[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=Special%20note%20regarding%20forward-looking%20statements) The report contains forward-looking statements that involve assumptions, risks, and uncertainties, and actual results could differ materially from those anticipated - The report contains forward-looking statements that involve assumptions, risks, and uncertainties, and actual results could differ materially from those anticipated[4](index=4&type=chunk) - Key risk factors include **volatility in oil, natural gas, and natural gas liquids prices**; the company's ability to generate sufficient cash flow; contractual limitations on managing the business; and the ability to replace oil and natural gas reserves[4](index=4&type=chunk) - Other significant risks include the cost and availability of goods and services (subject to inflation), drilling and operating risks, potential regulatory or legislative actions, environmental risks, and general economic conditions[4](index=4&type=chunk)[5](index=5&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Battalion Oil Corporation's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Battalion Oil Corporation's unaudited condensed consolidated financial statements, including statements of operations, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, debt, derivatives, and other financial information for the periods ended June 30, 2023 and 2022 [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This section provides the unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net income (loss) for the three and six months ended June 30, 2023 and 2022 | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Total operating revenues | $54,272 | $101,511 | $119,414 | $183,113 | | Total operating expenses | $53,963 | $51,722 | $107,981 | $99,522 | | Income (loss) from operations | $309 | $49,789 | $11,433 | $83,591 | | Net gain (loss) on derivative contracts | $4,473 | $(31,910) | $23,946 | $(155,768) | | Interest expense and other | $(9,530) | $(4,832) | $(17,316) | $(7,520) | | Net income (loss) | $(4,748) | $13,047 | $18,063 | $(79,697) | | Basic Net income (loss) per share | $(0.35) | $0.80 | $0.87 | $(4.88) | | Diluted Net income (loss) per share | $(0.35) | $0.79 | $0.86 | $(4.88) | [Condensed Consolidated Balance Sheets (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This section presents the unaudited condensed consolidated balance sheets, outlining assets, liabilities, and stockholders' equity as of June 30, 2023, and December 31, 2022 | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Total current assets | $52,782 | $88,165 | | Net oil and natural gas properties | $369,032 | $385,410 | | Total assets | $433,241 | $485,358 | | Total current liabilities | $107,256 | $165,025 | | Long-term debt, net | $164,055 | $182,676 | | Total stockholders' equity | $99,321 | $84,628 | | Total liabilities, temporary equity and stockholders' equity | $433,241 | $485,358 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This section details the unaudited condensed consolidated statements of stockholders' equity, showing changes in common shares, additional paid-in capital, and retained earnings for the periods ended June 30, 2023 | Metric | Balances at December 31, 2022 | Balances at March 31, 2023 | Balances at June 30, 2023 | |:-------------------------------------|:------------------------------|:---------------------------|:--------------------------| | Common Shares | 16,345 | 16,457 | 16,457 | | Stock Amount | $2 | $2 | $2 | | Additional Paid-In Capital | $334,571 | $332,952 | $331,201 | | Retained Earnings (Accumulated Deficit) | $(249,945) | $(227,134) | $(231,882) | | Stockholders' Equity | $84,628 | $105,820 | $99,321 | - Net income (loss) for the three months ended March 31, 2023, was **$22,811 thousand**, and for the three months ended June 30, 2023, was **$(4,748) thousand**[17](index=17&type=chunk) - Deemed dividends for Series A preferred stock were **$(1,492) thousand** for the three months ended March 31, 2023, and **$(997) thousand** for the three months ended June 30, 2023[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section presents the unaudited condensed consolidated statements of cash flows, summarizing cash movements from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) | $18,063 | $(79,697) | | Net cash provided by (used in) operating activities | $8,649 | $28,333 | | Net cash provided by (used in) investing activities | $(31,739) | $(51,986) | | Net cash provided by (used in) financing activities | $8,878 | $19,069 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(14,212) | $(4,584) | | Cash, cash equivalents and restricted cash at end of period | $18,604 | $43,775 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies, debt, derivatives, and other financial information supporting the unaudited condensed consolidated financial statements [1. FINANCIAL STATEMENT PRESENTATION](index=12&type=section&id=1.