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The following discussion is intended to assist in understanding our results of operations for the three and six months ended June 30, 2026 and 2025 and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report and with the consolidated financial statements, notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report for the fiscal year ended December 31, 2025. The results presented in this Quarterly Report are not necessarily indicative of future operating results.
Statements in this discussion may be forward-looking. As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report, and as supplemented by this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed. For more information, see “Special note regarding forward-looking statements.”
Overview
We are an independent energy company focused on the acquisition, production, exploration and development of onshore liquids-rich oil and natural gas assets in the United States. Our properties and drilling activities are currently focused in the Delaware Basin, where we have an extensive drilling inventory that we believe offers attractive long-term economics.
Our financial results depend upon many factors, but are largely driven by the volume of our oil and natural gas production and the price that we receive for that production. Our production volumes will decline as reserves are depleted unless we expend capital in successful development and exploration activities or acquire properties with existing production. The amount we realize for our production depends predominantly upon commodity prices, which are affected by changes in market demand and supply, as impacted by overall economic activity, attempts by foreign oil and natural gas producers to control the global supply, weather, transportation take-away capacity constraints, inventory storage levels, basis differentials and other factors. Accordingly, finding, developing and producing oil and natural gas reserves at economical costs are critical to our long-term success.
When commodity prices decline significantly our ability to finance our capital budget and operations may be adversely impacted. While we use derivative instruments to provide partial protection against declines in oil and natural gas prices, the total volumes we hedge are less than our expected production, vary from period to period based on our view of current and future market conditions, remain consistent with the requirements in effect under our Amended Term Loan Agreement and extend, on a rolling basis, for a limited period of time (generally, four years). These limitations result in our liquidity being susceptible to commodity price declines. Additionally, while intended to reduce the effects of volatile commodity prices, derivative transactions may limit our potential gains and increase our potential losses if commodity prices were to rise substantially over the price established by the hedge. Our hedge policies and objectives may change significantly as our operational profile changes and/or commodities prices change. We do not enter into derivative contracts for speculative trading purposes.
Recent Developments
2026 Term Loan Agreement
On June 30, 2026, we entered into a Third Amended and Restated Senior Secured Credit Agreement (the “2026 Term Loan Agreement”) which amended and restated in its entirety the Second Amended and Restated Senior Secured Credit Agreement (the “2024 Amended Term Loan Agreement”) dated as of December 26, 2024. Pursuant to the 2026 Term Loan Agreement, the lenders agreed to provide us with (i) a term loan facility in the aggregate principal amount of $162.5 million, deemed funded on June 30, 2026 and (ii) on an uncommitted and absolutely discretionary basis, a delayed draw term loan facility in a maximum aggregate amount of up to $175.0 million, to be made available from and
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including June 30, 2026 through and including the earliest to occur of (a) the date on which the delayed draw term loans have been fully drawn or (b) the date on which the discretionary delayed draw term loan commitments are terminated, subject to the satisfaction of certain conditions as outlined in the 2026 Term Loan Agreement. The 2026 Term Loan Agreement matures on December 31, 2029 and bears interest at a rate per annum equal to a forward-looking term rate based on SOFR for a tenor of three months (with a credit spread adjustment of 0.15% per annum) (or another applicable reference rate, as determined pursuant to the terms of the 2026 Term Loan Agreement) plus an applicable margin of 6.50% (or, for ABR Loans, a base rate plus an applicable margin of 5.50%). The applicable margin is fixed at 6.50% and replaces the leverage-based pricing grid contained in the 2024 Amended Term Loan Agreement, under which the applicable SOFR margin ranged from 7.75% to 8.50% depending on the Total Net Leverage Ratio. We are required under the 2026 Term Loan Agreement to make scheduled amortization payments (i) commencing with the fiscal quarter ending June 30, 2027 through and including the fiscal quarter ending March 31, 2029, in an aggregate principal amount equal to 1.25% of the loans outstanding on June 30, 2026, (ii) for the fiscal quarter ending June 30, 2029, an aggregate principal amount equal to 7.50% of the loans outstanding on June 30, 2026, and (iii) for the fiscal quarter ending September 30, 2029, an aggregate principal amount equal to 10.00% of the loans outstanding on June 30, 2026.
