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 wellsRecommenced drilling operations in Monument DrawExecuted 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 plansContinued 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, 2022Current 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
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(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
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(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
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(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
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(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
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(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.
