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Lease operating and workover expense was $11.56 per Boe in the third quarter of 2024 versus $10.13 per Boe in the third quarter of 2023. The increase in lease operating and workover expense per Boe year-over-year is primarily a result of an inflationary market increase in maintenance, power, and chemical costs as well as a decrease in average daily production. Gathering and other expense was $11.20 per Boe in the third quarter of 2024 versus $13.26 per Boe in the third quarter of 2023. The decrease in gathering and other expenses per Boe is primarily related to the start-up of the AGI facility and lower treating fees associated versus the Valkyrie (liquid redox) plant. General and administrative expenses were $3.46 per Boe in the third quarter of 2024 compared to $2.72 per Boe in the third quarter of 2023. The increase in general and administrative expense is primarily attributable to an increase in audit, legal and transaction costs associated with the potential merger with Fury Resources.

For the third quarter of 2024, the Company reported net income available to common stockholders of $5.6 million or net income of $0.34 per share available to common stockholders. After adjusting for selected items, the Company reported an adjusted diluted net loss available to common stockholders for the third quarter of 2024 of $21.5 million or an adjusted diluted net loss of $1.31 per common share (see Reconciliation for additional information). Adjusted EBITDA during the quarter ended September 30, 2024 was $13.5 million as compared to $13.6 million during the quarter ended September 30, 2023 (see Adjusted EBITDA Reconciliation table for additional information).

Liquidity and Balance Sheet

As of September 30, 2024, the Company had $147.8 million of indebtedness outstanding and approximately $0.3 million of letters of credit outstanding. Total liquidity on September 30, 2024, made up of cash and cash equivalents, was $29.8 million.

For further discussion on our liquidity and balance sheet, as well as recent developments, refer to Management’s Discussion and Analysis and Risk Factors in the Company’s Form 10-Q.

Merger Agreement with Fury Resources

On September 19, 2024, the Company entered into an amendment to the previously disclosed Agreement and Plan of Merger, dated December 14, 2023 (as amended, the “Merger Agreement”), with Fury Resources, Inc. (“Parent”), pursuant to which Parent has agreed to acquire all of the outstanding shares of common stock of the Company (the “Common Stock”) for $7.00 per share in cash, and requires that, in connection with the consummation of the Merger Agreement, holders of the outstanding shares of preferred stock of the Company contribute to Parent 100% of their preferred equity of the Company in exchange for new preferred shares of Parent.

In connection with the Merger Agreement, the Company will hold a special meeting of stockholders on November 19, 2024 (the “special meeting”), where Company stockholders will be asked to vote to adopt the Merger Agreement and approve related matters, as described in the notice of special meeting of stockholders and proxy statement. Adoption of the Merger Agreement requires the affirmative vote, at the special meeting or by proxy, of holders of a majority of the outstanding shares of Common Stock as of October 4, 2024, the record date for the special meeting.

Important Information for Investors and Stockholders

This communication is being made in respect of the proposed transaction involving the Company and Fury Resources, Inc., a Delaware corporation. In connection with the proposed transaction, the Company intends to file, or has filed, the relevant materials with the U.S. Securities and Exchange Commission (“SEC”), including a proxy statement on Schedule 14A and a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). Promptly after filing its definitive proxy statement with the SEC, the Company mailed the definitive proxy statement and a proxy card to each stockholder of the Company entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement, the Schedule 13e-3 or any other document that the Company has or may file with the SEC or send to its stockholders in connection with the proposed transaction. The relevant materials filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and copies may be obtained free of charge on the Company’s website at www.battalionoil.com. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the proxy statement, the Schedule 13e-3 and the other relevant materials as they become available before making any voting or investment decision with respect to the proposed transaction because they contain important information about the Company and the proposed transaction.

Participants in Solicitation

The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, and the proxy statement, the Schedule 13e-3 and other relevant materials that will be, or have been, filed with the SEC in connection with the proposed transaction as they become available. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the proposed transaction and the Schedule 13e-3, as they become available.

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, 2023, and other filings submitted by the Company to the 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

Matthew B. Steele
Chief Executive Officer & Principal Financial Officer
832-538-0300

(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 charges 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) 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.

(1) Amount reflects net (loss) income available to common stockholders on a diluted basis for earnings per share purposes as calculated using the two-class method of computing earnings per share which is further described in Note 10, Earnings Per Share in our Form 10-Q for the quarter ended September 30, 2024.
(2) Net (loss) income 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) The impact of selected items for the three and nine months ended September 30, 2024 and 2023 were calculated based upon weighted average diluted shares of 16.5 million, due to the net (loss) income available to common stockholders, excluding selected items.

(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 (loss) income. 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.

(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 (loss) income. 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.

(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.