Battalion Oil(BATL) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, market risk, and internal controls Item 1. Condensed Consolidated Financial Statements (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 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 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 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] - 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] Condensed Consolidated Statements of Cash Flows 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] Notes to Unaudited Condensed Consolidated Financial Statements 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][38][39] - 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, including production, costs, liquidity, and operational challenges Recent Developments 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] - 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] Capital Resources and Liquidity 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] - The company is considering delisting its common stock from the NYSE American to reduce the ongoing costs of being a reporting company[127] Cash Flow Analysis 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] Results of Operations 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] - 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] - 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] Item 4. Controls and Procedures 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] - 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] PART II: OTHER INFORMATION This part addresses legal proceedings, risk factors, unregistered equity sales, and other required disclosures Item 1. Legal Proceedings 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][168] - 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] Item 1A. Risk Factors 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] Other Items (Items 2, 3, 4, & 5) 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] Item 6. Exhibits 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][173]