BATL 10-K & 10-Q changes, risk factors and insider trading

Our business requires substantial capital expenditures primarily to fund our drilling program. We may also continue to selectively increase our acreage position, which would require capital in addition to the capital necessary to drill on our existing acreage. It is possible that we will acquire acreage in other areas that we believe are prospective for oil and natural gas production and expend capital to develop such acreage. We expect to use a portion of the proceeds from the sale of our West Quito Assets and from the sales of redeemable convertible preferred stock, if necessary, and which may be difficult or limited to access, to fund capital expenditures that are in excess of our operating cash flow and cash on hand.

On December 26, 2024, the Company and its wholly owned subsidiary, Halcón Holdings, LLC (the “Borrower”)we entered into a Second Amended and Restated Senior Secured Credit Agreement (the “2024 Term Loan Agreement”) with Fortress Credit Corp., as administrative agent, and certain other financial institutions party thereto, as lenders.Corp. Pursuant to the 2024 Term Loan Agreement, thewe lenderswere party thereto agreed to provide the Borrower withprovided (i) an initial term loan facility in the aggregate principal amount of $162.0 million, funded on December 26, 2024 and (ii) an incremental term loan facility in the aggregate principal amount of up to $63.0 million to be made available to the Borrower from January 3, 2025 until the date that is the earliest to occur of (x) the date on which such incremental term facility is fully drawn, (y) the date on which such incremental term facility is terminated and (z) January 11, 2025, subject to the satisfaction of certain conditions.million. On January 9, 2025, the Borrowerwe entered into a first amendment (the “First Amendment”) to itsour 2024 Term Loan Agreement (as amended, the “2024 Amended Term Loan Agreement”). Pursuant to the First Amendment, the Borrowerand incurred incremental term loans in the aggregate principal amount of $63.0 millionmillion. (On November 12, 2025, we entered into the “IncrementalSecond Amendment to the 2024 Amended Term Loans”).Loan Agreement to amend certain financial covenants, as described in more detail in Item 1. Business – Recent Developments.

As of December 31, 2024,2025, we had approximately $162.0$208.1 million of indebtedness outstanding under the 2024 Amended Term Loan Agreement.Agreement As of December 31, 2024, we haveand no additional borrowing capacity under the 2024 Amended Term Loan Agreement. Additionally, our 2024 Amended Term Loan Agreement contains certain covenants as well as a mandatory repayment schedule requiring us to make scheduled amortization payments in the aggregate amount of $16.9 million in 2025 and $22.5 million in 2026.both 2026 and 2027. The 2024 Amended Term Loan Agreement matures on December 26, 2028.

In the past, we have periodically sought amendments to the covenants under our revolving credit agreements, including the financial covenants, where we have anticipated difficulty in maintaining compliance. While historically we have largely been successful in obtaining modifications of our covenants as needed, as evidenced most recently by the Second Amendment to our 2024 Amended Term Loan Agreement, 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 2024 Amended Term Loan Agreement. Failure to comply with the covenants in our 2024 Amended Term Loan Agreement may limit our ability to borrow, result in an event of default and cause amounts outstanding under our 2024 Amended Term Loan Agreement to become immediately due and payable.

We could experience periods of higher costs for various reasons, including due to higher commodity prices, increased drilling activity in the Delaware Basin and trade disputesdisputes, tariffs or inflation that affect the costs of steel and other raw materials that we and our vendors rely upon, which could adversely affect our ability to execute our exploration and development plans on a timely basis and within budget.

As of December 31, 2024,2025, we owned leasehold interests in approximately 40,50037,600 net acres in the Delaware Basin in West Texas of which approximately 4,7002,400 net acres are undeveloped.undeveloped and approximately 6,100 net acres are to be divested in the West Quito Divestiture. Generally, our oil and natural gas leases remain in force as long as production in paying quantities is maintained. Currently, our leases on undeveloped oil and natural gas properties are either categorized as “held by production” or perpetuated by continuous development clauses contained in our leases or tolling agreements. We continually review our leases on acreage subject to these clauses or agreements when planning for our future drilling programs. If our leases on acreage subject to these provisions are not maintained by production in paying quantities or continuous development, our leases could expire and we would lose our right to develop the related properties.