The 2026 Term Loan Agreement also contains certain financial covenants (as defined in the 2026 Term Loan Agreement), including the maintenance of (i) a Total Net Leverage Ratio not to exceed 2.75x as of each fiscal quarter ending September 30, 2026 through and including December 31, 2026, and 2.50x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter, (ii) a Current Ratio not to fall below 1.00x, determined as of the last day of any fiscal quarter commencing with the fiscal quarter ending September 30, 2026, (iii) an Asset Coverage Ratio not to fall below 1.75x as of each fiscal quarter ending September 30, 2026 through and including December 31, 2026, 2.00x as of each fiscal quarter ending March 31, 2027 through and including December 31, 2027, and 2.50x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter, and (iv) Liquidity not to fall below the greater of (x) $10,000,000 and (y) the amount equal to the scheduled principal and interest payments for the immediately succeeding three-month period, determined as of the last day of any fiscal quarter.
We recorded an additional $0.4 million of deferred financing costs at June 30, 2026 in conjunction with entry into the 2026 Term Loan Agreement.
Joint Exploration and Development Agreement
On May 27, 2026, we entered into a joint exploration and development agreement (“JEDA”) with an energy investment firm, pursuant to which the investment firm will earn assigned working interests in certain wells and leasehold acreage in Monument Draw by funding its proportionate share of well costs, subject to a carried interest. Under the JEDA, we serve as operator and the investment firm as a non-operating working interest owner. The JEDA contemplates a primary tranche of four identified wells, in which both us and the investment firm have committed to participate, and following completion of that tranche, we may propose one or more subsequent tranches, each subject to the investment firm’s election to participate. Pursuant to the JEDA, we were required to spud an initial well prior to August 1, 2026, however, both parties agreed and the spud date of the initial well was delayed until mid-August 2026. Well costs and revenues for the initial tranche are allocated 50% to us and 50% to the investment firm on an 8/8ths cost basis, with post-completion net revenue interest and operating cost allocations of approximately 55% to us and 45% to the investment firm, subject to adjustment for the investment firm’s earned working interest share. We bear a carried interest equal to 10% of our participating interest with respect to well costs chargeable to wells in the primary tranche and any subsequent tranche, such that the investment firm funds a portion of costs attributable to our retained interest in exchange for the assignment of working interest. The investment firm’s allocated percentage of certain net revenue interest (up to an additional 2.5%) varies based on the trading price of 2027 WTI crude oil (as measured by the applicable futures index) on the last trading day of 2026, with a threshold of $70.00 per barrel determining whether a 25% or 45% allocated percentage applies. As of June 30, 2026, we had incurred approximately $0.5 million of well costs under the JEDA, of which 50% will be billed to the investment firm in accordance with the cost-sharing provisions of the JEDA.
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At the Market Sales Offering
On May 5, 2026, we entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”) pursuant to which we may issue and sell, from time to time, up to $150.0 million of shares of our common stock, through or to the Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions (the “ATM Program”). For the period May 6, 2026 through June 30, 2026, we sold and issued 17,396,701 shares under the ATM Program for net proceeds of $30.3 million, after deducting sales commissions and other offering costs. As of June 30, 2026, we had $118.9 million of aggregate gross sales remaining under the Sales Agreement. Subsequent to June 30, 2026 through July 29, 2026 when sales under the ATM Program were suspended, we sold an additional 14,895,784 shares under the ATM Program for net proceeds of $25.6 million, after deducting sales commissions and other offering costs.
Preferred Stock Conversion
On March 30, 2026, we issued 1,800,000 shares of our common stock to Luminus Energy Partners Master Fund, Ltd. (“Luminus”) upon the conversion of 7,803 shares of our Series A-2 Redeemable Convertible Preferred Stock (the “Series A-2 Preferred Stock”). The conversion was calculated in accordance with the terms of the Series A-2 Preferred Stock, including adjustments provided in respect of any Unpaid Dividend Accrual (as defined in the Company’s Certificate of Incorporation, as amended) and using a conversion price of $6.21 per share.
