Battalion Oil Corporation Announces Second Quarter 2022 Financial and Operating Results

Rhea-AI Summary

Battalion Oil Corporation (NYSE American: BATL) reported its second quarter 2022 financial results, with average daily production of 15,044 Boepd and total revenue of $101.5 million. This marks a revenue increase from $64.4 million in Q2 2021, driven by a $28.75 per Boe rise in average realized prices. The company faces realized hedge losses of $44.7 million. Positive developments include five wells brought online, a strategic acid gas treatment facility, and strong projected EBITDA growth. As of June 30, 2022, the company had $220 million in debt and $58.6 million in total liquidity.

Positive

• Average daily production increased to 15,044 Boepd.
• Total revenue rose to $101.5 million compared to $64.4 million in Q2 2021.
• Five wells from the 2022 capital program were successfully brought online.
• Construction of a strategic acid gas treating facility aims to reduce operating expenses and environmental impact.
• Adjusted EBITDA improved to $18.2 million, up from $14.1 million in Q2 2021.

Negative

• Realized hedge losses totaled approximately $44.7 million in Q2 2022.
• Average daily production decreased from 15,571 Boepd in Q2 2021.
• Lease operating and workover expenses increased to $9.71 per Boe from $7.72 per Boe in the prior year.
• Adjusted net loss to common stockholders was $0.2 million for the quarter.

HOUSTON, Aug. 08, 2022 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the second quarter 2022.

Key Highlights

• First five wells of 2022 capital program put online during quarter and continued one-rig program with spudding of next three well pad
• Disciplined capital program mitigating inflation and supply chain disruption
• Outstanding performance in drilling and completion operations – fewer drilling days and higher pump efficiency than plan
• Construction underway on recently announced strategic acid gas treating facility
• Anticipate meaningful production and EBITDA growth in second half of 2022
  

Management Comments

Richard Little, the Company’s CEO, commented, “The second quarter was all about building momentum as we pivoted towards production and cash flow growth. The first five wells of our 2022 capital program were brought online this quarter and with that comes increased exposure to a strong commodity price environment. While we are yet to see a full quarter of production from these wells, we are encouraged by the early results and the potential they bring from a cash flow perspective.”

“We are also excited to have recently announced a landmark joint venture to develop a strategic acid gas treatment facility in Winkler County. This agreement is a critical piece of our story and is central to our strategy. Not only does it provide a comprehensive solution for our current and future gas processing needs, but it does so while significantly reducing our operating expenses, minimizing our capital exposure, and meaningfully reducing our environmental impact.”

Mr. Little continued, “With our development program still clipping along with record efficiency and our hedge book continuously improving as we aim to lock in returns, we expect to generate substantial EBITDA growth in the second half of the year as we exit 2022 having delivered meaningful growth in daily production.”

Results of Operations

Average daily net production and total operating revenue during the second quarter 2022 were 15,044 barrels of oil equivalent per day (“Boepd”) (49% oil) and $101.5 million, respectively, as compared to production and revenue of 15,571 Boepd (57% oil) and $64.4 million, respectively, during the second quarter 2021. The increase in revenues year-over-year is primarily attributable to an approximate $28.75 per Boe increase in average realized prices (excluding the impact of hedges).

Excluding the impact of hedges, Battalion realized 101% of the average NYMEX oil price during the second quarter of 2022. Realized hedge losses totaled approximately $44.7 million during the second quarter 2022.

Lease operating and workover expense was $9.71 per Boe in the second quarter of 2022 and $7.72 per Boe in the second quarter of 2021. Adjusted G&A was $2.90 per Boe in the second quarter of 2022 compared to $2.69 per Boe in the second quarter of 2021 (see Selected Operating Data table for additional information).

The Company reported net income to common stockholders for the second quarter of 2022 of $13.0 million and net income per diluted share of $0.79. After adjusting for selected items, the Company reported an adjusted net loss to common stockholders for the second quarter of 2022 of $0.2 million, or an adjusted net loss of $0.01 per diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended June 30, 2022, was $18.2 million as compared to $14.1 million during the quarter ended June 30, 2021 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of June 30, 2022, the Company had $220.0 million of indebtedness outstanding, approximately $1.3 million of letters of credit outstanding and up to $15.0 million in delayed draw term loans available to be drawn under our Term Loan Agreement. Total liquidity on June 30, 2022, inclusive of $43.6 million of cash and cash equivalents, was $58.6 million.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, August 9, 2022, at 10:00 a.m. Central Time. To access the live conference call, local participants may dial +1 646-828-8193. All other participants may dial (888) 220-8474 for toll free. The confirmation code for the live conference call is 1239325. The live conference call will also be available through the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab. The replay for the event will be available on the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab.

