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Battalion Oil Corporation Announces First Quarter 2022 Financial and Operating Results

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Battalion Oil Corporation (NYSE: BATL) reported its Q1 2022 financial results, highlighting strong operational performance with average daily production at 14,767 Boepd and total revenue of $81.6 million. This marks an increase from Q1 2021's production of 14,333 Boepd and revenue of $55.5 million, driven by a $18.42 rise in average realized prices. Despite hedge losses of $32.8 million, adjusted EBITDA was $11.8 million. The company maintains $78.5 million in total liquidity. CEO Richard Little emphasized ongoing efforts in capital discipline amid operational growth.

Positive
  • Average daily net production increased to 14,767 Boepd from 14,333 Boepd in Q1 2021.
  • Total operating revenue rose to $81.6 million, up from $55.5 million in Q1 2021.
  • Operational efficiencies helped mitigate cost increases and material shortages.
  • Ample liquidity of $78.5 million supports capital program execution.
Negative
  • Net loss to common stockholders of $92.7 million and adjusted net loss of $3.5 million.
  • Realized hedge losses totaled approximately $32.8 million.

HOUSTON, May 09, 2022 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the first quarter 2022.

Key Highlights

  • Meeting or exceeding performance targets on drilling and completion activities year to date
  • Mitigating cost increases and material shortages through increased operational and capital efficiencies
  • Continued robust commodity pricing offering opportunity to layer on new hedges at attractive prices
  • Ample liquidity to execute on 2022 capital program
  • Recently began flowing back on first wells of 2022 capital program

Management Comments

Richard Little, the Company’s CEO, commented, “As we entered 2022, our goal was clear: ramp up activity and drive significant growth in daily production and cash flow while remaining committed to capital discipline and operational efficiency. I am pleased to say we are delivering on all operational fronts and we are well on our way to achieving our 2022 goals.”

Mr. Little continued, “With the first wells from our capital program flowing back, we expect to begin driving significant cash flow growth as we burn off below market hedges and layer on new ones at attractive prices. As we continue to move through 2022 and turn additional wells online, we will continue to prioritize capital discipline and operational efficiency and will remain diligent in our efforts to mitigate risks caused by inflationary pressures, supply chain disruption, or shifts in the geopolitical landscape.”

Results of Operations

Average daily net production and total operating revenue during the first quarter 2022 were 14,767 barrels of oil equivalent per day (“Boepd”) (50% oil) and $81.6 million, respectively, as compared to production and revenue of 14,333 Boepd (56% oil) and $55.5 million, respectively, during the first quarter 2021. In February 2021, we temporarily shut-in production due to inclement weather. The estimated decrease in average daily oil and natural gas production associated with this temporary shut-in was approximately 1,300 Boe/d in the first three months of 2021. The increase in revenues in the first quarter of 2022 as compared to the first quarter 2021 is primarily attributable to an approximate $18.42 per Boe increase in average realized prices (excluding the impact of hedges).

Excluding the impact of hedges, Battalion realized 99% of the average NYMEX oil price during the first quarter of 2022. Realized hedge losses totaled approximately $32.8 million during the first quarter 2022.

Lease operating and workover expense was $9.32 per Boe in the first quarter of 2022 and $7.77 per Boe in the first quarter of 2021. Adjusted G&A was $3.30 per Boe in the first quarter of 2022 compared to $3.24 per Boe in the first quarter of 2021 (see Selected Operating Data table for additional information).

The Company reported a net loss to common stockholders for the first quarter of 2022 of $92.7 million and a net loss per basic and diluted share of $5.69. After adjusting for selected items, the Company reported a net loss to common stockholders for the first quarter of 2022 of $3.5 million, or a $0.22 loss per basic and diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended March 31, 2022, was $11.8 million as compared to $15.3 million during the quarter ended March 31, 2021 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of March 31, 2022, the Company had $200.0 million of indebtedness outstanding, approximately $1.6 million of letters of credit outstanding and up to $35.0 million in delayed draw term loans available to be drawn under our Term Loan Agreement. Total liquidity on March 31, 2022, inclusive of $43.5 million of cash and cash equivalents, was $78.5 million. On April 29, 2022, the Company borrowed the $20.0 million available under the first delayed draw of the Term Loan Agreement.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, May 10, 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 2126195. 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 through June 30, 2022.