Monument Draw Acquisition
On March 10, 2026, we entered into a purchase and sale agreement to acquire certain oil and natural gas assets, comprising 7,090 net acres located in Ward County, Texas, from RoadRunner Resource Holding LLC (formerly, Sundown Energy LP) (“RoadRunner”), effective March 1, 2026, in an all-stock transaction. Under the terms of the agreement, upon closing on March 19, 2026, we issued 485,000 shares of our common stock to RoadRunner in exchange for the assets. The acquired acreage is directly adjacent to our existing Monument Draw acreage. The transaction is subject to customary post-closing adjustments.
Private Placement Equity Offering
On March 3, 2026, we entered into a definitive agreement to sell in a private placement to an institutional investor 1,800,000 shares of our common stock and 927,273 prefunded warrants for the purchase of common stock at $5.50 per share for total proceeds of $15.0 million. The offering closed on March 4, 2026, on satisfaction of customary closing conditions. We used the net proceeds received from the offering for working capital and general corporate purposes. The warrants were exercised on April 7, 2026 and accordingly, upon exercise, we issued 927,273 shares of common stock.
West Quito Divestiture
On December 18, 2025, we entered into an agreement of sale and purchase with MCM Delaware Resources, LLC (“MCM”) to sell substantially all of our oil and natural gas properties and related assets in the West Quito Draw area located in the Southern Delaware Basin in Ward County, Texas (the “West Quito Assets”) for a total sales price of approximately $62.6 million, subject to adjustment for accounting between the effective date of December 1, 2025 and the closing date and other customary adjustments (the “West Quito Divestiture”). The West Quito Divestiture closed on February 24, 2026 for an adjusted sales price of $60.1 million, reflecting adjustment for accounting effective date of December 1, 2025 and other customary adjustments. The West Quito Assets include approximately 6,100 net acres in Ward County, Texas and proved reserves for these properties accounted for approximately 6.0 MMboe, or approximately 10%, of our proved reserves at December 31, 2025. We used $45.6 million of the net proceeds from closing to repay amounts outstanding under the 2024 Amended Term Loan Agreement on February 24, 2026 - $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026. Pursuant to the Third Amendment, on February 24, 2026, $12.9 million of Reinvestment Proceeds were held in a reinvestment account to be used to acquire additional contiguous non-operated oil and natural gas properties consisting of proved developed reserves in Ward and Winkler Counties, Texas, to fund permitted capital expenditures in the Monument Draw area and/or to fund the drilling and completion of
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two Monument Draw wells within 180 days after receipt. Should such funds have not been spent within the 180-day period, the Reinvestment Proceeds shall be used to prepay borrowings outstanding under the 2024 Amended Term Loan Agreement. At June 30, 2026, $5.2 million of Reinvestment Proceeds remained and was recorded as restricted cash.
Term Loan Credit Facility
On February 24, 2026, we entered into the Third Amendment to our 2024 Amended Term Loan Agreement. Pursuant to the Third Amendment, among other changes specified therein, (a) the lenders consented to the transactions contemplated by the West Quito Divestiture sale agreement; and (b) we were required, upon receipt of the net cash proceeds from the West Quito Divestiture, to prepay the outstanding principal amount of the 2024 Amended Term Loan Agreement borrowings in an aggregate amount equal to $40.0 million. We may retain the remaining net cash proceeds received from the West Quito Divestiture, subject to certain reinvestment requirements, set forth in the Third Amendment.
We recorded a loss on extinguishment of debt in the amount of $0.9 million to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment and deferred an additional $0.6 million of deferred financing costs at March 31, 2026 in conjunction with entry into the Third Amendment.