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements. Forward-looking statements include, among others, statements about anticipated production, liquidity, capital spending, drilling and completion plans, and forward guidance. Forward-looking statements may often, but not always, be identified by the use of such words such as "expects", "believes", "intends", "anticipates", "plans", "estimates", “projects,” "potential", "possible", or "probable" or statements that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved. Forward-looking statements are based on current beliefs and expectations and involve certain assumptions or estimates that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and other filings submitted by the Company to the U.S. Securities and Exchange Commission (“SEC”), copies of which may be obtained from the SEC's website at www.sec.gov or through the Company's website at www.battalionoil.com. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. The Company has no duty, and assumes no obligation, to update forward-looking statements as a result of new information, future events or changes in the Company's expectations.

About Battalion

Battalion Oil Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.

Contact

Chris Lang
Director, Finance & Investor Relations
(832) 538-0551

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Operating revenues:
Oil, natural gas and natural gas liquids sales:
Oil	$	73,944			$	51,935			$	136,468			$	93,205
Natural gas		14,759				5,317				23,640				14,404
Natural gas liquids		12,587				6,851				22,590				11,760
Total oil, natural gas and natural gas liquids sales		101,290				64,103				182,698				119,369
Other		221				263				415				515
Total operating revenues		101,511				64,366				183,113				119,884
Operating expenses:
Production:
Lease operating		11,909				10,169				23,433				19,636
Workover and other		1,383				767				2,248				1,327
Taxes other than income		5,372				2,912				10,323				6,104
Gathering and other		15,869				14,331				31,124				27,502
General and administrative		4,588				4,031				9,573				8,858
Depletion, depreciation and accretion		12,601				11,249				22,821				21,844
Total operating expenses		51,722				43,459				99,522				85,271
Income (loss) from operations		49,789				20,907				83,591				34,613
Other income (expenses):
Net gain (loss) on derivative contracts		(31,910	)			(53,089	)			(155,768	)			(98,800	)
Interest expense and other		(4,832	)			(1,747	)			(7,520	)			(3,117	)
Total other income (expenses)		(36,742	)			(54,836	)			(163,288	)			(101,917	)
Income (loss) before income taxes		13,047				(33,929	)			(79,697	)			(67,304	)
Income tax benefit (provision)		—				—				—				—
Net income (loss)	$	13,047			$	(33,929	)		$	(79,697	)		$	(67,304	)
Net income (loss) per share of common stock:
Basic	$	0.80			$	(2.09	)		$	(4.88	)		$	(4.14	)
Diluted	$	0.79			$	(2.09	)		$	(4.88	)		$	(4.14	)
Weighted average common shares outstanding:
Basic		16,338				16,268				16,320				16,250
Diluted		16,510				16,268				16,320				16,250

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)

