Battalion Oil Corp DEFA14A, filed Nov 12, 2024
Battalion Oil Corp (BATL)
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): November 12, 2024
Battalion Oil Corporation
(Exact name of registrant as specified in its charter)
Delaware |
| 001-35467 |
| 20-0700684 |
(State or other jurisdiction |
| (Commission File Number) |
| (IRS Employer |
820 Gessner Road |
| 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 November 12, 2024, Battalion Oil Corporation (the “Company”) issued a press release with respect to the Company’s third 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 mailed 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
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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 November 12, 2024. |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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 | |
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| |
|
|
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November 12, 2024 | By: | /s/ Matthew B. Steele |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
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| |
Battalion Oil Corporation Announces Third Quarter 2024 Financial and Operating Results
HOUSTON, TEXAS – November 12, 2024 – Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the third quarter of 2024.
Key Highlights
| ● | AGI facility online and treated 1.7 Bcf for the third quarter 2024 |
| ● | Vermejo (a Monument Draw two-well pad) has been completed and is flowing back |
| ● | Next Monument Draw pad wells scheduled to spud prior to year-end |
| ● | Generated third quarter 2024 sales volumes of 12,076 Boe/d |
| ● | Amended the previously announced Merger Agreement with Fury reducing the purchase price to $7.00 per share and requiring 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 has been completed and is currently flowing back with initial rates in line with Company expectations. 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 continue to perform above the Company’s type curve with cumulative production averaging 370 Mboe (64% oil) in the first 280 days on Glacier and 132 Mboe (86% oil) in the first 150 days on Rio Bravo.
During the third quarter 2024, the acid gas injection (“AGI”) facility treated approximately 18 MMcf/d average and returned approximately 14 MMcf/d of sweet gas to the Company for sales to its midstream partner. To date, the AGI facility has processed more than 4.6 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 third quarter of 2024 were 12,076 Boe/d (52% oil) and $45.3 million, respectively, as compared to production and revenue of 12,717 Boe/d (46% oil) and $54.1 million, respectively, during the third quarter of 2023. The decrease in revenues in the third quarter of 2024 as compared to the third quarter of 2023 is primarily attributable to an approximate $5.07 decrease in average realized prices (excluding the impact of hedges) and an approximate 641 Boe/d decrease in average daily production over the periods. Excluding the impact of hedges, Battalion realized 98.4% of the average NYMEX oil price during the third quarter of 2024. Realized hedge losses totaled approximately $1.2 million during the third quarter of 2024.
Lease operating and workover expense was $11.56 per Boe in the third quarter of 2024 versus $10.13 per Boe in the third quarter of 2023. The increase in lease operating and workover expense per Boe year-over-year is primarily a result of an inflationary market increase in maintenance, power, and chemical costs as well as a decrease in average daily production. Gathering and other expense was $11.20 per Boe in the
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third quarter of 2024 versus $13.26 per Boe in the third 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 $3.46 per Boe in the third quarter of 2024 compared to $2.72 per Boe in the third quarter of 2023. The increase in general and administrative expense is primarily attributable to an increase in audit, legal and transaction costs associated with the potential merger with Fury Resources.
For the third quarter of 2024, the Company reported net income available to common stockholders of $5.6 million or net income of $0.34 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 third quarter of 2024 of $21.5 million or an adjusted diluted net loss of $1.31 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended September 30, 2024 was $13.5 million as compared to $13.6 million during the quarter ended September 30, 2023 (see Adjusted EBITDA Reconciliation table for additional information).
Liquidity and Balance Sheet
As of September 30, 2024, the Company had $147.8 million of indebtedness outstanding and approximately $0.3 million of letters of credit outstanding. Total liquidity on September 30, 2024, made up of cash and cash equivalents, was $29.8 million.
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
On September 19, 2024, the Company entered into an amendment to the previously disclosed Agreement and Plan of Merger, dated December 14, 2023 (as amended, the “Merger Agreement”), with Fury Resources, Inc. (“Parent”), pursuant to which Parent has agreed to acquire all of the outstanding shares of common stock of the Company (the “Common Stock”) for $7.00 per share in cash, and requires that, in connection with the consummation of the Merger Agreement, holders of the outstanding shares of preferred stock of the Company contribute to Parent 100% of their preferred equity of the Company in exchange for new preferred shares of Parent.