Capital Resources and Liquidity
Overview. Our ability to execute our operating strategy is dependent on our ability to maintain adequate liquidity and access additional capital, as needed. Our future capital resources and liquidity depend, in part, on our success in developing our leasehold interests, growing our reserves and production and finding additional reserves. Sufficient levels of available cash are required to fund capital expenditures necessary to offset inherent declines in our production and proven reserves. We generated a net loss of $41.0 million for the six months ended June 30, 2026 and had working capital of $58.4 million as of June 30, 2026. As of June 30, 2026, we had $83.1 million of cash and cash equivalents, $162.5 million of borrowings outstanding and secured access to up to $175.0 million of additional discretionary delayed draw capacity to fund future growth, available on an uncommitted basis under the 2026 Term Loan Agreement and no required debt repayments due until June 30, 2027 under our 2026 Term Loan Agreement. We closed on the sale of our West Quito Assets on February 24, 2026 for net proceeds of $60.1 million, of which $45.6 million was used to repay a portion of outstanding borrowings under our 2024 Amended Term Loan Agreement including $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026. Pursuant to the Third Amendment and continuing requirements under the 2026 Term Loan Agreement, remaining proceeds from the sale after related expenses (the “Reinvestment Proceeds”) are to be used to acquire additional contiguous non-operated oil and natural gas properties consisting of proved developed reserves in Ward and Winkler Counties, Texas, to fund permitted capital expenditures in the Monument Draw area and/or to fund the drilling and completion of two Monument Draw wells within 180 days after receipt. Should such funds have not been spent within the 180-day period, the Reinvestment Proceeds shall be used to prepay borrowings outstanding under the 2026 Term Loan Agreement. At June 30, 2026, $5.2 million of Reinvestment Proceeds remained and such were recorded as restricted cash.
On March 3, 2026, we entered into a definitive agreement to sell in a private placement to an institutional investor, 1,800,000 shares of our common stock and 927,273 prefunded warrants for the purchase of common stock at $5.50 per share for total proceeds of $15.0 million. The offering closed on March 4, 2026, on satisfaction of customary closing conditions. On May 5, 2026, we established our ATM Program, pursuant to which we may issue and sell, from time to time, up to $150.0 million of shares of our common stock, through or to our Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions. For the period May 6, 2026 through June 30, 2026, we sold 17,396,701 shares under the ATM Program for net proceeds of $30.3 million, after deducting sales commissions and other offering costs. Subsequent to June 30, 2026 through July 29, 2026 when sales under the ATM Program were suspended, we sold an additional 14,895,784 shares under the ATM Program for net proceeds of $25.6 million, after deducting sales commissions and other offering costs. We intend to use the net proceeds received from the private placement and ATM Program offerings for working capital and general corporate purposes.
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We continue to execute on a plan to reduce operating and capital costs to improve cash flow. We believe that, based upon our operational forecasts, cash and cash equivalents on hand, proceeds from the sale of our West Quito Assets and from the private placement equity offering, and cost reduction measures, it is probable that we will have sufficient liquidity to fund our operations, meet our debt requirements and maintain compliance with our future debt covenants as described in Note 5, “Debt,” for the next 12 months from the issuance of these unaudited condensed consolidated financial statements. We will, however, continue to consider alternative liquidity sources which could include entering into other financing arrangements (e.g. future equity raises), a sale of a portion of our assets, seeking capital partners for our drilling program, pursuing strategic merger opportunities or joint ventures, the sale of the Company, or pursuing additional general and administrative or other cost reduction opportunities. Our estimates and forecasts are based upon assumptions that may prove to be incorrect due to many factors that are currently unknown, such as prevailing economic conditions, many of which are beyond our control.
In the event the assumptions underlying our estimates and forecasts prove to be incorrect, our operating plans, capital requirements, and covenant compliance may be adversely impacted. In the event our cash flows are materially less than anticipated or our costs are materially greater than anticipated and other sources of capital we historically have utilized are not available on acceptable terms, we may be required to curtail drilling, development, land acquisitions and other activities to reduce our capital spending. However, significant or prolonged reductions in capital spending will adversely impact our production and may negatively affect our future cash flows.
We continuously monitor changes in market conditions and will continue to adapt our operational plans as necessary to strive to maintain sufficient liquidity, facilitate drilling on our undeveloped acreage position and permit us to selectively expand our acreage, as well as meet our debt obligations and restrictive covenants. We have been exploring, and continue to explore, strategic transactions to address these concerns, while also looking at opportunities to significantly reduce expenses in the near term. However, there can be no assurance that, absent additional capital, reducing costs or other material favorable developments, the Company will not experience liquidity and covenant compliance issues in the future.