	June 30, 2022				December 31, 2021
Current assets:
Cash and cash equivalents	$	43,640			$	46,864
Accounts receivable, net		53,002				36,806
Assets from derivative contracts		6,146				1,383
Restricted cash		135				1,495
Prepaids and other		927				1,366
Total current assets		103,850				87,914
Oil and natural gas properties (full cost method):
Evaluated		632,004				569,886
Unevaluated		64,760				64,305
Gross oil and natural gas properties		696,764				634,191
Less - accumulated depletion		(362,257	)			(339,776	)
Net oil and natural gas properties		334,507				294,415
Other operating property and equipment:
Other operating property and equipment		4,045				3,467
Less - accumulated depreciation		(1,027	)			(1,035	)
Net other operating property and equipment		3,018				2,432
Other noncurrent assets:
Assets from derivative contracts		3,972				2,515
Operating lease right of use assets		539				721
Other assets		3,329				2,270
Total assets	$	449,215			$	390,267
Current liabilities:
Accounts payable and accrued liabilities	$	97,334			$	62,826
Liabilities from derivative contracts		91,750				58,322
Current portion of long-term debt		15,000				85
Operating lease liabilities		377				369
Asset retirement obligations		401				—
Total current liabilities		204,862				121,602
Long-term debt, net		188,372				181,565
Other noncurrent liabilities:
Liabilities from derivative contracts		58,138				7,144
Asset retirement obligations		11,686				11,896
Operating lease liabilities		162				352
Other		1,408				4,003
Commitments and contingencies
Stockholders' equity:
Common stock: 100,000,000 shares of $0.0001 par value authorized;
16,337,910 and 16,273,913 shares issued and outstanding as of
June 30, 2022 and December 31, 2021, respectively		2				2
Additional paid-in capital		332,766				332,187
Retained earnings (accumulated deficit)		(348,181	)			(268,484	)
Total stockholders' equity		(15,413	)			63,705
Total liabilities and stockholders' equity	$	449,215			$	390,267

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Cash flows from operating activities:
Net income (loss)	$	13,047			$	(33,929	)		$	(79,697	)		$	(67,304	)
Depletion, depreciation and accretion		12,601				11,249				22,821				21,844
Stock-based compensation, net		473				485				857				1,079
Unrealized loss (gain) on derivative contracts		(12,837	)			34,817				78,201				70,869
Amortization of deferred loan costs		908				—				1,807				—
(Gain) loss on sale of other assets		(96	)			—				(96	)			—
Reorganization items		—				—				(744	)			—
Accrued settlements on derivative contracts		1,843				2,404				14,652				6,972
Change in fair value of Change of Control Call Option		(563	)			—				(2,595	)			—
Other income (expense)		—				(170	)			—				(287	)
Cash flows from operations before changes in working capital		15,376				14,856				35,206				33,173
Changes in working capital		910				886				(6,873	)			(4,073	)
Net cash provided by (used in) operating activities		16,286				15,742				28,333				29,100
Cash flows from investing activities:
Oil and natural gas capital expenditures		(35,693	)			(23,801	)			(51,377	)			(37,593	)
Proceeds received from sale of oil and natural gas properties		—				(150	)			—				926
Other operating property and equipment capital expenditures		(545	)			—				(705	)			—
Proceeds received from sale of other operating property and equipment		96				—				96				—
Funds held in escrow and other		—				1				—				(2	)
Net cash provided by (used in) investing activities		(36,142	)			(23,950	)			(51,986	)			(36,669	)
Cash flows from financing activities:
Proceeds from borrowings		20,000				66,000				20,000				82,000
Repayments of borrowings		—				(58,000	)			(85	)			(77,000	)
Debt issuance costs		—				—				(379	)			—
Other		(6	)			(5	)			(467	)			(268	)
Net cash provided by (used in) financing activities		19,994				7,995				19,069				4,732
Net increase (decrease) in cash, cash equivalents and restricted cash		138				(213	)			(4,584	)			(2,837	)
Cash, cash equivalents and restricted cash at beginning of period		43,637				1,671				48,359				4,295
Cash, cash equivalents and restricted cash at end of period	$	43,775			$	1,458			$	43,775			$	1,458

