Pedevco (PED) risk factors, FY2024 10-K

Risks Related to the Oil, NGL and Natural Gas Industry; Our Business and Operations

1. 01Declines in oil and, to a lesser extent, NGL and natural gas prices, have in the past, and will continue in the future, to adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations or targets and financial commitments
2. 02We have a limited operating history, have incurred net losses in the past and may incur net losses in the future
3. 03We 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
4. 04If this were to happen, we may be forced to scale back our business plan, sell or liquidate assets to satisfy outstanding debts, all of which could result in the value of our outstanding securities declining in value
5. 05We have been and may continue to be negatively impacted by inflation
6. 06Economic uncertainty may affect our access to capital and/or increase the costs of such capital
7. 07We may not be able to generate sufficient cash flow to meet any future debt service and other obligations due to events beyond our control
8. 08All of our crude oil, natural gas and NGLs production is located in the Permian Basin and the D-J Basin, making us vulnerable to risks associated with operating in only two geographic areas. In addition, we have a large amount of proved reserves attributable to a small number of producing formations
9. 09curtailment 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
10. 10If 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
11. 11overall worldwide economic conditions
12. 12We have in the past incurred impairments and future conditions might require us to incur additional impairments or make write-downs in our assets, which would adversely affect our balance sheet and results of operations
13. 13Declining 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
14. 14Our exploration, development and exploitation projects require substantial capital expenditures that may exceed cash on hand, cash flows from operations and potential borrowings, and we may be unable to obtain needed capital on satisfactory terms, which could adversely affect our future growth
15. 15our ability to access the equity and debt capital markets
16. 16Our 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
17. 17the accuracy of the assumptions
18. 18We may have accidents, equipment failures or mechanical problems while drilling or completing wells or in production activities, which could adversely affect our business
19. 19Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured
20. 20equipment failures or accidents
21. 21Our strategy as an onshore resource player may result in operations concentrated in certain geographic areas and may increase our exposure to many of the risks described in this Annual Report
22. 22Unless we replace our oil and natural gas reserves, our reserves and production will decline, which will adversely affect our business, financial condition and results of operations
23. 23Our 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
24. 24We may purchase oil and natural gas properties with liabilities or risks that we did not know about or that we did not assess correctly, and, as a result, we could be subject to liabilities that could adversely affect our results of operations
25. 25We may incur losses or costs as a result of title deficiencies in the properties in which we invest
26. 26Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling
27. 27We 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
28. 28We have limited control over activities on properties we do not operate
29. 29An 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 has adversely affected our business, financial condition and results of operations
30. 30Financial difficulties encountered by our oil and natural gas purchasers, third-party operators or other third parties could decrease our cash flow from operations and adversely affect the exploration and development of our prospects and assets
31. 31The calculated present value of future net revenues from our proved reserves will not necessarily be the same as the current market value of our estimated oil and natural gas reserves
32. 32changes in governmental regulations or taxation
33. 33Competition in the oil and natural gas industry is intense, making it difficult for us to acquire properties, market oil and natural gas and secure trained personnel
34. 34Our competitors may use superior technology and data resources that we may be unable to afford or that would require a costly investment by us in order to compete with them more effectively
35. 35Uncertainties associated with enhanced recovery methods may result in us not realizing an acceptable return on our investments in such projects
36. 36Competition for hydraulic fracturing services and water disposal could impede our ability to develop our oil and gas plays
37. 37Our operations are substantially dependent on the availability of water. Restrictions on our ability to obtain water may have an adverse effect on our financial condition, results of operations and cash flows
38. 38Downturns 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
39. 39Improvements in or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations
40. 40Competition due to advances in renewable fuels may lessen the demand for our products and negatively impact our profitability
41. 41Future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements
42. 42We may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity
43. 43A 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
44. 44being able to run tools and other equipment consistently through the horizontal wellbore
45. 45the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage
46. 46Prospects that we decide to drill may not yield oil or natural gas in commercially viable quantities
47. 47Negative public perception regarding us and/or our industry could have an adverse effect on our operations
48. 48The physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects. An economy-wide transition to lower GHG energy sources could have a variety of adverse effects on our operations and financial results
49. 49The $1.1 million owed to us under a secured convertible promissory note due from Tilloo in the Milnesand Sale may not be repaid
50. 50The requirements, restrictions and covenants in our RBL, including interest payable thereunder, may restrict our ability to operate our business and might lead to a default under such agreement
51. 51The amounts borrowed pursuant to the terms of the RBL are secured by substantially all of the present and after-acquired assets of the Company and its subsidiaries. Additionally, certain of our subsidiaries have guaranteed the amounts due, and obligations under, the RBL
52. 52Continued increases in interest rates will cause our debt service obligations to increase and may have an adverse effect on our operations

