BATL - Battalion Oil Corporation Announces Second Quarter 2022 Financial and Operating Results

August, 08 2022 04:30 PM Battalion Oil Corp (New)

HOUSTON, Aug. 08, 2022 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the second quarter 2022.

Key Highlights

First five wells of 2022 capital program put online during quarter and continued one-rig program with spudding of next three well pad
Disciplined capital program mitigating inflation and supply chain disruption
Outstanding performance in drilling and completion operations – fewer drilling days and higher pump efficiency than plan
Construction underway on recently announced strategic acid gas treating facility
Anticipate meaningful production and EBITDA growth in second half of 2022

Management Comments

Richard Little, the Company’s CEO, commented, “The second quarter was all about building momentum as we pivoted towards production and cash flow growth. The first five wells of our 2022 capital program were brought online this quarter and with that comes increased exposure to a strong commodity price environment. While we are yet to see a full quarter of production from these wells, we are encouraged by the early results and the potential they bring from a cash flow perspective.”

“We are also excited to have recently announced a landmark joint venture to develop a strategic acid gas treatment facility in Winkler County. This agreement is a critical piece of our story and is central to our strategy. Not only does it provide a comprehensive solution for our current and future gas processing needs, but it does so while significantly reducing our operating expenses, minimizing our capital exposure, and meaningfully reducing our environmental impact.”

Mr. Little continued, “With our development program still clipping along with record efficiency and our hedge book continuously improving as we aim to lock in returns, we expect to generate substantial EBITDA growth in the second half of the year as we exit 2022 having delivered meaningful growth in daily production.”

Results of Operations

Average daily net production and total operating revenue during the second quarter 2022 were 15,044 barrels of oil equivalent per day (“Boepd”) (49% oil) and $101.5 million, respectively, as compared to production and revenue of 15,571 Boepd (57% oil) and $64.4 million, respectively, during the second quarter 2021. The increase in revenues year-over-year is primarily attributable to an approximate $28.75 per Boe increase in average realized prices (excluding the impact of hedges).

Excluding the impact of hedges, Battalion realized 101% of the average NYMEX oil price during the second quarter of 2022. Realized hedge losses totaled approximately $44.7 million during the second quarter 2022.

Lease operating and workover expense was $9.71 per Boe in the second quarter of 2022 and $7.72 per Boe in the second quarter of 2021. Adjusted G&A was $2.90 per Boe in the second quarter of 2022 compared to $2.69 per Boe in the second quarter of 2021 (see Selected Operating Data table for additional information).

The Company reported net income to common stockholders for the second quarter of 2022 of $13.0 million and net income per diluted share of $0.79. After adjusting for selected items, the Company reported an adjusted net loss to common stockholders for the second quarter of 2022 of $0.2 million, or an adjusted net loss of $0.01 per diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended June 30, 2022, was $18.2 million as compared to $14.1 million during the quarter ended June 30, 2021 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of June 30, 2022, the Company had $220.0 million of indebtedness outstanding, approximately $1.3 million of letters of credit outstanding and up to $15.0 million in delayed draw term loans available to be drawn under our Term Loan Agreement. Total liquidity on June 30, 2022, inclusive of $43.6 million of cash and cash equivalents, was $58.6 million.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, August 9, 2022, at 10:00 a.m. Central Time. To access the live conference call, local participants may dial +1 646-828-8193. All other participants may dial (888) 220-8474 for toll free. The confirmation code for the live conference call is 1239325. The live conference call will also be available through the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab. The replay for the event will be available on the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab.

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements. Forward-looking statements include, among others, statements about anticipated production, liquidity, capital spending, drilling and completion plans, and forward guidance. Forward-looking statements may often, but not always, be identified by the use of such words such as "expects", "believes", "intends", "anticipates", "plans", "estimates", “projects,” "potential", "possible", or "probable" or statements that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved. Forward-looking statements are based on current beliefs and expectations and involve certain assumptions or estimates that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and other filings submitted by the Company to the U.S. Securities and Exchange Commission (“SEC”), copies of which may be obtained from the SEC's website at www.sec.gov or through the Company's website at www.battalionoil.com. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. The Company has no duty, and assumes no obligation, to update forward-looking statements as a result of new information, future events or changes in the Company's expectations.

About Battalion

Battalion Oil Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.