BATTALION OIL CORPORATION 
SELECTED OPERATING DATA (Unaudited)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Production volumes:
Crude oil (MBbls)		674				805				1,344				1,524
Natural gas (MMcf)		2,355				2,055				4,670				4,188
Natural gas liquids (MBbls)		303				270				576				485
Total (MBoe)		1,369				1,417				2,698				2,707
Average daily production (Boe/d)		15,044				15,571				14,906				14,956
Average prices:
Crude oil (per Bbl)	$	109.71			$	64.52			$	101.54			$	61.16
Natural gas (per Mcf)		6.27				2.59				5.06				3.44
Natural gas liquids (per Bbl)		41.54				25.37				39.22				24.25
Total per Boe		73.99				45.24				67.72				44.10
Cash effect of derivative contracts:
Crude oil (per Bbl)	$	(58.03	)		$	(22.55	)		$	(52.35	)		$	(18.13	)
Natural gas (per Mcf)		(2.39	)			(0.06	)			(1.54	)			(0.07	)
Natural gas liquids (per Bbl)		—				—				—				—
Total per Boe		(32.69	)			(12.89	)			(28.75	)			(10.32	)
Average prices computed after cash effect of settlement of derivative contracts:
Crude oil (per Bbl)	$	51.68			$	41.97			$	49.19			$	43.03
Natural gas (per Mcf)		3.88				2.53				3.52				3.37
Natural gas liquids (per Bbl)		41.54				25.37				39.22				24.25
Total per Boe		41.30				32.35				38.97				33.78
Average cost per Boe:
Production:
Lease operating	$	8.70			$	7.18			$	8.69			$	7.25
Workover and other		1.01				0.54				0.83				0.49
Taxes other than income		3.92				2.06				3.83				2.25
Gathering and other		11.59				10.11				11.54				10.16
General and administrative, as adjusted(1)		2.90				2.69				3.09				2.95
Depletion		9.07				7.77				8.33				7.89
(1)   Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
General and administrative:
General and administrative, as reported	$	3.36			$	2.84			$	3.55			$	3.27
Stock-based compensation:
Non-cash		(0.35	)			(0.34	)			(0.32	)			(0.40	)
Non-recurring charges and other:
Cash		(0.11	)			0.19				(0.14	)			0.08
General and administrative, as adjusted(2)	$	2.90			$	2.69			$	3.09			$	2.95
Total operating costs, as reported	$	28.58			$	22.73			$	28.44			$	23.42
Total adjusting items		(0.46	)			(0.15	)			(0.46	)			(0.32	)
Total operating costs, as adjusted(3)	$	28.12			$	22.58			$	27.98			$	23.10

____________________________

(2)   General and administrative, as adjusted, is a non-GAAP measure that excludes non-cash stock-based compensation charges relating to equity awards under our incentive stock plan, as well as other cash charges associated with non-recurring charges and other. The Company believes that it is useful to understand the effects that these charges have on general and administrative expenses and total operating costs and that exclusion of such charges is useful for comparison to prior periods

(3)   Represents lease operating expense, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in the reconciliation above.

BATTALION OIL CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
As Reported:
Net income (loss), as reported	$	13,047			$	(33,929	)		$	(79,697	)		$	(67,304	)
Impact of Selected Items:
Unrealized loss (gain) on derivatives contracts:
Crude oil	$	(11,939	)		$	31,591			$	70,962			$	66,402
Natural gas		(898	)			3,226				7,239				4,467
Total mark-to-market non-cash charge		(12,837	)			34,817				78,201				70,869
Change in fair value of Change of Control Call Option		(562	)			—				(2,594	)			—
Rig termination and stacking charges		—				—				—				—
Non-recurring charges and other		149				(273	)			366				(221	)
Selected items, before income taxes		(13,250	)			34,544				75,973				70,648
Income tax effect of selected items		—				—				—				—
Selected items, net of tax		(13,250	)			34,544				75,973				70,648
As Adjusted:
Net income (loss), excluding selected items(1)	$	(203	)		$	615			$	(3,724	)		$	3,344
Basic net income (loss) per common share, as reported	$	0.80			$	(2.09	)		$	(4.88	)		$	(4.14	)
Impact of selected items		(0.81	)			2.13				4.65				4.35
Basic net income (loss) per common share, excluding selected items(1)	$	(0.01	)		$	0.04			$	(0.23	)		$	0.21
Diluted net income (loss) per common share, as reported	$	0.79			$	(2.09	)		$	(4.88	)		$	(4.14	)
Impact of selected items		(0.80	)			2.13				4.65				4.35
Diluted net income (loss) per common share, excluding selected items(1)(2)	$	(0.01	)		$	0.04			$	(0.23	)		$	0.21
Net cash provided by (used in) operating activities	$	16,286			$	15,742			$	28,333			$	29,100
Changes in working capital		(910	)			(886	)			6,873				4,073
Cash flows from operations before changes in working capital		15,376				14,856				35,206				33,173
Cash components of selected items		(1,694	)			(2,677	)			(13,542	)			(7,193	)
Income tax effect of selected items		—				—				—				—
Cash flows from operations before changes in working capital, adjusted for selected items(1)	$	13,682			$	12,179			$	21,664			$	25,980

____________________________

(1)   Net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital adjusted for selected items are non-GAAP measures presented based on management's belief that they will enable a user of the financial information to understand the impact of these items on reported results. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flows from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

(2)  The impact of selected items for the three and six months ended June 30, 2022 were calculated based upon weighted average diluted shares of 16.3 million shares, respectively, due to the net income (loss) available to common stockholders, excluding selected items. The impact of selected items for the three and six months ended June 30, 2021 were calculated based upon weighted average diluted shares of 16.4 million shares, respectively, due to the net income (loss) available to common stockholders, excluding selected items.  

