PEDEVCO CORP (PED) SPO
|Company Name||PEDEVCO CORP|
|Company Address||4125 BLACKHAWK PLAZA CIRCLE
DANVILLE, CA 94506
|CEO||Frank C. Ingriselli|
|Employees (as of 5/8/2013)||10|
|State of Inc||TX|
|Fiscal Year End||12/31|
|Exchange||American Stock Exchange|
|Shares Over Alloted||1,333,334|
|Shareholder Shares Offered||--|
|Lockup Period (days)||180|
|Quiet Period Expiration||--|
We expect to receive net proceeds of approximately $17.7 million from the sale of the common stock offered by us after deducting estimated expenses of approximately $1.0 million and estimated underwriting discounts and commissions of approximately $1.3 million, assuming a public offering price of $2.25 per share. If the underwriters’ over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $20.7 million. The public offering price will be negotiated between us and representatives of the underwriters based on numerous factors and may not be indicative of the market price of our common stock after the completion of this offering. Each $0.50 increase or decrease in the public offering price would increase (decrease) our net proceeds by approximately $4.4 million. We intend to use the net proceeds from this offering to fund a portion our 2013 capital expenditures for drilling on our Mississippian and Eagle Ford core assets, as well as certain other purposes as set forth below. We expect to fund the remainder of our 2013 capital expenditure budget from cash on hand, cash flows from operations and future borrowings. Drilling and Completion of Wells: Mississippian Asset: $ 6,592,700 Eagle Ford Asset: $ 207,300 Total $ 6,800,000 Repayment of debt owed to MIE Holdings and Bridge Investors (1) $ 10,900,000 Net Proceeds after offering costs $ 17,700,000 (1)Represents approximately $6,400,000 of principal and accrued interest due to MIE Holdings pursuant to a secured promissory note, and up to approximately $4,500,000 of principal, accrued interest and fees due to the Bridge Investors pursuant to secured promissory notes, all of which are due and payable in full upon completion of this offering. In the event our net proceeds from this offering are less than the total amount set forth in the table above, the amount of the net proceeds used to fund our drilling capital expenditure budget will be reduced, and we will be required to use a greater amount of our cash flows from operations or access other sources of capital to fund our 2013 drilling capital expenditure budget. While we expect to use the net proceeds from this offering in the manner described above, the ultimate amount of capital we will expend may fluctuate materially based on market conditions and our drilling results. Our future financial condition and liquidity will be impacted by, among other factors, our level of production of oil and natural gas and the prices we receive from the sale of oil and natural gas, the outcome of our exploration and drilling programs, the number of commercially viable oil and natural gas discoveries made and the quantities of oil and natural gas discovered, the speed with which we can bring such discoveries to production, and the actual cost of exploration and development of our oil and natural gas assets. Pending our expenditure of the net proceeds of this offering in the manner described above, we intend to invest the net proceeds from this offering in U.S. treasury bonds or investment grade instruments.
The oil and natural gas industry is highly competitive. We compete and will continue to compete with major and independent oil and natural gas companies for exploration opportunities, acreage and property acquisitions. We also compete for drilling rig contracts and other equipment and labor required to drill, operate and develop our properties. Most of our competitors have substantially greater financial resources, staffs, facilities and other resources than we have. In addition, larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position. These competitors may be able to pay more for drilling rigs or exploratory prospects and productive oil and natural gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than we can. Our competitors may also be able to afford to purchase and operate their own drilling rigs. Our ability to drill and explore for oil and natural gas and to acquire properties will depend upon our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment. Our competitors have a longer history of operations than we have, and most of them have also demonstrated the ability to operate through industry cycles.
