Battalion Oil Corp 10-Q for FY2023 Q1

Battalion Oil Corp (BATL)

10-Q 2023-05-15 For: 2023-03-31

Added on April 10, 2026

About this 10-Q

Battalion Oil Corp filed this 10-Q on May 15, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $65.14M; down 20.2% from $81.6M a year earlier
Net income: $22.81M; compared with a net loss of $92.74M a year earlier
Diluted EPS: $1.28; compared with -$5.69 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 quarter ended March 31, 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 Months Ended March 31, 2023 and 2022	5
	Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2023 and December 31, 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2023 and the Year Ended December 31, 2022	7
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 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	35
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	35
ITEM 4.	Controls and Procedures	36

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	37
ITEM 3.	Defaults Upon Senior Securities	37
ITEM 4.	Mine Safety Disclosures	37
ITEM 5.	Other Information	37
ITEM 6.	Exhibits	37
Signatures		39


	Three Months Ended
	March 31,
	2023		2022
Operating revenues:
Oil, natural gas and natural gas liquids sales:
Oil	$	54,215	$	62,524
Natural gas		2,900		8,881
Natural gas liquids		7,158		10,003
Total oil, natural gas and natural gas liquids sales		64,273		81,408
Other		869		194
Total operating revenues		65,142		81,602

Operating expenses:
Production:
Lease operating		11,691		11,524
Workover and other		1,335		865
Taxes other than income		3,190		4,951
Gathering and other		16,517		15,255
General and administrative		5,137		4,985
Depletion, depreciation and accretion		16,148		10,220
Total operating expenses		54,018		47,800
Income (loss) from operations		11,124		33,802

Other income (expenses):
Net gain (loss) on derivative contracts		19,473		(123,858)
Interest expense and other		(7,786)		(2,688)
Total other income (expenses)		11,687		(126,546)
Income (loss) before income taxes		22,811		(92,744)
Income tax benefit (provision)		—		—
Net income (loss)	$	22,811	$	(92,744)

Net income (loss) per share of common stock:
Basic	$	1.29	$	(5.69)
Diluted	$	1.28	$	(5.69)
Weighted average common shares outstanding:
Basic		16,393		16,303
Diluted		16,535		16,303


	March 31, 2023		December 31, 2022
Current assets:
Cash and cash equivalents	$	23,245	$	32,726
Accounts receivable, net		32,456		37,974
Assets from derivative contracts		15,103		16,244
Restricted cash		90		90
Prepaids and other		1,028		1,131
Total current assets		71,922		88,165
Oil and natural gas properties (full cost method):
Evaluated		723,957		713,585
Unevaluated		62,651		62,621
Gross oil and natural gas properties		786,608		776,206
Less - accumulated depletion		(406,603)		(390,796)
Net oil and natural gas properties		380,005		385,410
Other operating property and equipment:
Other operating property and equipment		4,659		4,434
Less - accumulated depreciation		(1,319)		(1,209)
Net other operating property and equipment		3,340		3,225
Other noncurrent assets:
Assets from derivative contracts		5,434		5,379
Operating lease right of use assets		258		352
Other assets		3,023		2,827
Total assets	$	463,982	$	485,358

Current liabilities:
Accounts payable and accrued liabilities	$	58,643	$	100,095
Liabilities from derivative contracts		18,008		29,286
Current portion of long-term debt		40,106		35,067
Operating lease liabilities		258		352
Asset retirement obligations		225		225
Total current liabilities		117,240		165,025
Long-term debt, net		174,536		182,676
Other noncurrent liabilities:
Liabilities from derivative contracts		22,838		33,649
Asset retirement obligations		15,441		15,244
Other		3,074		4,136
Commitments and contingencies (Note 9)
Temporary equity:
Series A redeemable convertible preferred stock: 25,000 shares of $.0001		25,033		—
par value authorized, issued and outstanding as of March 31, 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
March 31, 2023 and December 31, 2022, respectively		2		2
Additional paid-in capital		332,952		334,571
Retained earnings (accumulated deficit)		(227,134)		(249,945)
Total stockholders' equity		105,820		84,628
Total liabilities, temporary equity and stockholders' equity	$	463,982	$	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


	March 31, 2023
Remaining period in 2023	$	261
Thereafter		—
Total operating lease payments		261
Less: discount to present value		3
Total operating lease liabilities		258
Less: current operating lease liabilities		258
Noncurrent operating lease liabilities	$	—


	March 31, 2023		December 31, 2022
Term loan credit facility	$	230,000	$	235,000
Other		291		190
Total debt (Face Value)		230,291		235,190
Less:
Current portion of long-term debt⁽¹⁾		(40,106)		(35,067)
Other⁽²⁾		(15,649)		(17,447)
Long-Term Debt, net	$	174,536	$	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 25-26			1.00%
Months 37-48			0.00%


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
Assets from commodity-based derivative contracts	$	—	$	20,537	$	—	$	20,537

Liabilities
Liabilities from commodity-based derivative contracts	$	—	$	40,846	$	—	$	40,846


	Change of Control
	Call Option
Balance at December 31, 2022	$	4,136
Change in fair value		(1,062)
Balance at March 31, 2023	$	3,074


Balance sheet location	March 31, 2023		December 31, 2022		Balance sheet location	March 31, 2023		December 31, 2022
Current assets	$	15,103	$	16,244	Current liabilities	$	(18,008)	$	(29,286)
Other noncurrent assets		5,434		5,379	Other noncurrent liabilities		(22,838)		(33,649)
	$	20,537	$	21,623		$	(40,846)	$	(62,935)


