Battalion Oil(US:BATL)2024-08-14 20:34Financial Performance - The company reported a net loss of $45.5 million for the six months ended June 30, 2024, with a negative working capital of $69.1 million[148]. - Net income for the six months ended June 30, 2024, was a loss of $31.3 million, compared to a profit of $18.1 million in 2023[184]. - Operating revenues for the six months ended June 30, 2024, were $98.6 million, down from $118.2 million in 2023, reflecting a decrease of approximately 16.5%[184]. - Average daily production decreased to 12,857 Boe/d for the three months ended June 30, 2024, from 14,253 Boe/d in 2023, a decline of about 9.8%[185]. - The company recorded a net derivative gain of $1.2 million for Q2 2024, down from a gain of $4.5 million in Q2 2023, while for the first half of 2024, a net derivative loss of $22.9 million was reported compared to a gain of $23.9 million in the same period of 2023[197]. Cash Flow and Liquidity - As of June 30, 2024, the company had $54.4 million in cash and cash equivalents, with no additional borrowing capacity under the Amended Term Loan Agreement[148]. - The company anticipates requiring additional liquidity to continue operations and meet debt obligations over the next 12 months[152]. - Net cash flows provided by operating activities for the six months ended June 30, 2024, were $33.7 million, compared to a net cash outflow of $8.7 million for the same period in 2023[174]. - Cash flows used in investing activities for the six months ended June 30, 2024, were approximately $45.7 million, primarily for drilling and completion activities[175]. - The company is exploring strategic transactions and cost reduction opportunities to maintain liquidity and compliance with debt covenants[157]. Debt and Financing - The company is required to make scheduled payments totaling $62.5 million from September 30, 2024, to September 30, 2025, including $12.5 million due at the end of Q3 2024[149]. - As of June 30, 2024, the company had $160.2 million of indebtedness outstanding and $0.3 million of letters of credit under the Amended Term Loan Agreement[165]. - The weighted average interest rate on borrowings for the quarter ended June 30, 2024, was approximately 12.95%[165]. - The principal amount of term loan debt was $160.2 million as of June 30, 2024, with a weighted average interest rate of 12.98%[203]. - A 10% change in market interest rates would impact the company's cash flows by approximately $2.6 million per year based on the current variable interest rate debt[203]. Capital Expenditures and Investments - Capital expenditures for oil and natural gas totaled $44.8 million for the six months ended June 30, 2024, compared to $32.6 million for the same period in 2023, representing a 37% increase[176][177]. - The company has advanced capital contributions totaling approximately $18.5 million for workover operations at the AGI Facility as of June 30, 2024[142]. - The Acid Gas Injection facility has processed over 2.1 Bcf of gas since becoming operational on March 9, 2024, despite facing delays and higher costs[143]. Operational Efficiency - Lease operating expenses increased to $9.41 per Boe for the three months ended June 30, 2024, compared to $8.76 per Boe in 2023, marking a rise of approximately 7.4%[186]. - Workover and other expenses decreased to $0.81 per Boe for the three months ended June 30, 2024, from $2.03 per Boe in 2023, a reduction of about 60%[187]. - Gathering and other expenses were $12.1 million for the three months ended June 30, 2024, down from $16.8 million in 2023, a decrease of approximately 28.6%[189]. - General and administrative expenses decreased to $3.3 million for Q2 2024 from $6.0 million in Q2 2023, and to $7.3 million for the first half of 2024 from $11.0 million in the same period of 2023, primarily due to reduced payroll and benefits[193]. Strategic Transactions - The company entered into a merger agreement with Fury Resources, with a total transaction value of approximately $450.0 million, converting shares into $9.80 in cash[130]. - The company raised $19.5 million from the sale of Series A-3 Convertible Preferred Stock and an additional $19.5 million from Series A-4 Redeemable Convertible Preferred Stock[135]. - The company has incurred approximately $3.6 million in costs related to the merger as of August 8, 2024[134]. - The company plans to reduce operating and capital costs to improve cash flow and has obtained a support letter from investors to purchase up to $30 million of additional preferred equity securities[152]. Risk Management - The company hedges approximately 50% to 85% of its anticipated oil and natural gas production under its Term Loan Agreement, utilizing various derivative instruments to manage price risk[200]. - The company expects energy prices to remain volatile and has implemented a risk management policy to mitigate the impact of price fluctuations on operations[200]. - The Total Net Leverage Ratio covenant was not in compliance as of March 31, 2024, but was cured by a prepayment of $17.3 million on May 14, 2024[170].