| PART I. FINANCIAL INFORMATION |
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| Item 1. | Financial Statements (Unaudited) | 5 |
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| Condensed Consolidated Balance Sheets | 6 |
| Condensed Consolidated Statements of Operations | 7 |
| Condensed Consolidated Statements of Changes in Equity (Deficit) | 8 |
| Condensed Consolidated Statements of Cash Flows | 9 |
| Notes to the Condensed Consolidated Financial Statements | 10 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 |
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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 55 |
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| Item 4. | Controls and Procedures | 58 |
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| PART II. OTHER INFORMATION |
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| Item 1. | Legal Proceedings | 59 |
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| Item 1A. | Risk Factors | 59 |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 93 |
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| Item 3. | Defaults Upon Senior Securities | 93 |
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| Item 4. | Mine Safety Disclosures | 93 |
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| Item 5. | Other Information | 94 |
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| Item 6. | Exhibits | 100 |
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| Signatures | 101 |
i
Certain Defined Terms
As used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise noted or the context otherwise requires, references to:
| • | “we,” “us,” “our,” the “Company,” the “Issuer,” and “Phoenix Energy,” and similar references refer to Phoenix Energy One, LLC, formerly known as Phoenix Capital Group Holdings, LLC, and, where appropriate, its subsidiaries. |
| • | “Adamantium” means Adamantium Capital LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Issuer. |
| • | “Adamantium Bonds” means unsecured bonds offered and sold by Adamantium pursuant to an offering under Rule 506(c) of Regulation D under the Securities Act, the proceeds of which are loaned to the Issuer under the Adamantium Loan Agreement (as defined below). |
| • | “Adamantium Debt” means, collectively, indebtedness outstanding under the Adamantium Bonds, Adamantium Loan Agreement, and Adamantium Secured Note. |
| • | “Adamantium Loan Agreement” means that certain Loan Agreement, dated as of September 14, 2023, by and among the Issuer and PhoenixOp, as borrowers, and Adamantium, as lender, as the same may be amended and supplemented from time to time. |
| • | “Adamantium Secured Note” means that certain Secured Subordinated Promissory Note, dated as of November 1, 2024, by and between Adamantium and the noteholder named therein, as the same may be amended and supplemented from time to time. |
| • | “Adamantium Securities” means, collectively, indebtedness outstanding under the Adamantium Bonds and Adamantium Secured Note. |
| • | “Bbl” means one stock tank barrel, of 42 U.S. gallons liquid volume, used in this Quarterly Report in reference to crude oil or other liquid hydrocarbons. |
| • | “Boe” means barrel of oil equivalent. |
| • | “Btu” means British thermal unit, which is the heat required to raise the temperature of one pound of liquid water by one degree Fahrenheit. |
| • | “E&P” means exploration and production. |
| • | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
| • | “Fortress” means Fortress Credit Corp., a Delaware corporation. |
| • | “Fortress Credit Agreement” means that certain Amended and Restated Senior Secured Credit Agreement, dated as of August 12, 2024, by and among the Issuer, PhoenixOp, as borrower, each of the lenders from time to time party thereto, and Fortress, as administrative agent for the lenders, as the same may be amended or supplemented from time to time. |
| • | “Mcf” means one thousand cubic feet. |
| • | “MMBtu” means one million Btus. |
| • | “NGL” means natural gas liquids. |
| • | “NMAs” means net mineral acres. |
| • | “NRAs” means net royalty acres. |
| • | “Phoenix Equity” means Phoenix Equity Holdings, LLC, a Delaware limited liability company and the sole member of the Issuer. |
| • | “PhoenixOp” means Phoenix Operating LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Issuer. |
| • | “Reg A Bonds” means unsecured bonds offered and sold to date by the Issuer pursuant to an offering under Regulation A under the Securities Act. |
| • | “Reg D Bonds” means unsecured bonds offered and sold to date by the Issuer pursuant to offerings under Rule 506(b) or (c), as applicable, of Regulation D under the Securities Act. |
| • | “Reg D/Reg A Bonds” means, collectively, the Reg D Bonds and the Reg A Bonds. |
| • | “Registered Notes” means unsecured notes offered and sold by the Issuer on a continuous basis pursuant to a registration statement on Form S-1 (File No. 333-282862), including the related prospectus. |
| • | “SEC” means the U.S. Securities and Exchange Commission. |
| • | “Senior Debt” means any indebtedness that the Issuer expressly determines is senior to the Registered Notes, including, as of the date of this Quarterly Report, indebtedness under the Fortress Credit Agreement, the Adamantium Debt, and the Senior Reg D/Reg A Bonds. |
| • | “Senior Reg D Bonds” means, collectively, the July 2022 506(c) Bonds, the 2020 506(b) Bonds, and the 2020 506(c) Bonds. |
| • | “Senior Reg D/Reg A Bonds” means the Reg D/Reg A Bonds that are not Subordinated Reg D Bonds. |
| • | “Subordinated Reg D Bonds” means, collectively, the August 2023 506(c) Bonds and the December 2022 506(c) Bonds. |
For ease of reference, we have repeated definitions for certain of these terms in other portions of the body of this Quarterly Report. All such definitions conform to the definitions set forth above.
