Financial Performance - The company generated a net income of $10.1 million for the nine months ended September 30, 2025[137]. - Operating revenues for the three months ended September 30, 2025, were $43.4 million, a decrease from $45.1 million in the same period of 2024, primarily due to lower average realized prices[164]. - Oil, natural gas, and NGLs revenues decreased to $133.3 million for the nine months ended September 30, 2025, down from $143.7 million in 2024, primarily due to lower average realized prices and production volumes[165]. - Average production was 12,396 Boe per day for the nine months ended September 30, 2025, compared to 12,639 Boe per day in 2024, reflecting a decrease in production[165]. - Average daily production for the three months ended September 30, 2025, was 12,293 Boe, compared to 12,076 Boe for the same period in 2024[164]. - Net derivative gain for the nine months ended September 30, 2025, was $26.0 million, compared to $3.9 million in 2024[176]. Financial Position - The company had negative working capital of $3.9 million at September 30, 2025[139]. - The company continues to report negative stockholders' equity of $(20.3) million as of September 30, 2025, along with ongoing losses from continuing operations[144]. - As of March 31, 2025, the company reported stockholders' equity of $(1.8) million, failing to meet NYSE American's listing standards requiring $2 million or more due to losses in three of the last four fiscal years[144]. - The company had $50.5 million in cash and cash equivalents as of September 30, 2025[139]. Debt and Liabilities - The company is required to maintain an Asset Coverage Ratio of at least 1.85x through December 31, 2026[138]. - The Total Net Leverage Ratio must not exceed 2.50x as of September 30, 2025[138]. - The company is required to make total debt repayments of $22.5 million through September 2026 under its 2024 Amended Term Loan Agreement[150]. - Scheduled amortization payments under the 2024 Amended Term Loan Agreement total $5.6 million for the remainder of 2025 and $22.5 million in 2026[132]. - The company recognized a loss on extinguishment of debt amounting to $7.5 million for the year ended December 31, 2024[133]. - Interest expense totaled $20.0 million for the nine months ended September 30, 2025, slightly up from $19.8 million in 2024, with a weighted average interest rate of approximately 12.20%[177]. Operational Activities - For the nine months ended September 30, 2025, cash flows provided by operating activities increased to $50.9 million from $28.7 million in the same period of 2024, driven by changes in working capital[153]. - Net cash flows used in investing activities for the nine months ended September 30, 2025, were approximately $70.0 million, primarily for drilling and completion activities[154]. - The company spent $69.6 million on oil and natural gas capital expenditures during the nine months ended September 30, 2025, with $59.9 million allocated to drilling and completion costs[155]. Cost Management - Lease operating expenses for the nine months ended September 30, 2025, were $33.4 million, slightly down from $34.2 million in 2024, with a per unit cost of $9.88 per Boe[166]. - Workover and other expenses increased to $4.6 million for the nine months ended September 30, 2025, up from $3.1 million in 2024, with a per unit cost of $1.35 per Boe[167]. - Taxes other than income were $7.9 million for the nine months ended September 30, 2025, down from $8.9 million in 2024, with a per unit cost of $2.35 per Boe[168]. - Gathering and other expenses decreased to $33.2 million for the nine months ended September 30, 2025, from $41.9 million in 2024, with a per unit cost of $9.80 per Boe[169][171]. - General and administrative expenses were $10.0 million for the nine months ended September 30, 2025, down from $11.1 million in 2024, with a per unit cost of $2.96 per Boe[172]. Strategic Initiatives - The company is exploring strategic transactions to improve liquidity and reduce expenses[143]. - The cessation of operations at the WAT facility has increased processing costs and decreased production and revenue[134]. - The company hedges approximately 85% to 50% of its anticipated oil and natural gas production on a rolling basis for the next four years[131].

Production and Revenue - Average daily net production for Q3 2025 was 12,293 Boe/d (53% oil), a slight increase from 12,076 Boe/d (52% oil) in Q3 2024[5] - Total operating revenue for Q3 2025 was $43.5 million, down from $45.3 million in Q3 2024, primarily due to a $2.24 decrease per Boe in average realized prices[5] - Average daily production for the nine months ended September 30, 2025, was 12,396 Boe/d, a decrease of 1.9% from 12,639 Boe/d in the same period of 2024[21] - Crude oil production volumes for the three months ended September 30, 2025, were 599 MBbls, a 3.8% increase from 577 MBbls in the same period of 2024[21] - The average price of crude oil per Bbl for the three months ended September 30, 2025, was $63.98, down 13.5% from $73.73 in the same period of 2024[21] Financial Performance - The company reported a net loss available to common stockholders of $15.0 million, equating to a net loss of $0.91 per share for Q3 2025[9] - The company experienced a net loss of $735,000 for the three months ended September 30, 2025, compared to a net income of $21,628,000 for the same period in 2024, indicating a substantial decline in profitability[19] - Battalion Oil's total stockholders' equity showed a deficit of $20,250,000 as of September 30, 2025, compared to a positive equity of $4,120,000 at the end of 2024[17] - For the three months ended September 30, 2025, the net loss available to common stockholders was $(15,014) thousand, compared to a net income of $5,587 thousand for the same period in 2024[24] - The diluted net loss per common share, as reported, was $(0.91) for the three months ended September 30, 2025, compared to earnings of $0.34 per share in 2024[24] Expenses and Costs - Lease operating and workover expense was $11.69 per Boe in Q3 2025, compared to $11.56 per Boe in Q3 2024[6] - General and administrative expenses decreased to $2.73 per Boe in Q3 2025 from $3.46 per Boe in Q3 2024, primarily due to lower merger costs[8] - The company incurred oil and natural gas capital expenditures of $69,573,000 for the nine months ended September 30, 2025, compared to $51,778,000 in the same period of 2024, representing a 34% increase[19] Cash Flow and Assets - Battalion Oil's cash flows from operating activities for the nine months ended September 30, 2025, were $50,909,000, up from $28,669,000 in the prior year, reflecting a 77% increase[19] - Net cash provided by operating activities for the three months ended September 30, 2025, was $27,973 thousand, a significant increase from $(5,072) thousand in the same period of 2024[24] - As of September 30, 2025, Battalion Oil Corporation reported total current assets of $84,269,000, a significant increase from $54,052,000 as of December 31, 2024, representing a 56% growth[17] Derivatives and Financial Instruments - Battalion realized 98.3% of the average NYMEX oil price during Q3 2025, with realized hedge gains totaling approximately $4.1 million[5] - The cash effect of derivative contracts for crude oil per Bbl was $1.48 for the three months ended September 30, 2025, compared to $(10.21) in the same period of 2024, indicating a significant improvement[21] - The total mark-to-market non-cash charge for the three months ended September 30, 2025, was $(1,044) thousand, compared to $(28,091) thousand in the same period of 2024[24] - The unrealized gain on derivatives contracts for the three months ended September 30, 2025, was $(1,044) thousand, compared to an unrealized loss of $(28,091) thousand in 2024[29] - The company experienced a change in fair value of embedded derivative liability of $41 thousand for the three months ended September 30, 2025, compared to a loss of $(1,323) thousand in 2024[29] Operational Changes - The company has entered into an amendment of its existing credit facility, providing additional operational flexibility[7] - Approximately 1,600 barrels of oil per day remain shut-in across Monument Draw, ready to flow to sales[4] - The AGI facility ceased operations on August 11, 2025, and the company has redirected gas production to alternative processing options[4] Adjusted Metrics - Adjusted EBITDA for Q3 2025 was $18.9 million, an increase from $13.5 million in Q3 2024[9] - Adjusted EBITDA for the three months ended September 30, 2025, was $18,882 thousand, an increase from $13,458 thousand in the same period of 2024, representing a 40.5% year-over-year growth[29]

Core Insights - Battalion Oil Corporation reported financial and operational results for Q3 2025, highlighting a net loss of $15.0 million and an adjusted EBITDA of $18.9 million, reflecting a year-over-year increase from $13.5 million in Q3 2024 [7][5]. Financial Performance - Average daily net production for Q3 2025 was 12,293 Boe/d (53% oil), compared to 12,076 Boe/d (52% oil) in Q3 2024, indicating a production increase of approximately 217 Boe/d [5][20]. - Total operating revenue for Q3 2025 was $43.5 million, down from $45.3 million in Q3 2024, primarily due to a $2.24 decrease per Boe in average realized prices [5][14]. - Battalion realized 98.3% of the average NYMEX oil price during Q3 2025, with realized hedge gains totaling approximately $4.1 million [5][8]. Operational Highlights - Drilling operations in the West Quito Draw resulted in two new wells producing an average of 883 Boe/day over the first 120 days, with savings of over $1.1 million per well compared to AFE [3][4]. - The acid gas injection facility ceased operations on August 11, 2025, leading to a temporary shut-in of a portion of the Monument Draw field, with approximately 1,600 barrels of oil per day still shut-in [4][8]. Cost Management - Lease operating and workover expenses were $11.69 per Boe in Q3 2025, up from $11.56 per Boe in Q3 2024, attributed to increased water production and disposal costs [6]. - Gathering and other expenses decreased to $9.02 per Boe in Q3 2025 from $11.20 per Boe in Q3 2024, due to improved efficiency at central production facilities [6]. Liquidity and Financial Position - As of September 30, 2025, Battalion had $213.8 million in term loan indebtedness and total liquidity of $50.5 million [9]. - The company entered into an amendment of its credit facility on November 12, 2025, providing additional operational flexibility through June 30, 2027 [9][10]. Production and Pricing - Crude oil production for Q3 2025 was 599 MBbls, with an average price of $63.98 per Bbl, down from $73.73 per Bbl in Q3 2024 [20]. - Total production volumes for Q3 2025 included 1,131 MBoe, with average prices per Boe at $38.36, compared to $40.60 in Q3 2024 [20].

