HOUSTON, Nov. 15, 2023 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the third quarter of 2023.

Key Highlights

  • Generated third quarter 2023 sales volumes of 12,717 barrels of oil equivalent per day (“Boe/d”)
  • Continued robust production results from our most recent completed wells
  • Recommenced drilling operations in Monument Draw
  • Executed a $38.0 million preferred equity raise in September 2023 and obtained commitments for an additional $55.0 million preferred equity in November 2023 to support incremental activity plans
  • Continued to explore strategic alternatives

Management Comments

The Company has commenced drilling operations on a two-well pad in Monument Draw while preparing additional locations across all three asset areas. Drilling is ahead of plan from both a capital and time perspective and the wells should now be online in early 2024. The previously announced acid gas injection (“AGI”) project is still undergoing workover operations. All workover operations and improvements are expected to be completed and the facility fully online in the first quarter of 2024. With this expected timing, the facility should be operational contemporaneously with placing the two-well pad on production.

The latest Monument Draw well continues to outperform offset wells and has produced over 266,000 Boe in its first 225 days on production while flowing naturally without artificial lift. Monument Draw production showcased a lower forecast decline in the quarter, however downstream shut-ins curtailed production by over 2,500 Boe/d which the Company expects to have back online before the end of the first quarter of 2024, post third-party improvements to infrastructure.

Matt Steele, Chief Executive Officer, commented, “Drilling activity in Monument Draw is underway and ahead of plan on all metrics after the team stood up a new rig and new crews. We look forward to entering 2024 in position to benefit from producing our existing and new wells into the enhanced cost structure associated with AGI coming online.”

Results of Operations

Average daily net production and total operating revenue during the third quarter of 2023 were 12,717 Boe/d (46% oil) and $54.1 million, respectively, as compared to production and revenue of 16,228 Boe/d (50% oil) and $99.1 million, respectively, during the third quarter of 2022. The decrease in revenues in the third quarter of 2023 as compared to the third quarter of 2022 is primarily attributable to an approximate $20.44 decrease in average realized prices (excluding the impact of hedges). Excluding the impact of hedges, Battalion realized 100.3% of the average NYMEX oil price during the third quarter of 2023. Realized hedge losses totaled approximately $6.9 million during the third quarter 2023.

Lease operating and workover expense was $10.13 per Boe in the third quarter of 2023 versus $9.93 per Boe in the third 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 $13.26 per Boe in the third quarter of 2023 versus $11.16 per Boe in the third quarter of 2022. The increase was primarily related to midstream disruptions and plant curtailments and an increased percentage of total production requiring H2S treatment, as well as inflationary impacts on costs associated with our own hydrogen sulfide treating plant. General and administrative expense was $2.72 per Boe in the third quarter of 2023 compared to $3.02 per Boe in the third quarter of 2022. The decrease is primarily due to a benefit recognized related to stock-based compensation forfeitures from the departure of certain executives and employees. After adjusting for selected items, Adjusted G&A was $2.64 per Boe in the third quarter of 2023 compared to $2.11 per Boe in the third quarter of 2022.

For the third quarter of 2023, the Company reported a net loss available to common stockholders of $57.7 million and a net loss of $3.50 per share available to common stockholders. After adjusting for selected items, the Company reported an adjusted net loss available to common stockholders for the third quarter of 2023 of $12.0 million, or an adjusted net loss of $0.72 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended September 30, 2023 was $13.6 million as compared to $24.3 million during the quarter ended September 30, 2022 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of September 30, 2023, the Company had $210.2 million of indebtedness outstanding and no letters of credit outstanding. Subsequent to September 30, 2023, letters of credit outstanding totaled $0.3 million. Total liquidity on September 30, 2023, made up of cash and cash equivalents, was $42.6 million.

