Filed
by PEDEVCO Corp.
Pursuant
to Rule 425 under the Securities Act of 1933
and
deemed filed pursuant to Rule 14a-12
under
the Securities Exchange Act of 1934
Subject
Company: SandRidge Permian Trust
Commission
File No. 001-35274
PEDEVCO
Corp.
575 N.
Dairy Ashford, Energy Center II, Suite 210
Houston,
Texas 77079
T:
(713) 221-1768
PEDEVCO ANNOUNCES TERMINATION OF EXCHANGE OFFER
HOUSTON,
TX, November 17, 2020 — PEDEVCO Corp. (NYSE American: PED)
(“PEDEVCO”) today announced that it has terminated its
previously announced offer to exchange each issued and outstanding
common unit of beneficial interest (the “Trust Common
Units”) of SandRidge Permian Trust (OTC Pink Sheets: PERS)
(the “Trust”) for 4/10ths of one share of PEDEVCO
common stock.
PEDEVCO
has been evaluating, and requesting transparency with respect to,
the transaction between Avalon Energy, LLC (“Avalon”)
and Montare Resources I, LLC (“Montare”) since it was
first announced on October 14, 2020, pursuant to which Avalon sold
assets to Montare unburdened by the Trust’s royalty interests
(the “Avalon Asset Sale”). As first announced, the
Trust indicated it would receive approximately $4.9 million for the
royalty interests to be released, and that the fair value of the
royalty interests to be released represented approximately 31.8% of
the total fair value of the royalty interests owned by the Trust
immediately prior to the Avalon Asset Sale.
On
November 13, 2020, at approximately 4:15 P.M. Central Time, the
Trust filed its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2020 (the “Trust 10-Q”), and provided
further details regarding the Avalon Asset Sale. The transaction
between Avalon and Montare resulted in the sale of 1,249 wells
unburdened by the royalty interests, leaving the Trust with royalty
interests on only 65 wells (although these are stated to be the
most valuable wells). Furthermore, the wells sold to Montare free
from the royalty interests represented approximately 76% of the
production attributable to the royalty interests.
Following
the additional information regarding the Avalon Asset Sale, PEDEVCO
no longer sees value in the royalty interests held by the Trust, or
the Trust, under the terms of the offer. As reported by the Trust
in the Trust 10-Q, the
primary factors affecting the Trust’s revenues and costs (and
therefore its value in PEDEVCO’s view) are the quantity of
production from the Trust’s wells, the prices received for
such production and post-production costs (primarily
transportation).
●
First, the Avalon
Asset Sale severely reduces future production attributable to the
royalty interests compared to what existed when PEDEVCO commenced
its exchange offer. Production for the three and nine months ended
September 30, 2020 was 1,000 and 1,100 barrels of oil equivalent
per day, respectively, as reported in the Trust 10-Q. Production
for the year ended December 31, 2019 was 1,400 barrels of oil
equivalent per day as reported in the Trust’s Annual Report
on Form 10-K for the year ended December 31, 2019. Applying a 76%
reduction, and based on the production for the three months ended
September 30, 2020, production would only be approximately 240
barrels of oil equivalent per day in future periods.
●
Second, the sale of
substantially all of the wells unburdened by the royalty interest
means that any future development of those wells would not benefit
holders of Trust Common Units, or the royalty interests. When
PEDEVCO commenced the offer, there were 1,249 additional wells
subject to the royalty interests. The value of the Trust and
royalty interests could have potentially been enhanced by working
with Avalon or the underlying operator to increase production
attributable to those wells, which is no longer the
case.
●
Third, PEDEVCO
continues to question the fair value assigned to the royalty
interests that were released, and believes it is low. Pursuant to
the conveyances, the royalty interests are non-operating,
non-expense bearing overriding royalty interests free of all cost,
risk and expense of production, operations and marketing.
Accordingly, the dollar value of production distributed to the
Trust pursuant to the royalty interests has historically only been
offset by post-production expenses, production taxes, franchise
taxes, trust administrative expenses and withholding for cash
reserves, prior to its distribution to holders of Trust Common
Units. It is unclear to PEDEVCO how the Avalon Asset Sale would
only result in the sale of 31.8% fair value when it reflects 76% of
production. Rather, PEDEVCO believes the value of the royalty
interests released would be a percentage closer to the production
released, but Avalon has continually failed to provide information
on how it calculated fair value.
Accordingly,
PEDEVCO believes the Trust has been materially and adversely
stripped of significant value for which it has not been fairly
compensated and PEDEVCO has elected to withdraw its offer. The
exchange offer was previously scheduled to expire on November 30,
2020. PEDEVCO has instructed the exchange agent for the exchange
offer to promptly return all Trust Common Units to
unitholders.
About
PEDEVCO Corp.
PEDEVCO Corp. (NYSE American: PED) is a publicly-traded energy
company engaged in the acquisition and development of strategic,
high growth energy projects in the United States. PEDEVCO’s
principal assets are its San Andres Asset located in the Northwest
Shelf of the Permian Basin in eastern New Mexico, and its
Denver-Julesberg (“D-J”) Basin Asset located in the D-J
Basin in Weld and Morgan Counties, Colorado. PEDEVCO is
headquartered in Houston, Texas. More information about PEDEVCO can
be found at www.pedevco.com.
