Battalion Oil (BATL) 9 Mar 212020 Q4 Earnings call transcript

Welcome to the Battalion Oil Fourth Quarter 2020 Earnings Call.

As a reminder, today's conference is being recorded.

Now I'll turn it over to Battalion's Manager of Finance, Chris Lang. Mr. Lang, you may begin.

morning. Good and a Battalion's colleagues Little; Chief Financial Kevin by like that our of Officer, Officer, introduce: Operating to Executive Andrews; few joined today my I'd Chief Daniel I'm Rohling. Chief our Officer, Richard contains This conference statements. call forward-looking

description to detailed see disclaimer, measure measures. non-GAAP earnings of certain and non-GAAP our issued conference call financial our website. these the comparable on financial under our yesterday. of contained This release most measures also yesterday in a announcement For release earnings posted are includes directly to references GAAP Reconciliations our released

We presentation, referenced on during found published have be our webcast. also an which may this will investor website and be

to few remarks, Rich present our to Q&A. Rich? turn to will start Now things like followed it scripted team off. over And a by I'd with that,

face issues the Thank our we to We'll you, joining update I our a Call. you why despite ourselves and describe morning for for did as welcome XXXX caused very navigating violent you my release we Oil's by We're recent the the find those XXXX us results begin to earnings weather. comments winter fulsome We night. and from this the we everyone Earnings to Chris. Fourth commending last challenges excited Quarter optimistic did want on Battalion team ongoing a little by enter more the issued and through first I response walk presentation later. they But and provide Battalion's outstanding recent COVID a operational life-threatening storms storm. want job to

liquidity. matters identity. belief the continuing reacting ESG manage per well in XX% by to And downturn higher execute, name. spent operations. May on banks COVID-XX year in latter pay The We quick in able and the well are of they demands all faced consumers between our to were in the the XXXX and severe war industry critical our a profited an service team to balance off in of us meeting strategy, the safe to We a seen new react Our downturn challenges challenges we the been XXXX. we're that pandemic We're of all that career. it proud to the plans the XX%. June, an XX%, D&C measures with may stop and essential much disrupting to a We teams stalled price temporary didn't my of faced. region. while task a combined board strike noncore aware kicked standard. acted year. to impact by by we exceptional I've as commitment keeping building shut-ins with and discipline, cutting our our managed down quickly new We to displayed BOE that which our by to costs actively force we capital of by creating to of meaningfully to and cost in the balance assets operating sheet, hold implementing adjusting a ourselves our reducing ability of work divesting from having has that the new providing the We the debt And anything And ESG did field new and our grow, across oil as have CapEx a to the the personnel and demonstrated and spite

best we our XXXX, half challenging Gas future focus accomplishments to I'd strengthening X of in our success halting the made by permits up like a to We optimization we After efficiency. Acid hedge year. first Injection our of obtaining capital the also and our shifted for set And our ourselves program and think show book.

with plan of do of accomplish in a work production this but through positioned level, significant By and we And to production As us work EBITDA. in where production cash methodically growth, while environment. to oil cash can allow deliver team price of flow a increase reinvestment now entered our are we achieve hard to completion we we XXXX, year with a with expected if XXXX in of rate continues offering maintain at of is and improving all our remain goal free our to supported we well This more sheet, per that invest this? cost by strength where balance downside improve. the our and we field flexibility the result single-digit flow. where the of believe XX% further drilling staying of XX% our liquidity expected approach. the to XX% BOE. operations costs to liquidity book, It reducing disciplined a protection, providing XXXX its should hedge targeting continues market hedged, that have How and XXXX $XX.X It add flexible in begins flat our million volumes higher-price our conditions

In addition a we plan, intend the with serving which provide company. scale continue on transactions, pursuing additional opportunities, our M&A as to on to might and deleveraging a executing strategic for XXXX focus event

as we As at to here forward an value Battalion core believe survive and we a thrive. be industry, ESG move must

and and staff, donating to performance. into also responders navigated all the business forward to instituting have created despite impact items impacting successfully this closures. to of on display key Our initiated a oversight community keeping office proud traffic, structure, bleed we intensity pit governance first while essential environment real-time reduced concerns setting work-from-home with volumes to We're for measures COVID initiatives an into through environmental reduced detection the plan gas mcf donating response ensure Board enhanced We and to and force and on X commitment as pipe, youth the task barrel, more impact. with we X.X was as our we to year flare our utilized truck ESG XXXX Those spill minimize per by organizations. positively goal push focused ESG campaign on to exited monitoring our PPE XXXX

an a as so only a to be but doing is in organization commitment responsible operator, not way. top-tier Our

to few to the minutes the improve front. As XXXX, to our up back capital on a done work highlight activity like ramps performance our has take hard in team I'd

we on drilling Before we made program strides. last have our cut year, tremendous back

