BATL · Battalion Oil Corporation

Battalion Oil’s Q1 2026 results reflect a strategic inflection point marked by significant balance sheet improvement and operational execution, though GAAP earnings were severely impacted by non-cash derivative accounting. The $64.8 million net loss was overwhelmingly attributable to $47.96 million in unrealized derivative losses — a function of rising oil prices at quarter-end remeasuring open contracts, not actual cash outflows. Excluding this, adjusted net loss was $16.2 million ($0.93/share), and Adjusted EBITDA stood at $10.0 million, down 34% YoY due to a $9.73/Boe decline in average realized prices (excluding hedges), partially offset by a 678 Boe/d production increase. Operationally, the Company delivered strong cost discipline: lease operating and workover expense fell 24% sequentially to $9.82/Boe, and gathering & other expenses dropped to $9.94/Boe — both driven by the January 2026 switch to a long-term processing agreement with a large-cap midstream provider. Production rose to 12,578 Boe/d (47% oil), benefiting from more reliable gas treating after terminating a prior agreement. Capital allocation was decisive: the $60.1 million West Quito divestiture cut net debt by $71.9 million (from $180.2M to $108.3M), while a $15.0 million private placement and preferred-to-common conversion strengthened equity. Forward catalysts include a pipeline infrastructure project expected online in early Q3 2026 (projected $6M annual savings), late-Q2 commencement of a carried drilling venture enabling multi-bench 'cube' development, and ongoing refinancing efforts aimed at lowering debt service costs and enhancing development flexibility. Management explicitly frames Q1 as an inflection point — shifting focus from survival to value creation in Monument Draw.