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 LangDirector, Finance & Investor Relations(832) 538-0551

BATTALION OIL CORPORATIONCONDENSED 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 CORPORATIONCONDENSED 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 CORPORATIONCONDENSED 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 CORPORATIONSELECTED 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 CORPORATIONADJUSTED 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 CORPORATIONADJUSTED 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 CORPORATIONADJUSTED 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.

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