Cautionary Note Regarding Forward-Looking Statements
All statements in this press release that are not based on
historical fact are “forward looking statements.” The
words “anticipate”, “believe”,
“estimate”, “expect”, “intend”,
“will”, “should”, “targeting”,
“projecting”, “driving” and similar
expressions, are intended to identify forward-looking statements.
These statements reflect management’s current beliefs,
assumptions and expectations and are subject to a number of factors
that may cause actual results to differ materially. Such factors
include the ultimate outcome of the offer and the Second-Step
Merger; the failure of the holders of Trust Common Units, if
required, to approve the terms of any transaction; the dissolution
and/or termination of the Trust prior to any future transaction
being completed; uncertainties as to whether the Trustee will
cooperate with PEDEVCO regarding the proposed transaction;
PEDEVCO’s ability to consummate the proposed transaction with
the Trust; the conditions to the completion of the proposed
transaction, including PEDEVCO’s ability to obtain
shareholder approval and/or being able to obtain effectiveness of
any registration statement required to be filed to register PEDEVCO
Common Stock issuable in such transaction, on a timely basis, if at
all; the possibility that PEDEVCO may be unable to achieve the
expected benefits of acquiring the Trust within the expected
time-frames or at all; that the integration of the Trust into
PEDEVCO may be more difficult, time-consuming or costly than
expected; that PEDEVCO’s costs and business disruption may be
greater than expected following the proposed transaction or the
public announcement of the proposed transaction; proved oil,
natural gas and NGL reserves associated with the underlying
properties; the Trust’s or Avalon’s future financial
position, business strategy, project costs and plans and objectives
for future operations; and the effect of COVID-19 on the U.S. and
global economy, the effect of U.S. and global efforts to reduce the
spread of the virus, including ‘stay-at-home’ and other
orders, and the resulting effect of such pandemic and governmental
responses thereto on the market for oil and gas and the U.S. and
global economy in general. Additional risks that may affect PEDEVCO
and the Trust’s operations are set forth in the
“Forward-Looking Statements,” “Risk
Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
section of the offer to exchange, and in each of PEDEVCO’s
and the Trust’s 2019 Annual Report on Form 10-K, as well as
in their respective Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the SEC. Both PEDEVCO and the Trust
operate in a highly competitive and rapidly changing environment,
thus new or unforeseen risks may arise. These forward-looking
statements speak only as of the date of this communication or as of
the date to which they refer, and PEDEVCO assumes no obligation to
update any forward-looking statements as a result of new
information or future events or developments, except as required by
law. Accordingly, investors should not place any reliance on
forward-looking statements as a prediction of actual results.
Readers are also urged to carefully review and consider the other
various disclosures in each of PEDEVCO’s and the
Trust’s public filings with the SEC.
Additional
Information
This communication relates to a proposal that PEDEVCO has made for
a business combination transaction with the Trust and the exchange
offer which PEDEVCO, through SRPT Acquisition, LLC, its wholly
owned subsidiary, has made to holders of Trust Common Units. The
exchange offer is being made pursuant to a tender offer statement
on Schedule TO (including the offer to exchange, the letter of
transmittal and other related offer documents) and a registration
statement on Form S-4 filed by PEDEVCO on October 13, 2020. These
materials, as may be amended from time to time, contain important
information, including the terms and conditions of the offer.
Subject to future developments, PEDEVCO (and, if applicable, the
Trust) may file one or more proxy statements, information
statements or other documents with the SEC. This communication is
not a substitute for any proxy statement, registration statement,
tender offer statement, prospectus or other document PEDEVCO and/or
the Trust may file with the SEC in connection with the proposed
transaction.
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. INVESTORS AND
SECURITY HOLDERS OF PEDEVCO AND THE TRUST ARE URGED TO READ THE
TENDER OFFER STATEMENT (INCLUDING THE OFFER TO EXCHANGE, THE LETTER
OF TRANSMITTAL AND OTHER RELATED OFFER DOCUMENTS) FILED BY PEDEVCO
WITH THE SEC ON OCTOBER 13, 2020, THE REGISTRATION STATEMENT ON
FORM S-4 FILED BY PEDEVCO WITH THE SEC ON OCTOBER 13, 2020, ANY
AMENDMENTS THERETO AND ANY OTHER DOCUMENTS FILED WITH THE SEC
CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE AS
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Any definitive proxy statements(s) or prospectus(es)
(if and when available) will be mailed to shareholders of PEDEVCO
and/or the Trust, as applicable. Investors and security holders may
obtain free copies of these documents (if and when available) and
other documents filed with the SEC by PEDEVCO through the web site
maintained by the SEC at www.sec.gov,
and by visiting PEDEVCO’s investor relations site
at www.pedevco.com under
the tab “Investors” and then under the tab “SEC
Filings.”
This communication shall not constitute an offer to sell or
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. You can find information about PEDEVCO’s
executive officers and directors in the Annual Report on Form 10-K
for the year ended December 31, 2019 filed by PEDEVCO with the
SEC on March 30, 2020, in PEDEVCO’s proxy statement filed by
PEDEVCO with the SEC on July 10, 2020, and in PEDEVCO’s
registration statement on Form S-4 filed by PEDEVCO with the SEC on
October 13, 2020.
PEDEVCO Corp., (713) 221-1768
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