Contact

Chris Lang
Director, Finance & Investor Relations
(832) 538-0551

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)














Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021
Operating revenues:











Oil, natural gas and natural gas liquids sales:











Oil
$
73,944


$
51,935


$
136,468


$
93,205

Natural gas

14,759



5,317



23,640



14,404

Natural gas liquids

12,587



6,851



22,590



11,760

Total oil, natural gas and natural gas liquids sales

101,290



64,103



182,698



119,369

Other

221



263



415



515

Total operating revenues

101,511



64,366



183,113



119,884













Operating expenses:











Production:











Lease operating

11,909



10,169



23,433



19,636

Workover and other

1,383



767



2,248



1,327

Taxes other than income

5,372



2,912



10,323



6,104

Gathering and other

15,869



14,331



31,124



27,502

General and administrative

4,588



4,031



9,573



8,858

Depletion, depreciation and accretion

12,601



11,249



22,821



21,844

Total operating expenses

51,722



43,459



99,522



85,271

Income (loss) from operations

49,789



20,907



83,591



34,613













Other income (expenses):











Net gain (loss) on derivative contracts

(31,910
)


(53,089
)


(155,768
)


(98,800
)
Interest expense and other

(4,832
)


(1,747
)


(7,520
)


(3,117
)
Total other income (expenses)

(36,742
)


(54,836
)


(163,288
)


(101,917
)
Income (loss) before income taxes

13,047



(33,929
)


(79,697
)


(67,304
)
Income tax benefit (provision)

—



—



—



—

Net income (loss)
$
13,047


$
(33,929
)

$
(79,697
)

$
(67,304
)












Net income (loss) per share of common stock:











Basic
$
0.80


$
(2.09
)

$
(4.88
)

$
(4.14
)
Diluted
$
0.79


$
(2.09
)

$
(4.88
)

$
(4.14
)
Weighted average common shares outstanding:











Basic

16,338



16,268



16,320



16,250

Diluted

16,510



16,268



16,320



16,250

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)








June 30, 2022

December 31, 2021
Current assets:





Cash and cash equivalents
$
43,640


$
46,864

Accounts receivable, net

53,002



36,806

Assets from derivative contracts

6,146



1,383

Restricted cash

135



1,495

Prepaids and other

927



1,366

Total current assets

103,850



87,914

Oil and natural gas properties (full cost method):





Evaluated

632,004



569,886

Unevaluated

64,760



64,305

Gross oil and natural gas properties

696,764



634,191

Less - accumulated depletion

(362,257
)


(339,776
)
Net oil and natural gas properties

334,507



294,415

Other operating property and equipment:





Other operating property and equipment

4,045



3,467

Less - accumulated depreciation

(1,027
)


(1,035
)
Net other operating property and equipment

3,018



2,432

Other noncurrent assets:





Assets from derivative contracts

3,972



2,515

Operating lease right of use assets

539



721

Other assets

3,329



2,270

Total assets
$
449,215


$
390,267







Current liabilities:





Accounts payable and accrued liabilities
$
97,334


$
62,826

Liabilities from derivative contracts

91,750



58,322

Current portion of long-term debt

15,000



85

Operating lease liabilities

377



369

Asset retirement obligations

401



—

Total current liabilities

204,862



121,602

Long-term debt, net

188,372



181,565

Other noncurrent liabilities:





Liabilities from derivative contracts

58,138



7,144

Asset retirement obligations

11,686



11,896

Operating lease liabilities

162



352

Other

1,408



4,003

Commitments and contingencies





Stockholders' equity:





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





16,337,910 and 16,273,913 shares issued and outstanding as of





June 30, 2022 and December 31, 2021, respectively

2



2

Additional paid-in capital

332,766



332,187

Retained earnings (accumulated deficit)

(348,181
)


(268,484
)
Total stockholders' equity

(15,413
)


63,705

Total liabilities and stockholders' equity
$
449,215


$
390,267

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)














Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021
Cash flows from operating activities:











Net income (loss)
$
13,047


$
(33,929
)

$
(79,697
)

$
(67,304
)
Depletion, depreciation and accretion

12,601



11,249



22,821



21,844

Stock-based compensation, net

473



485



857



1,079

Unrealized loss (gain) on derivative contracts

(12,837
)


34,817



78,201



70,869

Amortization of deferred loan costs

908



—



1,807



—

(Gain) loss on sale of other assets

(96
)


—



(96
)


—

Reorganization items

—



—



(744
)


—

Accrued settlements on derivative contracts

1,843



2,404



14,652



6,972

Change in fair value of Change of Control Call Option

(563
)


—



(2,595
)


—

Other income (expense)

—



(170
)


—



(287
)
Cash flows from operations before changes in working capital

15,376



14,856



35,206



33,173

Changes in working capital

910



886



(6,873
)


(4,073
)
Net cash provided by (used in) operating activities

16,286



15,742



28,333



29,100













Cash flows from investing activities:











Oil and natural gas capital expenditures

(35,693
)


(23,801
)


(51,377
)


(37,593
)
Proceeds received from sale of oil and natural gas properties

—



(150
)


—



926

Other operating property and equipment capital expenditures

(545
)


—



(705
)


—

Proceeds received from sale of other operating property and equipment

96



—



96



—

Funds held in escrow and other

—



1



—



(2
)
Net cash provided by (used in) investing activities

(36,142
)


