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Battalion Oil Corporation Announces Second Quarter 2023 Financial and Operating Results

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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.


Battalion Oil Corporation

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0.73%
81.04%
0.25%
Oil & Gas E&P
Crude Petroleum & Natural Gas
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United States of America
HOUSTON