In connection with the Merger Agreement, the Company will hold a special meeting of stockholders on November 19, 2024 (the “special meeting”), where Company stockholders will be asked to vote to adopt the Merger Agreement and approve related matters, as described in the notice of special meeting of stockholders and proxy statement. Adoption of the Merger Agreement requires the affirmative vote, at the special meeting or by proxy, of holders of a majority of the outstanding shares of Common Stock as of October 4, 2024, the record date for the special meeting.
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 mailed 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
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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.
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
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BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2024 | | 2023 | | 2024 | | 2023 | ||||
Operating revenues: | | | | | | | | | | | | |
Oil, natural gas and natural gas liquids sales: | | | | | | | | | | | | |
Oil | | $ | 42,545 | | $ | 43,689 | | $ | 130,673 | | $ | 144,072 |
Natural gas | | | (2,588) | | | 3,668 | | | (2,660) | | | 8,628 |
Natural gas liquids | | | 5,145 | | | 6,078 | | | 15,704 | | | 18,893 |
Total oil, natural gas and natural gas liquids sales | | | 45,102 | | | 53,435 | | | 143,717 | | | 171,593 |
Other | | | 164 | | | 671 | | | 523 | | | 1,927 |
Total operating revenues | | | 45,266 | | | 54,106 | | | 144,240 | | | 173,520 |
| | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | |
Production: | | | | | | | | | | | | |
Lease operating | | | 11,602 | | | 11,152 | | | 34,193 | | | 34,208 |
Workover and other | | | 1,249 | | | 700 | | | 3,088 | | | 4,669 |
Taxes other than income | | | 2,532 | | | 3,307 | | | 8,872 | | | 9,677 |
Gathering and other | | | 12,442 | | | 15,512 | | | 41,854 | | | 48,857 |
General and administrative | | | 3,854 | | | 3,192 | | | 11,265 | | | 13,572 |
Depletion, depreciation and accretion | | | 12,533 | | | 13,426 | | | 38,771 | | | 44,287 |
Total operating expenses | | | 44,212 | | | 47,289 | | | 138,043 | | | 155,270 |
Income from operations | | | 1,054 | | | 6,817 | | | 6,197 | | | 18,250 |
| | | | | | | | | | | | |
Other income (expenses): | | | | | | | | | | | | |
Net gain (loss) on derivative contracts | | | 26,896 | | | (53,687) | | | 3,932 | | | (29,741) |
Interest expense and other | | | (6,322) | | | (6,929) | | | (19,809) | | | (24,245) |
Total other (expenses) income | | | 20,574 | | | (60,616) | | | (15,877) | | | (53,986) |
Income (loss) income before income taxes | | | 21,628 | | | (53,799) | | | (9,680) | | | (35,736) |
Income tax benefit (provision) | | | — | | | — | | | — | | | — |
Net income (loss) | | $ | 21,628 | | $ | (53,799) | | $ | (9,680) | | $ | (35,736) |
Preferred dividends | | | (9,321) | | | (3,863) | | | (23,539) | | | (6,352) |
Undistributed earnings allocable to preferred stockholders | | | (6,732) | | | — | | | — | | | — |
Net income (loss) available to common stockholders | | $ | 5,575 | | $ | (57,662) | | $ | (33,219) | | $ | (42,088) |
| | | | | | | | | | | | |
Net income (loss) per share of common stock available to common stockholders: | | | | | | | | | | | | |
Basic | | $ | 0.34 | | $ | (3.50) | | $ | (2.02) | | $ | (2.56) |
Diluted | | $ | 0.34 | | $ | (3.50) | | $ | (2.02) | | $ | (2.56) |
Weighted average common shares outstanding: | | | | | | | | | | | | |
Basic | | | 16,457 | | | 16,457 | | | 16,457 | | | 16,436 |
Diluted | | | 16,523 | | | 16,457 | | | 16,457 | | | 16,436 |
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BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)
