UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K


CURRENT REPORT

Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 14, 2024 

 

Battalion Oil Corporation

(Exact name of registrant as specified in its charter)

  

Delaware

 

001-35467

 

20-0700684

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

820 Gessner Road
Suite 1100
Houston, Texas

 

77024

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (832) 538-0300

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock par value $0.0001

 

BATL

 

NYSE American

 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

 

 

 


Item 2.02 

Results of Operations and Financial Condition.

On August 14, 2024, Battalion Oil Corporation (the “Company”) issued a press release with respect to the Company’s second quarter 2024 financial results. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The press release contains certain measures discussed below that may be deemed “non-GAAP financial measures” as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In each case, the most directly comparable GAAP financial measure and information reconciling the GAAP and non-GAAP measures is also included in the press release.

Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

From time to time management discloses net income (loss) and earnings per share excluding selected items as well as EBITDA, LTM EBITDA, cash flow from operations, general and administrative expenses adjusted for selected items. These measures are presented based on management’s belief that these non-GAAP measures enable a user of the financial information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. These 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 flow from operations, as defined by GAAP. These measures may not be comparable to similarly named non-GAAP measures that other companies may use and may not be useful in comparing the performance of those companies to our performance.

Item 8.01

Other Events.

The press release furnished as Exhibit 99.1 to this Current Report on Form 8-K is incorporated herein by reference.

Important Information for Investors and Stockholders

This communication is being made in respect of the proposed transaction involving the Company and Fury Resources, Inc., a Delaware corporation. In connection with the proposed transaction, the Company intends to file, or has filed, the relevant materials with the U.S. Securities and Exchange Commission (“SEC”), including a proxy statement on Schedule 14A and a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). Promptly after filing its definitive proxy statement with the SEC, the Company will mail the definitive proxy statement and a proxy card to each stockholder of the Company entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement, the Schedule 13e-3 or any other document that the Company has or may file with the SEC or send to its stockholders in connection with the proposed transaction. The relevant materials filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and copies may be obtained free of charge on the Company’s website at www.battalionoil.com. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the proxy statement, the Schedule 13e-3 and the other relevant materials as they become available before making any voting or investment decision with respect to the proposed transaction because they contain important information about the Company and the proposed transaction.

Participants in Solicitation

The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2023, and the proxy statement, the Schedule 13e-3 and other relevant materials that will be, or have been, filed with the SEC in connection with the proposed transaction as they become available. Information concerning the interests of the Company’s

2


participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the proposed transaction and the Schedule 13e-3, as they become available.

Item 9.01 

Financial Statements and Exhibits.

(d)           Exhibits. The following exhibits are furnished as part of this Current Report on Form 8-K:

Exhibit No.

 

Description

 

 

 

99.1

 

Press release issued by Battalion Oil Corporation dated August 14, 2024.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

3


SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

BATTALION OIL CORPORATION

 

 

 

 

 

August 14, 2024

By:

/s/ Matthew B. Steele

 

Name:

Matthew B. Steele

 

Title:

Chief Executive Officer

4


Exhibit 99.1

Graphic

Battalion Oil Corporation Announces Second Quarter 2024 Financial and Operating Results

HOUSTON, TEXAS – August 14, 2024 – Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the second quarter of 2024.

Key Highlights

AGI facility online and treated 1.82 Bcf for the second quarter 2024 reducing operating expenses by $4.26/Boe compared to the first quarter 2024
On August 12, 2024, the AGI facility processed 26.6 MMcf/d which allowed the Company to return wells to production and realize approximately 7,500 Bbls of oil per day (approximately 13,500 Boe/d) net production
Drilled and brought two additional wells on production in Monument Draw in the second quarter  2024 with the next two-well pad to be completed in late third quarter or early fourth quarter 2024
Generated second quarter 2024 sales volumes of 12,857 Boe/d
Executed a $20.0 million preferred equity raise in May 2024 to support drilling program and debt reduction
Continuing strategic alternatives initiative and reviewing a requested amendment to the previously announced Merger Agreement with Fury that would reduce the purchase price to $7.00 per share and require all of the existing preferred equity holders to roll over 100% of their preferred equity

Management Comments

The Company concluded its current six-well campaign ahead of planned timing and under budget on each well. The Vermejo two-well pad in Monument Draw is currently a drilled but uncompleted well and is currently scheduled to be fracked in the third quarter of 2024. New pad locations and permits are being prepared in all asset areas to support additional activity in Ward, Winkler and Pecos Counties. Capital costs continue to trend lower in the field with latest Monument Draw wells estimated below $950/lateral foot for drilling, completion and wellsite facilities while maintaining completions over 2,000 lbs/ft proppant. The previously announced Glacier and Rio pads saw strong performance with IP’s reaching over 2,000 Boe/d and sustained production above the company’s type curve.