In November 2023, the Company obtained a commitment letter from its existing equity stockholders to purchase additional preferred equity securities in an amount up to $55.0 million. 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 Nine Months Ended
  September 30, September 30,
  2023  2022  2023  2022 
Operating revenues:            
Oil, natural gas and natural gas liquids sales:            
Oil $43,689  $70,406  $144,072  $206,874 
Natural gas  3,668   15,656   8,628   39,296 
Natural gas liquids  6,078   12,644   18,893   35,234 
Total oil, natural gas and natural gas liquids sales  53,435   98,706   171,593   281,404 
Other  671   443   1,927   858 
Total operating revenues  54,106   99,149   173,520   282,262 
             
Operating expenses:            
Production:            
Lease operating  11,152   12,265   34,208   35,698 
Workover and other  700   2,559   4,669   4,807 
Taxes other than income  3,307   5,613   9,677   15,936 
Gathering and other  15,512   16,663   48,857   47,787 
General and administrative  3,192   4,498   13,572   14,071 
Depletion, depreciation and accretion  13,426   13,615   44,287   36,436 
Total operating expenses  47,289   55,213   155,270   154,735 
Income from operations  6,817   43,936   18,250   127,527 
             
Other income (expenses):            
Net (loss) gain on derivative contracts  (53,687)  67,634   (29,741)  (88,134)
Interest expense and other  (6,929)  (5,682)  (24,245)  (13,202)
Total other (expenses) income  (60,616)  61,952   (53,986)  (101,336)
(Loss) income before income taxes  (53,799)  105,888   (35,736)  26,191 
Income tax benefit (provision)  —   —   —   — 
Net (loss) income  $(53,799) $105,888  $(35,736) $26,191 
Series A preferred dividends  (3,863)  —   (6,352)  — 
Net (loss) income available to common stockholders $(57,662) $105,888  $(42,088) $26,191 
             
Net (loss) income per share of common stock available to common stockholders:            
Basic $(3.50) $6.48  $(2.56) $1.60 
Diluted $(3.50) $6.42  $(2.56) $1.59 
Weighted average common shares outstanding:            
Basic  16,457   16,340   16,436   16,327 
Diluted  16,457   16,483   16,436   16,496 


 
BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
 
  September 30, 2023 December 31, 2022
Current assets:      
Cash and cash equivalents $42,590  $32,726 
Accounts receivable, net  27,177   37,974 
Assets from derivative contracts  4,649   16,244 
Restricted cash  90   90 
Prepaids and other  786   1,131 
Total current assets  75,292   88,165 
Oil and natural gas properties (full cost method):      
Evaluated  736,205   713,585 
Unevaluated  62,649   62,621 
Gross oil and natural gas properties  798,854   776,206 
Less: accumulated depletion  (434,034)  (390,796)
Net oil and natural gas properties  364,820   385,410 
Other operating property and equipment:      
Other operating property and equipment  4,623   4,434 
Less: accumulated depreciation  (1,653)  (1,209)
Net other operating property and equipment  2,970   3,225 
Other noncurrent assets:      
Assets from derivative contracts  2,022   5,379 
Operating lease right of use assets  889   352 
Other assets  10,768   2,827 
Total assets $456,761  $485,358 
       
Current liabilities:      
Accounts payable and accrued liabilities $59,417  $100,095 
Liabilities from derivative contracts  36,363   29,286 
Current portion of long-term debt  45,106   35,067 
Operating lease liabilities  513   352 
Asset retirement obligations  —   225 
Total current liabilities  141,399   165,025 
Long-term debt, net  153,476   182,676 
Other noncurrent liabilities:      
Liabilities from derivative contracts  35,089   33,649 
Asset retirement obligations  17,202   15,244 
Operating lease liabilities  375   — 
Deferred income taxes  —   — 
Other  1,554   4,136 
Commitments and contingencies      
Temporary equity:      
Series A redeemable convertible preferred stock: 63,000 shares of $0.0001  66,834   — 
par value authorized, issued and outstanding as of September 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      
September 30, 2023 and December 31, 2022, respectively  2   2 
Additional paid-in capital  326,511   334,571 
Retained earnings (accumulated deficit)  (285,681)  (249,945)
Total stockholders' equity  40,832   84,628 
Total liabilities, temporary equity and stockholders' equity $456,761  $485,358 


 
BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
 
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2023  2022  2023  2022 
Cash flows from operating activities:            
Net (loss) income $(53,799) $105,888  $(35,736) $26,191 
Adjustments to reconcile net (loss) income to net cash            
provided by operating activities:            
Depletion, depreciation and accretion  13,426   13,615   44,287   36,436 
Stock-based compensation, net  (686)  683   (1,231)  1,540 
Unrealized loss (gain) on derivative contracts  46,805   (102,112)  23,469   (23,911)
Amortization/accretion of financing related costs  1,946   919   5,789   2,726 
Reorganization items  —   —   —   (744)
Accrued settlements on derivative contracts  3,775   (7,159)  2,846   7,493 
Change in fair value of embedded derivative liability  (1,878)  (448)  (2,582)  (3,043)
Other  91   (32)  144   (128)
Cash flows from operations before changes in working capital  9,680   11,354   36,986   46,560 
Changes in working capital  (7,264)  14,127   (25,921)  7,254 
Net cash provided by operating activities  2,416   25,481   11,065   53,814 
             