|
| September 30, 2024 |
| December 31, 2023 | ||
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 29,834 | | $ | 57,529 |
Accounts receivable, net | | | 21,057 | | | 23,021 |
Assets from derivative contracts | | | 5,701 | | | 8,992 |
Restricted cash | | | 91 | | | 90 |
Prepaids and other | | | 890 | | | 907 |
Total current assets | | | 57,573 | | | 90,539 |
Oil and natural gas properties (full cost method): | | | | | | |
Evaluated | | | 801,099 | | | 755,482 |
Unevaluated | | | 51,895 | | | 58,909 |
Gross oil and natural gas properties | | | 852,994 | | | 814,391 |
Less: accumulated depletion | | | (483,534) | | | (445,975) |
Net oil and natural gas properties | | | 369,460 | | | 368,416 |
Other operating property and equipment: | | | | | | |
Other operating property and equipment | | | 4,659 | | | 4,640 |
Less: accumulated depreciation | | | (2,303) | | | (1,817) |
Net other operating property and equipment | | | 2,356 | | | 2,823 |
Other noncurrent assets: | | | | | | |
Assets from derivative contracts | | | 7,197 | | | 4,877 |
Operating lease right of use assets | | | 604 | | | 1,027 |
Other assets | | | 20,833 | | | 17,656 |
Total assets | | $ | 458,023 | | $ | 485,338 |
| | | | | | |
Current liabilities: | | | | | | |
Accounts payable and accrued liabilities | | $ | 61,621 | | $ | 66,525 |
Liabilities from derivative contracts | | | 9,799 | | | 17,191 |
Current portion of long-term debt | | | 50,106 | | | 50,106 |
Operating lease liabilities | | | 522 | | | 594 |
Total current liabilities | | | 122,048 | | | 134,416 |
Long-term debt, net | | | 92,668 | | | 140,276 |
Other noncurrent liabilities: | | | | | | |
Liabilities from derivative contracts | | | 9,714 | | | 16,058 |
Asset retirement obligations | | | 18,868 | | | 17,458 |
Operating lease liabilities | | | 124 | | | 490 |
Other | | | 10,761 | | | 2,084 |
Commitments and contingencies | | | | | | |
Temporary equity: | | | | | | |
Redeemable convertible preferred stock: 138,000 shares and 98,000 shares | | | 168,856 | | | 106,535 |
of $0.0001 par value authorized, issued and outstanding as of | | | | | | |
September 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 September 30, 2024 and | | | | | | |
December 31, 2023 | | | 2 | | | 2 |
Additional paid-in capital | | | 297,655 | | | 321,012 |
Accumulated deficit | | | (262,673) | | | (252,993) |
Total stockholders' equity | | | 34,984 | | | 68,021 |
Total liabilities, temporary equity and stockholders' equity | | $ | 458,023 | | $ | 485,338 |
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BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2024 | | 2023 | | 2024 | | 2023 | ||||
Cash flows from operating activities: | | | | | | | | | | | | |
Net income (loss) | | $ | 21,628 | | $ | (53,799) | | $ | (9,680) | | $ | (35,736) |
Adjustments to reconcile net (loss) income to net cash | | | | | | | | | | | | |
provided by operating activities: | | | | | | | | | | | | |
Depletion, depreciation and accretion | | | 12,533 | | | 13,426 | | | 38,771 | | | 44,287 |
Stock-based compensation, net | | | 5 | | | (686) | | | 140 | | | (1,231) |
Unrealized loss (gain) on derivative contracts | | | (28,091) | | | 46,805 | | | (12,764) | | | 23,469 |
Amortization/accretion of financing related costs | | | 1,559 | | | 1,946 | | | 4,949 | | | 5,789 |
Accrued settlements on derivative contracts | | | (1,876) | | | 3,775 | | | (1,102) | | | 2,846 |
Change in fair value of embedded derivative liability | | | 42 | | | (1,878) | | | (1,323) | | | (2,582) |
Other | | | 98 | | | 91 | | | 278 | | | 144 |
Cash flows from operations before changes in working capital | | | 5,898 | | | 9,680 | | | 19,269 | | | 36,986 |