On May 30, 2025, we received written notice (the “Notice”) on behalf of the NYSE American indicating that we are no longer in compliance with NYSE American’s continued listing standards. Specifically, the letter stated that we are not in compliance with the continued listing standards set forth in Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”). Section 1003(a)(i) requires a listed company to have stockholders’ deficit of $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years. Section 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years. Our noncompliance resulted from our reporting stockholders’ deficit of $1.8 million as of March 31, 2025, and losses from continuing operations and/or net losses in three of our four most recent fiscal years ended December 31, 2024. We reported stockholders’ equity of $157.1 million at March 31, 2026 resulting from the reclassification of our preferred stock from temporary to permanent equity and additional losses from operations and continued to report stockholders’ equity of $203.1 million at June 30, 2026. The Notice further provided that we must submit a plan of compliance (the “Plan”) by June 30, 2025 addressing how we intend to regain compliance with the continued listing standards by November 30, 2026. Such Plan was submitted by the required deadline and our Plan was accepted by the NYSE. The Notice has no immediate impact on the listing of our shares of common stock, which will continue to be listed and traded under the symbol “BATL” on the NYSE American during this period, subject to our compliance with the other listing requirements of the NYSE American. The notice does not affect our ongoing business operations or our reporting requirements with the Securities and Exchange Commission.
Other Risks and Uncertainties. Our ability to complete transactions and maintain or increase our liquidity is subject to a number of variables, including our level of oil and natural gas production, proved reserves and commodity prices, the amount and cost of our indebtedness, as well as various economic and market conditions that have historically affected the oil and natural gas industry. Even if we are otherwise successful in growing our proved reserves and production, if oil and natural gas prices decline for a sustained period of time, our ability to fund our capital expenditures, complete acquisitions, reduce debt, meet our financial obligations and become profitable may be materially impacted.
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Additionally, in periods of increasing commodity prices, we continue to be at risk to supply chain issues, including, but not limited to, labor shortages, pipe restrictions and potential delays in obtaining frac and/or drilling related equipment that could impact our business. During these periods, the costs and delivery times of rigs, equipment and supplies may also be substantially greater. The unavailability or high cost of drilling rigs and/or frac crews, pressure pumping equipment, tubulars and other supplies, and of qualified personnel can materially and adversely affect our operations and profitability.
Lastly, actual or anticipated declines in domestic or foreign economic activity or growth rates, regional or worldwide increases in tariffs or other trade restrictions, turmoil affecting the United States or global financial system and markets and a severe economic contraction either regionally or worldwide, resulting from international conflicts, efforts to contain pandemics or other factors, could materially affect our business and financial condition and impact our ability to finance operations by worsening the actual or anticipated future drop in worldwide oil demand, negatively impacting the price received for oil and natural gas production or adversely impacting our ability to comply with covenants in our 2026 Term Loan Agreement. Negative economic conditions could also adversely affect the collectability of our trade receivables or performance by our vendors and suppliers or cause our commodity hedging arrangements to be ineffective if our counterparties are unable to perform their obligations. All of the foregoing may adversely affect our business, financial condition, results of operations, cash flows and, potentially, compliance with the covenants contained in our 2026 Term Loan Agreement.
Debt Obligations. Under our 2026 Term Loan Agreement, we are required to make scheduled quarterly amortization payments (i) commencing with the fiscal quarter ending June 30, 2027 through and including the fiscal quarter ending March 31, 2029, in an aggregate principal amount equal to 1.25% of the loans outstanding on June 30, 2026, (ii) for the fiscal quarter ending June 30, 2029, an aggregate principal amount equal to 7.50% of the loans outstanding on June 30, 2026, and (iii) for the fiscal quarter ending September 30, 2029, an aggregate principal amount equal to 10.00% of the loans outstanding on June 30, 2026. We must make a total of $2.0 million in debt repayments through June 2027 under our 2026 Term Loan Agreement.
Changes in the level and timing of our production, drilling and completion costs, the cost and availability of transportation for our production and other factors varying from our expectations can affect our ability to comply with the covenants under our 2026 Term Loan Agreement. As a consequence, we endeavor to anticipate potential covenant compliance issues and work with our lenders to address any such issues ahead of time.
While we have largely been successful in obtaining modifications of our covenants as needed, there can be no assurance that we will be successful in the future. In the event we are not successful in obtaining covenant modifications, if needed, there is no assurance that we will be successful in implementing alternatives that allow us to maintain compliance with our covenants or that we will be successful in obtaining alternative financing that provides us with the liquidity that we need to operate our business. Even if successful, alternative sources of financing could prove more expensive than borrowings under our 2026 Term Loan Agreement.
