Battalion Oil Corporation Announces Second Quarter 2023 Financial and Operating Results

Rhea-AI Summary

Battalion Oil Corporation announced Q2 2023 results with sales volumes of 14,253 Boe/d. Net loss of $4.7 million and Adjusted EBITDA of $16.8 million. Acid gas injection project expected online before year end. Decrease in revenues due to lower average realized prices. Company obtained commitment letter for $38 million preferred equity securities.

Positive

• Acid gas injection project expected online before year end
• Company obtained commitment letter for $38 million preferred equity securities

Negative

• Decrease in revenues due to lower average realized prices

HOUSTON, Aug. 21, 2023 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the second quarter of 2023.

Key Highlights

• Generated second quarter 2023 sales volumes of 14,253 barrels of oil equivalent per day (“Boe/d”)
• Continued robust production results from our most recent wells
• Generated net loss of $4.7 million and Adjusted EBITDA of $16.8 million in the second quarter of 2023
  

Management Comments

The Company has continued to work with its partner on the previously announced acid gas injection (“AGI”) project and now expects to have the facility online before year end. Additional compression and well work are underway to maximize the expense savings potential of the project once it is fully online. The latest Monument Draw well continues to outperform offset wells and has produced over 217,000 Boe in its first six months on production while flowing naturally without artificial lift.

Matt Steele, Chief Executive Officer, commented, “In the second quarter, we prepared to recommence drilling activity in Monument Draw. We also worked diligently with our midstream partner to progress the AGI commissioning. We look forward to our drilling program and increasing EBITDA in the back half of the year.”

Results of Operations

Average daily net production and total operating revenue during the second quarter of 2023 were 14,253 Boe/d (49% oil) and $54.3 million, respectively, as compared to production and revenue of 15,044 Boe/d (49% oil) and $101.5 million, respectively, during the second quarter of 2022. The decrease in revenues in the second quarter of 2023 as compared to the second quarter of 2022 is primarily attributable to an approximate $32.44 decrease in average realized prices (excluding the impact of hedges). Excluding the impact of hedges, Battalion realized 98% of the average NYMEX oil price during the second quarter of 2023. Realized hedge gains totaled approximately $2.1 million during the second quarter 2023.

Lease operating and workover expense was $10.79 per Boe in the second quarter of 2023 versus $9.71 per Boe in the second quarter of 2022. The increase in lease operating and workover expense per Boe year-over-year is primarily attributable to a decrease in average daily production as a large portion of our lease operating expenses are fixed costs. Gathering and other expense was $12.97 per Boe in the second quarter of 2023 versus $11.59 per Boe in the second quarter of 2022. The increase was due primarily to cleanout projects on our Valkyrie facility that increased the throughput capacity. General and administrative expense was $4.04 per Boe in the second quarter of 2023 and $3.36 per Boe in the second quarter of 2022. The increase is primarily due to an increase in professional fees. After adjusting for selected items, Adjusted G&A was $4.01 per Boe in the second quarter of 2023 compared to $2.90 per Boe in the second quarter of 2022.

The Company reported net loss for the second quarter of 2023 of $4.7 million, or $0.35 per share available to common stockholders. After adjusting for selected items, the Company reported an adjusted net loss available to common stockholders for the second quarter of 2023 of $6.9 million, or $0.42 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended June 30, 2023 was $16.8 million as compared to $18.2 million during the quarter ended June 30, 2022 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of June 30, 2023, the Company had $220.3 million of indebtedness outstanding and approximately $1.4 million of letters of credit outstanding. Subsequent to June 30, 2023, the letters of credit were cancelled. Total liquidity on June 30, 2023, made up of cash and cash equivalents, was $18.5 million.

In August 2023, the Company obtained a commitment letter from its existing equity shareholders to purchase additional preferred equity securities in an amount up to $38 million and provided notice to the investors of its intent to draw the full $38 million with an expected close the third quarter of 2023. For further discussion on our liquidity and balance sheet, as well as recent developments, refer to Management’s Discussion and Analysis and Risk Factors in the Company’s Form 10-Q.