%20FINANCIAL%20STATEMENT%20PRESENTATION) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, confirming Battalion's focus on onshore liquids-rich oil and natural gas assets. It highlights the company's liquidity needs, plans to secure $38 million in additional preferred equity, and risks related to supply chain issues and commodity price volatility - Battalion is an independent energy company focused on the acquisition, production, exploration, and development of onshore liquids-rich oil and natural gas assets in the United States, operating in a single segment[27](index=27&type=chunk) - The company requires additional liquidity to continue operations and meet debt covenant requirements for the next 12 months, planning to draw **$38 million in additional preferred equity** from its largest investors in Q3 2023[30](index=30&type=chunk) - Risks include supply chain issues (labor shortages, equipment delays, increased costs) and **commodity price volatility**, which can adversely impact the ability to finance capital budgets and operations[31](index=31&type=chunk)[32](index=32&type=chunk) | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Cash and cash equivalents | $18,514 | $32,726 | | Restricted cash | $90 | $90 | | Total cash, cash equivalents and restricted cash | $18,604 | $32,816 | [2. LEASES](index=15&type=section&id=2.%20LEASES) This note details the company's accounting for operating leases, primarily for equipment and office space. It explains the recognition of right-of-use assets and lease liabilities for leases exceeding 12 months and provides a summary of lease costs and other related information - The company leases equipment and office space under operating leases, recognizing right-of-use assets and lease liabilities for leases with terms greater than 12 months[42](index=42&type=chunk) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:-------------------------------|:-------------------------------| | Operating lease costs | $196 | $196 | | Short-term lease costs | $375 | $4,003 | | Total lease costs | $571 | $4,199 | - The weighted-average remaining lease term for operating leases decreased from **1.4 years in 2022 to 0.4 years** as of June 30, 2023[46](index=46&type=chunk) [3. OPERATING REVENUES](index=17&type=section&id=3.%20OPERATING%20REVENUES) This note describes the company's revenue recognition policy, primarily from the sale of crude oil, natural gas, and natural gas liquids in the Delaware Basin. Revenue is recognized when control of the commodity is transferred to the customer, and it provides details on amounts due from contracts with customers - Substantially all of the company's revenues are derived from single basin operations in the **Delaware Basin, Texas**, from the sale of crude oil, natural gas, and natural gas liquids[48](index=48&type=chunk) - Revenue is recognized at a point in time when a performance obligation is satisfied by the transfer of control of each unit of commodity to the customer[49](index=49&type=chunk) | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Accounts receivable, net | $19.9 million | $34.0 million | [4. OIL AND NATURAL GAS PROPERTIES](index=19&type=section&id=4.%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES) This note explains the company's use of the full cost method of accounting for oil and natural gas properties, where all acquisition, exploration, and development costs are capitalized. It also details the quarterly impairment assessment for unevaluated properties and the full cost ceiling test, noting compliance as of June 30, 2023 - The company uses the **full cost method of accounting** for its investment in oil and natural gas properties, capitalizing all costs of acquisition, exploration, and development[54](index=54&type=chunk) - Unevaluated properties are assessed quarterly for impairment, and evaluated properties are subject to a full cost ceiling test limitation[55](index=55&type=chunk) - As of June 30, 2023, the net book value of oil and natural gas properties did not exceed the ceiling test value, with **WTI crude oil spot prices at $83.23/bbl** and **Henry Hub natural gas prices at $4.76/MMBtu**[56](index=56&type=chunk) [5. DEBT](index=21&type=section&id=5.%20DEBT) This note provides details on the company's debt, primarily the Amended Term Loan Agreement. It covers outstanding indebtedness, variable interest rates, prepayment premiums, mandatory prepayment requirements, and financial covenants, confirming compliance as of June 30, 2023 | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Term loan credit facility | $220,000 | $235,000 | | Total debt (Face Value) | $220,265 | $235,190 | | Long-Term Debt, net | $164,055 | $182,676 | - As of June 30, 2023, the company had **$220.3 million of indebtedness outstanding** under the Amended Term Loan Agreement, with a maturity date of November 24, 2025[61](index=61&type=chunk) - The weighted average interest rate on borrowings for the quarter ended June 30, 2023, was approximately **12.6%**, based on SOFR plus 7.65%[61](index=61&type=chunk) - The company was in compliance with all financial covenants (**Asset Coverage Ratio, Total Net Leverage Ratio, Current Ratio**) under the Amended Term Loan Agreement as of June 30, 2023[66](index=66&type=chunk)[67](index=67&type=chunk) [6. FAIR VALUE MEASUREMENTS](index=25&type=section&id=6.