Changes in working capital | | | (10,970) | | | (7,264) | | | 9,400 | | | (25,921) |
Net cash (used in) provided by operating activities | | | (5,072) | | | 2,416 | | | 28,669 | | | 11,065 |
| | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | |
Oil and natural gas capital expenditures | | | (6,929) | | | (4,062) | | | (51,778) | | | (36,695) |
Proceeds received from sale of oil and natural gas assets | | | — | | | — | | | 7,015 | | | 1,189 |
Acquisition of oil and natural gas properties | | | — | | | — | | | (47) | | | — |
Contract asset | | | 58 | | | (1,447) | | | (7,737) | | | (1,447) |
Other operating property and equipment capital expenditures | | | (2) | | | 148 | | | (19) | | | (136) |
Other | | | (7) | | | (6) | | | (20) | | | (17) |
Net cash used in investing activities | | | (6,880) | | | (5,367) | | | (52,586) | | | (37,106) |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Repayments of borrowings | | | (12,530) | | | (10,023) | | | (52,383) | | | (25,066) |
Payment of debt financing costs | | | (46) | | | — | | | (175) | | | — |
Proceeds from issuance of preferred stock | | | (68) | | | 37,050 | | | 38,781 | | | 61,425 |
Merger deposit | | | — | | | — | | | 10,000 | | | — |
Other | | | — | | | — | | | — | | | (454) |
Net cash (used in) provided by financing activities | | | (12,644) | | | 27,027 | | | (3,777) | | | 35,905 |
| | | | | | | | | | | | |
Net decrease in cash, cash equivalents and restricted cash | | | (24,596) | | | 24,076 | | | (27,694) | | | 9,864 |
| | | | | | | | | | | | |
Cash, cash equivalents and restricted cash at beginning of period | | | 54,521 | | | 18,604 | | | 57,619 | | | 32,816 |
Cash, cash equivalents and restricted cash at end of period | | $ | 29,925 | | $ | 42,680 | | $ | 29,925 | | $ | 42,680 |
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BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
| | 2024 | | 2023 | | 2024 | | 2023 | ||||
Production volumes: | | | | | | | | | | | | |
Crude oil (MBbls) | | | 577 | | | 539 | | | 1,720 | | | 1,905 |
Natural gas (MMcf) | | | 1,844 | | | 2,054 | | | 5,953 | | | 6,616 |
Natural gas liquids (MBbls) | | | 227 | | | 288 | | | 751 | | | 917 |
Total (MBoe) | | | 1,111 | | | 1,170 | | | 3,463 | | | 3,925 |
Average daily production (Boe/d) | | | 12,076 | | | 12,717 | | | 12,639 | | | 14,377 |
| | | | | | | | | | | | |
Average prices: | | | | | | | | | | | | |
Crude oil (per Bbl) | | $ | 73.73 | | $ | 81.06 | | $ | 75.97 | | $ | 75.63 |
Natural gas (per Mcf) | | | (1.40) | | | 1.79 | | | (0.45) | | | 1.30 |
Natural gas liquids (per Bbl) | | | 22.67 | | | 21.10 | | | 20.91 | | | 20.60 |
Total per Boe | | | 40.60 | | | 45.67 | | | 41.50 | | | 43.72 |
| | | | | | | | | | | | |
Cash effect of derivative contracts: | | | | | | | | | | | | |
Crude oil (per Bbl) | | $ | (10.21) | | $ | (14.96) | | $ | (12.20) | | $ | (7.04) |
Natural gas (per Mcf) | | | 2.55 | | | 0.57 | | | 2.04 | | | 1.08 |
Natural gas liquids (per Bbl) | | | — | | | — | | | — | | | — |
Total per Boe | | | (1.08) | | | (5.88) | | | (2.55) | | | (1.60) |
| | | | | | | | | | | | |
Average prices computed after cash effect of settlement of derivative contracts: | | | | | | | | | | | | |
Crude oil (per Bbl) | | $ | 63.52 | | $ | 66.10 | | $ | 63.77 | | $ | 68.59 |
Natural gas (per Mcf) | | | 1.15 | | | 2.36 | | | 1.59 | | | 2.38 |
Natural gas liquids (per Bbl) | | | 22.67 | | | 21.10 | | | 20.91 | | | 20.60 |
Total per Boe | | | 39.52 | | | 39.79 | | | 38.95 | | | 42.12 |
| | | | | | | | | | | | |
Average cost per Boe: | | | | | | | | | | | | |
Production: | | | | | | | | | | | | |