Core Points - Battalion Oil Corporation has received confirmation from NYSE American regarding the acceptance of its compliance plan to regain listing standards, with a plan period extending until November 30, 2026 [1][2] - The company was previously notified of noncompliance with NYSE American listing standards and submitted a detailed plan in response, which was accepted on August 19, 2025 [2] - NYSE American staff will monitor the company's progress during the plan period, and failure to comply may lead to delisting procedures [3] Management Comments - The CEO of Battalion Oil Corporation expressed appreciation for the acceptance of the compliance plan and emphasized the company's commitment to restoring compliance and strengthening operations and financial position [4] - The management remains confident in the long-term strategy and aims to deliver value to shareholders, although there is no assurance of success within the plan period [4]

[Overview of Second Quarter 2025 Results](index=1&type=section&id=Overview%20of%20Second%20Quarter%202025%20Results) [Key Highlights & Management Comments](index=1&type=section&id=Key%20Highlights%20%26%20Management%20Comments) Battalion Oil successfully completed its 2025 six-well drilling plan ahead of schedule and under budget, with new wells showing strong initial production. However, the company faces a significant operational challenge due to the abrupt shutdown of its primary acid gas injection (AGI) facility, forcing a temporary shut-in of production - Completed the 2025 six-well drilling plan, with the final two wells in the West Quito area drilled ahead of schedule and approximately **$1.0 million per well under budget**[2](index=2&type=chunk) - Initial production rates from the new wells are outperforming legacy offset wells, which have also seen increased production due to positive frac interference[2](index=2&type=chunk) - The Acid Gas Injection (AGI) facility, which treated an average of **24 MMcf/d**, ceased operations on August 11, 2025, citing economic non-viability. This has forced the company to temporarily shut in some production and seek alternative gas processing solutions[3](index=3&type=chunk) [Financial & Operating Performance](index=1&type=section&id=Financial%20%26%20Operating%20Performance) Q2 2025 revenue decreased to $42.8 million from $49.1 million year-over-year due to lower realized prices, despite a slight production increase to 12,989 Boe/d, resulting in a $3.5 million net loss to common stockholders Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Total Operating Revenue** | $42.8 million | $49.1 million | | **Average Daily Production** | 12,989 Boe/d | 12,857 Boe/d | | **Net Loss to Common Stockholders** | $3.5 million | $8.7 million | | **Adjusted EBITDA** | $18.1 million | $15.6 million | - The decrease in revenue was primarily due to a **$5.93 decrease per Boe** in average realized prices (excluding hedges), partially offset by a **132 Boe/d production increase**[4](index=4&type=chunk) Operating Expenses per Boe (YoY Comparison) | Expense Category | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Lease operating and workover** | $10.98 | $10.22 | | **Gathering and other** | $9.27 | $10.36 | | **General and administrative** | $2.17 | $2.85 | [Liquidity and Balance Sheet](index=3&type=section&id=Liquidity%20and%20Balance%20Sheet) As of June 30, 2025, Battalion Oil reported $44.6 million in cash and cash equivalents, with $219.4 million in outstanding term loan indebtedness Liquidity Position as of June 30, 2025 | Metric | Amount | | :--- | :--- | | **Cash and cash equivalents** | $44.6 million | | **Term loan indebtedness** | $219.4 million | [Financial Statements](index=5&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 total operating revenues were $42.8 million, leading to a net income of $4.8 million, significantly improved from a prior-year net loss, but resulting in a $3.5 million net loss to common stockholders after preferred dividends Q2 2025 Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Total operating revenues** | $42,812 | $49,104 | | **(Loss) income from operations** | $(153) | $5,120 | | **Net gain on derivative contracts** | $11,548 | $1,223 | | **Net income (loss)** | $4,796 | $(105) | | **Net loss available to common stockholders** | $(3,474) | $(8,691) | | **Diluted net loss per share** | $(0.21) | $(0.53) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $498.8 million, driven by higher cash and oil/gas properties, while total liabilities rose to $306.4 million, shifting stockholders' equity to a $5.2 million deficit Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $44,621 | $19,712 | | **Total current assets** | $83,462 | $54,052 | | **Net oil and natural gas properties** | $402,327 | $368,005 | | **Total assets** | $498,781 | $431,048 | | **Total current liabilities** | $90,042 | $77,664 | | **Long-term debt, net** | $191,467 | $145,535 | | **Total stockholders' (deficit) equity** | $(5,236) | $4,120 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to $10.2 million in Q2 2025, while investing activities used $33.4 million, and financing activities provided $55.4 million for the first six months Cash Flow Summary for Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $10,205 | $29,824 | | **Net cash used in investing activities** | $(33,362) | $(13,857) | | **Net cash (used in) provided by financing activities** | $(5,790) | $(10,478) | | **Net (decrease) increase in cash** | $(28,947) | $5,489 | [Supplemental Information](index=8&type=section&id=Supplemental%20Information) [Selected Operating Data](index=8&type=section&id=Selected%20Operating%20Data) Q2 2025 average daily production slightly increased to 12,989 Boe/d, while crude oil prices dropped, yet post-hedge total realized price per Boe rose, and adjusted total operating costs per Boe decreased Q2 Production Volumes | Production | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Crude oil (MBbls)** | 584 | 577 | | **Natural gas (MMcf)** | 2,136 | 1,929 | | **Total (MBoe)** | 1,182 | 1,170 | | **Average daily production (Boe/d)** | 12,989 | 12,857 | Q2 Average Prices per Unit | Price | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Crude oil (per Bbl)** | $62.14 | $79.20 | | **Total per Boe (pre-hedge)** | $36.02 | $41.95 | | **Total per Boe (post-hedge)** | $39.66 | $39.21 | Q2 Average Costs per Boe | Cost | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Lease operating** | $9.03 | $9.41 | | **Gathering and other** | $9.27 | $10.36 | | **General and administrative (adjusted)** | $2.11 | $2.49 | | **Total operating costs (adjusted)** | $24.49 | $25.93 | [Non-GAAP Reconciliations](index=9&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP measures, clarifying adjusted net loss and Adjusted EBITDA by removing non-cash and non-recurring items for a clearer operational performance view [Reconciliation of Net Loss to Adjusted Net Loss](index=9&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20Net%20Loss) Q2 2025 reported net loss of $3.5 million was adjusted to a $10.6 million net loss, or ($0.65) per share, primarily by excluding a $7.2 million non-cash unrealized derivative gain Adjusted Net Loss Reconciliation for Q2 2025 (in thousands) | Metric | Amount | | :--- | :--- | | **Net loss available to common stockholders** | $(3,474) | | **Unrealized gain on derivatives** | $(7,248) | | **Non-recurring charges** | $73 | | **Adjusted net loss available to common stockholders** | $(10,649) | | **Adjusted diluted net loss per share** | $(0.65) | [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 increased to $18.1 million, with the Last Twelve Months (LTM) Adjusted EBITDA reaching $64.7 million as of June 30, 2025 Adjusted EBITDA Reconciliation for Q2 (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net income (loss), as reported** | $4,796 | $(105) | | **Interest expense** | $7,341 | $7,610 | | **Depletion, depreciation and accretion** | $13,939 | $13,213 | | **Unrealized (gain) on derivatives** | $(7,248) | $(4,434) | | **Adjusted EBITDA** | $18,137 | $15,634 | - Adjusted Last Twelve Months (LTM) EBITDA as of June 30, 2025 was **$64.7 million**[30](index=30&type=chunk)