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, 2022, 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

Matthew B. Steele
Chief Executive Officer & Principal Financial Officer
832-541-8334

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,
		2023				2022				2023				2022
Operating revenues:
Oil, natural gas and natural gas liquids sales:
Oil		$	46,168			$	73,944			$	100,383			$	136,468
Natural gas			2,060				14,759				4,960				23,640
Natural gas liquids			5,657				12,587				12,815				22,590
Total oil, natural gas and natural gas liquids sales			53,885				101,290				118,158				182,698
Other			387				221				1,256				415
Total operating revenues			54,272				101,511				119,414				183,113
Operating expenses:
Production:
Lease operating			11,365				11,909				23,056				23,433
Workover and other			2,634				1,383				3,969				2,248
Taxes other than income			3,180				5,372				6,370				10,323
Gathering and other			16,828				15,869				33,345				31,124
General and administrative			5,243				4,588				10,380				9,573
Depletion, depreciation and accretion			14,713				12,601				30,861				22,821
Total operating expenses			53,963				51,722				107,981				99,522
Income (loss) from operations			309				49,789				11,433				83,591
Other income (expenses):
Net gain (loss) on derivative contracts			4,473				(31,910	)			23,946				(155,768	)
Interest expense and other			(9,530	)			(4,832	)			(17,316	)			(7,520	)
Total other income (expenses)			(5,057	)			(36,742	)			6,630				(163,288	)
Income (loss) before income taxes			(4,748	)			13,047				18,063				(79,697	)
Income tax benefit (provision)			—				—				—				—
Net income (loss)		$	(4,748	)		$	13,047			$	18,063			$	(79,697	)
Net income (loss) per share of common stock:
Basic		$	(0.35	)		$	0.80			$	0.87			$	(4.88	)
Diluted		$	(0.35	)		$	0.79			$	0.86			$	(4.88	)
Weighted average common shares outstanding:
Basic			16,457				16,338				16,425				16,320
Diluted			16,457				16,510				16,520				16,320

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

		June 30, 2023				December 31, 2022
Current assets:
Cash and cash equivalents		$	18,514			$	32,726
Accounts receivable, net			23,518				37,974
Assets from derivative contracts			9,611				16,244
Restricted cash			90				90
Prepaids and other			1,049				1,131
Total current assets			52,782				88,165
Oil and natural gas properties (full cost method):
Evaluated			727,347				713,585
Unevaluated			62,649				62,621
Gross oil and natural gas properties			789,996				776,206
Less - accumulated depletion			(420,964	)			(390,796	)
Net oil and natural gas properties			369,032				385,410
Other operating property and equipment:
Other operating property and equipment			4,674				4,434
Less - accumulated depreciation			(1,486	)			(1,209	)
Net other operating property and equipment			3,188				3,225
Other noncurrent assets:
Assets from derivative contracts			5,299				5,379
Operating lease right of use assets			162				352
Other assets			2,778				2,827
Total assets		$	433,241			$	485,358
Current liabilities:
Accounts payable and accrued liabilities		$	48,897			$	100,095
Liabilities from derivative contracts			15,480				29,286
Current portion of long-term debt			42,606				35,067
Operating lease liabilities			162				352
Asset retirement obligations			111				225
Total current liabilities			107,256				165,025
Long-term debt, net			164,055				182,676
Other noncurrent liabilities:
Liabilities from derivative contracts			17,406				33,649
Asset retirement obligations			15,741				15,244
Operating lease liabilities			—				—
Deferred income taxes			—				—
Other			3,432				4,136
Commitments and contingencies
Temporary equity:
Series A redeemable convertible preferred stock: 25,000 shares of $.0001			26,030				—
par value authorized, issued and outstanding as of June 30, 2023
Stockholders' equity:
Common stock: 100,000,000 shares of $0.0001 par value authorized;
16,456,563 and 16,344,815 shares issued and outstanding as of
June 30, 2023 and December 31, 2022, respectively			2				2
Additional paid-in capital			331,201				334,571
Retained earnings (accumulated deficit)			(231,882	)			(249,945	)
Total stockholders' equity			99,321				84,628
Total liabilities, temporary equity and stockholders' equity		$	433,241			$	485,358