Our feet cost in from $XXX first per half half had XX% $XXX by of drilled reduced of foot foot per improved in our to had the first the foot day 'XX. per And XX%. drilled per 'XX

more wells drilling cost-conscious were we it a our So way. in much doing and faster

in get is continue As to we back not trend, if our to XXXX, it. that improve on goal drilling

on pumping a at XXXX, and early similar both In completion were strides. larger really and fluid, them average, much prop lower tells jobs Our cost. we making a doing story. We performance were

As X complete to halt and oil which but our wells, us time prices with plans dropped, defined no to line wells left completing uncompleted drilled additional them. for we decided any

we left back However, we work where we're excited and in picked to up we got to December, off. say that

addition the us to In through progress that which the demand efficiencies well service to market say and identified should in per we drive previously we low we're were secure costs, down us able benefit helped year. to also as preempt that excited really cost,

all these and testing while pumping to savings, loading XX%. larger designs surfactant, with by higher roughly In premium fluid driving with been addition costs down jobs we've cost

subsurface down talked drilling as in to we services marrying bundling to knowledge made aim We've improving subsurface continue difficulties. we quarters limit continue consider teams frac and the real we we've And drive operational our our forward, to move previous expect about G&G pumping operational we to initiation further cost reductions to with work our also The plans. our designs while costs, pad-to-pad As testament and and our and that put times. strides are have in. with cycle improvements

On flawlessly, ability and react the operations team they production and execute was XXXX our production for did an just side, demonstrate quickly to its to opportunity that.

the of XXXX, able the we now I'd to a by operations COVID production recent were exit response to oil we the onset XXXX, low to we by that prices. year BOE the not take XX%. collapse were per in only May challenging wells we discuss particularly a recognize role result At and play to critical our we keep shut warm, to previous we temporarily did prices the moment a reduced of to get and up recently. our a storms. QX In And cost our way. back in of commodity the and like faced pull As the production June impact result as dramatic help that our producing houses forced winter back forced producing we commodities pandemic, levels in Battalion, times were in of in and our to having the on on lights like

work first priority and our of health service the our every safety day employees contractors those and that is and us. with providers However,

on production raged storms a tight keep of was good rope. we the as We as that goal much on, did could. job our safely as walking to As

production, We and have able quarter quantify to fully not including first been yet any our impact downtime temporary the shut-ins. to

done team and first great the of in Our and and damage better provide back evaluating quarter We'll has job results. information on any up we full running. impact quickly us of experienced that understanding storms, getting the a have we'll our

mouth And do as to reiterate can't to I standard important environmental financials, quite our big we part of Kevin a part put of won't record, are have forward. is ESG money we set They safety just into the Before EHS all. moving it stewardship our we our here of incorporated hand and strategy If I'd Kevin? structure. it aim right, our the how a are and we literally it truly our like Battalion. and where to at key and review at proud We're to compensation off is the culture. our do

from recap a liquidity I'll QX and you, touch start morning. few highlights year-end good a position our and then of XXXX. with on Thank

million, proceeds million, of and positioned liquidity mentioned to significantly was $X.X cash XXXX sale assets and of one our was $XX.X credit Partners Energy enhanced as of at and we liquidity adjustments. critical. post-closing This $XX.X [Indiscernible] enter our transaction we December West liquidity our certain to customary in completed us we Northern in which As consisting access for of well release XX, the of our million of a XXXX. to cash the challenging XXXX, year-end of under facility. Quito yesterday, Point revolving $XX.X press company availability year a million had subject At

of helped Bank which, credit with a allowed until liquidity remain XXXX. the This in third amendment Ratio So going our XX, base things, XXXX, into October our and Current and other flexibility XXXX. entered borrowing suspended among million into up at Montreal, $XXX to December free amendment testing agreement to we added

was options Our to at X.Xx reduce year-end, continue and leverage. leverage we ratio to net assess

actively continue cash protecting focus We our managing also flows to our by on book. hedge

in a management hedge percentage develop and PDP, Our of we to swaps high collars. approach our as to is using risk hedges layering X-way assets additional