During the second quarter 2024, the acid gas injection (“AGI”) facility treated approximately 20 MMcf/d average and returned approximately 17 MMcf/d of sweet gas to the Company for sales to its midstream partner. To date, the AGI facility has processed more than 2.7 Bcf of sour gas and allowed the Company to realize substantial savings compared to treating alternatives. The Company and its JV partner continued to ramp toward full inlet capacity, with expected savings up to $2.0 million per month in gas treating costs.

Results of Operations

Average daily net production and total operating revenue during the second quarter of 2024 were 12,857 Boe/d (49% oil) and $49.1 million, respectively, as compared to production and revenue of 14,253 Boe/d (49% oil) and $54.3 million, respectively, during the second quarter of 2023. The decrease in revenues in the second quarter of 2024 as compared to the second quarter of 2023 is primarily attributable to an

1


approximate 1,396 Boe/d decrease in average daily production. Excluding the impact of hedges, Battalion realized 98.4% of the average NYMEX oil price during the second quarter of 2024. Realized hedge losses totaled approximately $3.2 million during the second quarter of 2024.

Lease operating and workover expense was $10.22 per Boe in the second quarter of 2024 versus $10.79 per Boe in the second quarter of 2023. The decrease in lease operating and workover expense per Boe year-over-year is primarily a result of savings on chemicals and lower SWD costs. Gathering and other expense was $10.36 per Boe in the second quarter of 2024 versus $12.97 per Boe in the second quarter of 2023. The decrease in gathering and other expenses per Boe is primarily related to the start-up of the AGI facility and lower treating fees associated versus the Valkyrie (liquid redox) plant.  General and administrative expenses were $2.85 per Boe in the second quarter of 2024 compared to $4.04 per Boe in the second quarter of 2023. The decrease in general and administrative expense is primarily attributable to a decrease in payroll and benefits compared with the prior year period as a result of the headcount reduction in 2023 partially offset by an increase in audit, legal and transaction costs associated with the potential merger with Fury Resources.

For the second quarter of 2024, the Company reported a net loss available to common stockholders of $8.7 million or a net loss of $0.53 per share available to common stockholders. After adjusting for selected items, the Company reported an adjusted diluted net loss available to common stockholders for the second quarter of 2024 of $13.2 million or an adjusted diluted net loss of $0.80 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended June 30, 2024 was $15.6 million as compared to $16.8 million during the quarter ended June 30, 2023 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of June 30, 2024, the Company had $160.2 million of indebtedness outstanding and approximately $0.3 million of letters of credit outstanding. Total liquidity on June 30, 2024, made up of cash and cash equivalents, was $54.4 million.

On May 13, 2024, 20,000 shares of preferred equity were sold for proceeds of $19.5 million, net of discount.  On May 14, 2024, the Company used $17.3 million of the proceeds from the sale of the preferred equity to pay down debt.

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.

Merger Agreement with Fury Resources

Fury Resources, Inc. (“Fury”) has requested a further amendment of the previously disclosed Agreement and Plan of Merger dated December 14, 2024, as amended (the “Merger Agreement”), such that the amount of merger consideration payable to the Company’s stockholders in connection with the transaction contemplated by the Merger Agreement would be reduced from $9.80 per share to $7.00 per share.  The modified offer is contingent on the existing holders of the Company’s Series A through Series A-4 preferred equity rolling 100% of their preferred equity into new preferred equity in the surviving company following the merger in order to help support the transaction. The Company’s Special Committee and its Board of Directors are reviewing Fury’s proposal.  The Company has been advised by the holders of the Company’s preferred stock that they are also reviewing Fury’s proposal.  The Company does not intend to comment further on this matter until such reviews are complete.

Important Information for Investors and Stockholders

This communication is being made in respect of the proposed transaction involving the Company and Fury Resources, Inc., a Delaware corporation. In connection with the proposed transaction, the Company intends to file, or has filed, the relevant materials with the U.S. Securities and Exchange Commission

2


(“SEC”), including a proxy statement on Schedule 14A and a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). Promptly after filing its definitive proxy statement with the SEC, the Company will mail the definitive proxy statement and a proxy card to each stockholder of the Company entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement, the Schedule 13e-3 or any other document that the Company has or may file with the SEC or send to its stockholders in connection with the proposed transaction. The relevant materials filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and copies may be obtained free of charge on the Company’s website at www.battalionoil.com. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the proxy statement, the Schedule 13e-3 and the other relevant materials as they become available before making any voting or investment decision with respect to the proposed transaction because they contain important information about the Company and the proposed transaction.