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.


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

       
  Three Months Ended
  March 31,
  2022
 2021
Operating revenues:      
Oil, natural gas and natural gas liquids sales:      
Oil $62,524  $41,270 
Natural gas  8,881   9,087 
Natural gas liquids  10,003   4,909 
Total oil, natural gas and natural gas liquids sales  81,408   55,266 
Other  194   252 
Total operating revenues  81,602   55,518 
       
Operating expenses:      
Production:      
Lease operating  11,524   9,467 
Workover and other  865   560 
Taxes other than income  4,951   3,192 
Gathering and other  15,255   13,171 
General and administrative  4,985   4,827 
Depletion, depreciation and accretion  10,220   10,595 
Total operating expenses  47,800   41,812 
Income (loss) from operations  33,802   13,706 
       
Other income (expenses):      
Net gain (loss) on derivative contracts  (123,858)  (45,711)
Interest expense and other  (2,688)  (1,370)
Total other income (expenses)  (126,546)  (47,081)
Income (loss) before income taxes  (92,744)  (33,375)
Income tax benefit (provision)      
Net income (loss) $(92,744) $(33,375)
       
Net income (loss) per share of common stock:      
Basic $(5.69) $(2.06)
Diluted $(5.69) $(2.06)
Weighted average common shares outstanding:      
Basic  16,303   16,232 
Diluted  16,303   16,232 


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

       
  March 31, 2022 December 31, 2021
Current assets:      
Cash and cash equivalents $43,487  $46,864 
Accounts receivable, net  43,375   36,806 
Assets from derivative contracts  3,596   1,383 
Restricted cash  150   1,495 
Prepaids and other  1,268   1,366 
Total current assets  91,876   87,914 
Oil and natural gas properties (full cost method):      
Evaluated  593,525   569,886 
Unevaluated  64,885   64,305 
Gross oil and natural gas properties  658,410   634,191 
Less - accumulated depletion  (349,843)  (339,776)
Net oil and natural gas properties  308,567   294,415 
Other operating property and equipment:      
Other operating property and equipment  3,627   3,467 
Less - accumulated depreciation  (1,079)  (1,035)
Net other operating property and equipment  2,548   2,432 
Other noncurrent assets:      
Assets from derivative contracts  5,195   2,515 
Operating lease right of use assets  631   721 
Other assets  1,973   2,270 
Total assets $410,790  $390,267 
       
Current liabilities:      
Accounts payable and accrued liabilities $81,370  $62,826 
Liabilities from derivative contracts  103,232   58,322 
Current portion of long-term debt  5,000   85 
Operating lease liabilities  373   369 
Total current liabilities  189,975   121,602 
Long-term debt, net  177,463   181,565 
Other noncurrent liabilities:      
Liabilities from derivative contracts  58,166   7,144 
Asset retirement obligations  12,005   11,896 
Operating lease liabilities  258   352 
Other  1,971   4,003 
Commitments and contingencies      
Stockholders’ equity:      
Common stock: 100,000,000 shares of $0.0001 par value authorized;      
16,337,030 and 16,273,913 shares issued and outstanding as of      
March 31, 2022 and December 31, 2021, respectively  2   2 
Additional paid-in capital  332,178   332,187 
Retained earnings (accumulated deficit)  (361,228)  (268,484)
Total stockholders’ equity  (29,048)  63,705 
Total liabilities and stockholders’ equity $410,790  $390,267 


