Battalion Oil Reports 13 Percent Q2 Drop

Battalion Oil (BATL -3.67%), an independent oil and gas exploration and production company focused on the Delaware Basin, released its second quarter 2025 results on August 14, 2025. The most notable update was the AGI facility shutdown effective August 11, 2025, just after quarter-end, introducing significant operational and regulatory risk for the remainder of the year. Battalion Oil reported revenue (GAAP) of $42.8 million and an adjusted net loss per share (non-GAAP) of ($0.65); no analyst estimates were available for comparison. Revenue (GAAP) fell from $49.1 million compared to Q2 2024, driven mainly by lower realized oil prices, though production volumes held steady. Overall, the quarter demonstrated solid cost management and execution, but market pressures and post-quarter disruptions pose substantial challenges going forward.

Overview of Battalion Oil’s Business and Strategic Focus

Battalion Oil is an upstream energy company that produces oil, natural gas, and natural gas liquids from the Delaware Basin, with primary assets in the Wolfcamp and Bone Spring geological formations, maintaining nearly full operational control over its proved reserves, giving it a direct hand in production decisions and field development.

The company focuses on operational efficiency, liquidity management, and strategic growth through targeted drilling programs and potential acquisitions. Key success factors include its ability to control costs, optimize its drilling inventory, and comply with a changing regulatory environment. Recent attention has gone to keeping capital expenditures low and maximizing production from existing assets, particularly as commodity prices have grown more volatile.

Quarter in Review: Production, Costs, and a Major Operational Development

Average daily production climbed to 12,989 barrels of oil equivalent per day, a 1% increase from the second quarter of 2024. Oil accounted for 49% of output, with the balance coming from natural gas and natural gas liquids. The stability in volumes comes despite a sharp drop in average realized prices—oil realized $62.14 per barrel (GAAP), a 21.5% decrease year over year. Total average realized price per barrel of oil equivalent (Boe) fell nearly 14% to $36.02. Battalion Oil offset some of the negative price impact with $4.3 million in hedge gains, which helped cushion the effect on revenue.

Cost management was another area of progress. Gathering and other facility expenses improved to $9.27 per Boe, down from $10.36 in Q2 2024, due to efficiency gains at central production facilities. General and administrative expense per Boe also fell to $2.17, mostly from lower merger-related costs. However, lease operating and workover expenses per Boe increased to $10.98 from $10.22 in Q2 2024, reflecting more workover activity to maintain production levels. The company’s net loss available to common stockholders was ($3.5) million (GAAP), narrower than the ($8.7) million (GAAP) loss in Q2 2024, and adjusted EBITDA climbed to $18.1 million, up from $15.6 million in Q2 2024, despite declining revenue.

Operationally, Battalion Oil completed its 2025 drilling program ahead of schedule and under budget. The final two wells in its six-well plan were finished and brought online on July 5, 2025, and each came in around $1.0 million below their budget. The company reported positive production response even from offsets, due to effective hydraulic fracturing.

A major event after quarter-end was the shutdown of the AGI facility. This acid gas injection site plays a central role in managing emissions and gas processing. The shutdown forced the company to temporarily shut in a share of its Monument Draw field and move quickly to reroute production to other facilities. This raises risks for production volumes. Battalion Oil stated it is evaluating alternatives, but near-term output will likely be affected.

Hedging continued to play a crucial role. The company realized $4.3 million in hedge gains, helping offset market-driven revenue declines. This approach of using derivatives to fix prices is required under its loan terms and aims to protect cash flows against swings in oil and gas markets. Fixed-price swaps and similar contracts remain essential to revenue stability in a weak price environment.

No new acquisitions or joint ventures were announced during the quarter, and the company’s stated focus remained on drilling efficiency, maximizing the value of existing acreage, and maintaining liquidity. Preferred dividends of $8.3 million were paid out Redeemable convertible preferred stock grew to $197.6 million as of June 30, 2025, up from $177.5 million at year-end 2024.

Cash and cash equivalents ended the period at $44.6 million, down from $54.5 million as of Q2 2024 but up from the December 2024 level. Battalion Oil reported $219.4 million in term loan debt as of June 30, 2025, with limited borrowing capacity available. The balance sheet shifted to negative equity of ($5.2) million (GAAP) as of June 30, 2025, reflecting accumulated deficits and preferred dividend obligations. Net cash from operations (GAAP) was $10.2 million, less than half the prior-year quarter’s $29.8 million, another sign of pressure from commodity pricing.

Looking Ahead: Visibility, Risks, and Capital Considerations

Battalion Oil’s management did not offer clear forward guidance for future production, revenue, or cost trends in the quarter’s release. The company stated that the AGI system’s shutdown on August 11, 2025 “temporarily impacts” production in the Monument Draw field and that it is working to find alternative gas processing solutions nearby. Guidance on the effect of these challenges -- or the timing of resolution -- was not provided.

Liquidity remains a concern given debt levels and negative equity. The company’s ability to adapt to the new processing environment, contain regulatory risks, and manage cash outflows will be critical in the quarters ahead.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.