Risks Related to Management, Employees and Directors

1. 53Potential conflicts of interest could arise for certain members of our management team that hold management positions with other entities and our largest stockholder
2. 54We depend significantly upon the continued involvement of our present management
3. 55the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors

Risks Relating to Government Regulations

1. 56New or amended environmental legislation or regulatory initiatives could result in increased costs, additional operating restrictions, or delays, or have other adverse effects on us
2. 57The 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
3. 58SEC rules could limit our ability to book additional proved undeveloped reserves (“PUDs”) in the future
4. 59Proposed changes to U.S. tax laws, if adopted, could have an adverse effect on our business, financial condition, results of operations, and cash flows
5. 60We may incur substantial costs to comply with the various federal, state, and local laws and regulations that affect our oil and natural gas operations, including as a result of the actions of third parties
6. 61impose substantial liabilities for pollution resulting from our operations
7. 62Regulations could adversely affect our ability to hedge risks associated with our business and our operating results and cash flows

Risks Related to Our Common Stock

1. 63We 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
2. 64domestic and international economic, health, legal and regulatory factors unrelated to our performance
3. 65An active and sustained trading market for our common stock may not develop in the future
4. 66Our outstanding options may adversely affect the trading price of our common stock
5. 67We are subject to the Continued Listing Criteria of the NYSE American and our failure to satisfy these criteria may result in delisting of our common stock
6. 68Due to the fact that our common stock is listed on the NYSE American, we are subject to financial and other reporting and corporate governance requirements which increase our costs and expenses
7. 69Our Certificate of Formation and Bylaws provide for indemnification of officers and directors at our expense, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors
8. 70Our Certificate of Formation contains a specific provision that limits the liability of our directors for monetary damages to the Company and the Company’s stockholders
9. 71Anti-takeover provisions in our Certificate of Formation and our Bylaws, as well as provisions of Texas law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our securities
10. 72Amendment of Bylaws — Our Bylaws may be amended by our Board of Directors alone
11. 73Vacancies — Our Bylaws provide that vacancies on our Board may be filled by a majority of directors in office, although less than a quorum, and not by the stockholders
12. 74Limitation of Liability and Indemnification — Our Certificate of Formation limits the liability of, and provides indemnification to, our directors and officers
13. 75Our Board of Directors can authorize the issuance of preferred stock, which could diminish the rights of holders of our common stock and make a change of control of our company more difficult even if it might benefit our stockholders
14. 76If we complete acquisitions or enter into business combinations in the future, they may disrupt or have a negative impact on our business
15. 77the effect of any government regulations which relate to the business acquired
16. 78We may incur indebtedness which could reduce our financial flexibility, increase interest expense and adversely impact our operations and our unit costs
17. 79debt covenants to which we may agree may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry
18. 80maintain an investor relations function
19. 81We do not presently intend to pay any cash dividends on or repurchase any shares of our common stock
20. 82Our business could be adversely affected by security threats, including cybersecurity threats
21. 83Future sales of our common stock could cause our stock price to decline
22. 84The threat and impact of terrorist attacks, cyber-attacks or similar hostilities may adversely impact our operations
23. 85We 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
24. 86Failure to adequately protect critical data and technology systems could materially affect our operations
25. 87Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of securities
26. 88Securities analysts may not cover, or continue to cover, our common stock and this may have a negative impact on our common stock’s market price
27. 89If persons engage in short sales of our common stock, including sales of shares to be issued upon exercise of our outstanding warrants, the price of our common stock may decline
28. 90The Company does not insure against all potential losses, which could result in significant financial exposure
29. 91Increasing attention to environmental, social, and governance (“ESG”) matters may impact our business
30. 92Global economic conditions could materially adversely affect our business, results of operations, financial condition and growth
31. 93We may be adversely affected by climate change or by legal, regulatory or market responses to such change
32. 94We might be adversely impacted by changes in accounting standards