At the federal level, the U.S. has taken a variety of steps intended to address climate change. For example, the EPA announced new final regulations in December 2023 that impose more comprehensive restrictions on emissions of methane (a greenhouse gas) and volatile organic compounds from new, existing, and modified facilities in the oil and gas sector (such as wells and storage tank batteries). Among other things, the rule sets new emissions standards for certain equipment; requires routine monitoring for and repair of leaks at well sites, centralized production facilities, and compressor stations; limits flaring from existing oil wells; and prohibits flaring from new oil wells. While the EPA has proposed or made certain changes in those regulations that are intended to reduce compliance difficulties, the standards still have imposed and will impose additional requirements and costs on our operations. In addition, BLM promulgated new rules in 2024 to reduce venting, flaring and leaks from oil and gas production on public lands.lands, but they were challenged in court, and BLM currently is evaluating a replacement proposed rule. Aside from new controls, the 2022 Inflation Reduction Act createscreated incentives designed to increase use of electric cars and fuels other than oil and natural gas. That statute imposesrequired the EPA to impose a fee on certain excess methane emissions from oil and gas facilities of $900 per metric ton of methane for 2024, $1,200 per metric ton for 2025, and $1,500 per metric ton each year thereafter. The EPA had promulgated a final rule to implement the methane charges, but Congress disapproved it pursuant to the Congressional Review Act. The EPA reportedly is evaluating its options for complying with the statutory obligation to assess methane fees.

Our business could be adversely impacted by events beyond our control, including economic downturns, inflation, tariffs, increases in interest rates, natural disasters, public health crises such as pandemics, political crises, geopolitical events such as the conflict in Venezuela, Russia and Ukraine and the Middle East, or other macroeconomic conditions, which have in the past and may in the future result in adverse operating and financial results.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including, among other things, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, increases in inflation rates,rates and tariffs, higher interest rates and uncertainty about economic stability.

In May 2022, we entered into a joint venture agreement with Caracara to develop the AGI Facility in Winkler County, Texas. The joint venture, operating as WAT, also entered into a GTA with us for natural gas production from our Monument Draw area. Under the GTA, we were to pay a treating rate that varied based on volumes delivered to the AGI Facility and we had a minimum volume commitment of 20 MMcf per day. The GTA had a tiered-rate structure based on actual volumes delivered. In exchange for contributing to the joint venture a wellbore with an approved permit for the injection of acid gas and surface land, we retained a 5% equity interest in WAT, an unconsolidated subsidiary. Caracara provided the initial capital for the construction of the Facility, which iswas expected to have an initial capacity of approximately 30 MMcf per day, and a design capacity to treat up to 10% combined concentrations for H2S and CO2. We initially expected the AGI facilityFacility to be mechanically complete in early April 2023 and the facility to be in service in the second quarter of 2023. However, during commissioning and initial operations, it was determined that additional pressure was required to initiate gas injection. To correct this issue, a positive displacement pump was ordered and installed. The AGI Facility’s injection well also experienced pressure communication between the tubing and annular space after an injection procedure. WeWorkover operations commenced workover operations to remediate this issue.

During the third quarter of 2023, additional complications were encountered with the workover operation at the AGI Facility causing higher than expected costs. To fund this workover operation, we advanced capital contributions totaling approximately $18.5 million to date as of September 30, 2024 on behalf of our joint venture partner in WAT. Pursuant to the terms of the agreement governing the joint venture, we believebelieved that we havehad multiple remedies to recover such advance, including (1) declaring such payment a loan, which pursuant to the agreement would have an interest rate of the lesser of 15% or the maximum rate permitted by law, (2) recoupment from distributions from the joint venture and (3) reallocation of equity of the joint venture based on the relative level of total capital contributions by the parties after taking into account the advance. Pursuant to such, we initially recorded the advanced amount as a contract asset. During the fourth quarter of 2024, Caracara delivered a demand notice disputing our claims, indicating that the carrying value of the contract asset may not be recoverable and as a result, we recognized $18.5 million of impairment of charges to reduce the carrying value of the contract asset to zero at December 31, 2024.

