Battalion Oil Corp 10-Q for FY2023 Q2

Battalion Oil Corp (BATL)

10-Q 2023-08-21 For: 2023-06-30

Added on April 10, 2026

About this 10-Q

Battalion Oil Corp filed this 10-Q on August 21, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $54.27M; down 46.5% from $101.51M a year earlier
Net loss: $4.75M; compared with net income of $13.05M a year earlier
Diluted EPS: -$0.35; compared with $0.79 a year earlier

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001	BATL	NYSE American

		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	5
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	5
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2023 and December 31, 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2023 and the Year Ended December 31, 2022	7
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2023 and 2022	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	35
ITEM 4.	Controls and Procedures	35

PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 3.	Defaults Upon Senior Securities	36
ITEM 4.	Mine Safety Disclosures	36
ITEM 5.	Other Information	36
ITEM 6.	Exhibits	37
Signatures		38


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Operating revenues:
Oil, natural gas and natural gas liquids sales:
Oil	$	46,168	$	73,944	$	100,383	$	136,468
Natural gas		2,060		14,759		4,960		23,640
Natural gas liquids		5,657		12,587		12,815		22,590
Total oil, natural gas and natural gas liquids sales		53,885		101,290		118,158		182,698
Other		387		221		1,256		415
Total operating revenues		54,272		101,511		119,414		183,113

Operating expenses:
Production:
Lease operating		11,365		11,909		23,056		23,433
Workover and other		2,634		1,383		3,969		2,248
Taxes other than income		3,180		5,372		6,370		10,323
Gathering and other		16,828		15,869		33,345		31,124
General and administrative		5,243		4,588		10,380		9,573
Depletion, depreciation and accretion		14,713		12,601		30,861		22,821
Total operating expenses		53,963		51,722		107,981		99,522
Income (loss) from operations		309		49,789		11,433		83,591

Other income (expenses):
Net gain (loss) on derivative contracts		4,473		(31,910)		23,946		(155,768)
Interest expense and other		(9,530)		(4,832)		(17,316)		(7,520)
Total other income (expenses)		(5,057)		(36,742)		6,630		(163,288)
Income (loss) before income taxes		(4,748)		13,047		18,063		(79,697)
Income tax benefit (provision)		—		—		—		—
Net income (loss)	$	(4,748)	$	13,047	$	18,063	$	(79,697)

Net income (loss) per share of common stock:
Basic	$	(0.35)	$	0.80	$	0.87	$	(4.88)
Diluted	$	(0.35)	$	0.79	$	0.86	$	(4.88)
Weighted average common shares outstanding:
Basic		16,457		16,338		16,425		16,320
Diluted		16,457		16,510		16,520		16,320


	June 30, 2023		December 31, 2022
Current assets:
Cash and cash equivalents	$	18,514	$	32,726
Accounts receivable, net		23,518		37,974
Assets from derivative contracts		9,611		16,244
Restricted cash		90		90
Prepaids and other		1,049		1,131
Total current assets		52,782		88,165
Oil and natural gas properties (full cost method):
Evaluated		727,347		713,585
Unevaluated		62,649		62,621
Gross oil and natural gas properties		789,996		776,206
Less - accumulated depletion		(420,964)		(390,796)
Net oil and natural gas properties		369,032		385,410
Other operating property and equipment:
Other operating property and equipment		4,674		4,434
Less - accumulated depreciation		(1,486)		(1,209)
Net other operating property and equipment		3,188		3,225
Other noncurrent assets:
Assets from derivative contracts		5,299		5,379
Operating lease right of use assets		162		352
Other assets		2,778		2,827
Total assets	$	433,241	$	485,358

Current liabilities:
Accounts payable and accrued liabilities	$	48,897	$	100,095
Liabilities from derivative contracts		15,480		29,286
Current portion of long-term debt		42,606		35,067
Operating lease liabilities		162		352
Asset retirement obligations		111		225
Total current liabilities		107,256		165,025
Long-term debt, net		164,055		182,676
Other noncurrent liabilities:
Liabilities from derivative contracts		17,406		33,649
Asset retirement obligations		15,741		15,244
Other		3,432		4,136
Commitments and contingencies (Note 9)
Temporary equity:
Series A redeemable convertible preferred stock: 25,000 shares of $.0001		26,030		—
par value authorized, issued and outstanding as of June 30, 2023
Stockholders' equity:
Common stock: 100,000,000 shares of $0.0001 par value authorized;
16,456,563 and 16,344,815 shares issued and outstanding as of
June 30, 2023 and December 31, 2022, respectively		2		2
Additional paid-in capital		331,201		334,571
Retained earnings (accumulated deficit)		(231,882)		(249,945)
Total stockholders' equity		99,321		84,628
Total liabilities, temporary equity and stockholders' equity	$	433,241	$	485,358