Cash Flows
Net increase in cash and cash equivalents is summarized as follows (in thousands):
Six Months Ended
June 30,
2026 2025
Cash flows provided by operating activities $ 10,883 $ 22,936
Cash flows provided by (used in) investing activities 52,223 (53,474)
Cash flows (used in) provided by financing activities (2,771) 55,447
Net increase in cash, cash equivalents and restricted cash $ 60,335 $ 24,909
Operating Activities. Net cash flows provided by operating activities for the six months ended June 30, 2026 and 2025, were $10.8 million and $22.9 million, respectively. Items impacting the decrease in operating cash flows were
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driven by changes in working capital primarily related to unrealized losses (gains) on derivative contracts for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Investing Activities. Net cash flows provided by investing activities for the six months ended June 30, 2026 were approximately $52.2 million primarily from proceeds received from sales of oil and natural gas assets compared to net cash flows used in investing activities for the six months ended June 30, 2025 of $53.5 million primarily for drilling and completion activities.
During the six months ended June 30, 2026, we spent $7.8 million on oil and natural gas capital expenditures, of which $4.0 million related to drilling and completion costs and $3.2 million related to the development of our treating equipment and gathering support infrastructure.
During the six months ended June 30, 2025, we spent $53.1 million on oil and natural gas capital expenditures, of which $47.2 million related to drilling and completion costs and $5.0 million related to the development of our treating equipment and gathering support infrastructure. In the first six months of 2025, we ran one operated rig in the Delaware Basin, drilled and cased six gross (5.5 net) operated wells, and completed and put online four gross (4.0 net) operated wells.
Financing Activities. Net cash flows used in financing activities for the six months ended June 30, 2026 were $2.7 million compared to net cash flows provided by financing activities for the six months ended June 30, 2025 of $55.4 million. During the six months ended June 30, 2026, we repaid $45.6 million under our 2024 Amended Term Loan Agreement and issued $43.9 million in common stock, net of issuance costs. During the six months ended June 30, 2025, we received net proceeds of $61.1 million from the incurrence of the Incremental Term Loans on January 9, 2025.
Off-Balance Sheet Arrangements
At June 30, 2026, there are no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, results of operations or liquidity.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There have been no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
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Results of Operations
The table below sets forth financial information for the periods presented.
Three Months Ended Six Months Ended
June 30, June 30,
In thousands (except per unit and per Boe amounts) 2026 2025 2026 2025
Operating revenues:
Oil $ 49,152 $ 36,291 $ 85,434 $ 75,991
Natural gas (6,904) 935 (8,397) 3,758
Natural gas liquids 5,730 5,350 10,003 10,212
Other 151 236 263 326
Operating expenses:
Production:
Lease operating 9,189 10,670 19,283 21,028
Workover and other 622 2,309 1,640 3,742
Taxes other than income 2,981 2,522 5,305 5,322
Gathering and other 12,268 10,958 23,518 22,958
General and administrative:
General and administrative 3,645 2,567 7,905 6,932
Stock-based compensation 421 — 421 48
Depletion, depreciation and accretion:
Depletion – Full cost 11,988 13,554 24,076 26,228
Depreciation – Other 13 107 37 241
Accretion expense 221 278 471 550
Other income (expenses):
Net gain (loss) on derivative contracts 13,051 11,548 (34,913) 20,850
Interest expense and other (4,324) (6,599) (9,841) (13,269)
Loss on extinguishment of debt — — (862) —
Net (loss) income $ 15,508 $ 4,796 $ (40,969) $ 10,819
Production:
Oil – MBbls 510 584 1,038 1,153
Natural Gas - MMcf 2,012 2,136 4,066 3,935
Natural gas liquids – MBbls 283 242 546 444
Total MBoe(1) 1,129 1,182 2,262 2,253
Average daily production – Boe(1) 12,407 12,989 12,497 12,448
Average price per unit (2):
Oil price - Bbl $ 96.38 $ 62.14 $ 82.31 $ 65.91
Natural gas price - Mcf (3.43) 0.44 (2.07) 0.96
Natural gas liquids price - Bbl 20.25 22.11 18.32 23.00
Total per Boe(1) 42.50 36.02 38.48 39.93
Average cost per Boe:
Production:
Lease operating $ 8.14 $ 9.03 $ 8.52 $ 9.33
Workover and other 0.55 1.95 0.73 1.66
Taxes other than income 2.64 2.13 2.35 2.36
Gathering and other 10.87 9.27 10.40 10.19
General and administrative:
General and administrative 3.23 2.17 3.49 3.08
Stock-based compensation 0.37 — 0.19 0.02
Depletion 10.62 11.47 10.64 11.64
(1) Determined using a ratio of six Mcf of natural gas to one barrel of oil, condensate, or natural gas liquids (“NGLs”) based on approximate energy equivalency. This is an energy content correlation and does not reflect the value or price relationship between the commodities.