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

       
  Three Months Ended
  March 31,
  2022
 2021
Cash flows from operating activities:      
Net income (loss) $(92,744) $(33,375)
Adjustments to reconcile net income (loss) to net cash      
provided by (used in) operating activities:      
Depletion, depreciation and accretion  10,220   10,595 
Stock-based compensation, net  384   594 
Unrealized loss (gain) on derivative contracts  91,038   36,052 
Amortization of deferred loan costs  899    
Reorganization items  (744)   
Accrued settlements on derivative contracts  12,809   4,568 
Change in fair value of Change of Control Call Option  (2,032)   
Other income (expense)     (117)
Cash flows from operations before changes in working capital  19,830   18,317 
Changes in working capital  (7,783)  (4,959)
Net cash provided by (used in) operating activities  12,047   13,358 
       
Cash flows from investing activities:      
Oil and natural gas capital expenditures  (15,684)  (13,792)
Proceeds received from sale of oil and natural gas properties     1,076 
Funds held in escrow and other  (160)  (3)
Net cash provided by (used in) investing activities  (15,844)  (12,719)
       
Cash flows from financing activities:      
Proceeds from borrowings     16,000 
Repayments of borrowings  (85)  (19,000)
Debt issuance costs  (379)   
Other  (461)  (263)
Net cash provided by (used in) financing activities  (925)  (3,263)
       
Net increase (decrease) in cash, cash equivalents and restricted cash  (4,722)  (2,624)
       
Cash, cash equivalents and restricted cash at beginning of period  48,359   4,295 
Cash, cash equivalents and restricted cash at end of period $43,637  $1,671 


BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)

       
  Three Months Ended
  March 31,
  2022
 2021
Production volumes:      
Crude oil (MBbls)  670   719 
Natural gas (MMcf)  2,315   2,133 
Natural gas liquids (MBbls)  273   215 
Total (MBoe)  1,329   1,290 
Average daily production (Boe/d)  14,767   14,333 
       
Average prices:      
Crude oil (per Bbl) $93.32  $57.40 
Natural gas (per Mcf)  3.84   4.26 
Natural gas liquids (per Bbl)  36.64   22.83 
Total per Boe  61.26   42.84 
       
Cash effect of derivative contracts:      
Crude oil (per Bbl) $(46.64) $(13.17)
Natural gas (per Mcf)  (0.68)  (0.09)
Natural gas liquids (per Bbl)      
Total per Boe  (24.70)  (7.49)
       
Average prices computed after cash effect of settlement of derivative contracts:      
Crude oil (per Bbl) $46.68  $44.23 
Natural gas (per Mcf)  3.16   4.17 
Natural gas liquids (per Bbl)  36.64   22.83 
Total per Boe  36.56   35.35 
       
Average cost per Boe:      
Production:      
Lease operating $8.67  $7.34 
Workover and other  0.65   0.43 
Taxes other than income  3.73   2.47 
Gathering and other  11.48   10.21 
General and administrative, as adjusted (1)  3.30   3.24 
Depletion  7.57   8.02 
       
(1) Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below:
       
General and administrative:      
General and administrative, as reported $3.75  $3.74 
Stock-based compensation:      
Non-cash  (0.29)  (0.46)
Non-recurring charges and other:      
Cash  (0.16)  (0.04)
General and administrative, as adjusted(2) $3.30  $3.24 
       
Total operating costs, as reported $28.28  $24.19 
Total adjusting items  (0.45)  (0.50)
Total operating costs, as adjusted(3) $27.83  $23.69 



(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
  March 31,
  2022
 2021
As Reported:      
Net income (loss), as reported $(92,744) $(33,375)
       
Impact of Selected Items:      
Unrealized loss (gain) on derivatives contracts:      
Crude oil $82,901  $34,811 
Natural gas  8,137   1,241 
Total mark-to-market non-cash charge  91,038   36,052 
Change in fair value of Change of Control Call Option  (2,032)   
Non-recurring charges and other  217   52 
Selected items, before income taxes  89,223   36,104 
Income tax effect of selected items      
Selected items, net of tax  89,223   36,104 
       
As Adjusted:      
Net income (loss), excluding selected items (1) $(3,521) $2,729 
       