Cash flows from investing activities:            
Oil and natural gas capital expenditures  (4,062)  (35,621)  (36,695)  (86,998)
Proceeds received from sale of oil and natural gas assets  —   1   1,189   1 
Other operating property and equipment capital expenditures  148   (244)  (136)  (949)
Other  (1,453)  70   (1,464)  166 
Net cash used in operating activities  (5,367)  (35,794)  (37,106)  (87,780)
             
Cash flows from financing activities:            
Proceeds from borrowings  —   122   —   20,122 
Repayments of borrowings  (10,023)  —   (25,066)  (85)
Payment of deferred debt financing costs  —   —   —   (379)
Proceeds from issuance of preferred stock  37,050   —   61,425   — 
Other  —   (25)  (454)  (492)
Net cash provided by financing activities  27,027   97   35,905   19,166 
             
Net increase (decrease) in cash, cash equivalents and restricted cash  24,076   (10,216)  9,864   (14,800)
             
Cash, cash equivalents and restricted cash at beginning of period  18,604   43,775   32,816   48,359 
Cash, cash equivalents and restricted cash at end of period $42,680  $33,559  $42,680  $33,559 


 
BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)
 
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2023  2022  2023  2022 
Production volumes:            
Crude oil (MBbls)  539   753   1,905   2,097 
Natural gas (MMcf)  2,054   2,352   6,616   7,022 
Natural gas liquids (MBbls)  288   348   917   924 
Total (MBoe)  1,170   1,493   3,925   4,191 
Average daily production (Boe/d)  12,717   16,228   14,377   15,352 
             
Average prices:            
Crude oil (per Bbl) $81.06  $93.50  $75.63  $98.65 
Natural gas (per Mcf)  1.79   6.66   1.30   5.60 
Natural gas liquids (per Bbl)  21.10   36.33   20.60   38.13 
Total per Boe  45.67   66.11   43.72   67.14 
             
Cash effect of derivative contracts:            
Crude oil (per Bbl) $(14.96) $(36.07) $(7.04) $(46.50)
Natural gas (per Mcf)  0.57   (3.11)  1.08   (2.07)
Natural gas liquids (per Bbl)  —   —   —   — 
Total per Boe  (5.88)  (23.09)  (1.60)  (26.73)
             
Average prices computed after cash effect of settlement of derivative contracts:            
Crude oil (per Bbl) $66.10  $57.43  $68.59  $52.15 
Natural gas (per Mcf)  2.36   3.55   2.38   3.53 
Natural gas liquids (per Bbl)  21.10   36.33   20.60   38.13 
Total per Boe  39.79   43.02   42.12   40.41 
             
Average cost per Boe:            
Production:            
Lease operating $9.53  $8.22  $8.72  $8.52 
Workover and other  0.60   1.71   1.19   1.15 
Taxes other than income  2.83   3.76   2.47   3.80 
Gathering and other  13.26   11.16   12.45   11.40 
General and administrative, as adjusted (1)  2.64   2.11   3.32   2.74 
Depletion  11.17   8.97   11.02   8.56 
             
(1) Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
             
General and administrative:            
General and administrative, as reported $2.72  $3.02  $3.46  $3.36 
Stock-based compensation:            
Non-cash  0.59   (0.46)  0.31   (0.37)
Non-recurring charges and other:            
Cash  (0.67)  (0.45)  (0.45)  (0.25)
General and administrative, as adjusted(2) $2.64  $2.11  $3.32  $2.74 
             
Total operating costs, as reported $28.94  $27.87  $28.29  $28.23 
Total adjusting items  (0.08)  (0.91)  (0.14)  (0.62)
Total operating costs, as adjusted(3) $28.86  $26.96  $28.15  $27.61 


___________________
(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 Nine Months Ended
  September 30, September 30,
  2023  2022  2023  2022 
As Reported:            
Net (loss) income available to common stockholders - diluted (1) $(57,662) $105,888  $(42,088) $26,191 
             