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
Cash flows from operating activities:
Net income (loss)		$	(4,748	)		$	13,047			$	18,063			$	(79,697	)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depletion, depreciation and accretion			14,713				12,601				30,861				22,821
Stock-based compensation, net			(772	)			473				(545	)			857
Unrealized loss (gain) on derivative contracts			(2,332	)			(12,837	)			(23,336	)			78,201
Amortization/accretion of financing related costs			2,045				908				3,843				1,807
Reorganization items			—				—				—				(744	)
Accrued settlements on derivative contracts			(374	)			1,843				(929	)			14,652
Change in fair value of embedded derivative liability			358				(563	)			(704	)			(2,595	)
Other income (expense)			42				(96	)			53				(96	)
Cash flows from operations before changes in working capital			8,932				15,376				27,306				35,206
Changes in working capital			406				910				(18,657	)			(6,873	)
Net cash provided by (used in) operating activities			9,338				16,286				8,649				28,333
Cash flows from investing activities:
Oil and natural gas capital expenditures			(4,022	)			(35,693	)			(32,633	)			(51,377	)
Proceeds received from sale of oil and natural gas assets			—				—				1,189				—
Other operating property and equipment capital expenditures			(15	)			(545	)			(284	)			(705	)
Proceeds received from sale of other operating property and equipment			—				96				—				96
Other			(6	)			—				(11	)			—
Net cash provided by (used in) investing activities			(4,043	)			(36,142	)			(31,739	)			(51,986	)
Cash flows from financing activities:
Proceeds from borrowings			—				20,000				—				20,000
Repayments of borrowings			(10,026	)			—				(15,043	)			(85	)
Payment of deferred debt financing costs			—				—				—				(379	)
Proceeds from issuance of preferred stock			—				—				24,375				—
Other			—				(6	)			(454	)			(467	)
Net cash provided by (used in) financing activities			(10,026	)			19,994				8,878				19,069
Net increase (decrease) in cash, cash equivalents and restricted cash			(4,731	)			138				(14,212	)			(4,584	)
Cash, cash equivalents and restricted cash at beginning of period			23,335				43,637				32,816				48,359
Cash, cash equivalents and restricted cash at end of period		$	18,604			$	43,775			$	18,604			$	43,775

BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
Production volumes:
Crude oil (MBbls)			636				674				1,366				1,344
Natural gas (MMcf)			2,155				2,355				4,562				4,670
Natural gas liquids (MBbls)			302				303				629				576
Total (MBoe)			1,297				1,369				2,755				2,698
Average daily production (Boe/d)			14,253				15,044				15,221				14,906
Average prices:
Crude oil (per Bbl)		$	72.59			$	109.71			$	73.49			$	101.54
Natural gas (per Mcf)			0.96				6.27				1.09				5.06
Natural gas liquids (per Bbl)			18.73				41.54				20.37				39.22
Total per Boe			41.55				73.99				42.89				67.72
Cash effect of derivative contracts:
Crude oil (per Bbl)		$	(2.68	)		$	(58.03	)		$	(3.92	)		$	(52.35	)
Natural gas (per Mcf)			1.78				(2.39	)			1.31				(1.54	)
Natural gas liquids (per Bbl)			—				—				—				—
Total per Boe			1.65				(32.69	)			0.22				(28.75	)
Average prices computed after cash effect of settlement of derivative contracts:
Crude oil (per Bbl)		$	69.91			$	51.68			$	69.57			$	49.19
Natural gas (per Mcf)			2.74				3.88				2.40				3.52
Natural gas liquids (per Bbl)			18.73				41.54				20.37				39.22
Total per Boe			43.20				41.30				43.11				38.97
Average cost per Boe:
Production:
Lease operating		$	8.76			$	8.70			$	8.37			$	8.69
Workover and other			2.03				1.01				1.44				0.83
Taxes other than income			2.45				3.92				2.31				3.83
Gathering and other			12.97				11.59				12.10				11.54
General and administrative, as adjusted (1)			4.01				2.90				3.61				3.09
Depletion			11.07				9.07				10.95				8.33
(1) Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
General and administrative:
General and administrative, as reported		$	4.04			$	3.36			$	3.77			$	3.55
Stock-based compensation:
Non-cash			0.60				(0.35	)			0.20				(0.32	)
Non-recurring charges and other:
Cash			(0.63	)			(0.11	)			(0.36	)			(0.14	)
General and administrative, as adjusted(2)		$	4.01			$	2.90			$	3.61			$	3.09
Gathering and other, as reported		$	12.97			$	11.59			$	12.10			$	11.54
Rig termination and stacking charges and other			0.26				0.07				0.12				0.04
Gathering and other, as adjusted(3)		$	13.23			$	11.66			$	12.22			$	11.58
Total operating costs, as reported		$	30.25			$	28.58			$	27.99			$	28.44
Total adjusting items			0.23				(0.39	)			(0.04	)			(0.42	)
Total operating costs, as adjusted(3)		$	30.48			$	28.19			$	27.95			$	28.02