Core Insights - Battalion Oil Corporation reported its financial and operational results for Q2 2025, highlighting a net loss of $3.5 million and an adjusted diluted net loss of $10.6 million [6][9][12]. Operational Highlights - The company completed its 2025 six-well drilling plan ahead of schedule and under budget, with initial production rates from the new wells outperforming legacy wells [2][4]. - The acid gas injection facility treated approximately 2.2 Bcf of gas, but ceased operations on August 11, 2025, leading to a temporary shutdown of part of the Monument Draw field [3][8]. Financial Performance - Average daily net production was 12,989 Boe/d (49% oil), with total operating revenue of $42.8 million, a decrease from $49.1 million in Q2 2024 [4][6]. - The decline in revenue was primarily due to a $5.93 decrease per Boe in average realized prices, partially offset by a 132 Boe/d increase in production [4][6]. - Lease operating and workover expenses increased to $10.98 per Boe, while general and administrative expenses decreased to $2.17 per Boe [5][6]. Liquidity and Balance Sheet - As of June 30, 2025, the company had $219.4 million in term loan indebtedness and total liquidity of $44.6 million [9][15]. - Current assets increased to $83.5 million, with cash and cash equivalents at $44.6 million, up from $19.7 million a year earlier [15][9]. Production and Pricing Data - Crude oil production for Q2 2025 was 584 MBbls, with an average price of $62.14 per Bbl, down from $79.20 in Q2 2024 [20][21]. - Total production volumes for the quarter were 1,182 MBoe, with an average daily production of 12,989 Boe/d [20][21].

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents Battalion Oil Corporation's unaudited condensed consolidated financial statements and detailed notes for periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Statements of Operations (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net income (loss) for the specified periods Condensed Consolidated Statements of Operations (Unaudited, in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $42,812 | $49,104 | $90,287 | $98,974 | | Total operating expenses | $42,965 | $43,984 | $87,049 | $93,831 | | (Loss) income from operations | ($153) | $5,120 | $3,238 | $5,143 | | Net gain (loss) on derivative contracts | $11,548 | $1,223 | $20,850 | ($22,964) | | Interest expense and other | ($6,599) | ($6,448) | ($13,269) | ($13,486) | | Net income (loss) | $4,796 | ($105) | $10,819 | ($31,307) | | Preferred dividends | ($8,270) | ($8,586) | ($20,090) | ($14,218) | | Net loss available to common stockholders | ($3,474) | ($8,691) | ($9,271) | ($45,525) | | Basic net loss per share | ($0.21) | ($0.53) | ($0.56) | ($2.77) | | Diluted net loss per share | ($0.21) | ($0.53) | ($0.56) | ($2.77) | [Condensed Consolidated Balance Sheets (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) This section provides the unaudited condensed consolidated balance sheets, outlining assets, liabilities, and equity at June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Unaudited, in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $44,621 | $19,712 | | Total current assets | $83,462 | $54,052 | | Net oil and natural gas properties | $402,327 | $368,005 | | Total assets | $498,781 | $431,048 | | Total current liabilities | $90,042 | $77,664 | | Long-term debt, net | $191,467 | $145,535 | | Redeemable convertible preferred stock | $197,625 | $177,535 | | Total liabilities, temporary equity and stockholders' equity | $498,781 | $431,048 | | Total stockholders' (deficit) equity | ($5,236) | $4,120 | - Cash and cash equivalents increased significantly to **$44.6 million** at June 30, 2025, from **$19.7 million** at December 31, 2024[17](index=17&type=chunk) - Total stockholders' equity shifted from a positive **$4.1 million** at December 31, 2024, to a deficit of **$5.2 million** at June 30, 2025[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) This section details changes in stockholders' equity, including net income (loss) and preferred dividends, for the periods presented Changes in Stockholders' Equity (in thousands) | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------- | :------------ | | Balances at period end | $4,120 | ($1,762) | ($5,236) | | Net income (loss) for period | ($22,202) (Q4 2024) | $6,023 (Q1 2025) | $4,796 (Q2 2025) | | Deemed dividends for preferred stock | ($8,680) (Q4 2024) | ($11,820) (Q1 2025) | ($8,270) (Q2 2025) | - Total stockholders' equity decreased from **$4,120 thousand** at December 31, 2024, to a deficit of **$5,236 thousand** at June 30, 2025[20](index=20&type=chunk) - Net income for the six months ended June 30, 2025, totaled **$10,819 thousand**, but was offset by **$20,090 thousand** in deemed dividends for preferred stock[15](index=15&type=chunk)[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $10,819 | ($31,307) | | Net cash provided by operating activities | $22,936 | $33,741 | | Net cash used in investing activities | ($53,474) | ($45,706) | | Net cash provided by financing activities | $55,447 | $8,867 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $24,909 | ($3,098) | | Cash, cash equivalents and restricted cash at end of period | $44,712 | $54,521 | - Operating cash flows decreased by **$10.8 million (32%)** year-over-year for the six months ended June 30, 2025[23](index=23&type=chunk) - Investing activities saw an increase in capital expenditures for oil and natural gas properties, from **$44.8 million** in H1 2024 to **$53.1 million** in H1 2025[23](index=23&type=chunk) - Financing activities were boosted by **$61.1 million** from Incremental Term Loans in 2025, compared to **$38.8 million** from preferred stock issuances and a **$10.0 million** merger deposit in 2024[152](index=152&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the unaudited condensed consolidated financial statements, covering accounting policies, debt, and other financial disclosures [Note 1. Financial Statement Presentation](index=14&type=section&id=Note%201.%20FINANCIAL%20STATEMENT%20PRESENTATION) This note details the basis of financial statement presentation, liquidity challenges, and management's plan to address debt covenants and capital needs - The Company generated net income of **$10.8 million** for the six months ended June 30, 2025, but had negative working capital of **$6.6 million** at June 30, 2025[28](index=28&type=chunk) - At June 30, 2025, the Company had **$44.6 million** of cash and cash equivalents and **$22.5 million** in debt repayments due through June 30, 2026[28](index=28&type=chunk) - The Company requires additional liquidity to meet debt covenant requirements for the next 12 months[28](index=28&type=chunk) - Management believes it will have sufficient liquidity and maintain debt covenant compliance due to operational forecasts, cash on hand, cost reduction measures, and a support letter from three largest related party investors to purchase up to **$30.0 million** in additional preferred equity by August 31, 2026[28](index=28&type=chunk) Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Cash and cash equivalents | $44,621 | $19,712 | | Restricted cash | $91 | $91 | | **Total cash, cash equivalents and restricted cash** | **$44,712** | **$19,803** | [Note 2. Segments](index=17&type=section&id=Note%202.%20SEGMENTS) The Company operates as a single reportable segment, focusing on oil and natural gas assets, with performance evaluated on consolidated income or loss - Battalion Oil Corporation operates as one reportable segment, focusing on oil and natural gas acquisition, production, exploration, and development[40](index=40&type=chunk) - Performance is evaluated based on consolidated income or loss from operations, with the CODM managing based on consolidated production and operating expenses[40](index=40&type=chunk) [Note 3. Operating Revenues](index=17&type=section&id=Note%203.