Impact of Selected Items:            
Unrealized loss (gain) on derivatives contracts:            
Crude oil $46,133  $(99,848) $16,003  $(28,886)
Natural gas  672   (2,264)  7,466   4,975 
Total mark-to-market non-cash charge  46,805   (102,112)  23,469   (23,911)
Change in fair value of embedded derivative liability  (1,878)  (449)  (2,582)  (3,043)
Non-recurring charges  780   670   1,774   1,036 
Selected items, before income taxes  45,707   (101,891)  22,661   (25,918)
Income tax effect of selected items  —   —   —   — 
Selected items, net of tax  45,707   (101,891)  22,661   (25,918)
             
Net (loss) income available to common stockholders, as adjusted (2) $(11,955) $3,997  $(19,427) $273 
             
Diluted net (loss) income per common share, as reported $(3.50) $6.42  $(2.56) $1.59 
Impact of selected items  2.77   (6.18)  1.38   (1.57)
Diluted net (loss) income per common share, excluding selected items (2)(3) $(0.73) $0.24  $(1.18) $0.02 
             
             
Net cash (used in) provided by operating activities $2,416  $25,481  $11,065  $53,814 
Changes in working capital  7,264   (14,127)  25,921   (7,254)
Cash flows from operations before changes in working capital  9,680   11,354   36,986   46,560 
Cash components of selected items  (2,995)  7,829   (1,406)  (5,713)
Income tax effect of selected items  —   —   —   — 
Cash flows from operations before changes in working capital, adjusted for selected items (1) $6,685  $19,183  $35,580  $40,847 


___________________
(1)Amount reflects net (loss) income 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 September 30, 2023.
(2)Net (loss) income 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 nine months ended September 30, 2023 were calculated based upon weighted average diluted shares of 16.5 million and 16.4 million shares, respectively, due to the net (loss) income available to common stockholders, excluding selected items. The impact of selected items for the three and nine months ended September 30, 2022 were calculated based upon weighted average diluted shares of 16.5 million shares, respectively, due to the net (loss) income available to common stockholders, excluding selected items.


 
BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)
 
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2023  2022  2023  2022 
             
Net (loss) income, as reported $(53,799) $105,888  $(35,736) $26,191 
Impact of adjusting items:            
Interest expense  9,219   6,232   27,594   16,347 
Depletion, depreciation and accretion  13,426   13,615   44,287   36,436 
Stock-based compensation  (686)  683   (1,231)  1,540 
Interest income  (293)  (141)  (718)  (142)
Unrealized loss (gain) on derivatives contracts  46,805   (102,112)  23,469   (23,911)
Change in fair value of embedded derivative liability  (1,878)  (449)  (2,582)  (3,043)
Non-recurring charges and other  831   597   1,460   867 
Adjusted EBITDA(1) $13,625  $24,313  $56,543  $54,285 


___________________
(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
  September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022
             
Net (loss) income, as reported $(53,799) $(4,748)  22,811   (7,652)
Impact of adjusting items:            
Interest expense  9,219   9,366   9,009   9,378 
Depletion, depreciation and accretion  13,426   14,713   16,148   15,479 
Stock-based compensation  (686)  (772)  227   670 
Interest income  (293)  (234)  (191)  (227)
Unrealized loss (gain) on derivatives contracts  46,805   (2,332)  (21,004)  3,655 
Change in fair value of embedded derivative liability  (1,878)  358   (1,062)  1,224 
Non-recurring charges (credits) and other  831   477   152   194 
Adjusted EBITDA(1) $13,625  $16,828  $26,090  $22,721 
             
Adjusted LTM EBITDA(1) $79,264          


___________________
(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
  September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
             
Net income (loss), as reported $105,888   13,047   (92,744)  25,935 
Impact of adjusting items:            
Interest expense  6,232   5,394   4,721   3,215 
Depletion, depreciation and accretion  13,615   12,601   10,220   12,679 
Stock-based compensation  683   473   384   450 
Interest income  (141)  (1)  -   (1)
Loss (gain) on extinguishment of debt  —   —   —   122 
Unrealized loss (gain) on derivatives contracts  (102,112)  (12,837)  91,038   (21,332)
Change in fair value of embedded derivative liability  (449)  (562)  (2,032)  — 
Non-recurring charges (credits) and other  597   53   217   (718)
Adjusted EBITDA(1) $24,313  $18,168  $11,804  $20,350 
             
Adjusted LTM EBITDA(1) $74,635          


___________________
(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.

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Source: Battalion Oil Corporation

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