						Retained
				Additional		Earnings
	Common Stock			Paid-In		(Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit)		Equity
Balances at December 31, 2022	16,345	$	2	$	334,571	$	(249,945)	$	84,628
Net income (loss)	—		—		—		22,811		22,811
Deemed dividends for Series A preferred stock	—		—		(1,492)		—		(1,492)
Long-term incentive plan vestings	159		—		—		—		—
Tax withholding on vesting of restricted stock units	(47)		—		(454)		—		(454)
Stock-based compensation	—		—		327		—		327
Balances at March 31, 2023	16,457		2		332,952		(227,134)		105,820
Net income (loss)	—		—		—		(4,748)		(4,748)
Deemed dividends for Series A preferred stock	—		—		(997)		—		(997)
Stock-based compensation	—		—		(754)		—		(754)
Balances at June 30, 2023	16,457		2		331,201		(231,882)		99,321


	June 30, 2023
Remaining period in 2023	$	163
Thereafter		—
Total operating lease payments		163
Less: discount to present value		1
Total operating lease liabilities		162
Less: current operating lease liabilities		162
Noncurrent operating lease liabilities	$	—


	June 30, 2023		December 31, 2022
Term loan credit facility	$	220,000	$	235,000
Other		265		190
Total debt (Face Value)		220,265		235,190
Less:
Current portion of long-term debt⁽¹⁾		(42,606)		(35,067)
Other⁽²⁾		(13,604)		(17,447)
Long-Term Debt, net	$	164,055	$	182,676


Period (after applicable borrowing date⁽¹⁾)			Premium
Months 0-12			Make-whole amount equal to 12 months of interest plus 2.00%
Months 13-24			2.00%
Months 25-36			1.00%
Months 37-48			0.00%


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Assets
Assets from commodity-based derivative contracts	$	—	$	14,910	$	—	$	14,910

Liabilities
Liabilities from commodity-based derivative contracts	$	—	$	32,886	$	—	$	32,886


	Change of Control
	Call Option
Balance at December 31, 2022	$	4,136
Change in fair value		(704)
Balance at June 30, 2023	$	3,432


Balance sheet location	June 30, 2023		December 31, 2022		Balance sheet location	June 30, 2023		December 31, 2022
Current assets	$	9,611	$	16,244	Current liabilities	$	(15,480)	$	(29,286)
Other noncurrent assets		5,299		5,379	Other noncurrent liabilities		(17,406)		(33,649)
	$	14,910	$	21,623		$	(32,886)	$	(62,935)


	Location of net gain (loss)	Three Months Ended				Six Months Ended
	on derivative contracts on	June 30,				June 30,
Type	Statement of Operations	2023		2022		2023		2022
Commodity derivative contracts:
Unrealized gain (loss)	Other income (expenses)	$	2,332	$	12,837	$	23,336	$	(78,201)
Realized gain (loss)	Other income (expenses)		2,141		(44,747)		610		(77,567)
Total net gain (loss)		$	4,473	$	(31,910)	$	23,946	$	(155,768)


Instrument		2023		2024		2025		2026		2027
Crude oil:
Fixed-price swap:
Total volumes (Bbls)		1,115,335		1,805,885		1,240,171		936,741		198,000
Weighted average price	$	67.36	$	63.69	$	61.18	$	63.56	$	59.64
Basis swap:
Total volumes (Bbls)		1,047,536		1,801,951		1,240,171		936,741		198,000
Weighted average price	$	0.40	$	0.27	$	0.18	$	(0.01)	$	0.40
WTI NYMEX roll:
Total volumes (Bbls)		1,097,510		1,784,914		1,240,171		936,741		198,000
Weighted average price	$	0.51	$	0.27	$	0.12	$	(0.03)	$	—
Natural gas:
Fixed-price swap:
Total volumes (MMBtu)		2,925,851		4,423,784		3,687,113		1,979,033		—
Weighted average price	$	3.71	$	3.54	$	3.35	$	4.00	$	—
Two-way collar:
Total volumes (MMBtu)		1,082,869		2,610,639		1,651,321		2,063,812		900,000
Weighted average price (call)	$	5.21	$	5.08	$	5.12	$	5.26	$	5.75
Weighted average price (put)	$	3.76	$	3.67	$	3.72	$	3.70	$	4.25
Basis swap:
Total volumes (MMBtu)		4,008,720		7,034,372		5,319,878		4,042,845		900,000
Weighted average price	$	(0.89)	$	(0.87)	$	(0.67)	$	(0.77)	$	(0.78)


