Good day and welcome to the Battalion Oil Q1 2020 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to John-Davis Rutkauskas. Please go ahead, sir.

Good morning. I'm joined by a few of my colleagues today, who I'd like to introduce. Battalion's Chief Executive Officer, Richard Little; our Chief Financial Officer, Ragan Altizer; and our Chief Operating Officer, Daniel Rohling. This conference call contains forward-looking statements. For a detailed description of our disclaimer, see our earnings release issued yesterday and posted on our website. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement released yesterday. We have also published an investor presentation, which may be found on our website and will be referenced during this webcast. Now, I'll turn it over to our team to present a few scripted remarks followed by Q&A. Rich?

Thank you, John-Davis. I'd like to welcome listeners to Battalion’s first quarter 2020 earnings call and our second investor update as Battalion Oil Corporation. During last quarter's earnings call, we introduced our management team and presented our approach to oil and gas development. You heard me emphasize capital discipline as well as integrity, doing what we say we're going to do. We had already planned to suspend our capital program. And as the market continued to decline, the decisions we had to make in Q1 required agility and an even greater level of discipline. I'm proud of our team's ability to drive down costs and for their quick response time to thoughtfully be in production across all of our fields. In Q1, we continued to strengthen our three year hedge book with nearly a 100% of our PDP volume hedged through 2021 with an all-in price of over $48.50 when taking into account fixed price basis and roll for the entire two year period. And we have 75% of our production hedged out into year three with an all-in price of $53 a barrel in 2022. Ragan will touch on more of the specifics later in the presentation. We were also able to work with BMO during our spring redetermination to achieve a modest reduction in our borrowing base. We're now at a level that I'm comfortable operating within until our next redetermination in November. I want to thank BMO for their transparency and their vote of confidence in our business plan and this team's ability to deliver. We remain focused on creating value levers in our business such as our AGI well we mentioned on our last call. With the permit now in hand and the well already drilled, we've created more options to further drive down operating costs…

Thanks, Rich, and good morning, everyone. As Rich highlighted, we had a busy quarter delivering efficiency gains and savings across our operations. Most importantly, we did so safely in challenging times. I'd like to take a moment to recognize the crews and frontline leadership that has continued to fuel our nation even through this downturn because it'd be easy to lose focus with everything going on in the industry and the world right now. Instead of that, on Slide 4 you can see the continued improvements in our drilling and completions programs. We drilled another record well in both cost and days on the [Eureka] pad. In true Battalion fashion, that well’s record didn't stand along as you can see from the dotted red lines representing our Q2 wells on the graph on the right. Average cost came in just over $200 a foot which represented a 12% drop versus the fourth quarter. As Rich said, we laid the rig down after finishing up our last two well pad and we want to thank the crews and leadership from Precision. We went two years without a OSHA recordable and have drilled some of the most efficient wells in the basin together. Also in the quarter we wrapped up our initial seven-well frac campaign ahead of schedule and under budget while pumping larger jobs and we're excited about the early performance we've seen. We've postponed our next fracs but have four DUCs waiting on us in Monument Draw that are offsetting our existing pipelines and facilities. So there'll be some of the most efficient capital we'll spend when the time is right. Slide 5 shows our significant progress in LOE and workover expense. In the first quarter we aligned our operations with a new set of service partners that had initial…

Thanks, Danny. I'll begin with a few highlights from Q1 and then address our liquidity position. Our daily net production for the quarter was 18,791 Boe per day, of which oil represented 10,297 barrels per day. Same quarter last year was at 10,233 barrels of oil per day while Q4 of last year was 11,489 barrels of oil per day. We exited a quarter with increasing oil production at about 11,000 barrels per day. The company earned $47.4 million of total revenue for the quarter, of which 88% was from oil sales excluding the impact of hedge settlements. We realized 98% of the NYMEX WTI during the first quarter and realized the gain on crude oil derivative contracts of $5.1 million. Net income for the quarter was $114.5 million resulting in earnings per basic and diluted share of $7.07. Adjusted EBITDA for the quarter was $23.5 million compared to $12.7 million from the same quarter last year, primarily the result of sharply declining operating [TTO] and G&A cost. Our adjusted EBITDA reconciliation table can be found in our earnings announcement. Total operating costs were $18.20 per Boe compared to $25.49 per Boe for the first quarter of 2019. This was comprised in part of adjusted G&A of a $1.50 per Boe in the first quarter of 2020 compared to $5.99 per Boe in the first quarter of 2019 as well as lease operating and workover expense for this quarter of $8.07 per Boe compared to $10.94 per Boe in the same quarter last year. For additional financial metrics and adjusted financial data refer to the selected operating data table in our earnings announcement. During the first quarter of 2020 we incurred capital expenditures of $65.1 million. These expenditures included spudding three new wells and completing seven wells, securing surface acreage…