 ________________________
(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
RECONCILIATION (Unaudited)
(In thousands, except per share amounts)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
As Reported:
Net income (loss) available to common stockholders - diluted (1)		$	(5,745	)		$	13,047			$	14,280			$	(79,697	)
Impact of Selected Items:
Unrealized loss (gain) on derivatives contracts:
Crude oil		$	(10,440	)		$	(11,939	)		$	(30,130	)		$	70,962
Natural gas			8,108				(898	)			6,794				7,239
Total mark-to-market non-cash charge			(2,332	)			(12,837	)			(23,336	)			78,201
Change in fair value of embedded derivative liability			358				(562	)			(704	)			(2,594	)
Non-recurring charges			811				149				994				366
Selected items, before income taxes			(1,163	)			(13,250	)			(23,046	)			75,973
Income tax effect of selected items			—				—				—				—
Selected items, net of tax			(1,163	)			(13,250	)			(23,046	)			75,973
Net income (loss) available to common stockholders, as adjusted (2)		$	(6,908	)		$	(203	)		$	(8,766	)		$	(3,724	)
Diluted net income (loss) per common share, as reported		$	(0.35	)		$	0.79			$	0.86			$	(4.88	)
Impact of selected items			(0.07	)			(0.80	)			(1.39	)			4.65
Diluted net income (loss) per common share, excluding selected items (2)(3)		$	(0.42	)		$	(0.01	)		$	(0.53	)		$	(0.23	)
Net cash provided by (used in) operating activities		$	9,338			$	16,286			$	8,649			$	28,333
Changes in working capital			(406	)			(910	)			18,657				6,873
Cash flows from operations before changes in working capital			8,932				15,376				27,306				35,206
Cash components of selected items			851				(1,694	)			1,589				(13,542	)
Income tax effect of selected items			—				—				—				—
Cash flows from operations before changes in working capital, adjusted for selected items (1)		$	9,783			$	13,682			$	28,895			$	21,664

 ________________________
(1)  Amount reflects net income (loss) available to common stockholders on a diluted basis for earnings per share purposes as calculated using the two-class method of computing earnings per share which is further described in Note 12, Earnings Per Share in our Form 10-Q for the quarter ended June 30, 2023.
(2)  Net income (loss) 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.
(3)  The impact of selected items for the three and six months ended June 30, 2023 were calculated based upon weighted average diluted shares of 16.5 million and 16.4 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, 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.

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
Net income (loss), as reported		$	(4,748	)		$	13,047			$	18,063			$	(79,697	)
Impact of adjusting items:
Interest expense			9,366				5,394				18,375				10,115
Depletion, depreciation and accretion			14,713				12,601				30,861				22,821
Stock-based compensation			(772	)			473				(545	)			857
Interest income			(234	)			(1	)			(425	)			(1	)
Unrealized loss (gain) on derivatives contracts			(2,332	)			(12,837	)			(23,336	)			78,201
Deferred financing costs expensed			—				-				-				-
Change in fair value of embedded derivative liability			358				(562	)			(704	)			(2,594	)
Rig termination and stacking charges			—				—				—				—
Non-recurring charges and other			477				53				629				270
Adjusted EBITDA(1)		$	16,828			$	18,168			$	42,918			$	29,972

________________________
(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, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Net income (loss), as reported		$	(4,748	)		$	22,811				(7,652	)			105,888
Impact of adjusting items:
Interest expense			9,366				9,009				9,378				6,232
Depletion, depreciation and accretion			14,713				16,148				15,479				13,615
Stock-based compensation			(772	)			227				670				683
Interest income			(234	)			(191	)			(227	)			(141	)
Unrealized loss (gain) on derivatives contracts			(2,332	)			(21,004	)			3,655				(102,112	)
Change in fair value of embedded derivative liability			358				(1,062	)			1,224				(449	)
Non-recurring charges (credits) and other			477				152				194				597
Adjusted EBITDA(1)		$	16,828			$	26,090			$	22,721			$	24,313
Adjusted LTM EBITDA(1)		$	89,952

________________________
(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 embedded derivative liability			(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.