Certain monetary amounts, percentages, and other figures included in this Quarterly Report have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this Quarterly Report may not sum due to rounding.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements regarding all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding our current views, hopes, intentions, beliefs, or expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, and position in the markets and the industries in which we operate. These forward-looking statements are generally identifiable by forward-looking terminology such as “guidance,” “expect,” “believe,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “seek,” “estimate,” “should,” “will,” “would,” “approximately,” “predict,” “potential,” “may,” “continue,” and “assume,” as well as the negative version of such words, variations of such words, and similar expressions referring to the future.
Forward-looking statements are based on our beliefs, assumptions, and expectations, taking into account currently known market conditions and other factors. Our ability to predict results or the actual effect of future events, actions, plans, or strategies is inherently uncertain and involves certain risks and uncertainties, many of which are beyond our control. Our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Factors that could cause our actual results to differ materially from the expectations we describe in our forward-looking statements include, but are not limited to, the factors listed below and in Part II, Item 1A. “Risk Factors” elsewhere in this Quarterly Report. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Quarterly Report. You are cautioned that the forward-looking statements contained in this Quarterly Report are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the forward-looking events and circumstances will occur. All forward-looking statements in this Quarterly Report are made only as of the date this Quarterly Report, based on information available to us as of the date of this Quarterly Report, and we caution you not to place undue reliance on forward-looking statements in light of the risks and uncertainties associated with them.
The matters summarized below and elsewhere in this Quarterly Report could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements:
| • | changes in the markets in which we compete; |
| • | increasing costs of capital expenditures to acquire and develop properties; |
| • | the continued success of our E&P operators; |
| • | delays in development of and higher capital expenditures in our estimated proved and probable undeveloped reserves; |
| • | developments in governmental regulations; |
| • | deviations between the current market value of estimated proved reserves and the present value of future net revenues from our proved reserves; |
| • | changes in current or future commodity prices; |
| • | the fact that reserve estimates depend on many assumptions that may turn out to be inaccurate and that any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves; |
| • | our ability to replace reserves; |
| • | the development of our software and its ability to continue identifying productive assets; |
| • | our current or future levels of indebtedness; |
| • | repayment of our current or future indebtedness; |
| • | current and future litigation or other regulatory, administrative, or other legal proceedings; |
| • | the restatement of our financial statements; and |
| • | the other factors set forth in Part II, Item 1A. “Risk Factors” included in Part I, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025. |
Except as required by law, we are under no duty to, and we do not intend to, update or review any of our forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events or developments, or otherwise.
Investors and others should note that we announce financial and other material information using our website (https://phoenixenergy.com/), SEC filings, press releases, public conference calls, and webcasts. We use these channels of distribution to communicate with our investors and members of the public about our company, our services, and other items of interest. Information contained on our website is not part of this Quarterly Report or our other filings with the SEC.
