Item 2.02 Results of Operations and Financial
Condition.
On January 29, 2021, PEDEVCO Corp. (the
“Company”,
“we” and “us”) announced that, in connection with the
Company’s preparation of its audited financial statements for
the year-ended December 31, 2020 and estimates of the value of the
Company’s reserves as of December 31, 2020, the Company
believes that it will recognize a material impairment of the value
of its oil and gas assets located in the Northwest Shelf of the
Permian Basin in eastern New Mexico and in the D-J Basin in Weld
and Morgan Counties, Colorado for the year-ended December 31, 2020.
Based on preliminary assessments applying Securities and Exchange
Commission (SEC) mandated pricing and reserves methodologies, the
Company believes that, due primarily to the material decrease in
oil and gas pricing in 2020, coupled with the Company’s
cessation of development in 2020 due to such low pricing, the
Company will be required to take a one-time oil and gas asset
impairment charge in the range of 60% to 70% of the estimated
discounted value of its reserves (PV-10) as calculated the year
prior as of December 31, 2019, which was $122.7 million. The
Company notes that this is only a preliminary estimate of the
anticipated impairment charge, with the final impairment charge
anticipated to be determined by the Company in the upcoming months
and announced by the Company in the Company’s Annual Report
on Form 10-K for the year-ended December 31, 2020, which impairment
may be higher or lower than the range anticipated by the Company
today. Further, the Company notes that it is not reducing the
magnitude of oil and gas reserves it holds – rather, only the
year-end value as calculated in accordance with SEC-mandated
pricing and reserves methodologies – and that such impairment
affects neither the quantity of oil and gas resources held, nor the
going forward economics of the underlying oil and gas reserves,
which are anticipated to increase in value assuming market pricing
improves and all other factors remain constant, further noting that
the price of West Texas Intermediate crude (WTI) has already
significantly improved from the SEC’s mandated pricing of
$39.57 per barrel, which SEC pricing the Company must use for its
impairment analysis.
Forward-Looking Statements
This
filing contains a number of forward-looking statements. Words such
as “continue,” “estimate,”
“expect,” “forecast,” “plan,”
“will,” and variations of such words and similar future
or conditional expressions are intended to identify forward-looking
statements. These forward-looking statements include, but are not
limited to, statements regarding our beliefs and expectations
relating to the anticipated material impairment of the
Company’s oil and gas properties, the amount of such
impairment and timing thereof, non-cash impairment losses, and
future related events. These forward-looking statements are not
guarantees of future performance and are subject to a number of
risks and uncertainties, many of which are difficult to predict and
beyond our control. Important factors that may affect our business
and operations or that may cause actual results to differ
materially from those in the forward-looking statements include,
but are not limited to, our financial strategy, budget,
projections, and operating results; oil and natural gas realized
prices; timing and amount of future production of oil and natural
gas; availability of oil field labor; the amount, nature, and
timing of capital expenditures, including future exploration and
development costs; timing, status, and outcome of the drilling of
wells; government regulation and taxation of the oil and natural
gas industry; marketing of oil and natural gas; exploitation
projects or property acquisitions; costs of exploiting and
developing our properties and conducting other operations; general
economic conditions in the United States and around the world,
including the effect of regional or global health pandemics (such
as COVID-19); the effect of COVID-19 on the U.S. and global
economy, the effect of U.S. and global efforts to reduce the spread
of the virus, including ‘stay-at-home’ and other
orders, and the resulting effect of such pandemic and governmental
responses thereto on the market for oil and gas and the U.S. and
global economy in general; competition in the oil and natural gas
industry; effectiveness of our risk management activities;
environmental liabilities; counterparty credit risk; developments
in oil-producing and natural gas-producing countries; future
operating results; future acquisition transactions; estimated
future reserves and the present value of such reserves; changes in U.S. GAAP or other applicable
accounting policies; and others. Such risks, uncertainties, and
other factors include, but are not necessarily limited to, those
set forth under Item 1A “Risk Factors” in the Company's
Annual Report on Form 10-K for the year ended December 31, 2019,
and subsequently filed Quarterly Reports on Form 10-Q under the
heading “Risk Factors”. The Company operates in a
highly competitive and rapidly changing environment, thus new or
unforeseen risks may arise. Accordingly, investors should not place
any reliance on forward-looking statements as a prediction of
actual results. The Company disclaims any intention to, and
undertakes no obligation to, update or revise any forward-looking
statements, except as otherwise required by law, and also takes no
obligation to update or correct information prepared by third
parties that are not paid for by the Company. Readers are also
urged to carefully review and consider the other various
disclosures in the Company's public filings with the Securities
Exchange Commission (SEC).