Battalion Oil — Business Overview

What does Battalion Oil do?

Battalion Oil is a small independent oil and gas producer focused entirely on a single region of West Texas. The company acquires, explores for, and produces crude oil, natural gas, and natural gas liquids (NGLs, which are liquid hydrocarbons extracted from natural gas streams, like propane and butane) from onshore properties in the Delaware Basin, part of the broader Permian Basin. As of December 31, 2025, Battalion held roughly 39,968 net acres across Pecos, Reeves, Ward, and Winkler Counties in Texas, with 82 operated wells and average daily production of 12,096 barrels of oil equivalent per day (Boe/d). The company operates as a single business segment with no separate divisions.

The company is in an active restructuring of its asset base. In late 2025 and early 2026, Battalion sold its West Quito Draw properties in Ward County for approximately $60.1 million (the West Quito Divestiture), which represented about 15% of annual production and 10% of proved reserves. It simultaneously acquired 7,090 adjacent net acres in an all-stock deal and raised $15 million in a private equity placement — moves aimed at consolidating around its core Monument Draw and Hackberry areas while paying down debt.

How does Battalion Oil make money?

Battalion earns revenue by selling crude oil, natural gas, and NGLs from its producing wells. For the year ended December 31, 2025, total production was approximately 4,415 thousand Boe. Crude oil is by far the most important commodity, realizing an average price of $63.51 per barrel (before hedging). Natural gas prices were extremely low — just $0.49 per Mcf on average in 2025 — and were actually negative in 2024 due to processing costs exceeding market prices. NGLs averaged $19.90 per barrel. On a blended basis, the company received $37.36 per Boe before hedging and $40.95 per Boe after accounting for settled derivative contracts (financial instruments that lock in future prices to reduce volatility).

Customer concentration is a meaningful risk. Two buyers — Western Refining Company L.P. and Sunoco Inc. — together accounted for 86% of total sales in 2025. Losing either relationship would have a severe impact on revenue. The company is required under its loan agreement to hedge 85% to 50% of anticipated oil and gas production on a rolling four-year basis, which provides some floor on realized prices but also caps upside when commodity prices rise.

Total average production costs were $23.75 per Boe in 2025, broken down roughly as follows:

What market does Battalion Oil operate in?

Battalion operates in the U.S. onshore oil and gas exploration and production (E&P) industry, specifically within the Delaware Basin, one of the most active and well-studied sub-basins of the Permian Basin. The Permian is widely considered the most prolific oil-producing region in the United States. The company targets the Wolfcamp and Bone Spring formations, which are dense source-rock formations known for high oil content and repeatable well performance.

The oil and gas industry is cyclical and heavily influenced by commodity prices. Battalion's average realized oil price dropped from $73.89/barrel in 2024 to $63.51/barrel in 2025, directly compressing margins and causing negative reserve revisions. Longer term, the industry faces structural headwinds from the global energy transition, increased regulatory scrutiny of methane emissions and hydraulic fracturing (the high-pressure fluid injection technique used to release oil and gas from rock), and potential carbon-related costs. In the near term, however, the Trump administration's stated preference for domestic energy development may ease some regulatory burdens.

Who are Battalion Oil's main competitors?

The Delaware Basin is crowded with competitors of all sizes, and Battalion is a very small player. The company competes against major integrated oil companies, large independent E&P companies, and other small independents for acreage, drilling services, pipeline capacity, and skilled personnel. The filing explicitly states that many competitors have "greater financial and other resources." Named competitors are not individually listed in the filing, but well-known large operators in the Delaware Basin include companies such as Pioneer Natural Resources (now part of ExxonMobil), Diamondback Energy, Coterra Energy, and Occidental Petroleum.

Battalion's claimed competitive advantages are operational control and local expertise. The company operates 99.8% of its proved reserves, giving it direct control over drilling timing and capital spending. Management highlights its geologic and engineering experience in the Permian Basin as an advantage in identifying acquisition targets. With only 40 full-time employees and around 59.7 MMBoe of total proved reserves (valued at a PV-10 — the present value of future net cash flows discounted at 10% — of approximately $351.7 million), Battalion is a micro-cap operator in a basin dominated by companies with far greater scale.

Where does Battalion Oil operate?

Battalion operates exclusively in the United States, within a concentrated area of West Texas. All 39,968 net acres are located in four Texas counties: Pecos, Reeves, Ward, and Winkler — all within the Delaware Basin portion of the Permian Basin. There is no international exposure whatsoever. The company both produces and sells within this geography, with its corporate headquarters in Houston, Texas.

The geographic concentration cuts both ways. On one hand, it allows deep operational focus and expertise in a well-understood geology. On the other hand, it creates significant single-region risk — including exposure to local pipeline and processing bottlenecks (as demonstrated by the failure of the AGI Facility, a joint-venture gas treatment plant that abruptly ceased operations in August 2025, temporarily shutting in a portion of Monument Draw production). Battalion has since secured a new natural gas processing agreement with a large publicly traded midstream provider.