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Net income (loss), as reported	$	13,047			$	(33,929	)		$	(79,697	)		$	(67,304	)
Impact of adjusting items:
Interest expense		5,394				1,838				10,115				3,334
Depletion, depreciation and accretion		12,601				11,249				22,821				21,844
Stock-based compensation		473				485				857				1,079
Interest income		(1	)			(84	)			(1	)			(209	)
Unrealized loss (gain) on derivatives contracts		(12,837	)			34,817				78,201				70,869
Change in fair value of Change of Control Call Option		(562	)			—				(2,594	)			—
Non-recurring charges and other		53				(275	)			270				(277	)
Adjusted EBITDA(1)	$	18,168			$	14,101			$	29,972			$	29,386

____________________________

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management's belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

	Three Months				Three Months				Three Months				Three Months
	Ended				Ended				Ended				Ended
	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Net income (loss), as reported	$	13,047			$	(92,744	)		$	25,935			$	13,052
Impact of adjusting items:
Interest expense		5,394				4,721				3,215				1,904
Depletion, depreciation and accretion		12,601				10,220				12,679				10,885
Stock-based compensation		473				384				450				481
Interest income		(1	)			—				(1	)			(3	)
Loss (gain) on extinguishment of debt		—				—				122				(2,068	)
Unrealized loss (gain) on derivatives contracts		(12,837	)			91,038				(21,332	)			(1,816	)
Change in fair value of Change of Control Call Option		(562	)			(2,032	)			—				—
Non-recurring charges (credits) and other		53				217				(718	)			559
Adjusted EBITDA(1)	$	18,168			$	11,804			$	20,350			$	22,994
Adjusted LTM EBITDA(1)	$	73,316

____________________________

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management's belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

	Three Months				Three Months				Three Months				Three Months
	Ended				Ended				Ended				Ended
	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Net income (loss), as reported	$	(33,929	)		$	(33,375	)		$	(63,757	)		$	(153,125	)
Impact of adjusting items:
Interest expense		1,838				1,496				1,853				1,964
Depletion, depreciation and accretion		11,249				10,595				13,886				15,755
Full cost ceiling impairment		—				—				26,702				128,336
Stock-based compensation		485				594				785				620
Interest income		(84	)			(125	)			(171	)			(273	)
Unrealized loss (gain) on derivatives contracts		34,817				36,052				30,172				21,128
Non-recurring charges (credits) and other		(275	)			48				(658	)			210
Adjusted EBITDA(1)(2)	$	14,101			$	15,285			$	8,812			$	14,615
Adjusted LTM EBITDA(1)(2)	$	52,813

____________________________

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management's belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

(2)   Adjusted EBITDA for the three months ended September 30, 2020 includes approximately $6.6 million of net proceeds from hedge monetizations that occurred during the period.

FAQ

What were Battalion Oil's production and revenue figures for Q2 2022?

Battalion Oil reported average daily production of 15,044 Boepd and total revenue of $101.5 million for Q2 2022.

How did Battalion Oil's Q2 2022 revenue compare to Q2 2021?

The revenue of $101.5 million in Q2 2022 increased from $64.4 million in Q2 2021.

What caused the increase in Battalion Oil's revenue year-over-year?

The revenue increase is primarily due to a $28.75 per Boe rise in average realized prices.

What are Battalion Oil's hedge losses for Q2 2022?

Battalion Oil experienced realized hedge losses of approximately $44.7 million in Q2 2022.

What is the current liquidity position of Battalion Oil as of June 30, 2022?

As of June 30, 2022, Battalion Oil had total liquidity of $58.6 million, including $220 million in debt.