	Location of net gain (loss)	Three Months Ended
	on derivative contracts on	March 31,
Type	Statement of Operations	2023		2022
Commodity derivative contracts:
Unrealized gain (loss)	Other income (expenses)	$	21,004	$	(91,038)
Realized gain (loss)	Other income (expenses)		(1,531)		(32,820)
Total net gain (loss)		$	19,473	$	(123,858)


Instrument		2023		2024		2025		2026
Crude oil:
Fixed-price swap:
Total volumes (Bbls)		1,748,502		1,805,885		1,195,171		918,741
Weighted average price	$	68.69	$	63.69	$	60.97	$	63.58
Basis swap:
Total volumes (Bbls)		1,678,779		1,801,951		1,195,171		918,741
Weighted average price	$	0.42	$	0.27	$	0.15	$	(0.02)
WTI NYMEX roll:
Total volumes (Bbls)		1,682,452		1,784,914		1,195,171		918,741
Weighted average price	$	0.56	$	0.27	$	0.11	$	(0.03)
Natural gas:
Fixed-price swap:
Total volumes (MMBtu)		4,938,380		4,410,134		3,687,113		1,975,283
Weighted average price	$	3.71	$	3.54	$	3.35	$	4.00
Two-way collar:
Total volumes (MMBtu)		1,082,869		2,610,639		1,381,321		1,838,812
Weighted average price (call)	$	5.21	$	5.08	$	5.09	$	5.24
Weighted average price (put)	$	3.76	$	3.67	$	3.67	$	3.63
Basis swap:
Total volumes (MMBtu)		6,021,249		7,020,722		5,049,878		3,814,095
Weighted average price	$	(0.88)	$	(0.86)	$	(0.66)	$	(0.77)


	Derivative Assets				Derivative Liabilities
Offsetting of Derivative Assets and Liabilities	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022

Gross Amounts - Consolidated Balance Sheet	$	20,537	$	21,623	$	(40,846)	$	(62,935)
Amounts Not Offset - Consolidated Balance Sheet		(16,933)		(20,997)		16,933		20,997
Net Amount	$	3,604	$	626	$	(23,913)	$	(41,938)


Liability for asset retirement obligations as of December 31, 2022	$	15,469
Accretion expense		186
Liabilities incurred during the period		11
Liability for asset retirement obligations as of March 31, 2023		15,666


	March 31, 2023		December 31, 2022
Accounts receivable, net:
Oil, natural gas and natural gas liquids revenues	$	28,734	$	33,980
Joint interest accounts		1,694		3,201
Other		2,028		793
	$	32,456	$	37,974
Prepaids and other:
Prepaids	$	673	$	715
Funds in escrow		342		341
Other		13		75
	$	1,028	$	1,131
Other assets (Non-current):
Investment in unconsolidated affiliate⁽¹⁾	$	1,519	$	1,561
Oil, natural gas and natural gas liquids revenues		233		—
Funds in escrow		532		527
Other		739		739
	$	3,023	$	2,827
Accounts payable and accrued liabilities:
Trade payables	$	23,234	$	42,919
Accrued oil and natural gas capital costs		2,570		19,911
Revenues and royalties payable		23,569		26,759
Accrued interest expense		80		160
Accrued employee compensation		1,401		2,300
Accrued lease operating expenses		7,779		8,005
Other		10		41
	$	58,643	$	100,095


	Three Months Ended
	March 31,
In thousands (except per unit and per Boe amounts)	2023		2022
Net income (loss)	$	22,811	$	(92,744)
Operating revenues:
Oil		54,215		62,524
Natural gas		2,900		8,881
Natural gas liquids		7,158		10,003
Other		869		194
Operating expenses:
Production:
Lease operating		11,691		11,524
Workover and other		1,335		865
Taxes other than income		3,190		4,951
Gathering and other		16,517		15,255
General and administrative:
General and administrative		4,910		4,601
Stock-based compensation		227		384
Depletion, depreciation and accretion:
Depletion – Full cost		15,807		10,067
Depreciation – Other		155		44
Accretion expense		186		109
Other income (expenses):
Net gain (loss) on derivative contracts		19,473		(123,858)
Interest expense and other		(7,786)		(2,688)

Production:
Oil – MBbls		730		670
Natural Gas - MMcf		2,407		2,315
Natural gas liquids – MBbls		327		273
Total MBoe⁽¹⁾		1,458		1,329
Average daily production – Boe⁽¹⁾		16,200		14,767

Average price per unit ⁽²⁾:
Oil price - Bbl	$	74.27	$	93.32
Natural gas price - Mcf		1.20		3.84
Natural gas liquids price - Bbl		21.89		36.64
Total per Boe⁽¹⁾		44.08		61.26

Average cost per Boe:
Production:
Lease operating	$	8.02	$	8.67
Workover and other		0.92		0.65
Taxes other than income		2.19		3.73
Gathering and other		11.33		11.48
General and administrative:
General and administrative		3.37		3.46
Stock-based compensation		0.16		0.29
Depletion		10.84		7.57


	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 2023	1,000	$	11.67	—	—
February 2023	43,489		9.77	—	—
March 2023	2,594		6.65	—	—


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).
31.1	*	Sarbanes-Oxley Section 302 certification of Principal Executive Officer
31.2	*	Sarbanes-Oxley Section 302 certification of 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


May 15, 2023	By:	/s/ MATTHEW B. STEELE
		Name:	Matthew B. Steele
		Title:	Chief Executive Officer


May 15, 2023	By:	/s/ KRISTEN MCWATTERS
		Name:	Kristen McWatters
		Title:	Executive Vice President, Chief Financial Officer and Treasurer


	/s/ MATTHEW B. STEELE
May 15, 2023	Matthew B. Steele Chief Executive Officer


	/s/ KRISTEN MCWATTERS
May 15, 2023	Kristen McWatters Executive Vice President, Chief Financial Officer and Treasurer