%20FAIR%20VALUE%20MEASUREMENTS) This note describes the company's fair value measurement practices, categorizing financial instruments into a three-level hierarchy. It specifically details the fair value of commodity-based derivative contracts (Level 2) and the Change of Control Call Option (Level 3), including a reconciliation of its fair value changes - The company classifies fair value balances based on the observability of inputs, with **commodity-based derivative contracts listed as Level 2**[70](index=70&type=chunk)[72](index=72&type=chunk) | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Assets from commodity-based derivative contracts | $14,910 | $21,623 | | Liabilities from commodity-based derivative contracts | $32,886 | $62,935 | | Metric | Amount | |:-------------------------------------|:-------| | Balance at December 31, 2022 | $4,136 | | Change in fair value | $(704) | | Balance at June 30, 2023 | $3,432 | [7. DERIVATIVE AND HEDGING ACTIVITIES](index=27&type=section&id=7.%20DERIVATIVE%20AND%20HEDGING%20ACTIVITIES) This note outlines the company's use of derivative instruments (fixed-price swaps, collars, basis swaps, WTI NYMEX rolls) to manage commodity price risks, without designating them for hedge accounting. It details the fair value of these contracts and summarizes realized and unrealized gains and losses - The company uses derivative instruments (fixed-price swaps, costless put/call collars, basis swaps, and WTI NYMEX rolls) to hedge exposure to commodity price risks, but does not designate them for hedge accounting[77](index=77&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - The Term Loan Agreement requires hedging **50% to 85% of anticipated oil and natural gas production** for future periods on a rolling basis for the next four years[77](index=77&type=chunk) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Unrealized gain (loss) | $2,332 | $12,837 | $23,336 | $(78,201) | | Realized gain (loss) | $2,141 | $(44,747) | $610 | $(77,567) | | Total net gain (loss) | $4,473 | $(31,910) | $23,946 | $(155,768) | Open Crude Oil Derivative Contracts at June 30, 2023 | Instrument | 2023 Volumes (Bbls) | 2023 Avg Price ($) | 2024 Volumes (Bbls) | 2024 Avg Price ($) | 2025 Volumes (Bbls) | 2025 Avg Price ($) | |:-------------------------------------|:--------------------|:-------------------|:--------------------|:-------------------|:--------------------|:-------------------| | Fixed-price swap | 1,115,335 | 67.36 | 1,805,885 | 63.69 | 1,240,171 | 61.18 | | Basis swap | 1,047,536 | 0.40 | 1,801,951 | 0.27 | 1,240,171 | 0.18 | | WTI NYMEX roll | 1,097,510 | 0.51 | 1,784,914 | 0.27 | 1,240,171 | 0.12 | Open Natural Gas Derivative Contracts at June 30, 2023 | Instrument | 2023 Volumes (MMBtu) | 2023 Avg Price ($) | 2024 Volumes (MMBtu) | 2024 Avg Price ($) | 2025 Volumes (MMBtu) | 2025 Avg Price ($) | |:-------------------------------------|:---------------------|:-------------------|:---------------------|:-------------------|:---------------------|:-------------------| | Fixed-price swap | 2,925,851 | 3.71 | 4,423,784 | 3.54 | 3,687,113 | 3.35 | | Two-way collar (call) | 1,082,869 | 5.21 | 2,610,639 | 5.08 | 1,651,321 | 5.12 | | Two-way collar (put) | 1,082,869 | 3.76 | 2,610,639 | 3.67 | 1,651,321 | 3.72 | | Basis swap | 4,008,720 | (0.89) | 7,034,372 | (0.87) | 5,319,878 | (0.67) | [8. ASSET RETIREMENT OBLIGATIONS](index=30&type=section&id=8.%20ASSET%20RETIREMENT%20OBLIGATIONS) This note describes the company's accounting for Asset Retirement Obligations (AROs) on oil and natural gas properties, which are recorded when the fair value of site reclamation, dismantling, or plugging costs can be reasonably estimated. It also provides a reconciliation of the ARO liability - The company records an ARO liability on oil and natural gas properties when the fair value of site reclamation, dismantling facilities, or plugging and abandonment costs can be reasonably estimated[88](index=88&type=chunk) | Metric | Amount | |:-------------------------------------|:-------| | Liability as of December 31, 2022 | $15,469| | Accretion expense | $372 | | Liabilities incurred during the period | $11 | | Liability as of June 30, 2023 | $15,852| [9. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the company's commitments, including a joint venture for an acid gas treatment facility with a minimum volume commitment and long-term gathering, transportation, and sales contracts. It also addresses legal contingencies, specifically environmental claims in Louisiana, which management believes will not materially affect financial results - The company has a minimum volume commitment of **20,000 Mcf per day** under a gas treating agreement for an acid gas treatment facility, with an initial term of five years[91](index=91&type=chunk) - Long-term crude oil and natural gas contracts commit a substantial portion of production from the Delaware Basin for periods ranging from **one to twenty years**[92](index=92&type=chunk) - The company is involved in legal proceedings, including environmental damage claims in Louisiana, but management believes the resolution will not have a material effect on financial position or cash flows[93](index=93&type=chunk)[94](index=94&type=chunk) [10. REDEEMABLE CONVERTIBLE PREFERRED STOCK](index=31&type=section&id=10.%20REDEEMABLE%20CONVERTIBLE%20PREFERRED%20STOCK) This note describes the Series A Redeemable Convertible Preferred Stock issued in March 2023, including its issuance details, accounting as mezzanine equity, dividend terms (14.5% cash or 16.0% PIK accrual), conversion features, and redemption options by both the company and holders - On March 28, 2023, the company sold **25,000 shares of Series A Redeemable Convertible Preferred Stock** for **$24.4 million (net proceeds)** to its three largest existing shareholders[95](index=95&type=chunk) - The preferred stock is accounted for as mezzanine equity and carries cumulative dividends at a fixed rate of **14.5% per annum (cash)** or **16.0% per annum (PIK accrual)**, with PIK currently being used due to debt agreement restrictions[97](index=97&type=chunk)[99](index=99&type=chunk) - Holders can convert shares into common stock, and the company has options to redeem the preferred stock at varying premiums (**100-120% of Liquidation Preference**) based on the redemption date[100](index=100&type=chunk)[101](index=101&type=chunk) [11. STOCKHOLDERS' EQUITY](index=35&type=section&id=11.%20STOCKHOLDERS'%20EQUITY) This note discusses the company's 2020 Long-Term Incentive Plan, under which restricted stock units (RSUs) and stock options are granted. It highlights the stock-based compensation expense, including a negative amount due to forfeitures, and the remaining unrecognized compensation expense - The 2020 Long-Term Incentive Plan has approximately **0.6 million shares of common stock** reserved for issuance[104](index=104&type=chunk) - For the six months ended June 30, 2023, the company recognized a **negative stock-based compensation expense of $(0.5) million**, primarily due to forfeitures related to the departure of the prior CEO[104](index=104&type=chunk) - As of June 30, 2023, there was **$1.3 million of unrecognized compensation expense** related to non-vested RSU awards and **less than $0.1 million for stock options**, both to be recognized over less than 1 year[105](index=105&type=chunk)[106](index=106&type=chunk) [12. EARNINGS PER SHARE](index=36&type=section&id=12.%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per share using the two-class method, which allocates earnings between common shareholders and participating preferred stock. It also identifies common stock equivalents that were anti-dilutive and thus excluded from diluted EPS calculations | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) available to common stockholders (Basic) | $(5,745) | $13,047 | $14,273 | $(79,697) | | Basic net income (loss) per share | $(0.35) | $0.80 | $0.87 | $(4.88) | | Net income (loss) available to common stockholders (Diluted) | $(5,745) | $13,047 | $14,280 | $(79,697) | | Diluted net income (loss) per share | $(0.35) | $0.79 | $0.86 | $(4.88) | - For the three and six months ended June 30, 2023, common stock equivalents (options and restricted stock units) totaling **0.6 million and 0.5 million**, respectively, were anti-dilutive and not included in the computation of diluted earnings per share[110](index=110&type=chunk) [13. ADDITIONAL FINANCIAL STATEMENT INFORMATION](index=38&type=section&id=13.%20ADDITIONAL%20FINANCIAL%20STATEMENT%20INFORMATION) This note provides a detailed breakdown of selected balance sheet accounts, including accounts receivable, prepaids and other assets, other non-current assets (such as an investment in an unconsolidated affiliate), and accounts payable and accrued liabilities | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Oil, natural gas and natural gas liquids revenues | $19,853 | $33,980 | | Joint interest accounts | $1,779 | $3,201 | | Other | $1,886 | $793 | | Total Accounts receivable, net | $23,518 | $37,974 | | Metric | June 30, 2023 | December 31, 2022 | |:-------------------------------------|:--------------|:------------------| | Trade payables | $17,884 | $42,919 | | Accrued oil and natural gas capital costs | $1,928 | $19,911 | | Revenues and royalties payable | $20,392 | $26,759 | | Accrued interest expense | $104 | $160 | | Accrued employee compensation | $1,190 | $2,300 | | Accrued lease operating expenses | $7,388 | $8,005 | | Other | $11 | $41 | | Total Accounts payable and accrued liabilities | $48,897 | $100,095 | - The company holds a **5% equity interest in Brazos Amine Treater, LLC (BAT)**, an unconsolidated subsidiary formed in a joint venture with Caracara Services, LLC, to develop an acid gas treatment facility[112](index=112&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Battalion Oil Corporation's financial condition and results of operations for the three and six months ended June 30, 2023 and 2022. It covers an overview of the business, recent developments, capital resources and liquidity, cash flow analysis, critical accounting policies, and a detailed discussion of the results of operations [Overview](index=39&type=section&id=Overview) This overview describes Battalion as an independent energy company focused on onshore liquids-rich oil and natural gas assets in the Delaware Basin, with financial results driven by production volumes and commodity prices - Battalion 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**[115](index=115&type=chunk) - Financial results are largely driven by the volume of oil and natural gas production and the prices received, which are affected by market demand, supply, economic activity, and other factors[116](index=116&type=chunk) - The company uses derivative instruments 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 these may limit potential gains[117](index=117&type=chunk)[170](index=170&type=chunk) [Recent Developments](index=39&type=section&id=Recent%20Developments) This section highlights recent corporate actions, including the issuance of Series A Convertible Preferred Stock and the establishment of the H2S Treating Joint Venture for an acid gas treatment facility - On March 28, 2023, the company sold **25,000 shares of Series A Convertible Preferred Stock** to its three largest existing shareholders, generating **$24.4 million in net proceeds**[118](index=118&type=chunk) - Dividends on the preferred stock are cumulative, accruing quarterly at **14.5% cash or 16.0% PIK**, with PIK currently being used due to restrictions in the Amended Term Loan Agreement[118](index=118&type=chunk) - The H2S Treating Joint Venture (Brazos Amine Treater, LLC - BAT) with Caracara Services, LLC, is developing an acid gas treatment facility in Winkler County, Texas, with an expected initial capacity of **30 MMcf per day**[121](index=121&type=chunk) - The Acid Gas Injection (AGI) facility is forecasted to process **20,000 Mcf gas per day** in October 2023, though workover operations on the injection well could cause delays[121](index=121&type=chunk) [Capital Resources and Liquidity](index=41&type=section&id=Capital%20Resources%20and%20Liquidity) This section discusses the company's need for additional liquidity to fund operations and meet debt covenants, outlining management's plans for cost reduction and securing additional preferred equity - The company requires additional liquidity to fund operations and meet debt covenant requirements for the next 12 months, primarily due to **reduced commodity prices, higher interest rates, and high capital costs**[125](index=125&type=chunk)[127](index=127&type=chunk) - Management is implementing cost reduction measures, including headcount reductions, and expects to draw **$38 million in additional preferred equity** from its largest investors in Q3 2023 to ensure sufficient liquidity[128](index=128&type=chunk) - As of June 30, 2023, the company had **$18.5 million in cash and cash equivalents**, no additional borrowing capacity under the Amended Term Loan, and **$20 million in debt repayments** due in the remainder of 2023[123](index=123&type=chunk) - The company was in compliance with all financial covenants (**Asset Coverage Ratio, Total Net Leverage Ratio, Current Ratio**) under the Amended Term Loan Agreement as of June 30, 2023[140](index=140&type=chunk) - The Amended Term Loan Agreement includes mandatory prepayment requirements if the Consolidated Cash Balance exceeds **$20.0 million**, with forecasted APOD capital expenditures excluded until December 31, 2024[137](index=137&type=chunk)[140](index=140&type=chunk) [Cash Flow](index=48&type=section&id=Cash%20Flow) This section analyzes the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022, highlighting changes in net cash provided by each category | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:-------------------------------------|:-------------------------------|:-------------------------------| | Operating activities | $8,649 | $28,333 | | Investing activities | $(31,739) | $(51,986) | | Financing activities | $8,878 | $19,069 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(14,212) | $(4,584) | - Net cash provided by operating activities decreased from **$28.3 million in H1 2022 to $8.6 million in H1 2023**, primarily due to lower average realized prices despite increased production, and higher operating and interest