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 available to common stockholders of $64.1$36.8 million for the year ended December 31, 20242025 and had negative working capital of $23.6$6.5 million as of December 31, 2024.2025. As of December 31, 2024,2025, we had $19.7$28.0 million of cash and cash equivalents, $63.0 million of Incremental Term Loansno borrowing capacity remaining under our 2024 Amended Term Loan Agreement (see Item 8. Consolidated Financial Statements and Supplementary Date – Note 7,6, Debt) and a total of $12.2$22.5 million in debt repayments due under our 2024 Term Loan Agreement through December 2025. During January 2025, in conjunction with the entry into the Incremental Term Loans, the required repayments under our 2024 Amended Term Loan Agreement increased to a total of $16.9 million due through December 31, 2025.2026. At December 31, 2024,2025, $30.0 million remained available for issuance on or before August 29,31, 20252026 under a support letter from the Investors. 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 - $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, $12.9 million of proceeds from the sale (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 2024 Amended Term Loan Agreement. 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 intend to use the net proceeds received from the offering for working capital and general corporate purposes.

Our 2024 Amended Term Loan Agreement contains certain restrictive covenants as well as a mandatory repayment schedule. We are required to make scheduled quarterly amortization payments in an aggregate principal amount equal to 2.50% of the aggregate principal amount of the total loans outstanding commencing with the fiscal quarter ending June 30, 2025.outstanding.

We continuedcontinue to execute on a plan to reduce operating and capital costs to improve cash flow, including the issuance of preferred stock totaling $134.6 million during the years ended December 31, 2024 and 2023 and entry into our 2024 Amended Term Loan Agreement.flow. We believe that, based upon our operational forecasts, cash and cash equivalents on handhand, 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 Item 8. Consolidated Financial Statements and Supplementary Date – Note 7,6 Debt for the next 12 months from the issuance of these 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 non-core 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.

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, and continue to, explore strategic transactions to address these concerns, while also looking at opportunities to significantly reduce expenses in the near term. In this regard, we have considered whether it is advisable to continue to bear the ongoing costs of the listing of our common stock on the NYSE American and of being a reporting Company under the Securities Exchange Act of 1934. We believe that we currently qualify to suspend these obligations should we elect to do so. While such a determination has not yet been made, we expect that the cost savings, particularly over the longer term, would be significant. Accordingly, we will continue to consider the matter while we simultaneously pursue strategic and financial alternatives that may render it unnecessary. 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.

Borrowings under the 2024 Amended Term Loan Agreement bearinitially bore 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 2024 Amended Term Loan Agreement) plus an applicable margin of 7.75%.

We are required to make scheduled quarterly amortization payments in an aggregate principal amount equal to 2.50% of the aggregate principal amount of the loans outstanding commencing with the fiscal quarter ending June 30, 2025. We may be required to make mandatory prepayments of the loans under the 2024 Amended Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales and with excess cash on hand in excess of certain maximum levels. We are requiredSubsequent to makethe scheduled quarterly amortization payments in an aggregate principal amount equal to 2.50%closing of the aggregateWest principalQuito amountDivestiture on February 24, 2026, we used $40.0 million of the loansnet outstandingproceeds commencingas withprepayment of the fiscalloan quarterper endingthe Juneterms 30,of 2025.the Third Amendment.

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 Under the 2024 Amended Term Loan Agreement, we are required to hedge approximately 85% to 50% of our anticipated oil and natural gas production, in varying percentages by year, on a rolling basis for the next four years. The 2024 Amended Term Loan Agreement also contains certain events of default, including non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy.

