GlobeNewswire Inc | May 17, 2021 08:00AM EDT

May 17, 2021

HOUSTON, May 17, 2021 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, Battalion or the Company) today announced results of operations for the first quarter 2021.

Highlights

-- Completed four DUCs and spud two new wells in Monument Draw during the quarter -- Improved average completion costs from $575/lateral ft in 2020 down to $395/lateral ft in Q1 2021 -- Production from recent completions outperforming expectations -- On track to deliver on 2021 production guidance despite operational shut-ins due to Winter Storm Uri

Management Comments

Richard Little, the Companys CEO, commented, Battalion delivered a strong first quarter despite the operational disruption caused by Winter Storm Uri and the ongoing challenges faced as a result of the COVID-19 pandemic. Our operations team did a great job keeping us up and running during a historically long cold snap. Their efforts keeping production up combined with strong realized pricing allowed us to outperform our Adjusted EBITDA targets for the first quarter.

The team continued their exceptional work as we brought four wells online and spud two additional wells during the quarter. Our focus on capital discipline and operational efficiency allowed us to realize historically low drilling and completion costs despite price increases in the service market. These new wells are performing above expectations, and it is just one of the many reasons were optimistic about hitting our production targets for 2021 despite the production shut-ins caused by the winter storms.

Our commitment to capital efficiency, prudent liquidity management, and operational excellence has left us well positioned to execute on our 2021 plan. We are eager to return to growth and are well positioned to take advantage of the opportunities the market offers us regardless of whether those opportunities come through M&A or the drill bit.

Results of Operations

Average daily net production and total operating revenue during the first quarter 2021 were 14,333 barrels of oil equivalent per day (Boepd) (56% oil) and $55.5 million, respectively, as compared to production and revenue of 18,791 Boepd (55% oil) and $47.4 million, respectively, during the first quarter 2020. The decrease in total production year-over-year was primarily due to production declines in our non-core areas, including the divestiture of properties that produced ~800 Boepd, offset by increased production at Monument Draw as a result of our capital program. Also contributing to the decrease in total production is the temporary shut-in of production in February 2021 as a result of inclement weather during Winter Storm Uri. Despite the reduction in operating volumes, operating revenue increased year-over-year due to high realized natural gas prices during the quarter. As a result of high daily market prices experienced during the winter storm, Battalion was able to realize quarterly gas prices of $4.26 per Million cubic feet (Mcf) during the first quarter 2021 as compared to $1.16 per Mcf during the fourth quarter 2020.

Excluding the impact of hedges, Battalion realized 99% of the average NYMEX oil price during the first quarter of 2021. Realized hedge losses totaled approximately $9.7 million during the first quarter 2021.

Lease operating and workover expense was $7.77 per Boe in the first quarter of 2021 and $8.07 per Boe in the first quarter of 2020. Adjusted G&A was $3.24 per Boe in the first quarter of 2021 compared to $1.50 per Boe in the first quarter of 2020 (see Selected Operating Data table for additional information).

The Company reported a net loss to common stockholders for the first quarter of 2021 of $33.4 million and a net loss per basic and diluted share of $2.06. After adjusting for selected items, the Company reported net income to common stockholders for the first quarter of $2.7 million, or $0.17 per basic and diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended March 31, 2021 was $15.3 million as compared to $8.8 million during the quarter ended December 31, 2020 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of March 31, 2021, Battalion had $155.0 million of borrowings and $2.5 million of outstanding letters of credit issued under the Senior Revolving Credit Facility resulting in unused borrowing capacity of $32.5 million based on a borrowing base of $190.0 million. Total liquidity at March 31, 2021, inclusive of $1.7 million of cash and cash equivalents, was $34.2 million.

In May 2021, the Company entered into the Fourth Amendment to its Senior Secured Revolving Credit Agreement which, among other things, reduces the borrowing base to $185.0 million effective June 1, 2021 and further reduces the borrowing base to $175.0 million effective September 1, 2021.

Operations Update

During the first quarter of 2021, the Company completed and brought on production four drilled but uncompleted wells and spud two additional new wells in Monument Draw. The Company began completing the two new drill wells in May 2021.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, May 18, 2021, at 11:00 a.m. EDT (10:00 a.m. CDT). To participate in the conference call, dial +1 720-452-9102 or 800-437-2398 (toll free) a few minutes before the call begins and reference Battalion Oil Corporation confirmation code 5906562. The conference call recording will also be posted to Battalions website: www.battalionoil.com.

