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Battalion Oil Corporation Announces Second Quarter 2022 Financial and Operating Results

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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.

Battalion Oil Corporation

NYSE:BATL

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110.51M
16.46M
0.73%
81.5%
0.91%
Oil & Gas E&P
Crude Petroleum & Natural Gas
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United States of America
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