Battalion Oil Corporation

Welcome to the Battalion Oil Q3 2022 Earnings Call. As a reminder, today's conference is being recorded. Now I'll turn it over to your host, Battalion Oil Corporation's Chris Lang. You may begin.

Thank you. Welcome, everyone, to our third quarter 2022 earnings call. I'd like to introduce a few of my colleagues that have joined me this morning, our Chief Executive Officer Richard Little, our Chief Financial Officer Kevin Andrews, and our Chief Operating Officer Daniel Rowling. This conference call contains forward-looking statements. For a detailed description of our disclaimer, see our earnings release issued Monday and posted on our website. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement released Monday. We have also published an investor presentation, which may be found on our website and may be referenced during this webcast. Now our team will begin with a few scripted remarks followed by Q&A. At this time, I'd like to turn it over to Rich to begin.

Thank you, Chris. And good morning to everyone joining us for our third quarter earnings call. In November of last year, we closed on a new term loan with a simple goal in mind, get the company back to development mode and start to drive meaningful growth in production and EBITDA. With the majority of our wells from this program coming on in the back half of the year, we knew this process wouldn't happen overnight. So patience would be key. Production in the first quarter declined over the fourth quarter of 2021 as we worked to bring on our first three well pad. Then in the second quarter, production rebounded nicely. Volumes from our new wells were more than offsetting the natural decline of our existing production. And that was driving modest production growth quarter over quarter. Today, our third quarter results speak for themselves. Our average daily production is up almost 8% over the second quarter. With most of our base production hedged entering the year, those new volumes provided us with critical access to a higher commodity price environment. And as a result, our average realized price for crude oil increased 11% over the second quarter, and that's despite a 15% decline in average crude oil prices. The increased volumes, together with improved pricing, drove a 34% increase in adjusted EBITDA over the second quarter of 2022, bringing total adjusted EBITDA in the quarter to 24.3 million. That's our highest since 2019. I'm also excited to talk this morning about an important update we shared earlier this week, and that's the news of our recent third bone spring test. While results are still early, production from that well appear to be in line with our Wolf Camp well performance this year. With several producing bone spring wells around our acreage and quite a bit of our own subsurface work focused on this area, we felt confident that zone would be productive on our acreage. This test is successful, would go a long way in further de-risking the bone spring and could allow us to shift to a multi-zone development while potentially increasing inventory. This is an important test for us and we'll continue to watch closely as we close out the year. We expect to have a more complete update on our next call. Looking forward, with socio-political and economic headwinds causing tension in the commodity markets, we once again find ourselves planning into uncertainty. As always, we will remain cautious as we work to finalize our 2023 capital budget, but we expect to enter the new year with confidence. We have a brand new three-well pad that was brought online in October and two more wells on the way before the end of the year. We have a bone spring test underway with promising early results. And our operational excellence has been on display as we continue to improve on record drilling performances and completion efficiencies. And our financial strength only increases in the new year as our weighted average strike price on crude swaps in 2023 improved by nearly $15 per barrel over our fourth quarter 2022 averages. All of this suggests our story of growth looks primed to continue through the fourth quarter and into 2023. For a little more color on operational performance, let me pass it off to Danny now.