PEDEVCO CORP

Current report

The 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.

Current report

As of the date of this Report, the RBL has a balance of $0. Amounts, if any, that we borrow under the RBL, are due on September 11, 2028.

Current report

Borrowings under the RBL may be alternate base rate (“ABR”) loans or SOFR loans, at the election of the Company. Interest is payable quarterly for ABR loans and at the end of the applicable interest period for SOFR loans. SOFR loans bear interest at the forward-looking term rate based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) for a one, three or six-month interest period plus an applicable margin ranging from 300 to 400 basis points, depending on the percentage of the borrowing base utilized, plus an additional 10 basis point credit spread adjustment (the “SOFR Rate”). ABR loans bear interest at a rate per annum equal to the greatest of: (i) the prime rate as publicly announced by Citibank; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted forward-looking term rate based on SOFR for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 200 to 300 basis points, depending on the percentage of the borrowing base utilized (the “ABR Rate”). The Company also pays a commitment fee on unused commitment amounts under its facility of 37.5 basis points or 50 basis points, depending on the percentage of the borrowing base utilized. The Company may repay any amounts borrowed under the RBL prior to the maturity date without any premium or penalty, and is required to repay certain portions of the amounts borrowed under the RBL upon the occurrence of certain events.

Current report

The RBL includes customary representations and warranties, and affirmative and negative covenants of the Company for a facility of that size and type, including prohibiting the Loan Parties from creating any indebtedness without the consent of the lenders, subject to certain exceptions, and requiring the Company to have a net leverage ratio (the ratio of (a) total net debt to (b) EBITDAX) of no less than 1.0 to 1.0 and a current ratio (the ratio of (i) consolidated current assets to (ii) consolidated current liabilities) of no less than 1.0 to 1.0. EBITDAX is defined as Earnings Before Interest, Taxes, Depreciation (or Depletion), Amortization, and Exploration Expense.

Current report

In addition, the RBL is subject to customary events of default for a facility of this size and type, including a change in control. If an event of default occurs and is continuing, the administrative agent may, with the consent of majority lenders, or shall, at the request of the majority lenders, accelerate any amounts outstanding and terminate lender commitments and declare the entire amount of obligations owed under the RBL immediately due and payable and take certain other actions provided for under the RBL.

Current report

As a result of these requirements, covenants and limitations, we may not be able to respond to changes in business and economic conditions and to obtain additional financing, if needed, and we may be prevented from engaging in transactions that might otherwise be beneficial to us. The breach of any of these requirements or covenants could result in a default under the RBL or future credit facilities. Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding under such RBL or future debt facilities, including accrued interest or other obligations, to be immediately due and payable. If amounts outstanding under such RBL or future debt facilities were to be accelerated, our assets might not be sufficient to repay in full that indebtedness and our other indebtedness.

Current report

A prolonged period of weak, or a significant decrease in, industry activity and overall markets may make it difficult to comply with our covenants and the other restrictions in the agreements governing our debt and current global and market conditions have increased the potential for that difficulty.

Current report

Our obligations under the RBL are secured by a first priority security interest in substantially all of our assets and various Company guarantees.

Current report

The 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.

Current report

As a result of the above, our creditors, in the event of the occurrence of a default under the RBL, may enforce their security interests over our assets and/or our subsidiaries which secure such obligations, may take control of our assets and operations, force us to seek bankruptcy protection, or force us to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company (including, but not limited to any investment in our common stock) could become worthless.

Current report

Continued increases in interest rates will cause our debt service obligations to increase and may have an adverse effect on our operations.

Current report

The amounts borrowed under the RBL bear interest at either the SOFR Rate or the ABR Rate. Interest rates have recently been subject to increasing volatility and any increase in the interest rates associated with our floating-rate debt would increase our debt service costs and affect our results of operations. In addition, a future increase in interest rates could adversely affect our future ability to obtain financing or materially increase the cost of any additional financing.

Current report

Changes in interest rates could also have a material adverse impact on our earnings and cash flows. Because our future notes payable are expected to have variable interest rates, our business results are expected to be subject to fluctuations in interest rates. Changes in market interest rates may influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and cash flows.