(2) Amounts exclude the impact of cash paid/received on settled contracts as we did not elect to apply hedge accounting.
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Operating Revenues. Oil, natural gas and NGLs revenues were $48.0 million and $42.6 million for the three months ended June 30, 2026 and 2025, respectively. The increase in revenues is primarily attributable to an increase in average realized prices for oil, natural gas and NGLs partially offset by lower production volumes for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. We realized negative natural gas pricing for the three months ended June 30, 2026 whereby costs and differentials exceeded the sales price for natural gas and resulted in us as seller paying the purchaser to take the natural gas. Average realized prices (excluding the effects of hedging arrangements) increased approximately $6.48 per Boe for three months ended June 30, 2026 when compared with the same period in 2025. Production averaged 12,407 Boe per day for the three months ended June 30, 2026 compared to 12,989 Boe per day for the three months ended June 30, 2025.
Oil, natural gas and NGLs revenues were $87.0 million and $90.0 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in revenues is primarily attributable to a decrease in our average realized prices partially offset by slightly higher production volumes in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Average realized prices (excluding the effects of hedging arrangements) decreased approximately $1.45 per Boe for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025. Production averaged 12,497 Boe per day for the six months ended June 30, 2026 compared to 12,448 Boe per day for the six months ended June 30, 2025. The amount we realize for our production depends predominantly upon commodity prices, which are affected by changes in market demand and supply, as impacted by overall economic activity, weather, transportation take-away capacity constraints, inventory storage levels, quality of production, basis differentials and other factors.
Lease Operating Expenses. Lease operating expenses were $9.2 million and $10.7 million for the three months ended June 30, 2026 and 2025, respectively, and $19.3 million and $21.0 million for the six months ended June 30, 2026 and 2025, respectively. On a per unit basis, lease operating expenses were $8.14 per Boe and $9.03 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $8.52 per Boe and $9.33 per Boe for the six months ended June 30, 2026 and 2025, respectively. The decrease in lease operating expenses on a per unit basis for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 is primarily a result of lower maintenance, power, and chemical costs.
Workover and Other Expenses. Workover and other expenses were $0.6 million and $2.3 million for the three months ended June 30, 2026 and 2025, respectively, and $1.6 million and $3.7 million for the six months ended June 30, 2026 and 2025, respectively. On a per unit basis, workover and other expenses were $0.55 per Boe and $1.95 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $0.73 per Boe and $1.66 per Boe for the six months ended June 30, 2026 and 2025, respectively. The decrease in workover and other expenses for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 is the result of less workover activity during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025.
Taxes Other than Income. Taxes other than income were $3.0 million and $2.5 million for the three months ended June 30, 2026 and 2025, respectively, and $5.3 million for both the six months ended June 30, 2026 and 2025. Severance taxes are based on realized prices and volumes at the wellhead, while ad valorem taxes are tied to the annual valuation of our properties. As revenues or volumes from oil and natural gas sales increase or decrease, severance taxes on these sales also increase or decrease. On a per unit basis, taxes other than income were $2.64 per Boe and $2.13 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $2.35 per Boe and $2.36 per Boe for the six months ended June 30, 2026 and 2025, respectively.
Gathering and Other Expenses. Gathering and other expenses were $12.3 million and $11.0 million for the three months ended June 30, 2026 and 2025, respectively, and $23.5 million and $23.0 million for the six months ended June 30, 2026 and 2025, respectively. Gathering and other expenses include gathering fees paid to third parties on our oil and natural gas production and operating expenses of our gathering support infrastructure. Our gathering and other expenses are primarily driven by the amount and location of natural gas production, the concentration of H2S in our sour gas produced, and the amounts paid to treat our sour gas volumes. On a per unit basis, gathering and other expenses were $10.87 per Boe and $9.27 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $10.40 per Boe and $10.19 per Boe for the six months ended June 30, 2026 and 2025, respectively. The increase in gathering and other expenses per Boe for the three and six months ended June 30, 2026 compared to the three and six months ended June 30,
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2025 is primarily related to greater throughput volumes resulting from entry into a long-term processing agreement with a publicly traded large-cap midstream provider in January 2026.
