Battalion Oil Corporation Announces First Quarter 2022 Financial and Operating Results

Key Highlights

• Meeting or exceeding performance targets on drilling and completion activities year to date
• Mitigating cost increases and material shortages through increased operational and capital efficiencies
• Continued robust commodity pricing offering opportunity to layer on new hedges at attractive prices
• Ample liquidity to execute on 2022 capital program
• Recently began flowing back on first wells of 2022 capital program

Management Comments

Richard Little, the Company’s CEO, commented, “As we entered 2022, our goal was clear: ramp up activity and drive significant growth in daily production and cash flow while remaining committed to capital discipline and operational efficiency. I am pleased to say we are delivering on all operational fronts and we are well on our way to achieving our 2022 goals.”

Mr. Little continued, “With the first wells from our capital program flowing back, we expect to begin driving significant cash flow growth as we burn off below market hedges and layer on new ones at attractive prices. As we continue to move through 2022 and turn additional wells online, we will continue to prioritize capital discipline and operational efficiency and will remain diligent in our efforts to mitigate risks caused by inflationary pressures, supply chain disruption, or shifts in the geopolitical landscape.”

Results of Operations

Average daily net production and total operating revenue during the first quarter 2022 were 14,767 barrels of oil equivalent per day (“Boepd”) (50% oil) and $81.6 million, respectively, as compared to production and revenue of 14,333 Boepd (56% oil) and $55.5 million, respectively, during the first quarter 2021. In February 2021, we temporarily shut-in production due to inclement weather. The estimated decrease in average daily oil and natural gas production associated with this temporary shut-in was approximately 1,300 Boe/d in the first three months of 2021. The increase in revenues in the first quarter of 2022 as compared to the first quarter 2021 is primarily attributable to an approximate $18.42 per Boe increase in average realized prices (excluding the impact of hedges).

Excluding the impact of hedges, Battalion realized 99% of the average NYMEX oil price during the first quarter of 2022. Realized hedge losses totaled approximately $32.8 million during the first quarter 2022.

Lease operating and workover expense was $9.32 per Boe in the first quarter of 2022 and $7.77 per Boe in the first quarter of 2021. Adjusted G&A was $3.30 per Boe in the first quarter of 2022 compared to $3.24 per Boe in the first quarter of 2021 (see Selected Operating Data table for additional information).

The Company reported a net loss to common stockholders for the first quarter of 2022 of $92.7 million and a net loss per basic and diluted share of $5.69. After adjusting for selected items, the Company reported a net loss to common stockholders for the first quarter of 2022 of $3.5 million, or a $0.22 loss per basic and diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended March 31, 2022, was $11.8 million as compared to $15.3 million during the quarter ended March 31, 2021 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of March 31, 2022, the Company had $200.0 million of indebtedness outstanding, approximately $1.6 million of letters of credit outstanding and up to $35.0 million in delayed draw term loans available to be drawn under our Term Loan Agreement. Total liquidity on March 31, 2022, inclusive of $43.5 million of cash and cash equivalents, was $78.5 million. On April 29, 2022, the Company borrowed the $20.0 million available under the first delayed draw of the Term Loan Agreement.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, May 10, 2022, at 10:00 a.m. Central Time. To access the live conference call, local participants may dial +1 (646) 828-8193. All other participants may dial (888) 220-8474 for toll free. The confirmation code for the live conference call is 2126195. The live conference call will also be available through the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab. The replay for the event will be available on the Company’s website at www.battalionoil.com on the Events and Presentations page under the Investors tab through June 30, 2022.

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements. Forward-looking statements include, among others, statements about anticipated production, liquidity, capital spending, drilling and completion plans, and forward guidance. Forward-looking statements may often, but not always, be identified by the use of such words such as “expects”, “believes”, “intends”, “anticipates”, “plans”, “estimates”, “projects”, “potential”, “possible”, or “probable” or statements that certain actions, events or results “may”, “will”, “should”, or “could” be taken, occur or be achieved. Forward-looking statements are based on current beliefs and expectations and involve certain assumptions or estimates that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and other filings submitted by the Company to the U.S. Securities and Exchange Commission (“SEC”), copies of which may be obtained from the SEC’s website at www.sec.gov or through the Company’s website at www.battalionoil.com. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. The Company has no duty, and assumes no obligation, to update forward-looking statements as a result of new information, future events or changes in the Company’s expectations.

About Battalion

Battalion Oil Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per share amounts)

BATTALION OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)

BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)

(2)   General and administrative, as adjusted, is a non-GAAP measure that excludes non-cash stock-based compensation charges relating to equity awards under our incentive stock plan, as well as other cash charges associated with non-recurring charges and other. The Company believes that it is useful to understand the effects that these charges have on general and administrative expenses and total operating costs and that exclusion of such charges is useful for comparison to prior periods.
(3)   Represents lease operating expense, workover and other expense, taxes other than income, gathering and other expense and general and administrative costs per Boe, adjusted for items noted in the reconciliation above.

BATTALION OIL CORPORATION
SELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)
(In thousands, except per share amounts)

(1)   Net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital adjusted for selected items are non-GAAP measures presented based on management’s belief that they will enable a user of the financial information to understand the impact of these items on reported results. These financial measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income, earnings per share and cash flows from operations, as defined by GAAP. These financial measures may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion’s performance.

(2)   The impact of selected items for the three months ended March 31, 2022 and 2021 were calculated based upon weighted average diluted shares of 16.3 million and 16.4 million, respectively, due to the net income (loss) available to common stockholders, excluding selected items.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management’s belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion’s performance.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management’s belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion’s performance.

BATTALION OIL CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

(1)   Adjusted EBITDA is a non-GAAP measure, which is presented based on management’s belief that it will enable a user of the financial information to understand the impact of these items on reported results. This financial measure is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP measures, including net income (loss). This financial measure may not be comparable to similarly named non-GAAP financial measures that other companies may use and may not be useful in comparing the performance of those companies to Battalion’s performance.

(2)   Adjusted EBITDA for the three months ended September 30,2020 and June 30,2020 includes approximately $6.6 million and $16.4 million of net proceeds, respectively, from hedge monetizations that occurred during the periods.