Lease operating | | $ | 10.44 | | $ | 9.53 | | $ | 9.87 | | $ | 8.72 |
Workover and other | | | 1.12 | | | 0.60 | | | 0.89 | | | 1.19 |
Taxes other than income | | | 2.28 | | | 2.83 | | | 2.56 | | | 2.47 |
Gathering and other | | | 11.20 | | | 13.26 | | | 12.09 | | | 12.45 |
General and administrative, as adjusted (1) | | | 2.58 | | | 2.64 | | | 2.55 | | | 3.32 |
Depletion | | | 10.91 |
| | 11.17 | | | 10.85 | | | 11.02 |
| | | | | | | | | | | | |
(1) Represents general and administrative costs per Boe, adjusted for items noted in the reconciliation below: | ||||||||||||
| | | | | | | | | | | | |
General and administrative: | | | | | | | | | | | | |
General and administrative, as reported | | $ | 3.46 | | $ | 2.72 | | $ | 3.25 | | $ | 3.46 |
Stock-based compensation: | | | | | | | | | | | | |
Non-cash | | | — | | | 0.59 | | | (0.04) | | | 0.31 |
Non-recurring charges and other: | | | | | | | | | | | | |
Cash | | | (0.88) | | | (0.67) | | | (0.66) | | | (0.45) |
General and administrative, as adjusted(2) | | $ | 2.58 | | $ | 2.64 | | $ | 2.55 | | $ | 3.32 |
| | | | | | | | | | | | |
Total operating costs, as reported | | $ | 28.50 | | $ | 28.94 | | $ | 28.66 | | $ | 28.29 |
Total adjusting items | | | (0.88) | | | (0.08) | | | (0.70) | | | (0.14) |
Total operating costs, as adjusted(3) | | $ | 27.62 | | $ | 28.86 | | $ | 27.96 | | $ | 28.15 |
| (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. |
7
BATTALION OIL CORPORATION
RECONCILIATION (Unaudited)
(In thousands, except per share amounts)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
| | 2024 | | 2023 | | 2024 | | 2023 | ||||
As Reported: | | | | | | | | | | | | |
Net (loss) income available to common stockholders - diluted (1) | | $ | 5,587 | | $ | (57,662) | | $ | (33,219) | | $ | (42,088) |
| | | | | | | | | | | | |
Impact of Selected Items: | | | | | | | | | | | | |
Unrealized loss (gain) on derivatives contracts: | | | | | | | | | | | | |
Crude oil | | $ | (27,037) | | $ | 46,133 | | $ | (10,467) | | $ | 16,003 |
Natural gas | | | (1,054) | | | 672 | | | (2,297) | | | 7,466 |
Total mark-to-market non-cash charge | | | (28,091) | | | 46,805 | | | (12,764) | | | 23,469 |
Change in fair value of embedded derivative liability | | | 41 | | | (1,878) | | | (1,323) | | | (2,582) |
Non-recurring charges | | | 978 | | | 780 | | | 2,299 | | | 1,774 |
Selected items, before income taxes | | | (27,072) | | | 45,707 | | | (11,788) | | | 22,661 |
Income tax effect of selected items | | | — | | | — | | | — | | | — |
Selected items, net of tax | | | (27,072) | | | 45,707 | | | (11,788) | | | 22,661 |
| | | | | | | | | | | | |
Net loss available to common stockholders, as adjusted (2) | | $ | (21,485) | | $ | (11,955) | | $ | (45,007) | | $ | (19,427) |
| | | | | | | | | | | | |
Diluted net income (loss) per common share, as reported | | $ | 0.34 | | $ | (3.50) | | $ | (2.02) | | $ | (2.56) |
Impact of selected items | | | (1.65) | | | 2.77 | | | (0.71) | | | 1.38 |
Diluted net loss per common share, excluding selected items (2)(3) | | $ | (1.31) | | $ | (0.73) | | $ | (2.73) | | $ | (1.18) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net cash provided by (used in) operating activities | | $ | (5,072) | | $ | 2,416 | | $ | 28,669 | | $ | 11,065 |
Changes in working capital | | | 10,970 | | | 7,264 | | | (9,400) | | | 25,921 |
Cash flows from operations before changes in working capital | | | 5,898 | | | 9,680 | | | 19,269 | | | 36,986 |
Cash components of selected items | | | 2,854 | | | (2,995) | | | 3,401 | | | (1,406) |
Income tax effect of selected items | | | — | | | — | | | — | | | — |
Cash flows from operations before changes in working capital, adjusted for selected items (1) | | $ | 8,752 | | $ | 6,685 | | $ | 22,670 | | $ | 35,580 |