Participants in Solicitation

The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, and the proxy statement, the Schedule 13e-3 and other relevant materials that will be, or have been, filed with the SEC in connection with the proposed transaction as they become available. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the proposed transaction and the Schedule 13e-3, as they become available.

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, 2023, and other filings submitted by the Company to the 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.

3


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

832-538-0300

4


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,

    

2024

2023

2024

2023

Operating revenues:

Oil, natural gas and natural gas liquids sales:

Oil

$

45,699

$

46,168

$

88,128

$

100,383

Natural gas

(2,119)

2,060

(72)

4,960

Natural gas liquids

5,503

5,657

10,559

12,815

Total oil, natural gas and natural gas liquids sales

49,083

53,885

98,615

118,158

Other

21

387

359

1,256

Total operating revenues

49,104

54,272

98,974

119,414

Operating expenses:

Production:

Lease operating

11,005

11,365

22,591

23,056

Workover and other

951

2,634

1,839

3,969

Taxes other than income

3,349

3,180

6,340

6,370

Gathering and other

12,126

16,828

29,412

33,345

General and administrative

3,340

5,243

7,411

10,380

Depletion, depreciation and accretion

13,213

14,713

26,238

30,861

Total operating expenses

43,984

53,963

93,831

107,981

Income from operations

5,120

309

5,143

11,433

Other income (expenses):

Net gain (loss) on derivative contracts

1,223

4,473

(22,964)

23,946

Interest expense and other

(6,448)

(9,530)

(13,486)

(17,316)

Total other (expenses) income

(5,225)

(5,057)

(36,450)

6,630

(Loss) income before income taxes

(105)

(4,748)

(31,307)

18,063

Income tax benefit (provision)

Net (loss) income

$

(105)

$

(4,748)

$

(31,307)

$

18,063

Preferred dividends

(8,586)

(997)

(14,218)

(2,489)

Net (loss) income available to common stockholders

$

(8,691)

$

(5,745)

$

(45,525)

$

15,574

Net (loss) income per share of common stock available to common stockholders:

Basic

$

(0.53)

$

(0.35)

$

(2.77)

$

0.87

Diluted

$

(0.53)

$

(0.35)

$

(2.77)

$

0.86

Weighted average common shares outstanding:

Basic

16,457

16,457

16,457

16,425

Diluted

16,457

16,457

16,457

16,520

5


BATTALION OIL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share and per share amounts)

    

June 30, 2024

    

December 31, 2023

Current assets:

Cash and cash equivalents

$

54,430

$

57,529

Accounts receivable, net

24,894

23,021

Assets from derivative contracts

5,869

8,992

Restricted cash

91

90

Prepaids and other

821

907

Total current assets

86,105

90,539

Oil and natural gas properties (full cost method):

Evaluated

791,908

755,482

Unevaluated

51,896

58,909

Gross oil and natural gas properties

843,804

814,391

Less: accumulated depletion

(471,413)

(445,975)

Net oil and natural gas properties

372,391

368,416

Other operating property and equipment:

Other operating property and equipment

4,657

4,640

Less: accumulated depreciation

(2,141)

(1,817)

Net other operating property and equipment

2,516

2,823

Other noncurrent assets:

Assets from derivative contracts

4,614

4,877

Operating lease right of use assets

749

1,027

Other assets

20,916

17,656

Total assets

$

487,291

$

485,338

Current liabilities:

Accounts payable and accrued liabilities

$

76,456

$

66,525

Liabilities from derivative contracts

25,554

17,191

Current portion of long-term debt

52,606

50,106

Operating lease liabilities

634

594

Total current liabilities

155,250

134,416

Long-term debt, net

101,185

140,276

Other noncurrent liabilities:

Liabilities from derivative contracts

19,635

16,058

Asset retirement obligations

18,135

17,458

Operating lease liabilities

162

490

Other

10,719

2,084

Commitments and contingencies

Temporary equity:

Redeemable convertible preferred stock: 138,000 shares and 98,000 shares

159,535

106,535

of $0.0001 par value authorized, issued and outstanding as of

June 30, 2024 and December 31, 2023, respectively

Stockholders' equity:

Common stock: 100,000,000 shares of $0.0001 par value authorized;

16,456,563 shares issued and outstanding as of June 30, 2024 and

December 31, 2023

2

2

Additional paid-in capital

306,969

321,012

Accumulated deficit

(284,301)