%20OPERATING%20REVENUES) This note details revenue recognition policies for oil, natural gas, and NGLs, primarily from the Delaware Basin, recognized upon commodity transfer - Substantially all oil, natural gas, and NGLs revenues are derived from the Delaware Basin in Pecos, Reeves, Ward, and Winkler Counties, Texas[41](index=41&type=chunk) - Revenue is recognized at a point in time when control of each unit of commodity is transferred to the customer, measured based on contract consideration[45](index=45&type=chunk) Accounts Receivable from Customer Contracts (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Accounts receivable, net | $19,258 | $23,516 | [Note 4. Oil and Natural Gas Properties](index=19&type=section&id=Note%204.%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES) The Company uses the full cost method for oil and natural gas properties, capitalizing costs and performing quarterly impairment and ceiling tests - The Company uses the full cost method of accounting for oil and natural gas properties, capitalizing all acquisition, exploration, and development costs[48](index=48&type=chunk) - Quarterly impairment assessments are performed for unevaluated properties, considering factors like intent to drill, lease term, and economic viability[49](index=49&type=chunk) - At June 30, 2025, and 2024, the net book value of oil and natural gas properties did not exceed the ceiling test value of the Company's reserves[50](index=50&type=chunk) Oil and Natural Gas Prices for Ceiling Test Calculations | Date | WTI Crude Oil Spot Price (per barrel) | Henry Hub Natural Gas Price (per MMBtu) | | :--- | :------------------------------------ | :-------------------------------------- | | June 30, 2025 | $71.20 | $2.86 | | June 30, 2024 | $79.45 | $2.32 | [Note 5. Debt](index=21&type=section&id=Note%205.%20DEBT) This note details the Company's debt structure, including the 2024 Amended Term Loan Agreement, its terms, covenants, and hedging requirements Debt Composition (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Term loan credit facility | $219,375 | $162,000 | | Other | $53 | $106 | | **Total debt (Face Value)** | **$219,428** | **$162,106** | | Less: Current portion of long-term debt | ($22,553) | ($12,246) | | Less: Other (unamortized discount/costs) | ($5,408) | ($4,325) | | **Long-Term Debt, net** | **$191,467** | **$145,535** | - The 2024 Amended Term Loan Agreement, with a maturity date of December 26, 2028, was entered into on December 26, 2024, and amended on January 9, 2025, to include **$63.0 million** in Incremental Term Loans[56](index=56&type=chunk)[59](index=59&type=chunk) - Borrowings bear interest at SOFR (3-month tenor) + 0.15% credit spread adjustment + 7.75% applicable margin, with the weighted average interest rate for Q2 2025 at **12.20%**[60](index=60&type=chunk) - The Company is required to make scheduled quarterly amortization payments of **2.50%** of the total aggregate principal amount, commencing with a **$5.6 million** repayment for Q2 2025[61](index=61&type=chunk) - Financial covenants include maintaining specific Asset Coverage, Total Net Leverage, Current Ratios, and Liquidity levels, with the Company in compliance with all covenants at June 30, 2025[62](index=62&type=chunk)[64](index=64&type=chunk) - The Company is required to hedge approximately **85% to 50%** of anticipated oil and natural gas production on a rolling basis for the next four years[65](index=65&type=chunk) [Note 6. Fair Value Measurements](index=25&type=section&id=Note%206.%20FAIR%20VALUE%20MEASUREMENTS) This note describes the Company's fair value measurement hierarchy for financial instruments, classifying derivative contracts by input observability - The Company uses a fair value hierarchy (Level 1, 2, 3) to classify financial instruments, with Level 2 for observable inputs and Level 3 for unobservable inputs[71](index=71&type=chunk) Fair Value of Derivative Contracts (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Assets from derivative contracts | $20,061 | $11,021 | | Liabilities from derivative contracts | $9,247 | $19,284 | - Derivative contracts (fixed-price swaps, collars, basis swaps, WTI NYMEX rolls) are classified as Level 2, using forward curves for commodity prices and implied volatility[72](index=72&type=chunk) - The Exit Fee derivative, identified in the 2024 Term Loan Agreement, is classified as Level 3, with its fair value deemed zero at June 30, 2025, and December 31, 2024[74](index=74&type=chunk) [Note 7. Derivative and Hedging Activities](index=28&type=section&id=Note%207.%20DERIVATIVE%20AND%20HEDGING%20ACTIVITIES) Battalion uses derivative instruments to hedge commodity price exposure, recording fair value changes and settled payments in net gain (loss) - The Company uses derivative instruments to hedge commodity price risks but does not designate them for hedge accounting, recording all changes in fair value and settled payments in 'Net gain (loss) on derivative contracts'[79](index=79&type=chunk) Net Gain (Loss) on Derivative Contracts (in thousands) | Period | Unrealized Gain (Loss) | Realized (Loss) Gain | Total Net Gain (Loss) | | :----- | :--------------------- | :------------------- | :-------------------- | | Three Months Ended June 30, 2025 | $7,248 | $4,300 | $11,548 | | Three Months Ended June 30, 2024 | $4,434 | ($3,211) | $1,223 | | Six Months Ended June 30, 2025 | $19,076 | $1,774 | $20,850 | | Six Months Ended June 30, 2024 | ($15,327) | ($7,637) | ($22,964) | Fair Value of Commodity Derivative Contracts (in thousands) | Balance Sheet Location | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Current assets | $13,717 | $6,969 | | Other noncurrent assets | $6,344 | $4,052 | | Current liabilities | ($4,483) | ($12,330) | | Other noncurrent liabilities | ($4,764) | ($6,954) | | **Net Derivative Position** | **$10,814** | **($8,263)** | - At June 30, 2025, the Company had open crude oil fixed-price swaps for **1,042,821 Bbls** at **$65.37/Bbl** for 2025, decreasing to **140,544 Bbls** at **$60.14/Bbl** for 2029[83](index=83&type=chunk) - At June 30, 2025, the Company had open natural gas fixed-price swaps for **2,582,845 MMBtu** at **$3.36/MMBtu** for 2025, decreasing to **527,049 MMBtu** at **$3.84/MMBtu** for 2029[83](index=83&type=chunk) [Note 8. Asset Retirement Obligations](index=31&type=section&id=Note%208.%20ASSET%20RETIREMENT%20OBLIGATIONS) The Company records Asset Retirement Obligations (AROs) for site reclamation and well abandonment, with the liability increasing to $19.8 million - AROs are recorded for site reclamation, facility dismantling, and well abandonment costs, capitalized as oil and natural gas properties[86](index=86&type=chunk) Asset Retirement Obligations Activity (in thousands) | Metric | Amount | | :----- | :----- | | Liability at December 31, 2024 | $19,156 | | Accretion expense | $550 | | Liabilities incurred | $106 | | **Liability at June 30, 2025** | **$19,812** | [Note 9. Commitments and Contingencies](index=31&type=section&id=Note%209.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the Company's commitments, including a joint venture and gas treating agreement, and addresses ongoing legal proceedings - The Company has a joint venture with Caracara Services, LLC to develop an acid gas treatment facility and a gas treating agreement with Wink Amine Treater, LLC (WAT)[88](index=88&type=chunk)[108](index=108&type=chunk) - Under the gas treating agreement, the Company has a minimum volume commitment of **20,000 Mcf per day** for an initial term of five years, with a treating rate starting at **$1.44/Mcf**[88](index=88&type=chunk) - The Company is party to legal proceedings, including claims for environmental damages in Louisiana, but management believes the resolution will not have a material effect on financial position or results[92](index=92&type=chunk)[93](index=93&type=chunk) [Note 10. Redeemable Convertible Preferred Stock](index=33&type=section&id=Note%2010.