Battalion Oil(BATL) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Battalion Oil reported a Q1 2021 net loss of $33.4 million, reversing prior year's net income, primarily due to derivative losses Condensed Consolidated Statements of Operations Q1 2021 net loss of $33.4 million, reversing prior year's net income, primarily due to significant derivative contract losses | Financial Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total operating revenues | $55,518 | $47,399 | | Income (loss) from operations | $13,706 | $(2,179) | | Net gain (loss) on derivative contracts | $(45,711) | $118,299 | | Net income (loss) | $(33,375) | $114,491 | | Basic net income (loss) per share | $(2.06) | $7.07 | Condensed Consolidated Balance Sheets Total assets increased slightly to $350.6 million, while liabilities rose, decreasing stockholders' equity to $57.0 million | Balance Sheet Item | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total current assets | $44,468 | $47,836 | | Net oil and natural gas properties | $300,874 | $289,605 | | Total assets | $350,599 | $346,497 | | Total current liabilities | $118,762 | $83,176 | | Long-term debt | $155,086 | $158,489 | | Total liabilities | $293,588 | $256,539 | | Total stockholders' equity | $57,011 | $89,958 | Condensed Consolidated Statements of Cash Flows Net cash from operations was $13.4 million, used for investing and debt repayment, leading to a $2.6 million net cash decrease | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,358 | $12,343 | | Net cash used in investing activities | $(12,719) | $(47,648) | | Net cash provided by (used in) financing activities | $(3,263) | $25,968 | | Net decrease in cash | $(2,624) | $(9,337) | Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, COVID-19 impacts, debt, significant derivative losses, and sour gas treating commitments - The company monitors COVID-19 impacts, which depressed commodity prices and revenues, with future uncertainties remaining[28] Debt Instrument | Debt Instrument | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Senior revolving credit facility | $155,000 | $158,000 | | Paycheck Protection Program loan | $2,209 | $2,209 | | Total debt | $157,209 | $160,209 | - Q1 2021 saw a $45.7 million net loss on derivatives, a sharp reversal from Q1 2020's $118.3 million net gain[91] - Minimum volume commitment for sour gas treating through June 2022 totals $7.3 million for 2021 and $4.8 million for 2022[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 revenue growth from higher prices, production decline, 2021 capital plans, and liquidity management Key Operating Metrics | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Average Daily Production (Boe/d) | 14,333 | 18,791 | | Average Realized Price ($/Boe) | $42.84 | $27.50 | | Total Operating Revenues (in millions) | $55.5 | $47.4 | - The 2021 capital expenditure budget is projected to be between $40.0 million and $50.0 million for drilling and infrastructure[129] - Post-quarter, the Senior Credit Agreement was amended, reducing the borrowing base to $185.0 million by June 2021 and $175.0 million by September 2021[126][129][148] - A waiver for the Current Ratio covenant was obtained for Q3 2020, with suspension until Q4 2021, aiding liquidity management[131][147] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages commodity price and interest rate risks, hedging 65-85% of production and noting interest rate sensitivity - Risk management policy aims to hedge 65% to 85% of anticipated production for up to 30 months using derivatives[168] - Exposed to interest rate risk, with 98.6% of debt at floating rates; a 10% rate change impacts cash flow by $0.5 million annually[173] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes - Management concluded that disclosure controls and procedures were effective as of March 31, 2021[174] PART II. OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings are not expected to materially affect the company's financial condition or results of operations - Resolution of pending legal proceedings is not expected to materially affect operating results or financial position[101][175] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2020 Annual Report on Form 10-K were reported - No changes to the risk factors described in the 2020 Annual Report on Form 10-K were reported[176] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company acquired 23,680 shares from employees for tax withholding on vested restricted stock units - In February 2021, 23,680 shares were surrendered by employees at $11.16 per share for tax withholding on vested RSUs[177][179] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations Item 5. Other Information Post-quarter, the Senior Secured Revolving Credit Agreement was amended, reducing the borrowing base and revising covenants - The Fourth Amendment reduces the borrowing base to $185.0 million by June 2021 and $175.0 million by September 2021, increasing interest margins and revising covenants[178] Item 6. Exhibits This section lists documents filed as exhibits with the Form 10-Q, including credit agreement amendments