Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced financial and operating results for the third quarter of 2024.
Key Highlights
- AGI facility online and treated 1.7 Bcf for the third quarter 2024
- Vermejo (a Monument Draw two-well pad) has been completed and is flowing back
- Next Monument Draw pad wells scheduled to spud prior to year-end
- Generated third quarter 2024 sales volumes of 12,076 Boe/d
- Amended the previously announced Merger Agreement with Fury reducing the purchase price to $7.00 per share and requiring all of the existing preferred equity holders to roll over 100% of their preferred equity
Management Comments
The Company concluded its current six-well campaign ahead of planned timing and under budget on each well. The Vermejo two-well pad in Monument Draw has been completed and is currently flowing back with initial rates in line with Company expectations. Capital costs continue to trend lower in the field with latest Monument Draw wells estimated below $950/lateral foot for drilling, completion and wellsite facilities while maintaining completions over 2,000 lbs/ft proppant. The previously announced Glacier and Rio pads continue to perform above the Company’s type curve with cumulative production averaging 370 Mboe (64% oil) in the first 280 days on Glacier and 132 Mboe (86% oil) in the first 150 days on Rio Bravo.
During the third quarter 2024, the acid gas injection (“AGI”) facility treated approximately 18 MMcf/d average and returned approximately 14 MMcf/d of sweet gas to the Company for sales to its midstream partner. To date, the AGI facility has processed more than 4.6 Bcf of sour gas and allowed the Company to realize substantial savings compared to treating alternatives. The Company and its JV partner continued to ramp toward full inlet capacity, with expected savings up to $2.0 million per month in gas treating costs.
Results of Operations
Average daily net production and total operating revenue during the third quarter of 2024 were 12,076 Boe/d (52% oil) and $45.3 million, respectively, as compared to production and revenue of 12,717 Boe/d (46% oil) and $54.1 million, respectively, during the third quarter of 2023. The decrease in revenues in the third quarter of 2024 as compared to the third quarter of 2023 is primarily attributable to an approximate $5.07 decrease in average realized prices (excluding the impact of hedges) and an approximate 641 Boe/d decrease in average daily production over the periods. Excluding the impact of hedges, Battalion realized 98.4% of the average NYMEX oil price during the third quarter of 2024. Realized hedge losses totaled approximately $1.2 million during the third quarter of 2024.
Lease operating and workover expense was $11.56 per Boe in the third quarter of 2024 versus $10.13 per Boe in the third quarter of 2023. The increase in lease operating and workover expense per Boe year-over-year is primarily a result of an inflationary market increase in maintenance, power, and chemical costs as well as a decrease in average daily production. Gathering and other expense was $11.20 per Boe in the third quarter of 2024 versus $13.26 per Boe in the third quarter of 2023. The decrease in gathering and other expenses per Boe is primarily related to the start-up of the AGI facility and lower treating fees associated versus the Valkyrie (liquid redox) plant. General and administrative expenses were $3.46 per Boe in the third quarter of 2024 compared to $2.72 per Boe in the third quarter of 2023. The increase in general and administrative expense is primarily attributable to an increase in audit, legal and transaction costs associated with the potential merger with Fury Resources.
For the third quarter of 2024, the Company reported net income available to common stockholders of $5.6 million or net income of $0.34 per share available to common stockholders. After adjusting for selected items, the Company reported an adjusted diluted net loss available to common stockholders for the third quarter of 2024 of $21.5 million or an adjusted diluted net loss of $1.31 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended September 30, 2024 was $13.5 million as compared to $13.6 million during the quarter ended September 30, 2023 (see Adjusted EBITDA Reconciliation table for additional information).
Liquidity and Balance Sheet
As of September 30, 2024, the Company had $147.8 million of indebtedness outstanding and approximately $0.3 million of letters of credit outstanding. Total liquidity on September 30, 2024, made up of cash and cash equivalents, was $29.8 million.
For further discussion on our liquidity and balance sheet, as well as recent developments, refer to Management’s Discussion and Analysis and Risk Factors in the Company’s Form 10-Q.
Merger Agreement with Fury Resources
On September 19, 2024, the Company entered into an amendment to the previously disclosed Agreement and Plan of Merger, dated December 14, 2023 (as amended, the “Merger Agreement”), with Fury Resources, Inc. (“Parent”), pursuant to which Parent has agreed to acquire all of the outstanding shares of common stock of the Company (the “Common Stock”) for $7.00 per share in cash, and requires that, in connection with the consummation of the Merger Agreement, holders of the outstanding shares of preferred stock of the Company contribute to Parent 100% of their preferred equity of the Company in exchange for new preferred shares of Parent.
In connection with the Merger Agreement, the Company will hold a special meeting of stockholders on November 19, 2024 (the “special meeting”), where Company stockholders will be asked to vote to adopt the Merger Agreement and approve related matters, as described in the notice of special meeting of stockholders and proxy statement. Adoption of the Merger Agreement requires the affirmative vote, at the special meeting or by proxy, of holders of a majority of the outstanding shares of Common Stock as of October 4, 2024, the record date for the special meeting.
Important Information for Investors and Stockholders
This communication is being made in respect of the proposed transaction involving the Company and Fury Resources, Inc., a Delaware corporation. In connection with the proposed transaction, the Company intends to file, or has filed, the relevant materials with the U.S. Securities and Exchange Commission (“SEC”), including a proxy statement on Schedule 14A and a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). Promptly after filing its definitive proxy statement with the SEC, the Company mailed the definitive proxy statement and a proxy card to each stockholder of the Company entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement, the Schedule 13e-3 or any other document that the Company has or may file with the SEC or send to its stockholders in connection with the proposed transaction. The relevant materials filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and copies may be obtained free of charge on the Company’s website at www.battalionoil.com. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the proxy statement, the Schedule 13e-3 and the other relevant materials as they become available before making any voting or investment decision with respect to the proposed transaction because they contain important information about the Company and the proposed transaction.
Participants in Solicitation
The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, and the proxy statement, the Schedule 13e-3 and other relevant materials that will be, or have been, filed with the SEC in connection with the proposed transaction as they become available. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the proposed transaction and the Schedule 13e-3, as they become available.
