Battalion Oil (BATL) 8 Mar 222021 Q4 Earnings call transcript

Welcome to the Battalion Oil Q4 2021 Earnings Call.

As a reminder, today’s conference is being recorded. I’ll now turn it over to Battalion Oil Corporation’s Finance Manager, Chris Lang, to open the call. 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,

optimize Good investor and joining morning. Battalion’s earnings can We walk through as we’re active our beyond. website. move and our Full operationally today We year to last had our We story. Battalion XXXX closed, excited extensively, an joining found and Fourth designs. on of that presentation and market night Quarter they’re for those released geology Thank how using frac Earnings and and the the both Call. both XXXX, for focused Year to financially, an target XXXX knowledge team focus be a us and Battalion in been you which on strong growth after positioned Since has landing into laying we for results groundwork studied zones that

we in today, or of reliability, A across Battalion not key focus for into and the providers capital assurance. our our efficiency last pressure. for put our side, field environmental capital reduce cut our methodically maintenance as that field. daily we considerable flow against increase focused and quickly We’ve production operational the third as been effort and upgraded maximizing execution, our our a quarter our a well fact as and completed as own has the with just quarter-over-quarter, effort reported our impact achievement backdrop received XXXX. XXXX for redundancy our repair, Our of operating the amount inflationary on increased the year worked but to all field improving We’ve capital without XX% XQ committing capacity, rewarded in to working runtime time in sacrificing and and our safety, was given third-party was workover midstream total as program that that on of had facilities remarkable we of expenses well future. our the The team

picked liquidity D&C spudding XX% intend on $XXX dedicated spudding to final well closed proud While throughout was rig advance loan much facility, amounts with on a in million X of a not we facility rig led only Macquarie piece the place credit new that drilling on of to XX of On also of long-term company capital allowed estimated repay keep total previous as we’re and we November dollars year activities. running embark We a to XXXX CapEx a a In new $XXX the by those the activity. cash loan to in puzzle to under with with December, our significant XX, operations fine the our wells term a pad. our facility XXXX, outstanding the term program ground Bank. with provided us but The and into tuning ramp fell of XXXX million goal up larger, program. achievement, our breaking

year, in over the rolling as below won’t the keeping plan average meaningful production year, is we to by investor aimed we relatively the growth daily was On Corporation, hedges wells these through many flat growth plan strategy production create As year our online told we Battalion the move and organically off annualized of end half oil calls, we do on XXXX. many at XXXX. public With expect while the very of drive that. as second this market until come the Battalion our significant first and we of in the approach driving XXXX, intend to that value EBITDA focus to

we Daniel turn XXXX. walk many I’ll to you over call accomplishments of the to the through experienced Now, specific in

It’s many work as our time us, decisions, attacked and found economic activity. to we teams our ranging subsurface success cost of have tie and XXXX for foot it? of over XX per systematically in $X,XXX exciting understanding as XXXX. were that $XXX key teams yielded significantly How to sure. for to areas years fluids. an upon to year total components, I’ll of drilling equipment do costs. our opportunity The as the reduce results, last able operational start work proving We in been Rich. do we not opportunity from for and to to design operations, topside all areas Well, we Thanks, did, well for record compared BHA a many ways us overall capital, taking procedural that and engineering ground and of down-hole with and we increase as couple hard positioned it’s was has Battalion, reduced that a we

variety we the sizes, our subsurface completion and sand the on our frac we The optimize fight reduced serve industry. minimize we Draw success to made efforts A efficiencies out XXXX. has put into or by inflationary to the identify costs our is The reservoir. the effort over field-wides operations in to to Monument midstream as well, as our overhauling been the taking efficiency since our our increased utilizing of I significant capital amount our pressure of a call used production the part would operations also changes the reengineered and a HXS continue operations handling teams. without of similar stimulating best in basin, reduced one like also in like in when X% pump to method design, that critical this effectiveness gradient compromising across reason but the HXS. completion completions of the solution and the job primary HXS, as Simply in have will for performing only the attack. was to the produced the teams techniques designs that has We you costs X% in for development of Draw face cost field case and Historically, Monument that’s of slowed. of put, assets rates. had

our as spend and shied safely change field, increased safety, to methodically taken team something focus right has maintain we’re in that Rich to per it most been which become integrity, earlier, to little a and of possible, As BOE we basin away as that is experts key in increasing and and and allow goal treating instead field. HXS to handling which our In since isn’t way. doing development made the no operating the shortcuts producing no a for been have upgrade from zero doubling here. exceptions, leading resulted XXXX. incidents won’t proactive long the has something has detection industry has capabilities make as we the time, more We our at worked off-take mentioned capacity capacity HXS we’ve the economic barrels and sure

a reducing in also teams hard by to improve in in our XX% field we exceptional strong and fact have and still of the return. roughly downtime an rates by that from lowering runtime, the few our the more BOE field we of QX, on The overall produce matter rates incredibly producing of XX% the in worked have even reservoir, OpEx is models wells though year-over-year per producing Our dollars are failure XXXX. side,

go spend the extreme and forward a discussing our I of expect only and the addition lead have in solution, to milestone crunch long strategy. further enhance which discussions to up few potential want be With a in is we a continue our also being would commodity to industry in those the the market a We in feeling inflationary to development recent leader in prices, efforts tremendous AGI around run times returns ESG. volatility pricing. minutes

As prices contract future vendors. We while provides risks that rate increases. mitigating many drilling, on of with fall, costs began began squeeze negotiating moving our anticipated advanced on in limiting we secured a side our and the optionality the service this by

