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Battalion Oil Corporation Announces Fourth Quarter and Full Year 2020 Results, Provides an Operational Update, and Provides 2021 Guidance

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HOUSTON, March 08, 2021 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced results of operations for the fourth quarter and full year 2020.

Highlights

  • Battalion is well positioned to deliver single digit production growth while generating significant free cash flow in FY2021

  • Completed the sale of ~3,700 net acres in the Northern West Quito development area for $26.3 million in cash subject to customary post-closing adjustments. These assets accounted for less than 5% of the Company's average daily net oil production during the quarter ended September 30, 2020.

  • Improved 2020 adjusted operating unit costs by 12% from 2019 to 2020 (see Selected Operating data table for additional information)

  • Improved average well costs from $1,350/lin ft in 2019 down to $850/lin ft in 2020

  • Reduced Adjusted G&A unit cost by 49% from 2019 to 2020 (see Selected Operating data table for additional information)

  • Disciplined hedge strategy provides cash flow assurance on 90% of expected 2021 oil production

  • Strong balance sheet with attractively priced RBL provides ample liquidity to execute 2021 plan with a reinvestment rate of 70% - 80% of the estimated 2021 EBITDA

2021 Guidance

Battalion remains focused on execution and capital discipline as it drives toward growth and positive free cash flow. The Company developed its 2021 plan based on being free cash flow positive at $45 NYMEX WTI. Total capital expenditures are expected to range between $40 - $50 million, with 90% of its capital directed to drilling and completion activities on its Monument Draw assets. This plan will allow Battalion to modestly increase oil production while remaining free cash flow positive.

FY 2021 Guidance

Low

High

Oil Production, MBopd

8.8

9.8

Total Production, MBoepd

16.0

17.0

Wells POL

6

6

Total Capex, $MM

$

40

$

50

D&C Cost per Well, $/ft

$

800

$

900

G&A, $MM

$

15

$

20

Management Comments

Richard Little, the Company’s CEO, commented, “2020 proved itself to be one of the most challenging years in the history of our industry, and I am tremendously proud of what our team accomplished in the midst of that. COVID-19 and the unprecedented collapse in commodity prices may have permanently altered the outlook for oil and gas, but I believe our ability to remain nimble and our commitment to excellence and execution sets Battalion up well to succeed regardless of what that future holds.

Our plan for 2021 is simple: exercise capital discipline and continue to optimize our operations with an eye towards keeping production flat and improving our cash margins. Given how our team executed despite the various challenges in 2020, we feel optimistic that we can do just that while remaining cash flow positive. While we execute on that plan, we will continue to pursue strategic, deleveraging M&A transactions.”

Results of Operations

Battalion ended 2020 with 113 gross (107.3 net) horizontal wells producing in the Delaware Basin. Annual net production in 2020 was 16,858 barrels of oil equivalent per day (“Boepd”) (56% oil) as compared to 17,986 Boepd (58% oil) in 2019. Our total operating revenues for the year ended December 31, 2020 were approximately $148.3 million compared to total operating revenues for the period of October 2, 2019 through December 31, 2019 (Successor) and the period of January 1, 2019 through October 1, 2019 (Predecessor) of approximately $65.6 million and $159.1 million, respectively, or $224.7 million combined. The decrease in total operating revenues and average daily production year over year was driven by our temporary shut-in of a portion of producing wells across all our operating areas in May and June 2020 as a consequence of low oil prices as well as average realized prices that were lower by approximately $10.25 per Boe. Additionally, in December 2020, the Company divested properties that produced 600 Boepd during the nine months ended September 30, 2020.

Average daily net production and total operating revenue during the fourth quarter 2020 was 17,293 Boepd (54% oil) and $42.6 million, respectively, as compared to production and revenue of 20,293 Boepd (57% oil) and $65.6 million, respectively, during the fourth quarter 2019. Excluding the impact of hedges, Battalion realized 95% of the average NYMEX oil price during the fourth quarter of 2020. Realized hedge gains totaled approximately $1.2 million during the fourth quarter 2020.

Adjusted G&A was $3.24 per Boe in the fourth quarter of 2020 compared to $3.22 per Boe in the fourth quarter of 2019 (see Selected Operating Data table for additional information). Lease operating and workover expense was $6.39 per Boe in the fourth quarter of 2020 and $7.75 per Boe in the fourth quarter of 2019.

The Company reported a net loss to common stockholders for the fourth quarter of $63.8 million, including a non-cash full cost ceiling test impairment charge of $26.7 million, and a net loss per basic and diluted share of $3.93. Adjusted LTM EBITDA as of December 31, 2020 was $70.1 million, compared to $89.7 million as of December 31, 2019 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of December 31, 2020, Battalion has cash and cash equivalents of $4.3 million and a borrowing base of $190 million under its Senior Revolving Credit Facility. In addition, Battalion had $158.0 million of borrowings and $4.7 million of outstanding letters of credit issued under the Senior Revolving Credit Facility resulting in unused borrowing capacity of $27.3 million at year-end 2020.

Proved Reserves Update

Battalion's estimated proved reserves as of December 31, 2020 were approximately 63.4 MMBoe, comprised of 60% oil, 19% NGL and 21% natural gas, with a standardized measure of $209.4 million. Battalion's estimated proved reserves at December 31, 2020 were prepared by Netherland Sewell & Associates, Inc. in accordance with Securities and Exchange Commission guidelines using an average WTI price of $39.54 per barrel for oil and an average Henry Hub spot price of $1.99 per MMBtu for natural gas.

Operations Update

During the first quarter of 2021, the Company plans to spud two new wells and expects to complete and bring on production four drilled but uncompleted wells.

Hedging Activity

As of March 8, 2021, Battalion had approximately 8,430 barrels of oil per day (“Bopd”) of oil hedged for in 2021 at a price of $44.98 per barrel. For 2022, the Company has approximately 5,664 Bopd of oil hedged at an average price of $47.73 per barrel.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, March 9, 2021, at 11:00 a.m. EDT (10:00 a.m. CDT). To participate in the conference call, dial +1 856-344-9291 or 800-496-3856 (toll free) a few minutes before the call begins and reference Battalion Oil Corporation confirmation code 3115525. The conference call recording will also be posted to Battalion’s 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 Lang
Manager, Finance
(832) 538-0551


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

Successor

Predecessor

Period from

Period from

October 2, 2019

October 1, 2019

Three Months Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

Operating revenues:

Oil, natural gas and natural gas liquids sales:

Oil

$

34,672

$

58,325

$

Natural gas

2,716

1,719

Natural gas liquids

4,886

5,071

Total oil, natural gas and natural gas liquids sales

42,274

65,115

Other

292

467

Total operating revenues

42,566

65,582

Operating expenses:

Production:

Lease operating

9,226

12,804

Workover and other

942

1,655

Taxes other than income

2,926

3,730

Gathering and other

16,741

10,812

Restructuring

1,175

General and administrative

5,219

5,111

Depletion, depreciation and accretion

13,886

19,996

Full cost ceiling impairment

26,702

(Gain) loss on sale of Water Assets

(506

)

Total operating expenses

75,642

54,777

Income (loss) from operations

(33,076

)

10,805

Other income (expenses):

Net gain (loss) on derivative contracts

(28,936

)

(16,692

)

Interest expense and other

(1,745

)

(1,275

)

Reorganization items, net

(3,298

)

(115,366

)

Total other income (expenses)

(30,681

)

(21,265

)

(115,366

)

Income (loss) before income taxes

(63,757

)

(10,460

)

(115,366

)

Income tax benefit (provision)

Net income (loss)

$

(63,757

)

(10,460

)

(115,366

)

Net income (loss) per share of common stock:

Basic

$

(3.93

)

$

(0.65

)

$

(0.71

)

Diluted

$

(3.93

)

$

(0.65

)

$

(0.71

)

Weighted average common shares outstanding:

Basic

16,204

16,204

161,502

Diluted

16,204

16,204

161,502


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

Successor

Predecessor

Period from

Period from

October 2, 2019

January 1, 2019

Year Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

Operating revenues:

Oil, natural gas and natural gas liquids sales:

Oil

$

125,985

$

58,325

$

145,024

Natural gas

5,818

1,719

107

Natural gas liquids

14,972

5,071

13,229

Total oil, natural gas and natural gas liquids sales

146,775

65,115

158,360

Other

1,514

467

743

Total operating revenues

148,289

65,582

159,103

Operating expenses:

Production:

Lease operating

42,106

12,804

39,617

Workover and other

3,709

1,655

5,580

Taxes other than income

10,056

3,730

9,213

Gathering and other

56,016

10,812

36,057

Restructuring

2,580

1,175

15,148

General and administrative

18,456

5,111

36,550

Depletion, depreciation and accretion

62,053

19,996

90,912

Full cost ceiling impairment

215,145

985,190

(Gain) loss on sale of Water Assets

(506

)

3,618

Total operating expenses

410,121

54,777

1,221,885

Income (loss) from operations

(261,832

)

10,805

(1,062,782

)

Other income (expenses):

Net gain (loss) on derivative contracts

38,759

(16,692

)

(34,332

)

Interest expense and other

(6,634

)

(1,275

)

(37,606

)

Reorganization items, net

(3,298

)

(117,124

)

Total other income (expenses)

32,125

(21,265

)

(189,062

)

Income (loss) before income taxes

(229,707

)

(10,460

)

(1,251,844

)

Income tax benefit (provision)

95,791

Net income (loss)

$

(229,707

)

$

(10,460

)

$

(1,156,053

)

Net income (loss) per share of common stock:

Basic

$

(14.18

)

$

(0.65

)

$

(7.27

)

Diluted

$

(14.18

)

$

(0.65

)

$

(7.27

)

Weighted average common shares outstanding:

Basic

16,204

16,204

158,925

Diluted

16,204

16,204

158,925


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

Successor

December 31, 2020

December 31, 2019

Current assets:

Cash and cash equivalents

$

4,295

$

5,701

Accounts receivable, net

32,242

48,504

Assets from derivative contracts

8,559

4,995

Restricted cash

4,574

Prepaids and other

2,740

7,379

Total current assets

47,836

71,153

Oil and natural gas properties (full cost method):

Evaluated

509,274

420,609

Unevaluated

75,494

105,009

Gross oil and natural gas properties

584,768

525,618

Less - accumulated depletion

(295,163

)

(19,474

)

Net oil and natural gas properties

289,605

506,144

Other operating property and equipment:

Other operating property and equipment

3,535

3,655

Less - accumulated depreciation

(1,149

)

(378

)

Net other operating property and equipment

2,386

3,277

Other noncurrent assets:

Assets from derivative contracts

4,009

224

Operating lease right of use assets

310

3,165

Funds in escrow and other

2,351

703

Total assets

$

346,497

$

584,666

Current liabilities:

Accounts payable and accrued liabilities

$

58,928

$

97,333

Liabilities from derivative contracts

22,125

8,069

Current portion of long-term debt

1,720

Operating lease liabilities

403

923

Asset retirement obligations

109

Total current liabilities

83,176

106,434

Long-term debt

158,489

144,000

Other noncurrent liabilities:

Liabilities from derivative contracts

4,291

4,854

Asset retirement obligations

10,583

10,481

Operating lease liabilities

2,247

Commitments and contingencies

Stockholders' equity:

Common stock: 100,000,000 shares of $0.0001 par value authorized; 16,203,979 and 16,203,940 shares issued and outstanding as of December 31, 2020 and 2019, respectively

2

2

Additional paid-in capital

330,123

327,108

Retained earnings (accumulated deficit)

(240,167

)

(10,460

)

Total stockholders' equity

89,958

316,650

Total liabilities and stockholders' equity

$

346,497

$

584,666


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

Successor

Predecessor

Period from

Period from

October 2, 2019

October 1, 2019

Three Months Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

Cash flows from operating activities:

Net income (loss)

$

(63,757

)

$

(10,460

)

$

(115,366

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depletion, depreciation and accretion

13,886

19,996

Full cost ceiling impairment

26,702

(Gain) loss on sale of Water Assets

(506

)

Stock-based compensation, net

785

Unrealized loss (gain) on derivative contracts

30,172

18,681

Reorganization items, net

(125

)

(3,615

)

109,170

Other expense (income)

(442

)

253

Cash flow from operations before changes in working capital

7,221

24,349

(6,196

)

Changes in working capital

(4,902

)

(10,695

)

(302

)

Net cash provided by (used in) operating activities

2,319

13,654

(6,498

)

Cash flows from investing activities:

Oil and natural gas capital expenditures

(5,305

)

(43,230

)

Proceeds received from sales of oil and natural gas assets

25,529

Acquisition of oil and natural gas properties

(23

)

Other operating property and equipment capital expenditures

(54

)

Proceeds received from sale of other operating property and equipment

6

Funds held in escrow and other

2

434

Net cash provided by (used in) investing activities

20,149

(42,790

)

Cash flows from financing activities:

Proceeds from borrowings

29,000

36,000

130,000

Repayments of borrowings

(49,000

)

(22,000

)

(258,234

)

Cash payments to Common Holders, Noteholders and Preferred Holders

(4

)

Debt issuance costs

(1,471

)

(8,764

)

Common stock issued

155,929

Equity issuance costs and other

(2,503

)

(53

)

Net cash provided by (used in) financing activities

(20,000

)

10,026

18,874

Net increase (decrease) in cash, cash equivalents and restricted cash

2,468

(19,110

)

12,376

Cash, cash equivalents and restricted cash at beginning of period

1,827

29,385

17,009

Cash, cash equivalents and restricted cash at end of period

$

4,295

$

10,275

$

29,385


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

Successor

Predecessor

Period from

Period from

October 2, 2019

January 1, 2019

Year Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

Cash flows from operating activities:

Net income (loss)

$

(229,707

)

$

(10,460

)

$

(1,156,053

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depletion, depreciation and accretion

62,053

19,996

90,912

Full cost ceiling impairment

215,145

985,190

(Gain) loss on sale of Water Assets

(506

)

3,618

Deferred income tax provision (benefit)

(95,791

)

Stock-based compensation, net

2,578

(8,035

)

Unrealized loss (gain) on derivative contracts

6,143

18,681

45,834

Amortization and write-off of deferred loan costs

1,859

Amortization of discount and premium

134

Reorganization items, net

(6,565

)

(3,615

)

108,887

Other expense (income)

312

253

535

Cash flow from operations before changes in working capital

49,959

24,349

(22,910

)

Changes in working capital

238

(10,695

)

(16,821

)

Net cash provided by (used in) operating activities

50,197

13,654

(39,731

)

Cash flows from investing activities:

Oil and natural gas capital expenditures

(101,788

)

(43,230

)

(167,235

)

Proceeds received from sales of oil and natural gas assets

29,029

1,247

Acquisition of oil and natural gas properties

(23

)

(2,809

)

Other operating property and equipment capital expenditures

(82

)

(85,613

)

Proceeds received from sale of other operating property and equipment

6

Funds held in escrow and other

510

434

(7

)

Net cash provided by (used in) investing activities

(72,354

)

(42,790

)

(254,417

)

Cash flows from financing activities:

Proceeds from borrowings

148,209

36,000

445,234

Repayments of borrowings

(132,000

)

(22,000

)

(315,234

)

Cash payments to Common Holders, Noteholders and Preferred Holders

(4

)

Debt issuance costs

(1,471

)

(8,764

)

Common stock issued

155,929

Equity issuance costs and other

(32

)

(2,503

)

(494

)

Net cash provided by (used in) financing activities

16,177

10,026

276,667

Net increase (decrease) in cash, cash equivalents and restricted cash

(5,980

)

(19,110

)

(17,481

)

Cash, cash equivalents and restricted cash at beginning of period

10,275

29,385

46,866

Cash, cash equivalents and restricted cash at end of period

$

4,295

$

10,275

$

29,385


BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)

Three Months Ended December 31,

Years Ended December 31,

2020

2019 (5)

2020

2019 (5)

Production volumes:

Crude oil (MBbls)

857

1,057

3,446

3,780

Natural gas (MMcf)

2,332

2,755

8,769

9,136

Natural gas liquids (MBbls)

345

351

1,262

1,262

Total (MBoe)

1,591

1,867

6,170

6,565

Average daily production (Boe/d)

17,293

20,293

16,858

17,986

Average prices:

Crude oil (per Bbl)

$

40.46

$

55.18

$

36.56

$

53.80

Natural gas (per Mcf)

1.16

0.62

0.66

0.20

Natural gas liquids (per Bbl)

14.16

14.45

11.86

14.50

Total per Boe

26.57

34.88

23.79

34.04

Cash effect of derivative contracts:

Crude oil (per Bbl)

$

1.28

$

(1.03

)

$

12.31

$

(0.96

)

Natural gas (per Mcf)

0.06

0.19

0.28

0.71

Natural gas liquids (per Bbl)

7.31

8.80

Total per Boe

0.78

1.06

7.28

2.13

Average prices computed after cash effect of settlement of derivative contracts:

Crude oil (per Bbl)

$

41.74

$

54.15

$

48.87

$

52.84

Natural gas (per Mcf)

1.22

0.81

0.94

0.91

Natural gas liquids (per Bbl)

14.16

21.76

11.86

23.30

Total per Boe

27.35

35.94

31.07

36.17

Average cost per Boe:

Production:

Lease operating

$

5.80

$

6.86

$

6.82

$

7.98

Workover and other

0.59

0.89

0.60

1.10

Taxes other than income

1.84

2.00

1.63

1.97

Gathering and other, as adjusted (1)

10.52

5.80

8.53

6.88

Restructuring

0.63

0.42

2.49

General and administrative, as adjusted (1)

3.24

3.22

2.38

4.70

(1) Represents gathering and other and general and administrative costs per Boe, adjusted for items noted in the reconciliation below:

General and administrative:

General and administrative, as reported

$

3.28

$

2.74

$

2.99

$

6.35

Stock-based compensation:

Non-cash

(0.49

)

(0.42

)

1.22

Transaction costs and other:

Cash

0.45

0.48

(0.19

)

(2.87

)

General and administrative, as adjusted(2)

$

3.24

$

3.22

$

2.38

$

4.70

Gathering and other, as reported

$

10.52

$

5.79

$

9.08

$

7.14

Rig termination and stacking charges and other

0.01

(0.55

)

(0.26

)

Gathering and other, as adjusted(3)

$

10.52

$

5.80

$

8.53

$

6.88

Total operating costs, as reported

$

22.03

$

18.28

$

21.12

$

24.54

Total adjusting items

(0.04

)

0.49

(1.16

)

(1.91

)

Total operating costs, as adjusted(4)

$

21.99

$

18.77

$

19.96

$

22.63


(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 and other costs. 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.
(5) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the three months and the year ended December 31, 2019. 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 financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods. The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company’s financial results for the applicable periods.


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

Successor

Predecessor

Period from

Period from

October 2, 2019

October 1, 2019

Three Months Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

As Reported:

Net income (loss) available to common stockholders, as reported

$

(63,757

)

$

(10,460

)

$

(115,366

)

Impact of Selected Items:

Unrealized loss (gain) on derivatives contracts:

Crude oil

$

31,978

$

16,751

$

Natural gas

(1,806

)

(1,332

)

Natural gas liquids

3,262

Total mark-to-market non-cash charge

30,172

18,681

Full cost ceiling impairment

26,702

(Gain) loss on sale of Water Assets

(506

)

Reorganization items, net

3,298

115,366

Restructuring

1,175

Other

(658

)

(901

)

Selected items, before income taxes

56,216

21,747

115,366

Income tax effect of selected items

Selected items, net of tax

$

56,216

$

21,747

$

115,366

As Adjusted:

Net income (loss), excluding selected items (1)(2)

$

(7,541

)

$

11,287

$

Basic net income (loss) per common share, as reported

$

(3.93

)

$

(0.65

)

$

(0.71

)

Impact of selected items

3.46

1.35

0.71

Basic net income (loss) per common share, excluding selected items (1)(2)

$

(0.47

)

$

0.70

$

Diluted net income (loss) per common share, as reported

$

(3.93

)

$

(0.65

)

$

(0.71

)

Impact of selected items

3.46

1.35

0.71

Diluted net income (loss) per common share, excluding selected items (1)(2)(3)

$

(0.47

)

$

0.70

$

Net cash provided by (used in) operating activities

$

2,319

$

13,654

$

(6,498

)

Changes in working capital

4,902

10,695

302

Cash flow from operations before changes in working capital

7,221

24,349

(6,196

)

Cash components of selected items

(229

)

6,929

5,321

Income tax effect of selected items

Cash flows from operations before changes in working capital, adjusted for selected items (1)(2)

$

6,992

$

31,278

$

(875

)


(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) For the period from October 2, 2019 through December 31, 2019 (Successor), net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital include approximately $0.9 million of proceeds from hedge monetizations that occurred during the period.
(3) The impact of selected items for the three months ended December 31, 2020 (Successor),
October 2, 2019 through December 31, 2019 (Successor) and October 1, 2019 through October 1, 2019 (Predecessor) were calculated based upon weighted average diluted shares of 16.2 million, 16.2 million, and 161.5 million respectively, due to the net income (loss) available to common stockholders, excluding selected items.


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

Successor

Predecessor

Period from

Period from

October 2, 2019

January 1, 2019

Year Ended

through

through

December 31, 2020

December 31, 2019

October 1, 2019

As Reported:

Net income (loss), as reported

$

(229,707

)

$

(10,460

)

$

(1,156,053

)

Impact of Selected Items:

Unrealized loss (gain) on derivatives contracts:

Crude oil

$

5,777

$

16,751

$

35,967

Natural gas

366

(1,332

)

3,753

Natural gas liquids

3,262

6,114

Total mark-to-market non-cash charge

6,143

18,681

45,834

Full cost ceiling impairment

215,145

985,190

(Gain) loss on sale of Water Assets

(506

)

3,618

Reorganization items, net

3,298

117,124

Restructuring

2,580

1,175

15,148

Rig termination and stacking charges and other

4,669

(901

)

22,601

Selected items, before income taxes

228,537

21,747

1,189,515

Income tax effect of selected items(1)

(53,660

)

Selected items, net of tax

$

228,537

$

21,747

$

1,135,855

As Adjusted:

Net income (loss), excluding selected items (2)(3)

$

(1,170

)

$

11,287

$

(20,198

)

Basic net income (loss) per common share, as reported

$

(14.18

)

$

(0.65

)

$

(7.27

)

Impact of selected items

14.11

1.35

7.14

Basic net income (loss) per common share, excluding selected items (2)(3)

$

(0.07

)

$

0.70

$

(0.13

)

Diluted net income (loss) per common share, as reported

$

(14.18

)

$

(0.65

)

$

(7.27

)

Impact of selected items

14.11

1.35

7.14

Diluted net income (loss) per common share, excluding selected items (2)(3)(4)

$

(0.07

)

$

0.70

$

(0.13

)

Net cash provided by (used in) operating activities

$

50,197

$

13,654

$

(39,731

)

Changes in working capital

(238

)

10,695

16,821

Cash flow from operations before changes in working capital

49,959

24,349

(22,910

)

Cash components of selected items

13,194

6,929

44,851

Income tax effect of selected items (1)

(9,419

)

Cash flows from operations before changes in working capital, adjusted for selected items (2)(3)

$

63,153

$

31,278

$

12,522


(1) For the period from January 1, 2019 through October 1, 2019 (Predecessor), this represents the tax impact using an estimated tax rate of 21.0% and includes a $196.1 million adjustment for the net change in valuation allowance and deferred tax asset.
(2) 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.
(3) For the year ended December 31, 2020 (Successor), the period from October 2, 2019 through December 31, 2019 (Successor), and the period from January 1, 2019 through October 1, 2019 (Predecessor), net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital include approximately $22.9 million, $0.9 million, and $7.8 million, respectively, of net proceeds from hedge monetizations that occurred during the periods.
(4)
The impact of selected items for the year ended December 31, 2020 (Successor), the period October 2, 2019 through December 31, 2019 (Successor) and January 1, 2019 through October 1, 2019 (Predecessor) were calculated based upon weighted average diluted shares of 16.2 million, 16.2 million, and 158.9 million respectively, due to the net income (loss) available to common stockholders, excluding selected items.


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

Three Months Ended December 31,

Years Ended December 31,

2020

2019 (3)

2020

2019 (3)

Net income (loss), as reported

$

(63,757

)

$

(125,826

)

$

(229,707

)

$

(1,166,513

)

Impact of adjusting items:

Interest expense

1,853

1,430

7,373

37,695

Depletion, depreciation and accretion

13,886

19,996

62,053

110,908

Full cost ceiling impairment

26,702

215,145

985,190

Income tax provision (benefit)

(95,791

)

Stock-based compensation

785

2,578

(8,035

)

Interest income

(171

)

(128

)

(773

)

(219

)

(Gain) loss on sale of other assets

(6

)

52

412

Restructuring

1,175

2,580

16,323

Reorganization items, net

118,664

120,422

(Gain) loss on sale of Water Assets

(506

)

3,112

Unrealized loss (gain) on derivatives contracts

30,172

18,681

6,143

64,515

Rig termination and stacking charges and other

(658

)

(901

)

4,669

21,700

Adjusted EBITDA(1)(2)

$

8,812

$

32,579

$

70,113

$

89,719


(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 December 31, 2019 includes approximately $0.9 million of net proceeds from hedge monetizations that occurred during the period. Adjusted EBITDA for the years ended December 31, 2020 and 2019 includes approximately $22.9 million and $8.7 million, respectively, of net proceeds related to hedge monetizations that occurred during the year.
(3) For illustrative purposes, the Company has combined the Successor and Predecessor results to derive combined results for the three months and the year ended December 31, 2019. 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 be comparable to those of the Predecessor. The financial information preceding the table above provides the Successor and the Predecessor GAAP results for the applicable periods. The Company believes that subject to consideration of the impact of fresh-start reporting, combining the results of the Predecessor and Successor provide meaningful information about, for instance, production, revenues and costs, that assist a reader in understanding the Company’s financial results for the applicable periods.