expected our year. was at hedged $XX. for production free of of With XX% while approximately liquidity approximately and XXXX feel XXXX, XX, oil in execute XXXX cash positive the ability December average confident price in we of flows As our the at cash flow remaining position to in an our XXXX protected well plan, year-end, our strong

net Now $XX of fourth wells X% our year-end low was during and equipment $X.XX that barrels averaged year-over-year XXXX million reported a fact through decrease the few across a capital [indiscernible] hedge operating gain a expenditures production as Of compared of quarter for shareholders quarter XXXX $XX that treating XX,XXX a reporting result $X.X drilling XX,XXX per daily of XX% QX adjustments. $XX a in in and capital fourth million of revenue you our was Total capital million production program related from million day operating in And consequence our per I I'll a which loss portion oil of producing for BOE are the of reflected adjusting for a in press as the for made our Production of XXXX for XX% million to production certain XXXX. in net We of all share. to equivalent $X.X June from realized average $XX.X the is equivalent oil of completion GAAP NYMEX per year to items, oil shut-in compared shut-ins production a gas at a QX highlights decrease totaled suspended full well per the common loss activities development fields to derivative and Capital XXXX XX%. or for ceiling program. was team Average XXXX, the including BOE recognizing in in up loss year per cost areas effect those the day quarter the $XX.X we spite our XXXX and our or temporary impairment. of oil, fourth year-over-year suspend from XXXX, full XXXX. fourth end of XX% across to financial and in our the of was was and as a and million share, prices. of XX,XXX to in million X% loss barrels quarter the details related million by or May by for this of refer We all totaled unrealized QX, walk decrease. This of the EBITDA $XXX a XXXX. million compared The company the net price $X.XX $XX NGLs. outstanding average of million release a with expenditures day work quarter oil to driven XX% Adjusted from a day infrastructure. full results. in the QX XXXX. our XXXX, to decision temporary $X.X performed decline a in per The represented losses to XX,XXX of oil our program credit to summer $XX.X of of of after million was spent

service result allowing and demand to our operation [indiscernible] Northern West accelerate were transaction, secure as commenced the market preempt Looking XXXX, pricing. in X which program we XXXX advantaged able a capital forward bolstered in the to of liquidity, our December, as DUCs us to Quito we

We year. this vast plan up also to be the wells the markets. incur activity. production a offer And continue result, the I'll will new maintaining may With we until appropriate spud capital XXXX. base expect And We our as our around when to two some conditions QX and in remarks. concluding Rich the plan of to part during return our remain majority to ramp built turn commodity it confidence we of see flexible we to to that, assess to back first

Kevin. Thanks,

stated, with balance approach, well is it significantly cash growth, free There have the I've single-digit the we the flow positioned to with to production right do flat disciplined during increasing there, believe sheet As deliver to work to a team we make happen. are but our get year. we right certainly we to believe and

through a grow think also We in to we're unique position M&A.

done into gates costs away and With a paying we A a just and like from in momentum market, way. down the the an we future. even we responsible XXXX. to we conclude it a of operator walk gas oil lot quite assets interest going has a strides hasn't Q&A. down and you down energy the over new our move to we've it continue build made back come to debt, running, in Battalion, in in very about place be A it ways, away team [indiscernible] that. feels I'll as scripted many same it that today oil from Battalion right this for remarks. the right that future, facilitate from lot has driving approach But settled. believe to have turn dust gas. starts but and and as to And do transition and hope in can the your and that's Thank in enter to believe M&A to a view global to that strongly position. an XXXX been has the we out in the and I opportunity happened has that with you smart We confidence advantaged

Instructions]. [Operator

at comes from Tuohy question Noel first The Brothers. Parks

you. to run by few I a quick just I ones wanted had

mentioned I your knowledge, I'm right, You if guess, mind? and understood of I wondering just drilling what to, sort operations. in subsurface have changes completion might applying you

Thanks, Noel. Yes.

drill So it's where first, we the understanding well. of the

going their rates, they're if costs, to not a So which as tend from, steer going call frac high-carbonate see completion are because lateral, productive. stay up it, and areas higher to we away concentrated drive we're to we

up that you're It's set steer with you stages that we we clear frac what pumping. gradients that. also for dealing appropriately, we'll good to going So know it be our of have are that light we where

in lower you're the So the tendency, is -- areas. go frac for a when radiate fracking, fracs type to

the ways of have or stimulating we to So lower easy use set to have is subsurface use our That's stages of example want type you're gradient do you might grade, rock key it what costs. across similar-type how of up the designs. to zones. instead go in frac would do It's understand. probably entire some the off driving to you but so of an There's to that's lateral down where others, one frac price the your of having want