Basic net income (loss) per common share, as reported $(5.69) $(2.06)
Impact of selected items  5.47   2.23 
Basic net income (loss) per common share, excluding selected items (1) $(0.22) $0.17 
       
       
Diluted net income (loss) per common share, as reported $(5.69) $(2.06)
Impact of selected items  5.47   2.23 
Diluted net income (loss) per common share, excluding selected items (1)(2) $(0.22) $0.17 
       
       
Net cash provided by (used in) operating activities $12,047  $13,358 
Changes in working capital  7,783   4,959 
Cash flows from operations before changes in working capital  19,830   18,317 
Cash components of selected items  (11,848)  (4,516)
Income tax effect of selected items      
Cash flows from operations before changes in working capital, adjusted for selected items (1) $7,982  $13,801 



(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 months ended March 31, 2022 and 2021 were calculated based upon weighted average diluted shares of 16.3 million and 16.4 million, 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
  March 31,
  2022
 2021
       
Net income (loss), as reported $(92,744) $(33,375)
Impact of adjusting items:      
Interest expense  4,721   1,496 
Depletion, depreciation and accretion  10,220   10,595 
Stock-based compensation  384   594 
Interest income     (125)
Unrealized loss (gain) on derivatives contracts  91,038   36,052 
Change in fair value of Change of Control Call Option  (2,032)   
Non-recurring charges and other  217   48 
Adjusted EBITDA(1) $11,804  $15,285 



(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
  March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
             
Net income (loss), as reported $(92,744) $25,935  $13,052  $(33,929)
Impact of adjusting items:            
Interest expense  4,721   3,215   1,904   1,838 
Depletion, depreciation and accretion  10,220   12,679   10,885   11,249 
Stock-based compensation  384   450   481   485 
Interest income     (1)  (3)  (84)
Loss (gain) on extinguishment of debt     122   (2,068)   
Unrealized loss (gain) on derivatives contracts  91,038   (21,332)  (1,816)  34,817 
Change in fair value of Change of Control Call Option  (2,032)         
Non-recurring charges (credits) and other  217   (718)  559   (275)
Adjusted EBITDA(1) $11,804  $20,350  $22,994  $14,101 
             
Adjusted LTM EBITDA(1) $69,249          



(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
  March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020
             
Net income (loss), as reported $(33,375) $(63,757) $(153,125) $(127,316)
Impact of adjusting items:            
Interest expense  1,496   1,853   1,964   1,842 
Depletion, depreciation and accretion  10,595   13,886   15,755   14,382 
Full cost ceiling impairment     26,702   128,336   60,107 
Stock-based compensation  594   785   620   786 
Interest income  (125)  (171)  (273)  (232)
Restructuring           2,162 
Unrealized loss (gain) on derivatives contracts  36,052   30,172   21,128   67,221 
Rig termination and stacking charges           3,383 
Non-recurring charges (credits) and other  48   (658)  210   880 
Adjusted EBITDA(1)(2) $15,285  $8,812  $14,615  $23,215 
             
Adjusted LTM EBITDA(1)(2) $61,927          



(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 and June 30,2020 includes approximately $6.6 million and $16.4 million of net proceeds, respectively, from hedge monetizations that occurred during the periods.


FAQ

What were Battalion Oil's production levels in Q1 2022?

Battalion Oil's average daily production in Q1 2022 was 14,767 Boepd.

How much revenue did Battalion Oil generate in the first quarter of 2022?

The company generated total operating revenue of $81.6 million in Q1 2022.

What was Battalion Oil's net loss in Q1 2022?

Battalion Oil reported a net loss to common stockholders of $92.7 million for Q1 2022.

How did Battalion Oil's financial performance compare to Q1 2021?

In Q1 2022, revenues increased significantly compared to $55.5 million in Q1 2021.

What is Battalion Oil's liquidity position as of March 31, 2022?

Battalion Oil had total liquidity of $78.5 million as of March 31, 2022.

Battalion Oil Corporation

NYSE:BATL

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Oil & Gas E&P
Crude Petroleum & Natural Gas
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United States of America
HOUSTON