(23,950
)


(51,986
)


(36,669
)












Cash flows from financing activities:











Proceeds from borrowings

20,000



66,000



20,000



82,000

Repayments of borrowings

—



(58,000
)


(85
)


(77,000
)
Debt issuance costs

—



—



(379
)


—

Other

(6
)


(5
)


(467
)


(268
)
Net cash provided by (used in) financing activities

19,994



7,995



19,069



4,732













Net increase (decrease) in cash, cash equivalents and restricted cash

138



(213
)


(4,584
)


(2,837
)












Cash, cash equivalents and restricted cash at beginning of period

43,637



1,671



48,359



4,295

Cash, cash equivalents and restricted cash at end of period
$
43,775


$
1,458


$
43,775


$
1,458

BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)














Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021
Production volumes:











Crude oil (MBbls)

674



805



1,344



1,524

Natural gas (MMcf)

2,355



2,055



4,670



4,188

Natural gas liquids (MBbls)

303



270



576



485

Total (MBoe)

1,369



1,417



2,698



2,707

Average daily production (Boe/d)

15,044



15,571



14,906



14,956













Average prices:











Crude oil (per Bbl)
$
109.71


$
64.52


$
101.54


$
61.16

Natural gas (per Mcf)

6.27



2.59



5.06



3.44

Natural gas liquids (per Bbl)

41.54



25.37



39.22



24.25

Total per Boe

73.99



45.24



67.72



44.10













Cash effect of derivative contracts:











Crude oil (per Bbl)
$
(58.03
)

$
(22.55
)

$
(52.35
)

$
(18.13
)
Natural gas (per Mcf)

(2.39
)


(0.06
)


(1.54
)


(0.07
)
Natural gas liquids (per Bbl)

—



—



—



—

Total per Boe

(32.69
)


(12.89
)


(28.75
)


(10.32
)












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











Crude oil (per Bbl)
$
51.68


$
41.97


$
49.19


$
43.03

Natural gas (per Mcf)

3.88



2.53



3.52



3.37

Natural gas liquids (per Bbl)

41.54



25.37



39.22



24.25

Total per Boe

41.30



32.35



38.97



33.78













Average cost per Boe:











Production:











Lease operating
$
8.70


$
7.18


$
8.69


$
7.25

Workover and other

1.01



0.54



0.83



0.49

Taxes other than income

3.92



2.06



3.83



2.25

Gathering and other

11.59



10.11



11.54



10.16

General and administrative, as adjusted ⁽¹⁾

2.90



2.69



3.09



2.95

Depletion

9.07



7.77



8.33



7.89













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












General and administrative:











General and administrative, as reported
$
3.36


$
2.84


$
3.55


$
3.27

Stock-based compensation:











Non-cash

(0.35
)


(0.34
)


(0.32
)


(0.40
)
Non-recurring charges and other:











Cash

(0.11
)


0.19



(0.14
)


0.08

General and administrative, as adjusted ⁽²⁾
$
2.90


$
2.69


$
3.09


$
2.95













Total operating costs, as reported
$
28.58


$
22.73


$
28.44


$
23.42

Total adjusting items

(0.46
)


(0.15
)


(0.46
)


(0.32
)
Total operating costs, as adjusted ⁽³⁾
$
28.12


$
22.58


$
27.98


$
23.10

____________________________

(2) General and administrative, as adjusted, is a non-GAAP measure that excludes non-cash stock-based compensation charges relating to equity awards under our incentive stock plan, as well as other cash charges associated with non-recurring charges and other. The Company believes that it is useful to understand the effects that these charges have on general and administrative expenses and total operating costs and that exclusion of such charges is useful for comparison to prior periods

(3) Represents lease operating expense, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in the reconciliation above.

BATTALION OIL CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts )














Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021
*As Reported:*











Net income (loss), as reported
$
13,047


$
(33,929
)

$
(79,697
)

$
(67,304
)












*Impact of Selected Items:*











Unrealized loss (gain) on derivatives contracts:











Crude oil
$
(11,939
)

$
31,591


$
70,962


$
66,402

Natural gas

(898
)


3,226



7,239



4,467

Total mark-to-market non-cash charge

(12,837
)


34,817



78,201



70,869

Change in fair value of Change of Control Call Option

(562
)


—



(2,594
)


—

Rig termination and stacking charges

—



—



—



—

Non-recurring charges and other

149



(273
)


366



(221
)
Selected items, before income taxes

(13,250
)


34,544



75,973



70,648

Income tax effect of selected items

—



—



—



—

Selected items, net of tax

(13,250
)


34,544



75,973



70,648













*As Adjusted:*











Net income (loss), excluding selected items ⁽¹⁾
$
(203
)

$
615


$
(3,724
)