This Noel, I'd also is Daniel just jump in. Rohling.

also identify done and coming used we our way try views be our is of that. the stated, higher -- from. our at as have in where a a development water mitigate forward down beginning HXS. subsurface job long to look helping HXS really move may to And higher And we take to us be to or As have water teams able that great to a road

a equipment? Great. be gas to also just wondered, And the increasingly. was legacy you with And sense there maybe a going you're I what have similar go out was of do that be? I cost to you incremental mentioned retrofit a might plan something wondering as monitoring wells of if that doing real-time

clear our Yes. the daily going we field we all now around we test and of locations. Noel, that right the have cameras that is X different what own take -- different

scanned our like So make not getting and [indiscernible] mistakes we're that and are having viewed of to sure locations that. all things connections

monitored. getting is location So every

What DUC the year? And end the little housekeeping bit the was count question. at a of Great. Okay. a of

Sure.

the you end you're getting by we completion our capital had December. if on XX, December defining opportunity felt an have we already we seen where could started we it comments, saw in of as in start. as fracs our might -- year, an We So save like early

the see actually some first also is the of know around, We some to when comes that which the we the challenges operators. tendency -- did happen supply -- chain of other of with to for year see

at we -- rolled the beginning our then year, other end year about the year. But the think DUCs into I at I the the X the think DUCs of before X the X bringing the of it X that. is of the technically. those first in them completion how started by quarter, we end And starting fracking as of online So of and of

Great. And then just last me. from one

mention the any did bit chain of little a amount? And inflation basically operators. bottom planned other supply Do issues you of this cycle cost, you material have anticipate shipped some the horizon? You Have for a service saw so, for if you point? at you on costs with the certain

happening Yes. as on the part you No. the in The of is our majority first activity, our guidance, of year. saw

handle So on some seeing start for inflation, more the big on oil side. we're a be we on activity, our numbers seeing equipment that's result being in I going as prices trading completion this to thought. would count with strains putting absolutely, haven't on used, we built inflation ought to it ought my think year the to that we and into currently But that's

from the We [indiscernible]. next question Instructions]. [Operator take

obviously, you if inform on was could related how to interested with hedge how can in that with moving wondering comments comment WTI. around some view production. outlook And the for you unrealized positions, I on the gains XXXX talked about see on if and your the future just hedging for you you comment to just you of hedging

Yes. that. Kevin let answer I'll

plan it, -- we're of -- on production a executed XXXX. hedge in is we've and percentage is in to XXXX our expected general, to So our large and

oil 'XX. like we're call on said are, for We the on XX% earlier, we hedged

early start and have that, increase our outlook, as But we year. do depending we some 'XX to in we some have adding 'XX. hedges probably in have and 'XX, we'll planned hedges, add hedging, We activity. we believe the the and we prices in continue, in to room will on eventually, 'XX likely this been And especially activity. that during doing do And

program wells that we'll future obligation plan the our consistently our on drill. up to may activity with to We decide certain in the have match more we in hedging We pricing. And depending try do field. to

is -- XX% And at you -- kind goal hedged. trying a is at? Is of there that that it to all guys a stay

our XX% typically protect what that think I to our to from production. flows, Well, we've and is been show like we we cash XX% anywhere of

the market decisions. we've Just We've create hedges what do we And as in -- cash hedging cash then to way investment we able historically. as approach an invest into flows. the now, the those we're I increase. when those hedged And made you see like and we want is our protect those environment we from when to that prices like that we been to protect investment, we'll the in right be XX% to volumes But to hedge anywhere XX% we flexibility that, make flow. think

questions additional there to this to time. any are for further I you Little, appears Mr. would remarks. at call turn closing the It or no like back

our Thanks. Great. just no us achieve recovering we was us disciplined for in approach stronger accomplishments again, has thank in positioned want to we that And able interest the in their do a that to that There's a but to do well period we feel well feel everybody like industry, organization. doubt our were will I market. like difficult Battalion. XXXX And position development manage only a and Okay.

we get into XXXX. Thank of So accomplishments we much. very with look those to as you you forward some sharing

This concludes you participation. Thank call. today's your for

You may now disconnect.