

Constrained Near-Term Liquidity

Total cash and restricted cash at quarter end was $11.3 million, while $98 million was drawn on the revolving credit facility against a $120 million borrowing base, leaving about $22 million in availability. Management cited total liquidity of roughly $33 million, acknowledging that near‑term flexibility is limited and must be carefully managed.

Noncash Impairment and Elevated DD&A

The company recorded a $1.6 million noncash impairment on expired D‑J acreage, a modest charge relative to its expanding footprint. Depletion, depreciation and amortization climbed to $12.5 million, reflecting higher production from the enlarged asset base, which investors should expect to track volumes going forward.

Short-Term Cash Timing and Payable Settlements

Working capital improvement was driven in part by settling development and merger‑related payables, producing a roughly $10.7 million use of cash from working capital in the quarter. To meet these obligations and participation commitments, Pedevco drew $11 million on its revolver, highlighting the impact of timing on headline cash flows.

Forward-Looking Guidance and Strategic Priorities

Management reiterated 2026 guidance and framed Q1 as a high‑water mark ahead of expected mid‑year production moderation. They plan to complete one high‑working‑interest D‑J DUC in mid‑summer or early Q3, advance the $10 million to $13 million optimization program to push LOE lower, and continue improving working capital and net leverage while staying within disciplined capex levels and existing liquidity.

Pedevco’s earnings call showcased strong operational execution, powerful year‑over‑year financial gains, and meaningful balance sheet progress, even as derivative losses and production declines temper near‑term optics. For investors, the story is one of a company trading some short‑term headline noise for improved cash generation, rising efficiency, and a multi‑basin inventory that could support long‑term value creation.