$
3,344













Basic net income (loss) per common share, as reported
$
0.80


$
(2.09
)

$
(4.88
)

$
(4.14
)
Impact of selected items

(0.81
)


2.13



4.65



4.35

Basic net income (loss) per common share, excluding selected items ⁽¹⁾
$
(0.01
)

$
0.04


$
(0.23
)

$
0.21

























Diluted net income (loss) per common share, as reported
$
0.79


$
(2.09
)

$
(4.88
)

$
(4.14
)
Impact of selected items

(0.80
)


2.13



4.65



4.35

Diluted net income (loss) per common share, excluding selected items ⁽¹⁾⁽²⁾
$
(0.01
)

$
0.04


$
(0.23
)

$
0.21

























Net cash provided by (used in) operating activities
$
16,286


$
15,742


$
28,333


$
29,100

Changes in working capital

(910
)


(886
)


6,873



4,073

Cash flows from operations before changes in working capital

15,376



14,856



35,206



33,173

Cash components of selected items

(1,694
)


(2,677
)


(13,542
)


(7,193
)
Income tax effect of selected items

—



—



—



—

Cash flows from operations before changes in working capital, adjusted for selected items ⁽¹⁾
$
13,682


$
12,179


$
21,664


$
25,980

____________________________

(1) Net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital adjusted for selected items are non-GAAP measures presented based on management's belief that they will enable a user of the financial information to understand the impact of these items on reported results. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flows from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

(2) The impact of selected items for the three and six months ended June 30, 2022 were calculated based upon weighted average diluted shares of 16.3 million shares, respectively, due to the net income (loss) available to common stockholders, excluding selected items. The impact of selected items for the three and six months ended June 30, 2021 were calculated based upon weighted average diluted shares of 16.4 million shares, respectively, due to the net income (loss) available to common stockholders, excluding selected items.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)














Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021












Net income (loss), as reported
$
13,047


$
(33,929
)

$
(79,697
)

$
(67,304
)
Impact of adjusting items:











Interest expense

5,394



1,838



10,115



3,334

Depletion, depreciation and accretion

12,601



11,249



22,821



21,844

Stock-based compensation

473



485



857



1,079

Interest income

(1
)


(84
)


(1
)


(209
)
Unrealized loss (gain) on derivatives contracts

(12,837
)


34,817



78,201



70,869

Change in fair value of Change of Control Call Option

(562
)


—



(2,594
)


—

Non-recurring charges and other

53



(275
)


270



(277
)
Adjusted EBITDA ⁽¹⁾
$
18,168


$
14,101


$
29,972


$
29,386

____________________________

(1) Adjusted EBITDA is a non-GAAP measure, which is presented based on management's belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion's performance.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)














Three Months

Three Months

Three Months

Three Months

Ended

Ended

Ended

Ended

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021












Net income (loss), as reported
$
13,047


$
(92,744
)

$
25,935


$
13,052

Impact of adjusting items:











Interest expense

5,394



4,721



3,215



1,904

Depletion, depreciation and accretion

12,601



10,220



12,679



10,885

Stock-based compensation

473



384



450



481

Interest income

(1
)


—



(1
)


(3
)
Loss (gain) on extinguishment of debt

—



—



122



(2,068
)
Unrealized loss (gain) on derivatives contracts

(12,837
)


91,038



(21,332
)


(1,816
)
Change in fair value of Change of Control Call Option

(562
)


(2,032
)


—



—

Non-recurring charges (credits) and other

53



217



(718
)


559

Adjusted EBITDA ⁽¹⁾
$
18,168


$
11,804


$
20,350


$
22,994













Adjusted LTM EBITDA ⁽¹⁾
$
73,316

____________________________

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)














Three Months

Three Months

Three Months

Three Months

Ended

Ended

Ended

Ended

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020












Net income (loss), as reported
$
(33,929
)

$
(33,375
)

$
(63,757
)

$
(153,125
)
Impact of adjusting items:











Interest expense

1,838



1,496



1,853



1,964

Depletion, depreciation and accretion

11,249



10,595



13,886



15,755

Full cost ceiling impairment

—



—



26,702



128,336

Stock-based compensation

485



594



785



620

Interest income

(84
)


(125
)


(171
)


(273
)
Unrealized loss (gain) on derivatives contracts

34,817



36,052



30,172



21,128

Non-recurring charges (credits) and other

(275
)


48



(658
)


210

Adjusted EBITDA ⁽¹⁾⁽²⁾
$
14,101


$
15,285


$
8,812


$
14,615













Adjusted LTM EBITDA ⁽¹⁾⁽²⁾
$
52,813

____________________________

(2) A djusted 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.

Company Name:	Battalion Oil Corp (New)
Stock Symbol:	BATL
Market:	NYSE
Website:	battalionoil.com

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