Phoenix Energy One, LLC Offering - What You Need to Know

Thinking about investing in Phoenix Energy One, LLC? It is exciting to look at new opportunities, but before you invest your hard-earned money, let’s break down what this company is doing in plain English.

Note: This is not a typical stock offering. You are lending money to the company in exchange for interest payments.

1. What is this company doing?

Phoenix Energy One is an Irvine, California-based energy company. They acquire, develop, and operate oil and natural gas properties, mainly in the Permian Basin. They use a proprietary software system to find undervalued land and drilling opportunities. They rely on trade secrets to protect this technology rather than patents. This is a risk, as competitors could create similar tools, making it harder for the company to find profitable drilling sites.

2. How do they make money?

The company makes money by selling the oil and natural gas they extract. They have grown quickly, with revenue rising from $54.6 million in 2022 to $281.2 million in 2024. However, the company is not yet profitable. They reported a loss of $24.8 million in 2024. Because drilling is expensive, they rely on borrowing money to fund their growth.

3. What is this "Note" offering?

You are acting as a lender. The company is offering "Senior Subordinated Notes" with interest rates between 9% and 12% per year.

• Cash Interest: You can choose to receive monthly interest payments in cash.
• Compound Interest: You can choose to have interest added to your balance, which then earns more interest until the note matures. You can choose terms of 3, 5, 7, or 11 years.

Important: The company wants to raise $750 million. If they hit this goal, they expect to pay over $11 million in sales commissions and fees. This leaves less money available for actual drilling operations.

4. What are the main risks?

• The "Debt Cycle": The company admits it does not make enough cash to pay its current debts and fund new drilling. They rely on selling new notes to pay off existing lenders.
• You are at the back of the line: These notes are "subordinated." This means if the company goes bankrupt, banks and other senior lenders get paid first. You only get paid if there is money left over. Also, your claim is against the parent company, not the specific assets held by its subsidiaries.
• No Safety Net: These notes are not FDIC insured or government-backed. The company has no "sinking fund"—a dedicated pile of cash—set aside to ensure they can pay you back.
• Lack of Liquidity: You cannot easily sell these notes. There is no public market for them. You need the company’s written permission to transfer them, and they do not have to say yes.
• Regulatory Hurdles: The energy business is heavily regulated. If environmental or drilling permits are delayed or if government policies change, the company may have to stop operations, which could stop your interest payments.

5. Is this right for me?

You are a lender, not an owner. You are betting that the company will have enough cash to pay you back over the life of your note. With nearly $1 billion in total debt and ongoing losses, this investment is very risky. Only consider this if you have a high risk tolerance and can afford to lose your entire investment.

Final Thought: Before you commit, ask yourself if you are comfortable with the "Debt Cycle" risk mentioned above. If you are relying on these interest payments for your monthly living expenses, the lack of liquidity and the company’s current lack of profitability are significant factors to weigh carefully.

Disclaimer: I am an AI, not a financial advisor. This guide is for informational purposes only. Always read the full prospectus before investing.