	Derivative Assets				Derivative Liabilities
Offsetting of Derivative Assets and Liabilities	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022

Gross Amounts - Consolidated Balance Sheet	$	14,910	$	21,623	$	(32,886)	$	(62,935)
Amounts Not Offset - Consolidated Balance Sheet		(11,762)		(20,997)		11,762		20,997
Net Amount	$	3,148	$	626	$	(21,124)	$	(41,938)


	Six Months Ended
	June 30,
	2023			2022
Lease cost
Operating lease costs	$	196		$	196
Short-term lease costs		375			4,003
Variable lease costs		—			—
Total lease costs	$	571		$	4,199

Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	196		$	196
Right-of-use assets obtained in exchange for new operating lease liabilities		—			—
Weighted-average remaining lease term - operating leases		0.4	years		1.4	years
Weighted-average discount rate - operating leases		4.29	%		4.29	%


Liability for asset retirement obligations as of December 31, 2022	$	15,469
Accretion expense		372
Liabilities incurred during the period		11
Liability for asset retirement obligations as of June 30, 2023		15,852


	June 30, 2023		December 31, 2022
Accounts receivable, net:
Oil, natural gas and natural gas liquids revenues	$	19,853	$	33,980
Joint interest accounts		1,779		3,201
Other		1,886		793
	$	23,518	$	37,974
Prepaids and other:
Prepaids	$	509	$	715
Funds in escrow		343		341
Other		197		75
	$	1,049	$	1,131
Other assets (Non-current):
Investment in unconsolidated affiliate⁽¹⁾	$	1,477	$	1,561
Oil, natural gas and natural gas liquids revenues		24		—
Funds in escrow		538		527
Other		739		739
	$	2,778	$	2,827
Accounts payable and accrued liabilities:
Trade payables	$	17,884	$	42,919
Accrued oil and natural gas capital costs		1,928		19,911
Revenues and royalties payable		20,392		26,759
Accrued interest expense		104		160
Accrued employee compensation		1,190		2,300
Accrued lease operating expenses		7,388		8,005
Other		11		41
	$	48,897	$	100,095


3.1		Amended and Restated Certificate of Incorporation of Battalion Oil Corporation dated October 8, 2019, as amended by the Certificate of Amendment, dated January 21, 2020 (Incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-K filed March 25, 2020).
3.1.1		Certificate of Designations of Series A Redeemable Convertible Preferred Stock dated effective March 24, 2023 (Incorporated by reference to Exhibit 3.1.1 of our Annual Report on Form 10-K filed March 30, 2023).
3.2		Seventh Amended and Restated Bylaws of Battalion Oil Corporation (Incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K filed January 27, 2020).
10.1		Amended and Restated Senior Secured Credit Agreement dated as of November 24, 2021, by and among Battalion Oil Corporation, as holdings, Halcón Holdings LLC, as borrower, the subsidiary guarantors party thereto, Macquarie Bank Limited, as administrative agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 29, 2021).
10.1.1		Second Amendment to Amended and Restated Senior Secured Credit Agreement dated as of November 14, 2022, by and among Halcón Holdings, LLC, as borrower, Macquarie Bank Limited, as administrative agent and the lenders party hereto, the guarantors party hereto and Battalion Oil Corporation, as holdings (Incorporated by reference to Exhibit 10.1.1 of our Quarterly Report on Form 10-Q filed November 14, 2022).
10.2		Purchase Agreement, dated March 28, 2023, by and among Battalion Oil Corporation and each of the purchasers set forth on Schedule A thereto (Incorporated by reference to Exhibit 10.8 of our Annual Report on Form 10-K filed March 30, 2023).
31	*	Sarbanes-Oxley Section 302 certification of Principal Executive Officer and Principal Financial Officer
32	*	Sarbanes-Oxley Section 906 certification of Principal Executive Officer and Principal Financial Officer
101.INS	*	Inline XBRL Instance Document
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	Cover Page Interactive Data File (embedded within the Inline XBRL document)


	BATTALION OIL CORPORATION


August 21, 2023	By:	/s/ MATTHEW B. STEELE
	Name:	Matthew B. Steele
	Title:	Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)


	/s/ Matthew B. Steele
August 21, 2023	Matthew B. Steele Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)