Operating Activities. Net cash flows provided by operating activities for the years ended December 31, 20242025 and 20232024 were $35.4$39.1 million and $17.6$35.4 million, respectively. Operating cash flows for the year ended December 31, 20242025 increased from the prior year primarily due to lower gathering and transportation expense, decreased interest expense associated with lower outstanding debt balance during the year, the inclusion of the merger termination payment of $10.0 million and changes in working capital. The increase in operating cash flows in 20242025 were partially offset by decreased oil and natural gas revenues as a result of lower realized commodity prices and lower production volumes than the comparable prior year period.

Financing Activities. Net cash flows used in financing activities for the year ended December 31, 2024 were $7.7 million compared to net cash flows provided by financing activities for the year ended December 31, 2023 of $59.1 million. During the year ended December 31, 2024, prior to the refinancing transaction, we made principal payments of $52.4 million under our 2021 Amended Term Loan Agreement. On December 26, 2024, we entered into the 2024 Term Loan Agreement, incurring $162.0 million in borrowings, which such proceeds were used to repay all amounts outstanding under the 2021 Amended Term Loan Agreement in the amount of $147.7 million. Additionally, we incurred $8.2 million of debt issuance costs related to the new credit agreement. We received $38.8 million in proceeds from the sales and issuance of preferred stock during the year ended December 31, 2024.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect our reported results of operations and the amount of reported assets, liabilities and proved oil and natural gas reserves. Some accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Actual results may differ from the estimates and assumptions used in the preparation of our consolidated financial statements. Described below are the significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under U.S. GAAP. We also describe the significant estimates and assumptions we make in applying these policies. We discussed the development, selection and disclosure of each of these with our audit committee. See Item 8. Consolidated Financial Statements and Supplementary Data—Note 1, “Financial Statement Presentation and Summary of Significant Events and Accounting Policies,” for a discussion of additional accounting policies and estimates made by management.

Operating Revenues. Oil, natural gas and NGLs revenues were $193.2$165.0 million and $218.5$193.2 million for the years ended December 31, 20242025 and 2023,2024, respectively. The decrease of $25.3$28.3 million in revenue is primarily attributable to a $7.6$19.6 million decrease resulting from lower average realized prices and aan $17.7$8.7 million decrease due to lower production volumes in 20242025 compared to 2023.2024. 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.

Production for the years ended December 31, 20242025 and 20232024 averaged 12,66712,096 Boe/d and 13,78412,667 Boe/d, respectively. Production is lower in 20242025 compared with 20232024 in total due largely to the timing of capital expenditures spent to bring new wells online and natural production declines on our existing producing wells.wells and curtailed production resulting from the AGI Facility complications. In 2024,2025, we put online 6.0 gross (5.6 net) operated wells while in 2024 we put online 4.0 gross (3.88 net) operated wells while in 2023 we put online 3.0 gross (3.00 net) operated wells. However, two of the four operated wells placed online in 2024 were put online during the fourth quarter. As such, these wells had minimal impact on 2024 production.

Workover and Other Expenses. Workover and other expenses were $5.2$6.5 million and $7.2$5.2 million for the years ended December 31, 20242025 and 2023,2024, respectively. On a per unit basis, workover and other expenses were $1.12$1.46 per Boe and $1.42$1.12 per Boe for the years ended December 31, 20242025 and 2023,2024, respectively. The decreasedincreased workover and other expenses in 2025 compared to 2024 relate to fewer significantincreased workover projectsactivity undertakenduring 2025 and includes costs related to a non-recurring well cleanout program that meaningfully increased production on wells in which workovers were completed combined with a higher volume of electric submersible pump (or “ESP”) maintenance during the current year compared to 2023.year.

Taxes Other than Income. Taxes other than income were $11.2$9.8 million and $11.9$11.2 million for the years ended December 31, 20242025 and 2023,2024, respectively. Most production taxes are based on production volumes and realized prices at the wellhead. As revenues or volumes from oil and natural gas sales increase or decrease, production taxes on these sales also increase or decrease, as such, taxes other than income decreased due to the decrease in production volumes and revenues. On a per unit basis, taxes other than income were $2.42$2.23 per Boe and $2.37$2.42 per Boe for the years ended December 31, 20242025 and 2023,2024, respectively.