General and Administrative Expense. General and administrative expense, excluding stock-based compensation, was $3.6 million and $2.6 million for the three months ended June 30, 2026 and 2025, respectively, and $7.9 million and $6.9 million for the six months ended June 30, 2026 and 2025, respectively. On a per unit basis, general and administrative expenses were $3.23 per Boe and $2.17 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $3.50 per Boe and $3.08 per Boe for the six months ended June 30, 2025 and 2024, respectively. The increase in general and administrative expense for the three and six months ended June 30, 2026 compared with the same prior year periods is primarily due to higher professional fees including legal costs. We incurred $0.4 million of stock-based compensation expense during the three and six months ended June 30, 2026 related to the vesting of a restricted stock unit grant to specific executives upon the occurrence of a defined event. Comparatively, we incurred less than $0.1 million of stock-based compensation expense for the six months ended June 30, 2025.
Depletion, Depreciation, and Amortization Expense. Depletion for oil and natural gas properties is calculated using the unit of production method, which depletes the capitalized costs of evaluated properties plus future development costs based on the ratio of production for the current period to total reserve volumes of evaluated properties as of the beginning of the period.
Depletion expense was $12.0 million and $13.6 million for the three months ended June 30, 2026 and 2025, respectively, and $24.1 million and $26.2 million for the six months ended June 30, 2026 and 2025, respectively. On a per unit basis, depletion expense was $10.62 per Boe and $11.47 per Boe for the three months ended June 30, 2026 and 2025, respectively, and $10.64 per Boe and $11.64 per Boe for the six months ended June 30, 2026 and 2025, respectively. The decrease in our depletion rate per Boe is primarily due to a period over period decrease in net oil and natural gas properties resulting from the sale of our West Quito Assets combined with the associated period over period decrease in proved reserves.
Net gain (loss) on derivative contracts. We enter into derivative commodity instruments to hedge our exposure to price fluctuations on our anticipated oil, natural gas and NGLs production. Consistent with prior years, we have elected not to designate any positions as cash flow hedges for accounting purposes, and accordingly, we recorded the net change in the mark-to-market value of these derivative contracts in the unaudited condensed consolidated statements of operations.
For the three months ended June 30, 2026, we recorded a net derivative gain of $13.1 million ($20.9 million net unrealized gain on unsettled contracts offset by a $7.8 million net realized loss on settled contracts). For the three months ended June 30, 2025, we recorded a net derivative gain of $11.5 million ($7.2 million net unrealized gain on unsettled contracts and $4.3 million net realized gain on settled contracts). For the six months ended June 30, 2026, we recorded a net derivative loss of $34.9 million ($26.1 million net unrealized loss on unsettled contracts and $8.8 million net realized loss on settled contracts). For the six months ended June 30, 2025, we recorded a net derivative gain of $20.9 million ($19.1 million net unrealized gain on unsettled contracts and $1.8 million net realized gain on settled contracts). At June 30, 2026, we had a $8.0 million derivative asset ($4.2 million current) and a $12.9 million derivative liability ($6.7 million current).
Interest Expense and Other. Interest expense and other totaled $4.3 million and $6.6 million for the three months ended June 30, 2026 and 2025, respectively and $9.8 million and $13.3 million for the six months ended June 30, 2026 and 2025, respectively. Our weighted average interest rate was approximately 11.59% and 11.58% for the three and six months ended June 30, 2026, respectively. Comparatively, our weighted average interest rate was approximately 12.20% for the three and six months ended June 30, 2025. For the third quarter of 2026, our interest rate will be approximately 10.38% on outstanding borrowings.
Loss on extinguishment of debt. We recorded a loss on extinguishment of debt in the amount of $0.9 million for the six months ended June 30, 2026 to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment under our 2024 Amended Term Loan Agreement.
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