| (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 September 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 three and nine months ended September 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. |
8
BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
| | 2024 | | 2023 | | 2024 | | 2023 | ||||
| | | | | | | | | | | | |
Net income (loss), as reported | | $ | 21,628 | | $ | (53,799) | | $ | (9,680) | | $ | (35,736) |
Impact of adjusting items: | | | | | | | | | | | | |
Interest expense | | | 6,873 | | | 9,219 | | | 22,874 | | | 27,594 |
Depletion, depreciation and accretion | | | 12,533 | | | 13,426 | | | 38,771 | | | 44,287 |
Stock-based compensation | | | 5 | | | (686) | | | 140 | | | (1,231) |
Interest income | | | (509) | | | (293) | | | (1,844) | | | (718) |
Unrealized loss (gain) on derivatives contracts | | | (28,091) | | | 46,805 | | | (12,764) | | | 23,469 |
Change in fair value of embedded derivative liability | | | 41 | | | (1,878) | | | (1,323) | | | (2,582) |
Non-recurring charges and other | | | 978 | | | 831 | | | 2,299 | | | 1,460 |
Adjusted EBITDA(1) | | $ | 13,458 | | $ | 13,625 | | $ | 38,473 | | $ | 56,543 |
| (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. |
9
BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)
| | Three Months | | Three Months | | Three Months | | Three Months | | ||||
| | Ended | | Ended | | Ended | | Ended | | ||||
| | September 30, 2024 | | June 30, 2024 | | March 31, 2024 | | December 31, 2023 | | ||||
| | | | | | | | | | | | | |
Net income (loss), as reported | | $ | 21,628 | | $ | (105) | | $ | (31,203) | | $ | 32,688 | |
Impact of adjusting items: | | | | | | | | | | | | | |
Interest expense | | | 6,873 | | | 7,610 | | | 8,391 | | | 8,917 | |
Depletion, depreciation and accretion | | | 12,533 | | | 13,213 | | | 13,025 | | | 12,337 | |
Stock-based compensation | | | 5 | | | 36 | | | 99 | | | 161 | |
Interest income | | | (509) | | | (634) | | | (701) | | | (525) | |
Unrealized loss (gain) on derivatives contracts | | | (28,091) | | | (4,434) | | | 19,761 | | | (45,403) | |
Change in fair value of embedded derivative liability | | | 41 | | | (436) | | | (928) | | | 529 | |
Non-recurring charges (credits) and other | | | 978 | | | 384 | | | 937 | | | 1,268 | |
Adjusted EBITDA(1) | | $ | 13,458 | | $ | 15,634 | | $ | 9,381 | | $ | 9,972 | |
| | | | | | | | | | | | | |
Adjusted LTM EBITDA(1) | | $ | 48,445 | | | | | | | | | | |
| (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 | | ||||
| | September 30, 2023 | | June 30, 2023 | | March 31, 2023 | | December 31, 2022 | | ||||
| | | | | | | | | | | | | |
Net (loss) income, as reported | | $ | (53,799) | | $ | (4,748) | | $ | 22,811 | | $ | (7,652) | |
Impact of adjusting items: | | | | | | | | | | | | | |
Interest expense | | | 9,219 | | | 9,366 | | | 9,009 | | | 9,378 | |
Depletion, depreciation and accretion | | | 13,426 | | | 14,713 | | | 16,148 | | | 15,479 | |
Stock-based compensation | | | (686) | | | (772) | | | 227 | | | 670 | |
Interest income | | | (293) | | | (234) | | | (191) | | | (227) | |
Unrealized loss (gain) on derivatives contracts | | | 46,805 | | | (2,332) | | | (21,004) | | | 3,655 | |
Change in fair value of embedded derivative liability | | | (1,878) | | | 358 | | | (1,062) | | | 1,224 | |
Non-recurring charges (credits) and other | | | 831 | | | 477 | | | 152 | | | 194 | |
Adjusted EBITDA(1) | | $ | 13,625 | | $ | 16,828 | | $ | 26,090 | | $ | 22,721 | |
| | | | | | | | | | | | | |
Adjusted LTM EBITDA(1) | | $ | 79,264 | | | | | | | | | | |
| (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. |
11