%20REDEEMABLE%20CONVERTIBLE%20PREFERRED%20STOCK) This note details the Company's Redeemable Convertible Preferred Stock, including cumulative dividends and conversion/redemption features Redeemable Convertible Preferred Stock Issuances (in thousands) | Preferred Stock | Issuance Date | Shares | Conversion Price | Net Equity Recorded | Cumulative Non-cash Deemed Dividends | Total Net Equity & Cumulative Deemed Dividends | | :-------------- | :------------ | :----- | :--------------- | :------------------ | :----------------------------------- | :--------------------------------------------- | | Series A | March 28, 2023 | 25,000 | $9.03 | $23,541 | $19,226 | $42,767 | | Series A 1 | September 6, 2023 | 38,000 | $7.63 | $36,941 | $17,639 | $54,580 | | Series A 2 | December 15, 2023 | 35,000 | $6.21 | $34,006 | $14,149 | $48,155 | | Series A 3 | March 27, 2024 | 20,000 | $6.83 | $19,397 | $6,925 | $26,322 | | Series A 4 | May 13, 2024 | 20,000 | $6.42 | $19,385 | $6,416 | $25,801 | | **Total** | | **138,000** | | **$133,270** | **$64,355** | **$197,625** | - Preferred stockholders are entitled to cumulative dividends at a fixed rate of **14.5% cash** or **16.0% PIK** annually, with cash dividends currently prohibited by the 2024 Amended Term Loan Agreement[100](index=100&type=chunk) Preferred Stock PIK Dividends (in thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | $8,270 | $8,586 | | Six Months Ended June 30 | $20,090 | $14,218 | - The carrying value of preferred stock, including PIK dividends, was approximately **$197.6 million** at June 30, 2025[97](index=97&type=chunk) [Note 11. Earnings Per Share](index=36&type=section&id=Note%2011.%20EARNINGS%20PER%20SHARE) This note details basic and diluted earnings per share calculations, reporting net losses available to common stockholders for all periods Net Loss Per Share of Common Stock (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss available to common stockholders (in thousands) | ($3,474) | ($8,691) | ($9,271) | ($45,525) | | Basic EPS | ($0.21) | ($0.53) | ($0.56) | ($2.77) | | Diluted EPS | ($0.21) | ($0.53) | ($0.56) | ($2.77) | | Weighted average common shares outstanding (in thousands) | 16,457 | 16,457 | 16,457 | 16,457 | - Common stock equivalents (options and RSUs) were anti-dilutive and excluded from diluted EPS calculations for all periods presented[106](index=106&type=chunk) [Note 12. Additional Financial Statement Information](index=37&type=section&id=Note%2012.%20ADDITIONAL%20FINANCIAL%20STATEMENT%20INFORMATION) This note provides a detailed breakdown of selected balance sheet and income statement accounts and clarifies the equity method investment Accounts Receivable, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Oil, natural gas and NGL revenues | $19,258 | $23,516 | | Joint interest accounts | $4,333 | $2,140 | | Other | $873 | $642 | | **Total** | **$24,464** | **$26,298** | Accounts Payable and Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Trade payables | $15,708 | $15,663 | | Accrued oil and natural gas capital costs | $16,843 | $7,800 | | Revenues and royalties payable | $18,861 | $19,816 | | Accrued interest expense | $74 | $330 | | Accrued employee compensation | $1,361 | $1,472 | | Accrued lease operating expenses | $7,645 | $7,597 | | Other | $1,794 | $4 | | **Total** | **$62,286** | **$52,682** | - The Company accounts for its **5% equity interest** in Wink Amine Treater, LLC (WAT), an unconsolidated affiliate for acid gas treatment, using the equity method[108](index=108&type=chunk) [Note 13. Subsequent Events](index=38&type=section&id=Note%2013.%20SUBSEQUENT%20EVENTS) This note discloses the cessation of Wink Amine Treater, LLC (WAT) operations, impacting production and increasing processing costs - On August 11, 2025, Wink Amine Treater, LLC (WAT) ceased operations, leading to a temporary shutdown of a portion of the Company's Monument Draw field production[112](index=112&type=chunk)[128](index=128&type=chunk) - The cessation of WAT operations is expected to materially increase processing costs and decrease production and revenue projections in the near-term[112](index=112&type=chunk)[128](index=128&type=chunk) - Management is actively working to identify and execute a plan for alternative gas processing[112](index=112&type=chunk)[128](index=128&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition and operational results, covering performance factors, recent developments, liquidity, and detailed revenue and expense analysis [Overview](index=39&type=section&id=Overview) Battalion Oil Corporation is an independent energy company focused on Delaware Basin oil and gas assets, with results driven by production, prices, and hedging - Battalion Oil Corporation is an independent energy company focused on the acquisition, production, exploration, and development of onshore liquids-rich oil and natural gas assets in the Delaware Basin[116](index=116&type=chunk) - Financial results are largely driven by oil and natural gas production volumes and the prices received for that production, which are subject to market demand, supply, and other economic factors[117](index=117&type=chunk) - Derivative instruments are used to provide partial protection against declines in oil and natural gas prices, hedging **50% to 85%** of anticipated production for the next four years, but do not cover total expected production[118](index=118&type=chunk) [Recent Developments](index=39&type=section&id=Recent%20Developments) Recent developments include debt refinancing via the 2024 Amended Term Loan Agreement and operational challenges from the cessation of WAT operations - The Company entered into the 2024 Amended Term Loan Agreement on December 26, 2024, and incurred **$63.0 million** in Incremental Term Loans on January 9, 2025, maturing on December 26, 2028[120](index=120&type=chunk) - The net proceeds from the 2024 Term Loan Agreement were used to repay approximately **$152.1 million** of outstanding indebtedness under the previous 2021 Amended Term Loan Agreement[121](index=121&type=chunk)[122](index=122&type=chunk) - The Company recognized a **$7.5 million** loss on extinguishment of debt for the year ended December 31, 2024, due to the refinancing[127](index=127&type=chunk) - On August 11, 2025, Wink Amine Treater, LLC (WAT) ceased operations, causing a temporary shut-in of a portion of the Monument Draw field production[128](index=128&type=chunk) - The cessation of WAT operations is expected to materially increase processing costs and decrease production and revenue projections in the near-term[128](index=128&type=chunk) [Capital Resources and Liquidity](index=43&type=section&id=Capital%20Resources%20and%20Liquidity) The Company faces liquidity challenges and negative working capital but expects sufficient liquidity for 12 months, while evaluating strategic alternatives including potential delisting - The Company generated net income of **$10.8 million** for the six months ended June 30, 2025, but had negative working capital of **$6.6 million** at June 30, 2025[133](index=133&type=chunk) - At June 30, 2025, the Company had **$44.6 million** in cash and cash equivalents and **$22.5 million** in debt repayments due through June 2026[133](index=133&type=chunk) - Management believes it will have sufficient liquidity for the next 12 months, supported by operational forecasts, cash, cost reductions, and a **$30.0 million** preferred equity commitment from related party investors by August 31, 2026[134](index=134&type=chunk) - The Company received a notice of non-compliance with NYSE American listing standards due to negative stockholders' equity and sustained losses, and is considering