The following discussion is intended to assist in understanding our results of operations for the three and six months ended MarchJune 31,30, 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 on Form 10-Q 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 on Form 10-K for the fiscal year ended December 31, 2025. The results presented in this FormQuarterly 10-QReport 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.”

On May 5, 2026, we entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”) (the “Sales Agreement”) 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 AgreementProgram”). For the period May 6, 2026 tothrough MayJune 8,30, 2026, we sold and issued 550,01317,396,701 shares of our common stock under the ATM AgreementProgram for net proceeds of $1.6$30.3 million.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.

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 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 MarchJune 31,30, 2026, $7.9$5.2 million of Reinvestment Proceeds remained and was recorded as restricted cash.

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 $56.5$41.0 million for the threesix months ended MarchJune 31,30, 2026 and had negative working capital of $9.1$58.4 million as of MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, we had $46.4$83.1 million of cash and cash equivalents, no$162.5 million of borrowings outstanding and secured access to up to $175.0 million of additional borrowingdiscretionary delayed draw capacity to fund future growth, available on an uncommitted basis under the 2024 Amended2026 Term Loan Agreement (as defined in Note 5, “Debt” to the unaudited condensed consolidated financial statements) and ano total of $22.5 million inrequired debt repayments due throughuntil MarchJune 30, 2027 under our 2024 Amended2026 Term Loan Agreement. As of March 31, 2026, $30.0 million remained available for issuance on or before August 31, 2026 under a support letter from our investors. 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,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 2024 Amended2026 Term Loan Agreement. At MarchJune 31,30, 2026, $7.9$5.2 million of Reinvestment Proceeds remained and wassuch 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. We intend to use the net proceeds received from the offering for working capital and general corporate purposes.

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’ equitydeficit 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’ equitydeficit of $(1.8)$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 continuingoperations 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.

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 2024 Amended2026 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 Amended2026 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 2024 Amended2026 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 2024 Amended2026 Term Loan Agreement.

Operating Activities. Net cash flows provided by operating activities for the threesix months ended MarchJune 31,30, 2026 and 2025, were $2.1$10.8 million and $12.7$22.9 million, respectively. Items impacting the decrease in operating cash flows were primarily driven by changes in working capital primarily related to unrealized losses (gains) on derivative contracts for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025.

Investing Activities. Net cash flows provided by investing activities for the threesix months ended MarchJune 31,30, 2026 were approximately $56.4$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 threesix months ended MarchJune 31,30, 2025 of $20.1$53.5 million primarily for drilling and completion activities.

During the threesix months ended MarchJune 31,30, 2026, we spent $3.6$7.8 million on oil and natural gas capital expenditures, of which $2.6$4.0 million related to drilling and completion costs and $0.8$3.2 million related to the development of our treating equipment and gathering support infrastructure.

During the threesix months ended MarchJune 31,30, 2025, we spent $19.8$53.1 million on oil and natural gas capital expenditures, of which $17.4$47.2 million related to drilling and completion costs and $2.1$5.0 million related to the development of our treating equipment and gathering support infrastructure. In the first threesix 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, and did not complete and put online any operated wells.

Financing Activities. Net cash flows used in financing activities for the threesix months ended MarchJune 31,30, 2026 were $32.3$2.7 million compared to net cash flows provided by financing activities for the threesix months ended MarchJune 31,30, 2025 of $61.2$55.4 million. During the threesix months ended MarchJune 31,30, 2026, we repaid $45.6 million under our 2024 Amended Term Loan Agreement and issued $14.0$43.9 million in common stock.stock, net of issuance costs. During the threesix months ended MarchJune 31,30, 2025, we received net proceeds of $61.3$61.1 million from the incurrence of the Incremental Term Loans on January 9, 2025.

Operating Revenues. Oil, natural gas and NGLs revenues were $39.1$48.0 million and $47.4$42.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decreaseincrease in revenues is primarily attributable to aan decreaseincrease in average realized prices for oil, natural gas and NGLs.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 quarterthree months ended MarchJune 31,30, 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) decreasedincreased approximately $9.73$6.48 per Boe for three months ended MarchJune 31,30, 2026 when compared with the same period in 2025. Production averaged 12,57812,407 Boe per day for the three months ended MarchJune 31,30, 2026 compared to 11,90012,989 Boe per day for the three months ended MarchJune 31, 2025 due to more consistent and reliable processing during the first quarter of 2026 compared to the first quarter of30, 2025. West Quito area production averaged approximately 1,045 Boe per day of the Company’s total production for the quarter ended March 31, 2026 compared to 1,751 Boe per day for the quarter ended March 31, 2025. We completed the West Quito Divestiture on February 24, 2026.

Lease Operating Expenses. Lease operating expenses were $10.1$9.2 million and $10.4$10.7 million for the three months ended MarchJune 31,30, 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 $8.92$8.14 per Boe and $9.67$9.03 per Boe for the three months ended MarchJune 31,30, 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 Boeunit basis for the three and six months ended MarchJune 31,30, 2026 compared to the samethree periodand ofsix months ended June 30, 2025 is primarily a result of increasedlower averagemaintenance, dailypower, productionand volumes.chemical costs.

Workover and Other Expenses. Workover and other expenses were $1.0$0.6 million and $1.4$2.3 million for the three months ended MarchJune 31,30, 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 $0.90$0.55 per Boe and $1.34$1.95 per Boe for the three months ended MarchJune 31,30, 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 MarchJune 31,30, 2026 compared to the samethree periodand insix months ended June 30, 2025 is the result of less workover activity during the firstthree quarterand ofsix 2026.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 $2.3$3.0 million and $2.8$2.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.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 $2.05$2.64 per Boe and $2.61$2.13 per Boe for the three months ended MarchJune 31,30, 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 $11.3$12.3 million and $12.0$11.0 million for the three months ended MarchJune 31,30, 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 $9.94$10.87 per Boe and $11.20$9.27 per Boe for the three months ended MarchJune 31,30, 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 decreaseincrease in gathering and other expenses per Boe for the three and six months ended MarchJune 31,30, 2026 compared to the samethree periodand ofsix months ended June 30, 2025 is primarily related to realized savings from capital project returns and more reliablegreater 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 expenseexpense, excluding stock-based compensation, was $4.3$3.6 million and $4.4$2.6 million for the three months ended MarchJune 31,30, 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 $3.76$3.23 per Boe and $4.08$2.17 per Boe for the three months ended MarchJune 31,30, 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 decreaseincrease in general and administrative expense per Boe for the three and six months ended MarchJune 31,30, 2026 compared with the same prior year periods is primarily due to increasedhigher averageprofessional dailyfees production.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 expense was $12.1$12.0 million and $12.7$13.6 million for the three months ended MarchJune 31,30, 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 $10.68$10.62 per Boe and $11.83$11.47 per Boe for the three months ended MarchJune 31,30, 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) gain 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 MarchJune 31,30, 2026, we recorded a net derivative lossgain of $48.0$13.1 million ($47.0$20.9 million net unrealized lossgain on unsettled contracts andoffset by a $1.0$7.8 million net realized loss on settled contracts). For the three months ended MarchJune 31,30, 2025, we recorded a net derivative gain of $9.3$11.5 million ($11.8$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 $2.5net 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 MarchJune 31,30, 2026, we had a $9.4$8.0 million derivative asset ($7.4$4.2 million current) and a $35.2$12.9 million derivative liability ($24.6$6.7 million current).

Interest Expense and Other. Interest expense and other totaled $5.5$4.3 million and $6.7$6.6 million for the three months ended MarchJune 31,30, 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 11.57%11.59% and 12.21%11.58% for the three and six months ended MarchJune 31,30, 20262026, respectively. Comparatively, our weighted average interest rate was approximately 12.20% for the three and 2025,six respectively.months ended June 30, 2025. For the secondthird quarter of 2026, our interest rate will be approximately 11.60%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 quartersix months ended MarchJune 31,30, 2026 to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment.prepayment under our 2024 Amended Term Loan Agreement.