We are an energy company engaged in the acquisition, exploration, development and production of oil and natural gas resources in the United States, with a primary focus on oil and natural gas shale plays and a secondary focus on conventional oil and natural gas plays. Our current operations are
located primarily in the Niobrara Shale play in the Denver-Julesburg Basin in Morgan and Weld Counties, Colorado, the Eagle Ford Shale play in McMullen County, Texas, and the Mississippian Lime play in Comanche, Harper, Barber and Kiowa Counties, Kansas. We also hold an interest in the North Sugar Valley Field in Matagorda County, Texas, though we consider this a non-core asset. We have approximately 10,224 gross and 2,774 net acres of oil and gas properties in our Niobrara core area. Our current Eagle Ford position is a 3.97% non-operated working interest in 1,331 acres. We also recently acquired an average 97% working interest in 7,006 gross (6,763 net) acres in the Mississippian Lime play, which we operate. Condor Energy Technology LLC, which we jointly own and manage with an affiliate of MIE Holdings Corporation as described below, operates our Niobrara interests, including three producing wells in the Niobrara asset with aggregate current daily production of approximately 324 Bbl of oil and 819 Mcf of natural gas or 462 BOE (140 BOE net). We believe our current assets could contain a gross total of 239 drilling locations. We also have an option agreement in place (subject to customary closing conditions) for the acquisition of an additional 7,880 gross (7,043 net) acres in the Mississippian Lime play in Comanche, Harper, Barber and Kiowa Counties, Kansas and Woods County, Oklahoma, expiring May 30, 2013 . We believe these optioned Mississippian interests, if acquired, could contain a gross total of 42 additional drilling locations. We believe that the Niobrara, Eagle Ford and Mississippian Shale plays represent among the most promising unconventional oil and natural gas plays in the United States. We will continue to seek additional acreage proximate to our currently held core acreage. Our strategy is to be the operator, directly or through our subsidiaries and joint ventures, in the majority of our acreage so we can dictate the pace of development in order to execute our business plan. The majority of our capital expenditure budget for 2013 will be focused on the acquisition, development and expansion of these formations. The following table presents summary data for our leasehold acreage in our Niobrara and Eagle Ford core areas as of December 31, 2012, and our Mississippian core area as of its acquisition effective March 25, 2013, and our drilling capital budget with respect to this acreage in 2013. We plan to fund our drilling and land acquisition capital budget through use of proceeds from this offering, cash on hand, anticipated cashflow generated through operations, and future debt financings. Drilling & Land Acquisition Capital Budget January 1, 2013 - December 31, 2013 Potential Total Gross Gross Ownership -Drilling Acreage Interest Net Acres Acre Spacing Locations(4) Gross Wells Net Wells $/Well Capital Cost Current Core Assets: Niobrara(1) 10,224 27.13 % 2,774 160 180 4 1.09 $ 4,500,000 $ 4,883,400 Acquisition Cost(2) $ 500,000 Eagle Ford (3) 1,331 3.97 % 53 60 17 1 0.04 $ 9,000,000 $ 357,300 Mississippian 7,006 96.53 % 6,763 160 42 3 2.90 $ 3,250,000 9,411,675 Current Assets 18,561 9,590 239 8 4.02 $ 15,152,375 (1)We have a 27.13% net ownership interest in the leased acreage in the Niobrara asset (12.15% of the acreage is held directly by us plus 14.98% of the acreage is held by virtue of our 20% interest in Condor, which in turn holds a 74.88% working interest in the leased acreage in the Niobrara asset). (2)Represents funds estimated to be applied for possible extension of existing leases and acquisition of additional interests in the Niobrara play, which have not yet been identified. (3)We have a 3.97% ownership in the leased acreage in the Eagle Ford asset (held by virtue of our 50% interest in White Hawk Petroleum, LLC, which holds a 7.939% working interest in the Eagle Ford asset). (4)Potential gross drilling locations are calculated using the acre spacings specified for each area in the table and adjusted assuming forced pooling in the Niobrara. Colorado, where the Niobrara asset is located, allows for forced pooling, which may create more potential gross drilling locations than acre spacing alone would otherwise indicate. -------- Our principal executive offices are located at 4125 Blackhawk Plaza Circle, Suite 201, Danville, California 94506, and our telephone number at that address is (855)733-3826. Our website address is www.pacificenergydevelopment.com.
|Auditor||GBH CPAs, PC|
|Company Counsel||TroyGould PC|
|Lead Underwriter||Wunderlich Securities, Inc|
|Transfer Agent||First American Stock Transfer, Inc|
|Underwriter||C.K. Cooper & Company|
|Underwriter||Global Hunter Securities|
|Underwriter||Global Hunter Securities, LLC|
|Underwriter Counsel||Bracewell & Giuliani LLP|
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