costs[146](index=146&type=chunk) - Net cash used in investing activities decreased from **$52.0 million in H1 2022 to $31.7 million in H1 2023**, primarily due to reduced oil and natural gas capital expenditures[147](index=147&type=chunk)[148](index=148&type=chunk) - Net cash provided by financing activities was **$8.9 million in H1 2023**, including **$24.4 million from preferred stock issuance**, offset by **$15.0 million in debt repayments**[148](index=148&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no material changes to the company's critical accounting policies and estimates since the prior fiscal year-end - There have been no material changes to the company's critical accounting policies and estimates from those described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022[149](index=149&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, including revenues, production volumes, average prices, and key operating expenses for the three and six months ended June 30, 2023 and 2022 | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | |:-------------------------------------|:-----------------------------|:-----------------------------|:-----------------------------|:-----------------------------| | Net income (loss) | $(4,748) | $13,047 | $18,063 | $(79,697) | | Oil, natural gas and natural gas liquids revenues | $53,885 | $101,290 | $118,158 | $182,698 | | Total MBoe production | 1,297 | 1,369 | 2,755 | 2,698 | | Average daily production – Boe | 14,253 | 15,044 | 15,221 | 14,906 | | Total average price per Boe | $41.55 | $73.99 | $42.89 | $67.72 | | Lease operating expenses per Boe | $8.76 | $8.70 | $8.37 | $8.69 | | Workover and other expenses per Boe | $2.03 | $1.01 | $1.44 | $0.83 | | Taxes other than income per Boe | $2.45 | $3.92 | $2.31 | $3.83 | | Gathering and other expenses per Boe | $12.97 | $11.59 | $12.10 | $11.54 | | General and administrative per Boe | $4.64 | $3.01 | $3.97 | $3.23 | | Depletion per Boe | $11.07 | $9.07 | $10.95 | $8.33 | - Operating revenues decreased for both the three and six months ended June 30, 2023, primarily due to a significant decrease in average realized prices (down **$32.44/Boe and $24.83/Boe**, respectively), partially offset by higher production volumes for the six-month period[153](index=153&type=chunk) - Production averaged **14,253 Boe/d for Q2 2023** (down from 15,044 Boe/d in Q2 2022) due to natural declines, but increased to **15,221 Boe/d for H1 2023** (up from 14,906 Boe/d in H1 2022) due to additional wells brought online in H2 2022[154](index=154&type=chunk) - Workover and other expenses per Boe increased due to more significant workover projects and continued inflationary pressures. Gathering and other expenses per Boe increased due to higher acid natural gas production in the Monument Draw area requiring H2S treatment and inflationary impacts[156](index=156&type=chunk)[161](index=161&type=chunk) - Net derivative gains were **$4.5 million for Q2 2023** and **$23.9 million for H1 2023**, a significant improvement from net losses of **$31.9 million and $155.8 million** in the prior year periods, respectively[165](index=165&type=chunk)[166](index=166&type=chunk) - Interest expense and other increased due to higher interest rates and an increased average debt balance, with a weighted average interest rate of **12.6% for Q2 2023**[167](index=167&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, including energy commodity price risk and interest rate sensitivity. It details the use of derivative instruments for hedging and the impact of interest rate fluctuations on debt obligations [Derivative Instruments and Hedging Activity](index=55&type=section&id=Derivative%20Instruments%20and%20Hedging%20Activity) This section details the company's use of derivative instruments to mitigate energy commodity price risk, outlining the types of contracts and compliance with Term Loan Agreement hedging requirements - The company uses derivative instruments (fixed-price swaps, costless collars, basis swaps, WTI NYMEX rolls) to mitigate energy commodity price risk, hedging **50% to 85% of anticipated production** for the next four years as required by the Term Loan Agreement[170](index=170&type=chunk) - Derivative contracts are with creditworthy financial institutions, and no collateral was posted as of June 30, 2023, as they are secured under the Term Loan Agreement[171](index=171&type=chunk) [Fair Market Value of Financial Instruments](index=55&type=section&id=Fair%20Market%20Value%20of%20Financial%20Instruments) This section states that the estimated fair values for short-term financial instruments like cash, accounts receivable, and accounts payable approximate their carrying values - The estimated fair values for cash, cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their carrying values due to their short-term nature[172](index=172&type=chunk) [Interest Rate Sensitivity](index=55&type=section&id=Interest%20Rate%20Sensitivity) This section assesses the company's exposure to interest rate risk, specifically the impact of variable interest rates on its term loan debt and potential cash flow fluctuations - The company is exposed to interest rate risk, with **$220.0 million in term loan debt** bearing variable interest rates tied to SOFR[173](index=173&type=chunk) - A **10% change in market interest rates** would impact cash flows by approximately **$2.9 million per year**, based on the June 30, 2023 debt balance and a weighted average interest rate of 12.6%[173](index=173&type=chunk) [ITEM 4. Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the Chief Executive Officer and Principal Financial Officer, evaluated the company's disclosure controls and procedures as of June 30, 2023, concluding they are effective in providing reasonable assurance for timely and accurate reporting. No material changes to internal controls over financial reporting occurred during the period - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023, ensuring timely and accurate reporting[174](index=174&type=chunk)[177](index=177&type=chunk) - No material changes to internal controls over financial reporting occurred during the three or six months ended June 30, 2023[177](index=177&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, and a list of exhibits [ITEM 1. Legal Proceedings](index=57&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 9, 'Commitments and Contingencies,' for information regarding legal proceedings, indicating no new material information beyond what is already disclosed - Information regarding legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the financial statements[178](index=178&type=chunk) [ITEM 1A. Risk Factors](index=57&type=section&id=ITEM%201A.%20Risk%20Factors) This section states that there have been no changes to the risk factors previously described in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - There have been no changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[179](index=179&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[179](index=179&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=57&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[179](index=179&type=chunk) [ITEM 4. Mine Safety Disclosures](index=57&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[179](index=179&type=chunk) [ITEM 5. Other Information](index=57&type=section&id=ITEM%205.%20Other%20Information) This section states that there is no other information to report under this item - No other information to report[179](index=179&type=chunk) [ITEM 6. Exhibits](index=58&type=section&id=ITEM%206.%20Exhibits) This section provides a list of documents included as exhibits to the Quarterly Report on Form 10-Q, specifying whether they are incorporated by reference or attached - The report includes a list of exhibits, some incorporated by reference (e.g., Amended and Restated Certificate of Incorporation, Amended and Restated Senior Secured Credit Agreement) and others attached (e.g., Sarbanes-Oxley certifications, XBRL documents)[181](index=181&type=chunk)[182](index=182&type=chunk) [Signatures](index=59&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q, signed by Matthew B. Steele as Chief Executive Officer and Principal Financial Officer on August 21, 2023 - The report is signed by Matthew B. Steele, Chief Executive Officer and Principal Financial Officer, on August 21, 2023[184](index=184&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35467 Battalion Oil Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Commission File Number: 001-35467 Battalion Oil Corporation (Exact name of registrant as specified in its charter) Delaware 20-0700684 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3505 West Sam Houston Parkway North, Suite 30 ...

Battalion Oil Corporation (NYSE:BATL) Q3 2022 Results Conference Call November 16, 2022 11:00 AM ET Company Participants Chris Lang - Manager, Finance Richard Little - Chief Executive Officer Daniel Rohling - Chief Operating Officer Kevin Andrews - Chief Financial Officer Conference Call Participants Operator Welcome to the Battalion Oil Q3 2022 Earnings Call. As a reminder, today's conference is being recorded. Now I'll turn it over to your host, Battalion Oil Corporation's, Chris Lang. You may begin. Chri ...

Battalion Oil Corporation (NYSE:BATL) Q1 2022 Earnings Conference Call May 10, 2021 11:00 AM ET Company Participants Chris Lang - Manager, Finance Richard Little - Chief Executive Officer Daniel Rohling - Chief Operating Officer Kevin Andrews - Chief Financial Officer Conference Call Participants Jeff Robertson - Water Tower Research Operator Good day ladies and gentlemen and welcome to the Battalion Oil Q1 2022 Earnings Call. As a reminder, today's conference is being recorded. Now, I'll turn it over to ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35467 Battalion Oil Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdic ...