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Battalion Oil Corporation Announces Second Quarter 2021 Results

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HOUSTON, Aug. 09, 2021 (GLOBE NEWSWIRE) -- Battalion Oil Corporation (NYSE American: BATL, “Battalion” or the “Company”) today announced results of operations for the second quarter 2021.

Highlights

  • Completed and put online two new wells in Monument Draw during the quarter

  • 2021 capital program largely complete – 6 wells put online at average D&C cost of ~$878 per well per foot despite increasing service costs

  • Continued success in reducing workover expense despite rising service and material prices due to 33% YTD reduction in failure rates over 2020

  • Facility upgrades in Q2 expected to reduce well downtime and increase flow assurance in 2H 2021

Management Comments

Richard Little, the Company’s CEO, commented, “The second quarter was in many ways a pivot point for Battalion. Our team did a great job continuing the trend of capital discipline as we completed and brought online two wells in our Monument Draw area. With these two wells online, our 2021 capital program is substantially complete and I’m proud to be able to say we did so while remaining under budget despite rising service costs.”

“As our 2021 capital program draws to a close, we remain focused on our future as we prepare to accelerate in 2022 and beyond. We put significant effort this quarter into upgrading our central processing facility to allow for improved flow assurance and reduced downtime across our fields. With the improvements we’ve made to our facilities, as well as the improvements made by our midstream partners, we are well positioned to have a stronger second half of the year despite the completion of our 2021 development capital program.”

“As we enter the second half of 2021, we remain optimistic. Well results from our 2021 capital program are promising, and we feel confident in our ability to execute on our long-term plan of methodically growing the company.”

Results of Operations

Average daily net production and total operating revenue during the second quarter 2021 were 15,571 barrels of oil equivalent per day (“Boepd”) (57% oil) and $64.4 million, respectively, as compared to production and revenue of 14,264 Boepd (60% oil) and $18.5 million, respectively, during the second quarter 2020. The increase in revenues in the second quarter of 2021 as compared to the second quarter 2020 is primarily attributable to an approximate $31.35 per Boe increase in average realized prices. Total production increased in the three months ended June 30, 2021, when compared to the same period in the prior year due to new production brought online as a result of our 2021 capital program as well as production from wells brought back online that were shut-in during May and June 2020 when historically low commodity prices occurred, which was partially offset by third-party processing curtailments and facility upgrades and repairs in the current year period.

Excluding the impact of hedges, Battalion realized 97% of the average NYMEX oil price during the second quarter of 2021. Realized hedge losses totaled approximately $18.3 million during the second quarter 2021.

Lease operating and workover expense was $7.72 per Boe in the second quarter of 2021 and $8.36 per Boe in the second quarter of 2020. Adjusted G&A was $2.69 per Boe in the second quarter of 2021 compared to $2.85 per Boe in the second quarter of 2020 (see Selected Operating Data table for additional information).

The Company reported a net loss to common stockholders for the second quarter of 2021 of $33.9 million and a net loss per basic and diluted share of $2.09. After adjusting for selected items, the Company reported net income to common stockholders for the second quarter of 2021 of $0.6 million, or $0.04 per basic and diluted share (see Selected Item Review and Reconciliation for additional information). Adjusted EBITDA during the quarter ended June 30, 2021, was $14.1 million as compared to $23.2 million during the quarter ended June 30, 2020 (see Adjusted EBITDA Reconciliation table for additional information). Adjusted EBITDA for the quarter ended June 30, 2020, included approximately $8.2 million of net proceeds from the monetization of hedge positions associated with the third quarter of 2020.

Liquidity and Balance Sheet

As of June 30, 2021, Battalion had $163.0 million of borrowings and $1.9 million of outstanding letters of credit issued under the Senior Revolving Credit Facility resulting in unused borrowing capacity of $20.1 million based on a borrowing base of $185.0 million. Total liquidity at June 30, 2021, inclusive of $1.4 million of cash and cash equivalents, was $21.5 million.

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

Operations Update

The Company completed and brought on production two wells in its Monument Draw area during the quarter which substantially concludes the 2021 capital program.

Conference Call Information

Battalion Oil Corporation has scheduled a conference call for Tuesday, August 10, 2021, at 11:00 a.m. EDT (10:00 a.m. CDT). To participate in the conference call, dial +1 334-777-6979 or 800-377-9510 (toll free) a few minutes before the call begins and reference Battalion Oil Corporation confirmation code 9932177. 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Operating revenues:

Oil, natural gas and natural gas liquids sales:

Oil

$

51,935

$

15,758

$

93,205

$

57,675

Natural gas

5,317

836

14,404

1,190

Natural gas liquids

6,851

1,437

11,760

6,190

Total oil, natural gas and natural gas liquids sales

64,103

18,031

119,369

65,055

Other

263

463

515

838

Total operating revenues

64,366

18,494

119,884

65,893

Operating expenses:

Production:

Lease operating

10,169

10,300

19,636

22,789

Workover and other

767

539

1,327

1,862

Taxes other than income

2,912

1,493

6,104

4,408

Gathering and other

14,331

15,228

27,502

25,775

Restructuring

2,162

2,580

General and administrative

4,031

5,270

8,858

9,126

Depletion, depreciation and accretion

11,249

14,382

21,844

32,412

Full cost ceiling impairment

60,107

60,107

Total operating expenses

43,459

109,481

85,271

159,059

Income (loss) from operations

20,907

(90,987

)

34,613

(93,166

)

Other income (expenses):

Net gain (loss) on derivative contracts

(53,089

)

(34,761

)

(98,800

)

83,538

Interest expense and other

(1,747

)

(1,568

)

(3,117

)

(3,197

)

Total other income (expenses)

(54,836

)

(36,329

)

(101,917

)

80,341

Income (loss) before income taxes

(33,929

)

(127,316

)

(67,304

)

(12,825

)

Income tax benefit (provision)

Net income (loss)

$

(33,929

)

$

(127,316

)

$

(67,304

)

$

(12,825

)

Net income (loss) per share of common stock:

Basic

$

(2.09

)

$

(7.86

)

$

(4.14

)

$

(0.79

)

Diluted

$

(2.09

)

$

(7.86

)

$

(4.14

)

$

(0.79

)

Weighted average common shares outstanding:

Basic

16,268

16,204

16,250

16,204

Diluted

16,268

16,204

16,250

16,204

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

June 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

1,458

$

4,295

Accounts receivable, net

37,098

32,242

Assets from derivative contracts

1,280

8,559

Prepaids and other

2,475

2,740

Total current assets

42,311

47,836

Oil and natural gas properties (full cost method):

Evaluated

544,418

509,274

Unevaluated

75,822

75,494

Gross oil and natural gas properties

620,240

584,768

Less - accumulated depletion

(316,519

)

(295,163

)

Net oil and natural gas properties

303,721

289,605

Other operating property and equipment:

Other operating property and equipment

3,367

3,535

Less - accumulated depreciation

(1,206

)

(1,149

)

Net other operating property and equipment

2,161

2,386

Other noncurrent assets:

Assets from derivative contracts

563

4,009

Operating lease right of use assets

78

310

Other assets

2,903

2,351

Total assets

$

351,737

$

346,497

Current liabilities:

Accounts payable and accrued liabilities

$

65,297

$

58,928

Liabilities from derivative contracts

71,443

22,125

Current portion of long-term debt

2,209

1,720

Operating lease liabilities

78

403

Total current liabilities

139,027

83,176

Long-term debt

163,000

158,489

Other noncurrent liabilities:

Liabilities from derivative contracts

15,117

4,291

Asset retirement obligations

10,945

10,583

Commitments and contingencies

Stockholders' equity:

Common stock: 100,000,000 shares of $0.0001 par value authorized;

16,268,037 and 16,203,979 shares issued and outstanding as of

June 30, 2021 and December 31, 2020, respectively

2

2

Additional paid-in capital

331,117

330,123

Retained earnings (accumulated deficit)

(307,471

)

(240,167

)

Total stockholders' equity

23,648

89,958

Total liabilities and stockholders' equity

$

351,737

$

346,497

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Cash flows from operating activities:

Net income (loss)

$

(33,929

)

$

(127,316

)

$

(67,304

)

$

(12,825

)

Adjustments to reconcile net income (loss) to net cash

provided by (used in) operating activities:

Depletion, depreciation and accretion

11,249

14,382

21,844

32,412

Full cost ceiling impairment

60,107

60,107

Stock-based compensation, net

485

786

1,079

1,173

Unrealized loss (gain) on derivative contracts

34,817

67,221

70,869

(45,157

)

Reorganization items, net

(739

)

(5,723

)

Accrued settlements on derivative contracts

2,404

5,272

6,972

349

Other income (expense)

(170

)

457

(287

)

464

Cash flows from operations before changes in working capital

14,856

20,170

33,173

30,800

Changes in working capital

886

10,591

(4,073

)

12,304

Net cash provided by (used in) operating activities

15,742

30,761

29,100

43,104

Cash flows from investing activities:

Oil and natural gas capital expenditures

(23,801

)

(43,007

)

(37,593

)

(91,164

)

Proceeds received from sale of oil and natural gas properties

(150

)

500

926

500

Funds held in escrow and other

1

(2

)

509

Net cash provided by (used in) investing activities

(23,950

)

(42,507

)

(36,669

)

(90,155

)

Cash flows from financing activities:

Proceeds from borrowings

66,000

30,209

82,000

81,209

Repayments of borrowings

(58,000

)

(19,000

)

(77,000

)

(44,000

)

Equity issuance costs and other

(5

)

(268

)

(32

)

Net cash provided by (used in) financing activities

7,995

11,209

4,732

37,177

Net increase (decrease) in cash and cash equivalents

(213

)

(537

)

(2,837

)

(9,874

)

Cash and cash equivalents at beginning of period

1,671

938

4,295

10,275

Cash and cash equivalents at end of period

$

1,458

$

401

$

1,458

$

401

BATTALION OIL CORPORATION
SELECTED OPERATING DATA (Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Production volumes:

Crude oil (MBbls)

805

775

1,524

1,712

Natural gas (MMcf)

2,055

1,632

4,188

4,171

Natural gas liquids (MBbls)

270

251

485

601

Total (MBoe)

1,417

1,298

2,707

3,008

Average daily production (Boe/d)

15,571

14,264

14,956

16,527

Average prices:

Crude oil (per Bbl)

$

64.52

$

20.33

$

61.16

$

33.69

Natural gas (per Mcf)

2.59

0.51

3.44

0.29

Natural gas liquids (per Bbl)

25.37

5.73

24.25

10.30

Total per Boe

45.24

13.89

44.10

21.63

Cash effect of derivative contracts:

Crude oil (per Bbl)

$

(22.55

)

$

40.67

$

(18.13

)

$

21.40

Natural gas (per Mcf)

(0.06

)

0.58

(0.07

)

0.42

Natural gas liquids (per Bbl)

Total per Boe

(12.89

)

25.01

(10.32

)

12.76

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

Crude oil (per Bbl)

$

41.97

$

61.00

$

43.03

$

55.09

Natural gas (per Mcf)

2.53

1.09

3.37

0.71

Natural gas liquids (per Bbl)

25.37

5.73

24.25

10.30

Total per Boe

32.35

38.90

33.78

34.39

Average cost per Boe:

Production:

Lease operating

$

7.18

$

7.94

$

7.25

$

7.58

Workover and other

0.54

0.42

0.49

0.62

Taxes other than income

2.06

1.15

2.25

1.47

Gathering and other, as adjusted (1)

10.11

9.08

10.16

7.43

Restructuring

1.67

0.86

General and administrative, as adjusted (1)

2.69

2.85

2.95

2.08

Depletion

7.77

10.79

7.89

10.51

(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

$

2.84

$

4.06

$

3.27

$

3.03

Stock-based compensation:

Non-cash

(0.34

)

(0.61

)

(0.40

)

(0.39

)

Non-recurring professional fees and other:

Cash

0.19

(0.60

)

0.08

(0.56

)

General and administrative, as adjusted(2)

$

2.69

$

2.85

$

2.95

$

2.08

Gathering and other, as reported

10.11

11.73

10.16

8.57

Rig termination and stacking charges and other

(2.65

)

(1.14

)

Gathering and other, as adjusted(3)

$

10.11

$

9.08

$

10.16

$

7.43

Total operating costs, as reported

22.73

25.30

23.42

21.27

Total adjusting items

(0.15

)

(3.86

)

(0.32

)

(2.09

)

Total operating costs, as adjusted(4)

$

22.58

$

21.44

$

23.10

$

19.18

________________________________

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

As Reported:

Net income (loss), as reported

$

(33,929

)

$

(127,316

)

$

(67,304

)

$

(12,825

)

Impact of Selected Items:

Unrealized loss (gain) on derivatives contracts:

Crude oil

$

31,591

$

66,279

$

66,402

$

(45,555

)

Natural gas

3,226

942

4,467

398

Total mark-to-market non-cash charge

34,817

67,221

70,869

(45,157

)

Full cost ceiling impairment

60,107

60,107

Restructuring

2,162

2,580

Rig termination and stacking charges

3,383

3,383

Other

(273

)

828

(221

)

1,734

Selected items, before income taxes

34,544

133,701

70,648

22,647

Income tax effect of selected items

Selected items, net of tax

34,544

133,701

70,648

22,647

As Adjusted:

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

$

615

$

6,385

$

3,344

$

9,822

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

$

(2.09

)

$

(7.86

)

$

(4.14

)

$

(0.79

)

Impact of selected items

2.13

8.25

4.35

1.40

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

$

0.04

$

0.39

$

0.21

$

0.61

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

$

(2.09

)

$

(7.86

)

$

(4.14

)

$

(0.79

)