(252,993)

Total stockholders' equity

22,670

68,021

Total liabilities, temporary equity and stockholders' equity

$

487,291

$

485,338

6


BATTALION OIL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

    

2024

2023

2024

2023

Cash flows from operating activities:

Net (loss) income

$

(105)

$

(4,748)

$

(31,307)

$

18,063

Adjustments to reconcile net (loss) income to net cash

provided by operating activities:

Depletion, depreciation and accretion

13,213

14,713

26,238

30,861

Stock-based compensation, net

36

(772)

135

(545)

Unrealized loss (gain) on derivative contracts

(4,434)

(2,332)

15,327

(23,336)

Amortization/accretion of financing related costs

1,689

2,045

3,390

3,843

Accrued settlements on derivative contracts

(659)

(374)

774

(929)

Change in fair value of embedded derivative liability

(437)

358

(1,365)

(704)

Other

(91)

42

179

53

Cash flows from operations before changes in working capital

9,212

8,932

13,371

27,306

Changes in working capital

20,612

406

20,370

(18,657)

Net cash provided by operating activities

29,824

9,338

33,741

8,649

Cash flows from investing activities:

Oil and natural gas capital expenditures

(20,250)

(4,022)

(44,849)

(32,633)

Proceeds received from sale of oil and natural gas assets

7,015

7,015

1,189

Acquisition of oil and natural gas properties

(47)

(47)

Contract asset

(560)

(7,795)

Other operating property and equipment capital expenditures

(9)

(15)

(17)

(284)

Other

(6)

(6)

(13)

(11)

Net cash used in investing activities

(13,857)

(4,043)

(45,706)

(31,739)

Cash flows from financing activities:

Repayments of borrowings

(29,827)

(10,026)

(39,853)

(15,043)

Payment of debt financing costs

(129)

Proceeds from issuance of preferred stock

19,349

38,849

24,375

Merger deposit

10,000

Other

(454)

Net cash (used in) provided by financing activities

(10,478)

(10,026)

8,867

8,878

Net decrease in cash, cash equivalents and restricted cash

5,489

(4,731)

(3,098)

(14,212)

Cash, cash equivalents and restricted cash at beginning of period

49,032

23,335

57,619

32,816

Cash, cash equivalents and restricted cash at end of period

$

54,521

$

18,604

$

54,521

$

18,604

7


BATTALION OIL CORPORATION

SELECTED OPERATING DATA (Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2024

2023

2024

2023

Production volumes:

Crude oil (MBbls)

577

636

1,143

1,366

Natural gas (MMcf)

1,929

2,155

4,109

4,562

Natural gas liquids (MBbls)

271

302

524

629

Total (MBoe)

1,170

1,297

2,352

2,755

Average daily production (Boe/d)

12,857

14,253

12,923

15,221

Average prices:

Crude oil (per Bbl)

$

79.20

$

72.59

$

77.10

$

73.49

Natural gas (per Mcf)

(1.10)

0.96

(0.02)

1.09

Natural gas liquids (per Bbl)

20.31

18.73

20.15

20.37

Total per Boe

41.95

41.55

41.93

42.89

Cash effect of derivative contracts:

Crude oil (per Bbl)

$

(14.03)

$

(2.68)

$

(13.20)

$

(3.92)

Natural gas (per Mcf)

2.53

1.78

1.81

1.31

Natural gas liquids (per Bbl)

Total per Boe

(2.74)

1.65

(3.25)

0.22

Average prices computed after cash effect of settlement of derivative contracts:

Crude oil (per Bbl)

$

65.17

$

69.91

$

63.90

$

69.57

Natural gas (per Mcf)

1.43

2.74

1.79

2.40

Natural gas liquids (per Bbl)

20.31

18.73

20.15

20.37

Total per Boe

39.21

43.20

38.68

43.11

Average cost per Boe:

Production:

Lease operating

$

9.41

$

8.76

$

9.61

$

8.37

Workover and other

0.81

2.03

0.78

1.44

Taxes other than income

2.86

2.45

2.70

2.31

Gathering and other

10.36

12.97

12.51

12.10

General and administrative, as adjusted (1)

2.49

4.01

2.53

3.61

Depletion

10.95

    

11.07

10.82

10.95

(1) Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below:

General and administrative:

General and administrative, as reported

$

2.85

$

4.04

$

3.15

$

3.77

Stock-based compensation:

Non-cash

(0.03)

0.60

(0.06)

0.20

Non-recurring charges and other:

Cash

(0.33)

(0.63)

(0.56)

(0.36)

General and administrative, as adjusted(2)

$

2.49

$

4.01

$

2.53

$

3.61

Gathering and other, as reported

$

10.36

$

12.97

$

12.51

$

12.10

Rig termination and stacking charges and other

0.26

0.12

Gathering and other, as adjusted(3)

$

10.36

$

13.23

$

12.51

$

12.22

Total operating costs, as reported

$

26.29

$

30.25

$

28.75

$

27.99

Total adjusting items

(0.36)

0.23

(0.62)

(0.04)

Total operating costs, as adjusted(3)

$

25.93

$

30.48

$

28.13

$

27.95


(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.