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, 2020 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.

Contact

Chris LangManager, Finance (832) 538-0551

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

Three Months Ended March 31, 2021 2020 Operating revenues: Oil, natural gas and natural gas liquids sales: Oil $ 41,270 $ 41,917 Natural gas 9,087 354 Natural gas liquids 4,909 4,753 Total oil, natural gas and natural gas liquids 55,266 47,024 salesOther 252 375 Total operating revenues 55,518 47,399 Operating expenses: Production: Lease operating 9,467 12,489 Workover and other 560 1,323 Taxes other than income 3,192 2,915 Gathering and other 13,171 10,547 Restructuring ? 418 General and administrative 4,827 3,856 Depletion, depreciation and accretion 10,595 18,030 Total operating expenses 41,812 49,578 Income (loss) from operations 13,706 (2,179 ) Other income (expenses): Net gain (loss) on derivative contracts (45,711 ) 118,299 Interest expense and other (1,370 ) (1,629 )Total other income (expenses) (47,081 ) 116,670 Income (loss) before income taxes (33,375 ) 114,491 Income tax benefit (provision) ? ? Net income (loss) $ (33,375 ) $ 114,491 Net income (loss) per share of common stock: Basic $ (2.06 ) $ 7.07 Diluted $ (2.06 ) $ 7.07 Weighted average common shares outstanding: Basic 16,232 16,204 Diluted 16,232 16,204

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

March 31, 2021 December 31, 2020Current assets: Cash and cash equivalents $ 1,671 $ 4,295 Accounts receivable, net 39,534 32,242 Assets from derivative contracts 672 8,559 Prepaids and other 2,591 2,740 Total current assets 44,468 47,836 Oil and natural gas properties (full cost method):Evaluated 530,499 509,274 Unevaluated 75,880 75,494 Gross oil and natural gas properties 606,379 584,768 Less - accumulated depletion (305,505 ) (295,163 )Net oil and natural gas properties 300,874 289,605 Other operating property and equipment: Other operating property and equipment 3,524 3,535 Less - accumulated depreciation (1,257 ) (1,149 )Net other operating property and equipment 2,267 2,386 Other noncurrent assets: Assets from derivative contracts 828 4,009 Operating lease right of use assets 195 310 Other assets 1,967 2,351 Total assets $ 350,599 $ 346,497 Current liabilities: Accounts payable and accrued liabilities $ 74,073 $ 58,928 Liabilities from derivative contracts 42,371 22,125 Current portion of long-term debt 2,123 1,720 Operating lease liabilities 195 403 Total current liabilities 118,762 83,176 Long-term debt 155,086 158,489 Other noncurrent liabilities: Liabilities from derivative contracts 9,029 4,291 Asset retirement obligations 10,711 10,583 Commitments and contingencies Stockholders' equity: Common stock: 100,000,000 shares of $0.0001par value authorized; 16,267,157 and16,203,979 shares issued and outstanding as 2 2 of March 31, 2021 and December 31, 2020,respectivelyAdditional paid-in capital 330,551 330,123 Retained earnings (accumulated deficit) (273,542 ) (240,167 )Total stockholders' equity 57,011 89,958 Total liabilities and stockholders' equity $ 350,599 $ 346,497

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

Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income (loss) $ (33,375 ) $ 114,491 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depletion, depreciation and accretion 10,595 18,030 Stock-based compensation, net 594 387 Unrealized loss (gain) on derivative contracts 36,052 (112,378 )Reorganization items, net ? (4,984 )Accrued settlements on derivative contracts 4,568 (4,923 )Other income (expense) (117 ) 7 Cash flows from operations before changes in 18,317 10,630 working capitalChanges in working capital (4,959 ) 1,713 Net cash provided by (used in) operating 13,358 12,343 activities Cash flows from investing activities: Oil and natural gas capital expenditures (13,792 ) (48,157 )Proceeds received from sale of oil and natural gas 1,076 ? propertiesFunds held in escrow and other (3 ) 509 Net cash provided by (used in) investing (12,719 ) (47,648 )activities Cash flows from financing activities: Proceeds from borrowings 16,000 51,000 Repayments of borrowings (19,000 ) (25,000 )Equity issuance costs and other (263 ) (32 )Net cash provided by (used in) financing (3,263 ) 25,968 activities Net increase (decrease) in cash and cash (2,624 ) (9,337 )equivalents Cash and cash equivalents at beginning of period 4,295 10,275 Cash and cash equivalents at end of period $ 1,671 $ 938

BATTALION OIL CORPORATIONSELECTED OPERATING DATA (Unaudited)

Three Months Ended March 31, 2021 2020 Production volumes: Crude oil (MBbls) 719 937 Natural gas (MMcf) 2,133 2,539 Natural gas liquids (MBbls) 215 350 Total (MBoe) 1,290 1,710 Average daily production (Boe/d) 14,333 18,791 Average prices: Crude oil (per Bbl) $ 57.40 $ 44.74 Natural gas (per Mcf) 4.26 0.14 Natural gas liquids (per Bbl) 22.83 13.58 Total per Boe 42.84 27.50 Cash effect of derivative contracts: Crude oil (per Bbl) $ (13.17 ) $ 5.47 Natural gas (per Mcf) (0.09 ) 0.32 Natural gas liquids (per Bbl) ? ? Total per Boe (7.49 ) 3.46 Average prices computed after cash effect of settlement of derivative contracts:Crude oil (per Bbl) $ 44.23 $ 50.21 Natural gas (per Mcf) 4.17 0.46 Natural gas liquids (per Bbl) 22.83 13.58 Total per Boe 35.35 30.96 Average cost per Boe: Production: Lease operating $ 7.34 $ 7.30 Workover and other 0.43 0.77 Taxes other than income 2.47 1.70 Gathering and other, as adjusted ^(1) 10.21 6.18 Restructuring ? 0.24 General and administrative, as adjusted^ (1) 3.24 1.50 Depletion 8.02 10.29 (1) Represents gathering and other and general and administrative costs perBoe, adjusted for items noted in the reconciliation below: General and administrative: General and administrative, as reported $ 3.74 $ 2.26 Stock-based compensation: Non-cash (0.46 ) (0.23 )Transaction costs and other: Cash (0.04 ) (0.53 )General and administrative, as adjusted^(2) $ 3.24 $ 1.50 Gathering and other, as reported 10.21 6.17 Rig termination and stacking charges and other ? 0.01 Gathering and other, as adjusted^(3) $ 10.21 $ 6.18 Total operating costs, as reported 24.19 18.20 Total adjusting items (0.50 ) (0.75 )Total operating costs, as adjusted^(4) $ 23.69 $ 17.45

___________________________(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 plans, as well as other cash charges associated with transaction costs 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)Gathering and other, as adjusted, is a non-GAAP measure that excludes rig termination and stacking charges and other costs. The Company believes that it is useful to understand the effects that these charges have on gathering and other expense and total operating costs and that exclusion of such charges is useful for comparative purposes.(4)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 CORPORATIONSELECTED ITEM REVIEW AND RECONCILIATION (Unaudited)(In thousands, except per share amounts)

Three Months Ended March 31, 2021 2020 As Reported: Net income (loss), as reported $ (33,375 ) $ 114,491 Impact of Selected Items: Unrealized loss (gain) on derivatives contracts: Crude oil $ 34,811 $ (111,834 )Natural gas 1,241 (544 )Natural gas liquids ? ? Total mark-to-market non-cash charge 36,052 (112,378 )Restructuring ? 418 Transaction costs, rig termination and stacking 52 906 charges and otherSelected items, before income taxes 36,104 (111,054 )Income tax effect of selected items ? ? Selected items, net of tax 36,104 (111,054 ) As Adjusted: Net income (loss), excluding selected items ^(1) $ 2,729 $ 3,437 Basic net income (loss) per common share, as $ (2.06 ) $ 7.07 reportedImpact of selected items 2.23 (6.86 )Basic net income (loss) per common share, $ 0.17 $ 0.21 excluding selected items ^(1) Diluted net income (loss) per common share, as $ (2.06 ) $ 7.07 reportedImpact of selected items 2.23 (6.86 )Diluted net income (loss) per common share, $ 0.17 $ 0.21 excluding selected items ^(1)(2) Net cash provided by (used in) operating $ 13,358 $ 12,343 activitiesChanges in working capital 4,959 (1,713 )Cash flows from operations before changes in 18,317 10,630 working capitalCash components of selected items (4,516 ) 11,231 Income tax effect of selected items ? ? Cash flows from operations before changes in $ 13,801 $ 21,861 working capital, adjusted for selected items ^(1)

____________________________(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, 2021 and 2020 were calculated based upon weighted average diluted shares of 16.4 million and 16.2 million, respectively, due to the net income (loss) available to common stockholders, excluding selected items.