We We secured work materials times. eliminating several including for crews our for frac several of wells, preparing a into prices lower of also casing, the hard half lead lot pre-purchased and locking of first this of first and in ensuring through the availability we put moment. our year, the

or confident execute to in strategy moving forward conviction. our We’re as ability execution with

Now, our financial I’ll off you of to walk through pass results. to Kevin it some

a XXXX, per BOE XX,XXX Full BOE to with Thank day XXXX compared sold December production XXXX day you, for were everyone. per associated in production averaged approximately decrease. good Danny, includes year in XX,XXX and of morning, which day, Average daily BOE XXXX. per production X% divested properties, XXX

Excluding of divested the line XXXX production the average properties, in is daily XXXX. with in impact

we XXXX average temporary average to by day, approximately amounting per was shut-in root approximately tied In XXXX, XXXX while daily XXXX the production weather storms. impacted BOE associated temporary wells to temporarily XXX by February in the to of production Additionally, shut-in shut-in due amounting X,XXX BOE production is X impacted was daily production with of per day. inclement causes. winter to production of impact Much

from facility by impacted repairs. upgrades year, downtime the third-party was and and production throughout Additionally, curtailments resulting processing

December equivalent $XX.XX ended XXXX were average an The primarily revenues approximate Our $XXX.X approximately ended total arrangements. XXXX of for million. the increase attributable realized excluding $XXX.X revenues in the in year prices, compared of of approximately operating hedging XX, oil year to XX, December revenues effects operating is for barrel million to per the increase

totaled Delaware capital the XXXX, of XXXX development to $XX.X completion gathering we was our the XXXX, drilling released Of fourth We $XX.X in decrease changes $XX.X XXXX the $XX.X back to year, average the the to for totaled million market XXXX million $XX.X EBITDA in Capital for million of a and common in of for $XX.X the activity X and on Basin, early company XXXX and result year-end Adjusted as in for million year. and oil in NYMEX loss realized running result related or million prices, expenditures and full spent the but in commodity GAAP $X.X In year-over-year. per $X.XX activity infrastructure. a the XXXX rig of XXXX. million commodity loss related from compared expenditures decrease to shareholders treating share. $XX.X price a support the scale million costs drilling conditions rig. full $XX.X of a that the to the year began contracts. to On The realized in million of quarter was million loss and equipment reported net eventually the XX%

put and during wells, online drilled that year, company X X gross gross comparison, we By and XXXX, gross wells and wells, year. completed gross X in the and gross drilled completed X online wells During wells. put wells cased X cased X gross the

in expect second in As the facility and earlier of calendar the million rig should Term capital of to million loan to capital with the November interest our and to expenditures term program. allowed many X%. credit is In agreed during long-term institutions. Agreement due activity in mentioned year, throughout of Limited spend bears our in on activities. an with LIBOR in the the be increase expenditures maturity those term in pay large successful XX, as year. Credit as Pursuant part entered other owed call, to capital us refinancing $XXX to refinancing dollars plus Loan under senior to used million, of the running and we date well to to Senior company large fees with the incurred allow refinance certain and during the expected planned keep quarter. online in commenced approximately $XXX certain The Rich to additional Macquarie previous drilling conditions. the funded XXXX connection loan loan $XX XX% of XXXX, the The the with November, This The November, and all the us Agreement Agreement, program fourth a a with coming financial amounts under at which XXXX a certain Bank capital Loan million those Term subject available drilling wells into completion during is lenders a to satisfaction of half $XXX has

and about XXXX, we of total net our outstanding of XX, $XXX December $XXX,XXX. amounts of of million including PPP of As $XXX,XXX indebtedness, letters under have owed credit loan

and to hedge our will approximately natural basis future Finally, increased flows focus gas anticipated I’d XX% make loan, few comments and X hedging as by We pay to XX% with the in to rolling hedge on year, like the varying this connection development. a risk next we believe we on percentages agreed on on limit position. future our our company’s a production, of oil term In for dividends the cash the years. protect downside in

$XX.X carried liability million million XXXX, as of from XXXX XX, prices. [ph] derivative [many significantly as $XX.X current, of] we are with that contracts Additionally, market at booked December our below [ph] hedges

are as expected higher flow in XXXX off market hedges to prices, on year, the move hedges layer our first flow below at of cash volumes in and half expect these wins While online. we cash these significant come to we see limit roll through a ramp as as we new the new

Rich offer it over remarks. to turn to some concluding Now, I’ll

transformational we for is have was I Q&A. XXXX, truly fourth quarter I’ll to prepare accomplish. Once and point was execution you industry in the do in growth our thank That team Thanks, story. for interest commence pivot We’ve and our was challenges over scripted and facilitate Battalion our back work Kevin. to a your capital left Battalion. and the able I’m operator capital long-term what full Despite proud in to the the concludes to and our of year Battalion that. our program. confidence the ability have now for This we All done the a again, believe by it faced turn to to remarks this in

no back It you I’ll Mr. remarks. this for questions additional Thank appears to time. Little, any call you. [Operator the closing are turn or Instructions] there at

thank you. Okay,

part equation, to the to we no doubt part plan a we country, us where back get there’s important we’re like as do small see make as So and up be being to some times an energy decisions that have ramp strange But do production. only to independent. a to to U.S. And want of power. our energy while we I’d

and want well pricing, targets we’ll additional we program, of testing time and We our on begin in for acreage current but only you obviously, focusing have increased Again, in position. updating today your thank accelerate pace inventory continues for forward your approximately look to on our primary see XX to you zones to years But development. of not to interest XXXX. a I progress of to bye. Battalion, Good a good assuming our market parent the this look only and ways

That concludes today’s call. Thank you for your participation.

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