An independent oil and gas explorer based in Houston, Battalion drills liquids-rich acreage in West Texas's Delaware Basin, tapping the Wolfcamp and Bone Spring rock formations across its Monument Draw and Hackberry areas. It began life as Halcón Resources before renaming itself in 2020, choosing "Battalion" to evoke an organized, disciplined team pulling together toward one shared goal. The name nods to the same team-driven spirit, a fitting label for a company working the shale zones that reshaped American energy.
Battalion Oil returned to net income of $15.5M in Q2 2026, driven by a $13.1M derivative gain and higher oil prices, while production fell 4.5%.
A $13.1 million and a increase in realized oil prices pushed Battalion Oil to a $15.5 million , even as production continued to decline. rose 12.4% to $48.1 million, and swung to a $6.8 million profit from a near-breakeven result a year ago, as a $34.24 per barrel increase in realized oil prices more than offset a 4.5% drop in total production. The company has bought time with a new term loan and an at-the-market equity program, but the cash it generates from operations remains thin.
Key takeaways
swung to a $15.5 million profit from a $4.8 million profit a year ago, driven primarily by a $13.1 million non-cash gain on commodity derivatives, which included a $20.9 million unrealized gain on unsettled contracts.
Oil, natural gas, and NGL revenues rose 12.4% to $48.1 million, as a $34.24 per barrel increase in realized oil prices to $96.38 per barrel outweighed a 4.5% decline in total production to 12,407 Boe/d.
swung to a $6.8 million profit from a $0.2 million loss a year ago, and expanded to 14.1% from -0.4%, as the increase and lower per-unit lease operating expenses more than offset higher gathering costs.
Section summaries
Management's Discussion and Analysis
Q2 FY2026 net income of $15.5M driven by higher realized oil prices and a $13.1M derivative gain, offset by lower production volumes.
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Oil, natural gas, and NGL revenues rose to $48.0M in Q2 FY2026 from $42.6M in Q2 FY2025, driven by a $34.24/Bbl increase in realized oil prices to $96.38/Bbl, partially offset by a 4.5% decline in total production to 12,407 Boe/d.
Gathering and other expenses rose to $10.87 per Boe from $9.27 per Boe a year ago, which management attributed to greater throughput volumes under a new long-term processing agreement with a midstream provider.
Cash and equivalents rose 85.8% to $83.1 million, bolstered by $30.3 million in net proceeds from a new at-the-market equity program and the $60.1 million West Quito asset sale that closed in February 2026.
The company entered a new $162.5 million term loan agreement with a fixed 6.50% margin, replacing a -based grid, and has no required debt repayments until June 30, 2027.
What changed
The $97.7 million term loan maturity that was flagged as a critical risk in Q3 2025 and FY 2025 has been addressed: the company entered a new $162.5 million term loan agreement with no required repayments until June 30, 2027, removing the immediate refinancing overhang.
The negative that triggered a NYSE American non-compliance notice at year-end 2025 has swung to positive $203.1 million, driven by the $15.0 million equity raise and the accounting effects of the West Quito asset sale, though the company has since issued 32.3 million additional shares under the ATM program, diluting existing holders.
The AGI Facility shutdown that management warned would materially increase future costs is now reflected in gathering expenses, which rose to $10.87 per Boe from $9.27 per Boe a year ago, though the company attributes the increase to a new processing agreement rather than the shutdown itself.
The six-well Monument Draw drilling campaign flagged in prior quarters has concluded, but total production still fell 4.5% to 12,407 Boe/d, indicating the campaign did not reverse the production decline that has persisted since 2022.
What to watch
Whether the new at-the-market equity program, which has already increased outstanding shares by 32.3 million, continues to dilute existing shareholders and depresses the stock price as the company draws on the remaining capacity under the $150.0 million program.
The trajectory of production volumes following the West Quito divestiture and the conclusion of the Monument Draw drilling campaign, given that output fell 4.5% despite a 6% increase in the prior quarter.
The cash settlement of derivative positions through the remainder of 2026, given the $13.1 million gain this quarter was predominantly non-cash and the company must hedge 50% to 85% of anticipated production.
Whether the new $162.5 million term loan agreement's fixed 6.50% margin and the absence of near-term maturities provide sufficient runway for the company to generate consistent , which was $8.8 million this quarter.
Lease operating and decreased on a per-unit and absolute basis due to lower maintenance, power, chemical costs, and reduced workover activity.
increased to $10.87/Boe from $9.27/Boe, primarily due to greater throughput volumes under a new long-term processing agreement with a midstream provider.
A $13.1M net derivative gain in Q2 FY2026, including a $20.9M unrealized gain, significantly boosted , contrasting with a $34.9M net derivative loss for the first six months of FY2026.
Liquidity was strengthened by $30.3M in net proceeds from the new at-the-market equity program and a $60.1M West Quito asset sale, with $83.1M in cash and $162.5M in borrowings outstanding as of June 30, 2026.
The company entered a new $162.5M term loan agreement with a lower fixed 6.50% margin, replacing a -based grid, and has no required debt repayments until June 30, 2027.
Quantitative and Qualitative Disclosures About Market Risk
The company uses derivatives to hedge energy commodity price risk and carries floating-rate debt tied to SOFR, exposing it to interest rate changes.
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Energy commodity price risk arises from differentials between NYMEX and local index prices where production is sold, and the company uses fixed-price swaps, , , and WTI NYMEX rolls to partially protect against price declines.
Under its Term Loan Agreement, the company is required to hedge approximately 50% to 85% of anticipated oil and natural gas production on a rolling four-year basis, and it does not enter derivatives for speculative purposes.
Counterparty credit risk is managed by transacting only with creditworthy institutions deemed competitive market makers; at June 30, 2026, no collateral was posted as derivatives are secured under the Term Loan Agreement.
Interest rate risk stems from $162.5 million in floating-rate debt under the 2026 Term Loan Agreement, which had a weighted average rate of 11.58% at June 30, 2026.
A hypothetical 10% change in market interest rates on the variable-rate debt balance would impact annual cash flows by approximately $1.9 million.
Information regarding legal proceedings to which we are a party is set forth in Item 1. Condensed Consolidated Financial Statements (Unaudited)—Note 9, “Commitments and Contingencies,” which is incorporated herein by reference.
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Information regarding legal proceedings to which we are a party is set forth in Item 1. Condensed Consolidated Financial Statements (Unaudited)—Note 9, “Commitments and Contingencies,” which is incorporated herein by reference.