suspending its NYSE listing to reduce costs[137](index=137&type=chunk)[139](index=139&type=chunk) - Scheduled quarterly amortization payments under the 2024 Amended Term Loan total **$22.5 million** through June 2026[143](index=143&type=chunk) [Cash Flows](index=47&type=section&id=Cash%20Flows) Operating cash flows decreased to $22.9 million, investing activities used $53.5 million, and financing activities provided $55.5 million, driven by incremental term loans Cash Flow Summary (in thousands) | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :----------------------------- | :----------------------------- | | Operating activities | $22,936 | $33,741 | | Investing activities | ($53,474) | ($45,706) | | Financing activities | $55,447 | $8,867 | | **Net increase (decrease) in cash** | **$24,909** | **($3,098)** | - Net cash from operating activities decreased by **$10.8 million (32%)** year-over-year for the six months ended June 30, 2025[148](index=148&type=chunk) - Oil and natural gas capital expenditures for the six months ended June 30, 2025, were **$53.1 million**, including **$47.2 million** for drilling and completion[150](index=150&type=chunk) - Financing activities were boosted by **$61.1 million** from Incremental Term Loans in 2025, compared to **$38.8 million** from preferred stock issuances and a **$10.0 million** merger deposit in 2024[152](index=152&type=chunk) [Critical Accounting Policies and Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes occurred in critical accounting policies and estimates from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to critical accounting policies and estimates from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[155](index=155&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Net income improved significantly due to derivative gains, offsetting lower operating revenues from reduced commodity prices and production, while per-unit operating expenses generally decreased Key Financial and Operational Metrics (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues (in thousands) | $42,812 | $49,104 | $90,287 | $98,974 | | Total operating expenses (in thousands) | $42,965 | $43,984 | $87,049 | $93,831 | | Net income (loss) (in thousands) | $4,796 | ($105) | $10,819 | ($31,307) | | Total MBoe production | 1,182 | 1,170 | 2,253 | 2,352 | | Average daily production – Boe | 12,989 | 12,857 | 12,448 | 12,923 | | Average oil price - Bbl | $62.14 | $79.20 | $65.91 | $77.10 | | Average natural gas price - Mcf | $0.44 | ($1.10) | $0.96 | ($0.02) | | Average NGLs price - Bbl | $22.11 | $20.31 | $23.00 | $20.15 | | Total average price per Boe | $36.02 | $41.95 | $39.93 | $41.93 | - Operating revenues decreased for both three and six-month periods primarily due to lower average realized prices, despite a slight increase in Q2 2025 production[160](index=160&type=chunk)[161](index=161&type=chunk) - Net gain on derivative contracts significantly improved, from a **$22.9 million loss** in H1 2024 to a **$20.9 million gain** in H1 2025[171](index=171&type=chunk) - Lease operating expenses decreased on a per-unit basis due to contract negotiations, lower chemical costs, and preventative maintenance[162](index=162&type=chunk) - Workover and other expenses increased due to higher activity and a non-recurring well cleanout program[163](index=163&type=chunk) - Depletion expense per Boe increased due to a period-over-period increase in net oil and natural gas properties combined with a decrease in proved reserves[169](index=169&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the Company's exposure to market risks, including commodity price and interest rate risks, and related hedging strategies - The Company uses derivative instruments (fixed-price swaps, costless collars, basis swaps, WTI NYMEX rolls) to hedge commodity price risk, aiming to protect against declines in oil and natural gas prices[173](index=173&type=chunk) - Under its Term Loan Agreement, the Company is required to hedge approximately **50% to 85%** of anticipated oil and natural gas production on a rolling basis for the next four years[175](index=175&type=chunk) - At June 30, 2025, the Company's term loan debt was **$219.4 million**, bearing variable interest rates tied to SOFR, with a weighted average interest rate of **12.20%**[179](index=179&type=chunk) - A **10% change** in market interest rates would impact the Company's cash flows by approximately **$2.7 million** per year, based on the June 30, 2025, variable-rate debt balance[179](index=179&type=chunk) [ITEM 4. Controls and Procedures](index=54&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management concluded that disclosure controls and procedures were designed and effective as of June 30, 2025, ensuring timely and accurate reporting[180](index=180&type=chunk) - No material changes occurred in internal controls over financial reporting during the six months ended June 30, 2025[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=56&type=section&id=ITEM%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the financial statements - Information regarding legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the financial statements[182](index=182&type=chunk) [ITEM 1A. Risk Factors](index=56&type=section&id=ITEM%201A.%20Risk%20Factors) No changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[183](index=183&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and no use of proceeds to report[184](index=184&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=56&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - No defaults upon senior securities to report[184](index=184&type=chunk) [ITEM 4. Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[184](index=184&type=chunk) [ITEM 5. Other Information](index=56&type=section&id=ITEM%205.%20Other%20Information) No other information to report for this period - No other information to report[184](index=184&type=chunk) [ITEM 6. Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists documents filed as exhibits to the Quarterly Report on Form 10-Q, including corporate governance and credit agreements - The report includes exhibits such as the Ninth Amended and Restated Certificate of Incorporation, Seventh Amended and Restated Bylaws, and the Second Amended and Restated Senior Secured Credit Agreement[187](index=187&type=chunk) - Sarbanes-Oxley Section 302 and 906 certifications of the Principal Executive Officer and Principal Financial Officer are attached[187](index=187&type=chunk) [Signatures](index=58&type=section&id=Signatures) The report is signed by Matthew B. Steele, Chief Executive Officer and Principal Financial Officer, on August 13, 2025 - The report is signed by Matthew B. Steele, Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) on August 13, 2025[191](index=191&type=chunk)

Core Insights - The conflict between Israel and Iran is driving investor interest towards energy and shipping stocks, with significant pre-market gains observed in specific companies [1][3]. Group 1: Company Performance - Battalion Oil (NYSEAMERICAN: BATL) experienced a 164% increase to $2.70 in pre-market trading, following a nearly 15% rise in the previous session [1][2]. - TMD Energy (NYSEAMERICAN: TMDE) surged 204% to $2.72 in early trading, building on a 77% gain from the previous Friday [2]. - OceanPal (NASDAQ: OP) saw its shares climb 101% to $3.25 in pre-market activity [2]. Group 2: Market Dynamics - The surge in energy and shipping stocks is attributed to potential disruptions in Middle Eastern oil supplies, with crude prices expected to rise [3]. - Battalion Oil and TMD Energy are positioned to benefit from these rising crude prices, while OceanPal is gaining from increased freight rates amid heightened geopolitical risks [3]. - The possibility of Iran closing the Strait of Hormuz, a critical waterway for global oil transport, adds to market concerns, as it handles about 20% of the world's oil [4].

