Company: PED
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001654954-25-003703
Chunk: 279

Company: PEDEVCO CORP
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 279
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 may subject us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries.

As discussed in Note 4 to our audited consolidated financial statements included under Restatement of Previously Issued Consolidated Financial Statements, we determined to restate our consolidated financial statements as of December 31, 2023 and 2022, respectively, after we identified errors in our calculation of depletion expenses for our oil and gas properties. As a result of this error and the resulting restatement of our consolidated financial statements for the impacted periods, we have incurred, and may continue to incur, unanticipated costs for accounting and legal fees in connection with or related to the restatement, and have become subject to a number of additional risks and uncertainties, including the increased possibility of litigation and regulatory inquiries. Any of the foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business, both of which could harm our business and financial results.

Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist our business, results of operations and cash flows could be materially and adversely affected.

Year 2022 saw significant increases in the costs of certain services and materials, including steel, sand and fuel, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fully employed US labor force, high inflation, interest rates and other factors, with supply and demand fundamentals being further aggravated by disruptions in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine and the current armed conflict in Israel and the Gaza Strip, all resulting in an estimated cost increase of approximately 25% to 30% per well on our Permian Asset and 10% to 20% on our D-J Basin Asset, based on costs we experienced commencing in the third quarter of 2021 and continuing throughout 2022. Service and materials costs also increased accordingly through 2022, stabilizing in 2023 in 2024, with general supply chain and inflation issues seen throughout the industry leading to increased operating costs. While the Company is cautiously optimistic that such costs have plateaued and will hold at current levels as we have not seen significant cost increases in 2024 and thus far in 2025, supply chain constraints, the effect of tariffs, and inflationary pressures may adversely impact our operating costs and may negatively impact