Impact of selected items

2.13

8.25

4.34

1.40

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

$

0.04

$

0.39

$

0.20

$

0.61

Net cash provided by (used in) operating activities

$

15,742

$

30,761

$

29,100

$

43,104

Changes in working capital

(886

)

(10,591

)

4,073

(12,304

)

Cash flows from operations before changes in working capital

14,856

20,170

33,173

30,800

Cash components of selected items

(2,677

)

1,390

(7,193

)

12,621

Income tax effect of selected items

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

$

12,179

$

21,560

$

25,980

$

43,421

__________________________

(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 three and six months ended June 30, 2020, net income (loss) and earnings per share excluding selected items and cash flows from operations before changes in working capital include approximately $16.4 million and $16.3 million, respectively, of net proceeds from hedge monetizations that occurred during the periods. For both periods, approximately $8.2 million of the net proceeds relate to the monetization of hedge positions associated with the third quarter of 2020.

(3)

The impact of selected items for the three months ended June 30, 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. The impact of selected items for the six months ended June 30, 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 CORPORATION
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Net income (loss), as reported

$

(33,929

)

$

(127,316

)

$

(67,304

)

$

(12,825

)

Impact of adjusting items:

Interest expense

1,838

1,842

3,334

3,556

Depletion, depreciation and accretion

11,249

14,382

21,844

32,412

Full cost ceiling impairment

60,107

60,107

Stock-based compensation

485

786

1,079

1,173

Interest income

(84

)

(232

)

(209

)

(329

)

Restructuring

2,162

2,580

(Gain) loss on sale of other assets

(2

)

52

(6

)

52

Unrealized loss (gain) on derivatives contracts

34,817

67,221

70,869

(45,157

)

Rig termination and stacking charges

3,383

3,383

Other

(273

)

828

(221

)

1,734

Adjusted EBITDA(1)(2)

$

14,101

$

23,215

$

29,386

$

46,686

_______________

(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 and six months ended June 30, 2020 includes approximately $16.4 million and $16.3 million, respectively, of net proceeds from hedge monetizations that occurred during the period. For both periods, approximately $8.2 million of the net proceeds relate to the monetization of hedge positions associated with the third quarter of 2020.


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

Three Months

Three Months

Three Months

Three Months

Ended

Ended

Ended

Ended

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

Net income (loss), as reported

$

(33,929

)

$

(33,375

)

$

(63,757

)

$

(153,125

)

Impact of adjusting items:

Interest expense

1,838

1,496

1,853

1,964

Depletion, depreciation and accretion

11,249

10,595

13,886

15,755

Full cost ceiling impairment

26,702

128,336

Stock-based compensation

485

594

785

620

Interest income

(84

)

(125

)

(171

)

(273

)

(Gain) loss on sale of other assets

(2

)

(4

)

Unrealized loss (gain) on derivatives contracts

34,817

36,052

30,172

21,128

Other(1)

(273

)

52

(658

)

210

Adjusted EBITDA(2)(3)

$

14,101

$

15,285

$

8,812

$

14,615

Adjusted LTM EBITDA(2)(3)

$

52,813

______________________

(1)

Other adjustments to net income (loss), as reported include 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 includes approximately $6.6 million of net proceeds from hedge monetizations that occurred during the period.



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

Three Months

Three Months

Three Months

Three Months

Ended

Ended

Ended

Ended

June 30, 2020

March 31, 2020

December 31, 2019(1)

September 30, 2019

Net income (loss), as reported

$

(127,316

)

$

114,491

$

(125,826

)

$

(63,284

)

Impact of adjusting items:

Interest expense

1,842

1,714

1,430

9,911

Depletion, depreciation and accretion

14,382

18,030

19,996

20,512

Full cost ceiling impairment

60,107

45,568

Stock-based compensation

786

387

(2,278

)

Interest income

(232

)

(97

)

(128

)

(13

)

Reorganization items, net

118,664

1,758

Restructuring

2,162

418

1,175

3,223

(Gain) loss on sale of other assets

52

(6

)

2

(Gain) loss on sale of Water Assets

(506

)

(164

)

Unrealized loss (gain) on derivatives contracts

67,221

(112,378

)

18,681

(11,571

)

Rig termination and stacking charges

3,383

Other(2)

828

906

(901

)

15,276

Adjusted EBITDA(3)(4)

$

23,215

$

23,471

$

32,579

$

18,940

Adjusted LTM EBITDA(1)(3)(4)

$

98,205

________________

(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 June 30, 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 Company’s financial results for the applicable periods.

(2)

Other adjustments to net income (loss), as reported includes 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, 2020 includes approximately $16.4 million of net proceeds from hedge monetizations that occurred during the period. For this period, approximately $8.2 million of the net proceeds relate to the monetization of hedge positions associated with the third quarter of 2020.