[PART I: FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section details the company's unaudited financial statements, management's analysis, market risk, and internal controls [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents Q1 2025 unaudited financial statements, showing a net income turnaround to **$6.0 million** from a **$31.2 million** loss [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 net income was **$6.0 million**, a significant improvement from a **$31.2 million** loss, due to a **$9.3 million** derivative gain Summary of Operations | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $47,475 | $49,870 | -4.8% | | Income from Operations | $3,391 | $23 | +14,643% | | Net Gain (Loss) on Derivatives | $9,302 | $(24,187) | Favorable Turnaround | | Net Income (Loss) | $6,023 | $(31,203) | Favorable Turnaround | | Net Income (Loss) to Common Stockholders | $(5,797) | $(36,835) | Improved | | Basic & Diluted EPS | $(0.35) | $(2.24) | Improved | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of **March 31, 2025**, total assets increased to **$506.2 million**, while stockholders' equity shifted to a deficit of **$1.8 million** Key Balance Sheet Items | Balance Sheet Item | March 31, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $73,568 | $19,712 | +273.2% | | Total Assets | $506,248 | $431,048 | +17.4% | | Long-term debt, net | $196,833 | $145,535 | +35.2% | | Total Liabilities | $318,656 | $249,393 | +27.8% | | Total Stockholders' (Deficit) Equity | $(1,762) | $4,120 | Turned to Deficit | [Condensed Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased to a deficit of **$1.8 million**, primarily due to **$11.8 million** in deemed preferred stock dividends - Stockholders' equity turned into a deficit of **$1.8 million** at the end of Q1 **2025**, down from a positive **$4.1 million** at the end of **2024**[21](index=21&type=chunk) - The primary drivers for the change in equity during Q1 **2025** were net income of **$6.0 million**, offset by deemed dividends for preferred stock of **$11.8 million**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased to **$12.7 million** in Q1 2025, with new borrowings driving a **$53.9 million** net cash increase Summary of Cash Flows | Cash Flow Activity (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,731 | $3,916 | | Net cash used in investing activities | $(20,112) | $(31,848) | | Net cash provided by financing activities | $61,237 | $19,345 | | **Net increase (decrease) in cash** | **$53,856** | **$(8,587)** | - The increase in financing cash flow was driven by **$63.0 million** in proceeds from new borrowings under the amended term loan[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail debt refinancing, derivative contract impact, and accounting for redeemable convertible preferred stock, including paid-in-kind dividends - The company operates as a **single reportable segment** focused on oil and natural gas acquisition, production, exploration, and development in the **Delaware Basin**[25](index=25&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - The company's net book value of oil and natural gas properties did not exceed the ceiling test value at **March 31, 2025**, using an average WTI price of **$75.33 per barrel**[47](index=47&type=chunk) - The company has a minimum volume commitment of **20,000 Mcf per day** under a gas treating agreement with Wink Amine Treater, LLC, related to its joint venture for an acid gas treatment facility[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial performance, including production, costs, liquidity, and operational challenges [Recent Developments](index=38&type=section&id=Recent%20Developments) Recent developments include a major debt refinancing with **$63.0 million** in new term loans and ongoing H2S treating joint venture interruptions - The company entered into a new **2024** Amended Term Loan Agreement, refinancing prior debt and incurring an additional **$63.0 million** in Incremental Term Loans on January **9**, **2025**[113](index=113&type=chunk) - The acid gas injection (AGI) facility, a key joint venture, has experienced processing interruptions, resulting in the company paying higher processing rates to other service providers than originally forecasted[120](index=120&type=chunk) [Capital Resources and Liquidity](index=42&type=section&id=Capital%20Resources%20and%20Liquidity) Liquidity improved with **$73.6 million** in cash, but the company faces **$22.5 million** in debt repayments and is exploring NYSE American delisting - As of **March 31, 2025**, the company had **$73.6 million** of cash and cash equivalents, no additional borrowing capacity, and **$22.5 million** in debt repayments due through March **2026**[125](index=125&type=chunk) - The company is considering delisting its common stock from the NYSE American to reduce the ongoing costs of being a reporting company[127](index=127&type=chunk) [Cash Flow Analysis](index=44&type=section&id=Cash%20Flow%20Analysis) Operating cash flow increased to **$12.7 million** in Q1 2025, with reduced investing cash use and significant financing inflows from new debt Summary of Cash Flows | Cash Flow Activity (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $12,731 | $3,916 | | Cash flows used in investing activities | $(20,112) | $(31,848) | | Cash flows provided by financing activities | $61,237 | $19,345 | - During Q1 **2025**, the company spent **$19.8 million** on oil and natural gas capital expenditures, primarily on drilling and completion costs[138](index=138&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Operating revenues decreased due to lower production volumes, but gathering expenses improved due to the AGI facility, while depletion rates increased Key Operating Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Average Daily Production (Boe) | 11,900 | 12,989 | | Average Realized Price per Boe | $44.24 | $41.91 | | Lease Operating Expense per Boe | $9.67 | $9.80 | | Gathering and Other Expense per Boe | $11.20 | $14.62 | | Depletion Expense per Boe | $11.83 | $10.68 | - The decrease in gathering and other expenses was primarily due to a full quarter of volumes being treated by the AGI facility in **2025**, which came online in March **2024**[153](index=153&type=chunk) - The increase in the depletion rate per Boe was mainly due to an increase in future development costs combined with a decrease in proved reserves[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=50&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details the company's exposure to commodity price and interest rate risks, including hedging requirements and debt sensitivity - The company's term loan agreement requires it to hedge approximately **50% to 85%** of its anticipated oil and natural gas production on a rolling basis for the next four years[160](index=160&type=chunk) - The company has **$225.0 million** in variable-rate debt A **10%** change in market interest rates would impact cash flows by approximately **$2.7 million** per year[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were **effective**, with **no material changes** to internal controls over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by this report (**March 31, 2025**)[166](index=166&type=chunk) - There were **no changes** in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[167](index=167&type=chunk) [PART II: OTHER INFORMATION](index=52&type=section&id=PART%20II%20OTHER%20INFORMATION) This part addresses legal proceedings, risk factors, unregistered equity sales, and other required disclosures [Item 1. Legal Proceedings](index=52&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in legal proceedings from former operations in Louisiana, but management expects no material financial impact - The company is a defendant in lawsuits from surface owners in Louisiana, where it formerly operated, concerning claims of environmental damages[90](index=90&type=chunk)[168](index=168&type=chunk) - Management does not believe that the resolution of currently pending legal proceedings will have a material effect on the company's financial position, operating results, or cash flows[89](index=89&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=ITEM%201A.%20Risk%20Factors) There have been **no changes** to the risk factors previously disclosed in the company's Annual Report on Form 10-K for **December 31, 2024** - There have been **no changes** to the risk factors described in the company's Annual Report on Form 10-K for the fiscal year ended **December 31, 2024**[169](index=169&type=chunk) [Other Items (Items 2, 3, 4, & 5)](index=52&type=section&id=Other%20Items%20(2,%203,%204,%20%26%205)) The company reported **"None"** for unregistered equity sales, no defaults on senior securities, and **"Not applicable"** for mine safety - The company reported **"None"** for Unregistered Sales of Equity Securities and Use of Proceeds, Defaults Upon Senior Securities, and Other Information Mine Safety Disclosures were noted as **"Not applicable"**[170](index=170&type=chunk) [Item 6. Exhibits](index=54&type=section&id=ITEM%206.%20Exhibits) Lists documents filed as exhibits, including **Sarbanes-Oxley certifications (31 and 32)** and **Inline XBRL data files (101 series)** - The exhibits filed with this report include **Sarbanes-Oxley certifications (31 and 32)** and **Inline XBRL data files (101 series)**[171](index=171&type=chunk)[173](index=173&type=chunk)