8


BATTALION OIL CORPORATION

RECONCILIATION (Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2024

2023

2024

2023

As Reported:

Net (loss) income available to common stockholders - diluted (1)

$

(8,691)

$

(5,745)

$

(45,525)

$

14,280

Impact of Selected Items:

Unrealized loss (gain) on derivatives contracts:

Crude oil

$

(4,847)

$

(10,440)

$

16,570

$

(30,130)

Natural gas

413

8,108

(1,243)

6,794

Total mark-to-market non-cash charge

(4,434)

(2,332)

15,327

(23,336)

Change in fair value of embedded derivative liability

(436)

358

(1,364)

(704)

Non-recurring charges

384

811

1,321

994

Selected items, before income taxes

(4,486)

(1,163)

15,284

(23,046)

Income tax effect of selected items

Selected items, net of tax

(4,486)

(1,163)

15,284

(23,046)

Net loss available to common stockholders, as adjusted (2)

$

(13,177)

$

(6,908)

$

(30,241)

$

(8,766)

Diluted net (loss) income per common share, as reported

$

(0.53)

$

(0.35)

$

(2.77)

$

0.86

Impact of selected items

(0.27)

(0.07)

0.93

(1.39)

Diluted net loss per common share, excluding selected items (2)(3)

$

(0.80)

$

(0.42)

$

(1.84)

$

(0.53)

Net cash provided by (used in) operating activities

$

29,824

$

9,338

$

33,741

$

8,649

Changes in working capital

(20,612)

(406)

(20,370)

18,657

Cash flows from operations before changes in working capital

9,212

8,932

13,371

27,306

Cash components of selected items

1,043

851

547

1,589

Income tax effect of selected items

Cash flows from operations before changes in working capital, adjusted for selected items (1)

$

10,255

$

9,783

$

13,918

$

28,895


(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 10, Earnings Per Share in our Form 10-Q for the quarter ended June 30, 2024.
(2)Net (loss) income 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 six months ended June 30, 2024 and 2023 were calculated based upon weighted average diluted shares of 16.5 million, due to the net (loss) income available to common stockholders, excluding selected items.

9


BATTALION OIL CORPORATION

ADJUSTED EBITDA RECONCILIATION (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2024

2023

2024

2023

Net (loss) income, as reported

$

(105)

$

(4,748)

$

(31,307)

$

18,063

Impact of adjusting items:

Interest expense

7,610

9,366

16,001

18,375

Depletion, depreciation and accretion

13,213

14,713

26,238

30,861

Stock-based compensation

36

(772)

135

(545)

Interest income

(634)

(234)

(1,335)

(425)

Unrealized loss (gain) on derivatives contracts

(4,434)

(2,332)

15,327

(23,336)

Change in fair value of embedded derivative liability

(436)

358

(1,364)

(704)

Non-recurring charges and other

384

477

1,321

629

Adjusted EBITDA(1)

$

15,634

$

16,828

$

25,016

$

42,918


(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 (loss) income. 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.

10


BATTALION OIL CORPORATION

ADJUSTED EBITDA RECONCILIATION (Unaudited)

(In thousands)

Three Months

Three Months

Three Months

Three Months

Ended

Ended

Ended

Ended

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Net (loss) income, as reported

$

(105)

$

(31,203)

$

32,688

$

(53,799)

Impact of adjusting items:

Interest expense

7,610

8,391

8,917

9,219

Depletion, depreciation and accretion

13,213

13,025

12,337

13,426

Stock-based compensation

36

99

161

(686)

Interest income

(634)

(701)

(525)

(293)

Unrealized loss (gain) on derivatives contracts

(4,434)

19,761

(45,403)

46,805

Change in fair value of embedded derivative liability

(436)

(928)

529

(1,878)

Non-recurring charges (credits) and other

384

937

1,268

831

Adjusted EBITDA(1)

$

15,634

$

9,381

$

9,972

$

13,625

Adjusted LTM EBITDA(1)

$

48,612


(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 (loss) income. 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.

11


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.

12



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