BATTALION OIL CORPORATIONADJUSTED EBITDA RECONCILIATION (Unaudited)(In thousands)

Three Months Ended March 31, 2021 2020 Net income (loss), as reported $ (33,375 ) $ 114,491 Impact of adjusting items: Interest expense 1,496 1,714 Depletion, depreciation and accretion 10,595 18,030 Stock-based compensation 594 387 Interest income (125 ) (97 )Restructuring ? 418 (Gain) loss on sale of other assets (4 ) ? Unrealized loss (gain) on derivatives contracts 36,052 (112,378 )Transaction costs, rig termination and stacking 52 906 charges and otherAdjusted EBITDA^(1) $ 15,285 $ 23,471

__________________________(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 CORPORATIONADJUSTED EBITDA RECONCILIATION (Unaudited)(In thousands)

Three Three Three Months Three Months Months Months Ended Ended Ended Ended March 31, December September June 30. 2021 31, 2020 30, 2020 2020 Net income (loss), $ (33,375 ) $ (63,757 ) $ (153,125 ) $ (127,316 ) as reportedImpact of adjusting items:Interest expense 1,496 1,853 1,964 1,842 Depletion,depreciation and 10,595 13,886 15,755 14,382 accretionFull cost ceiling ? 26,702 128,336 60,107 impairmentStock-based 594 785 620 786 compensationInterest income (125 ) (171 ) (273 ) (232 ) Restructuring ? ? ? 2,162 (Gain) loss on sale (4 ) ? ? 52 of other assetsUnrealized loss(gain) on 36,052 30,172 21,128 67,221 derivativescontractsOther^(1) 52 (658 ) 210 4,211 Adjusted EBITDA^(2) $ 15,285 $ 8,812 $ 14,615 $ 23,215 (3) Adjusted LTM EBITDA $ 61,927 ^(2)(3)

_________________________(1) Other adjustments to net income (loss), as reported include rig termination and stacking charges, transaction costs, and other non-recurring professional fees and costs.(2) 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.(3) 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.

BATTALION OIL CORPORATIONADJUSTED EBITDA RECONCILIATION (Unaudited)(In thousands)

Three Months Three Months Three Three Months Months Ended Ended Ended Ended March 31, December 31, September June 30. 2020 2019^(1) 30, 2019 2019 Net income (loss), $ 114,491 $ (125,826 ) $ (63,284 ) $ (640,844 ) as reportedImpact of adjusting items:Interest expense 1,714 1,430 9,911 14,382 Depletion,depreciation and 18,030 19,996 20,512 40,425 accretionFull cost ceiling ? ? 45,568 664,383 impairmentIncome taxprovision ? ? ? (50,306 ) (benefit)Stock-based 387 ? (2,278 ) 1,025 compensationInterest income (97 ) (128 ) (13 ) (17 ) Reorganization ? 118,664 1,758 ? items, netRestructuring 418 1,175 3,223 654 (Gain) loss onsale of other ? (6 ) 2 ? assets(Gain) loss onsale of Water ? (506 ) (164 ) 2,897 AssetsUnrealized loss(gain) on (112,378 ) 18,681 (11,571 ) (10,764 ) derivativescontractsOther^(2) 906 (901 ) 15,276 3,678 Adjusted EBITDA^ $ 23,471 $ 32,579 $ 18,940 $ 25,513 (3)(4) Adjusted LTM $ 100,503 EBITDA^(1)(3)(4)

__________________________(1)For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for Adjusted EBITDA for the three months ended December 31, 2019 and the Adjusted LTM EBITDA as of March31, 2020.The combination was generated by addition of comparable financial statement line items. However, because of various adjustments to the consolidated financial statements in connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor are not comparable to those of the Predecessor. The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provides meaningful information about Adjusted LTM EBITDA that assists a reader in understanding the Companys financial results for the applicable periods.(2) Other adjustments to net income (loss), as reported includes rig termination and stacking charges, prepetition reorganization costs, and other non-recurring professional fees and costs.(3) 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.(4) Adjusted EBITDA for the three months ended June 30, 2019 includes approximately $4.1 million of net proceeds from hedge monetizations that occurred during the period.