[First Quarter 2025 Financial and Operating Results](index=1&type=section&id=First%20Quarter%202025%20Financial%20and%20Operating%20Results) Battalion Oil Corporation's Q1 2025 results highlight progress in its six-well drilling program, with operations ahead of schedule and under budget, and recently completed wells producing above expectations [Overview and Key Highlights](index=1&type=section&id=Overview%20and%20Key%20Highlights) Battalion Oil Corporation's Q1 2025 highlights include ahead-of-schedule drilling, under-budget capital expenditure, and strong production from new wells, alongside improved AGI facility performance - The company is advancing its 2025 six-well activity plan, having completed four wells and drilling the final two ahead of schedule in the West Quito area[2](index=2&type=chunk) - Capital expenditure on the first well in West Quito was approximately **$1.0 million below** the Authorized for Expenditure (AFE) estimate, and a 10,000-foot lateral well was drilled in record time for the area[2](index=2&type=chunk) - Recently completed wells in the Monument Draw field are producing above type curve and are projected to each achieve an ultimate recovery of over **1,000,000 barrels of oil**[2](index=2&type=chunk) - The Acid Gas Injection (AGI) facility treated an average of **18 MMcf/d** during Q1 2025, with daily rates surpassing **30 MMcf/d** post-quarter due to equipment additions[3](index=3&type=chunk) [Financial and Operating Performance](index=1&type=section&id=Financial%20and%20Operating%20Performance) Q1 2025 saw decreased production and revenue, a net loss, but a significant increase in Adjusted EBITDA, with mixed trends in per-Boe operating costs Q1 Production and Revenue Comparison (YoY) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Average Daily Net Production | 11,900 Boe/d (53% oil) | 12,989 Boe/d (48% oil) | -8.4% | | Total Operating Revenue | $47.5 million | $49.9 million | -4.8% | | Realized Hedge Losses | $2.5 million | N/A | N/A | Operating Expenses per Boe (YoY) | Expense Category | Q1 2025 (/Boe) | Q1 2024 (/Boe) | Key Driver for Change | | :--- | :--- | :--- | :--- | | Lease Operating & Workover | $11.01 | $10.55 | Inflationary increases in maintenance, power, and chemicals | | Gathering and Other | $11.20 | $14.62 | Full quarter of volumes treated by the AGI facility | | General and Administrative | $4.12 | $3.44 | Higher payroll and benefits costs | Q1 2025 Profitability Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Loss available to common stockholders | ($5.8 million) | ($36.8 million) | | Net Loss per share | ($0.35) | ($2.24) | | Adjusted Diluted Net Loss | ($16.5 million) | N/A | | Adjusted Diluted Net Loss per share | ($1.00) | N/A | | Adjusted EBITDA | $15.1 million | $9.4 million | [Financial Position and Liquidity](index=3&type=section&id=Financial%20Position%20and%20Liquidity) As of March 31, 2025, the company reported **$73.6 million** in total liquidity and **$225.0 million** in outstanding term loan indebtedness - As of March 31, 2025, the Company had **$225.0 million** of term loan indebtedness outstanding[9](index=9&type=chunk) - Total liquidity was **$73.6 million**, composed of cash and cash equivalents[9](index=9&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) Unaudited Q1 2025 consolidated financial statements show a shift to net income, increased total assets, and positive cash flow from operations, driven by derivative gains and new debt [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 operations generated **$47.5 million** in revenue and **$3.4 million** in income, with a **$9.3 million** derivative gain leading to **$6.0 million** net income, but a **$5.8 million** net loss for common stockholders Q1 Statement of Operations Highlights (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total operating revenues | $47,475 | $49,870 | | Income from operations | $3,391 | $23 | | Net gain (loss) on derivative contracts | $9,302 | ($24,187) | | Net income (loss) | $6,023 | ($31,203) | | Net loss available to common stockholders | ($5,797) | ($36,835) | | Diluted net loss per share | ($0.35) | ($2.24) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$506.2 million**, driven by cash growth, while total liabilities rose to **$318.7 million**, resulting in a **$1.8 million** stockholders' deficit Balance Sheet Comparison (in thousands) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $73,568 | $19,712 | | Total current assets | $111,443 | $54,052 | | Net oil and natural gas properties | $380,359 | $368,005 | | **Total assets** | **$506,248** | **$431,048** | | Total current liabilities | $96,080 | $77,664 | | Long-term debt, net | $196,833 | $145,535 | | **Total liabilities** | **$318,656** | **$249,393** | | Total stockholders' (deficit) equity | ($1,762) | $4,120 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw **$12.7 million** net cash from operations, **$20.1 million** used in investing, and **$61.2 million** provided by financing, resulting in a **$53.9 million** net cash increase Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,731 | $3,916 | | Net cash used in investing activities | ($20,112) | ($31,848) | | Net cash provided by financing activities | $61,237 | $19,345 | | **Net increase (decrease) in cash** | **$53,856** | **($8,587)** | | Cash at end of period | $73,659 | $49,032 | [Selected Operating Data](index=8&type=section&id=Selected%20Operating%20Data) Q1 2025 average daily production decreased to **11,900 Boe/d**, while the post-hedge average realized price increased to **$41.88 per Boe**, and total adjusted operating costs decreased to **$27.83 per Boe** Q1 Production Volumes (YoY) | Production | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Crude oil (MBbls) | 569 | 566 | | Natural gas (MMcf) | 1,799 | 2,180 | | Natural gas liquids (MBbls) | 202 | 253 | | **Total (MBoe)** | **1,071** | **1,182** | | **Average daily production (Boe/d)** | **11,900** | **12,989** | Average Prices and Costs per Boe (YoY) | Metric (per Boe) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Average Price (pre-hedge) | $44.24 | $41.91 | | Cash effect of derivatives | ($2.36) | ($3.74) | | **Average Price (post-hedge)** | **$41.88** | **$38.17** | | Lease operating | $9.67 | $9.80 | | Gathering and other | $11.20 | $14.62 | | G&A, as adjusted | $3.01 | $2.57 | | **Total operating costs, as adjusted** | **$27.83** | **$30.27** | [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section reconciles non-GAAP measures, including Adjusted Net Loss and Adjusted EBITDA, to GAAP figures, providing clarity on underlying operational performance [Reconciliation of Net Loss to Adjusted Net Loss](index=9&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20Net%20Loss) Q1 2025 reported net loss of **$5.8 million** was adjusted to a **$16.5 million** net loss, or **($1.00)** per diluted share, primarily by removing an **$11.8 million** unrealized derivative gain Adjusted Net Loss Reconciliation (in thousands, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss available to common stockholders (reported) | ($5,797) | ($36,835) | | Unrealized (gain) loss on derivatives | ($11,828) | $19,761 | | Non-recurring charges | $1,149 | $937 | | **Net loss available to common stockholders (adjusted)** | **($16,476)** | **($17,065)** | | Diluted net loss per share (adjusted) | ($1.00) | ($1.04) | [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) Q1 2025 Adjusted EBITDA significantly improved to **$15.1 million** from **$9.4 million** in Q1 2024, with LTM Adjusted EBITDA reaching **$62.2 million** as of March 31, 2025 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss), as reported | $6,023 | ($31,203) | | Interest expense | $7,189 | $8,391 | | Depletion, depreciation and accretion | $13,080 | $13,025 | | Unrealized (gain) loss on derivatives | ($11,828) | $19,761 | | **Adjusted EBITDA** | **$15,082** | **$9,381** | Quarterly Adjusted EBITDA Trend (in thousands) | Quarter | Adjusted EBITDA | | :--- | :--- | | Q2 2024 | $15,634 | | Q3 2024 | $13,458 | | Q4 2024 | $18,019 | | Q1 2025 | $15,082 | | **LTM Adjusted EBITDA** | **$62,193** |