Thanks Ragan. I share that same confidence with you. We're certainly far more accustomed to bring in new wells online than we are to strategically shutting in over half of our production. Nevertheless, while these times are challenging, I do reinforce the notion of sound business principles such as long-term planning, remain the best way to make what could be difficult near term decisions. Our team has done a commendable job of preparing us for circumstances such as the one we find ourselves in, building long-term relationships with key stakeholders such as mineral owners and vendors for actively creating optionality in our development strategies and simply treating each other with respect. I'm hopeful that the market will turn around before the end of the year but regardless we'll continue to look for more ways to enhance our competitive advantage and further strengthen our balance sheet. Thank you for your time and interest in Battalion Oil Corporation. With that, we'll now open the call up to questions.

[Operator Instructions]. We'll take our first question today from Noel Parks with Coker & Palmer.

I just had a few things I wanted to run by you. With the shut-ins, do you have an idea of roughly where LOE might end up for the period that you have shut-in your either percentage or sort of unit figure for what that might look like?

I think you're asking about a unit cost, Noel, and the problem with giving unit cost is in the denominator we're looking at the barrels per day. And so we don't know yet how long we'll be shut-in for the quarter. And so I can tell you that we've shut-in from May. We'll assess the market in June and again in July. And so I can't give guidance -- and I think you're asking for second quarter because you asked the shut in period, so shut-in May. So given guidance on an LOE unit cost would be difficult because we're not aware of what our production is going to be for the quarter, but we'll continue to assess the market, and check things to make the right call. So, sorry, I can't give you a unit cost because I don't know what the production is going to be.

No problem. Fair enough. And also on the cost side, just looking at G&A, I noticed that the absolute dollar level of quarter was similar to what it was a year ago before the filing. And I'm just wondering, going forward, is there anything much less -- much left as far as restructuring costs either that you expect will be reported separately or items that are not going to fold into recurring G&A?

We still have a little bit. I think one of the things we did and we mentioned on the last call, Noel, was that we consolidated the offices and so we shut down the Denver office. There's nobody working there. We are -- we still need to get out from under that lease. And so we're working those agreements today. And so I think short of that, that might be the last thing we've got to deal with on the restructuring cost.

Okay, great. And just looking at the larger environment in basin. Do you have any thoughts on what consolidation might look like either for assets on the market that might be attractive to you? And is there any thoughts you had on that. And I guess I'd be curious about, what would be the most attractive trait that would help you decide one way or the other about maybe looking at other properties?

Sure, Noel, I think that's an easy one right now. When you look across the landscape, there's not a lot of value being given for undeveloped. So we're being realistic about deals that we would look at, it's probably going to be PDP heavy, but we'd also want to be able to continue our efficiencies, which mean that we're going to be looking into Permian Basin because that's where we operate. So we're going to be looking to that as well. And of course, we have done a good job of de-levering our balance sheet. We've got a strong balance sheet and we're not looking at doing a leveraging transaction. So, those are the kind of deals that we'd be looking at doing for us.

Okay, great. And just last one for me. When you've been looking at just planning for the rest of the year sort of slow down we have now and hopefully some recovery later, do you have any thoughts about NGL markets and any -- I'm not so familiar with what's available for those products as far as hedging. But is it down on the horizon looking at maybe getting back into hedging NGLs?

No, I'd be honest with you. I think Ragan even alluded in his comments that we're looking at 88% of our revenue coming from oil. We're going to be looking forward improvement in NGLs and gas pricing before we’re going to look at doing any kind of hedging for those products. We're mainly focused on what drives our business and that's oil.

Next we will hear from Emily Holden with The Guardian.

I wanted to ask about a reference that you had in an SEC filing to a PPP loan. It seems to say that you have taken one that doesn't disclose the amount. Can you provide more information about that?

Yes. Sure. We didn't disclose your amount but we took about $2.2 million of PPP loan. We think that was the right thing to do. We felt like the PPP loans were set up for businesses our size and it helped us to further our operations. So yes, we did it.

That will conclude today's question-and-answer session. I'll now turn the conference over to Richard Little for any additional or closing remarks.

Okay, great. Thanks. I want to thank everybody on the call for your interest in Battalion Oil. I hope on this spell we were able to convey to you that we will continue to be opportunistic and we're going to find ways to create value while at the same time we're going to protect our business for our stakeholders. So while we recognize we're in better shape than most in the downturn, it's not lost on us that there's a lot of workers out there in our industry facing an uncertain future and our hearts go out to them. This pandemic has definitely lasted a lot longer than what we were expecting, but we'll continue to put the health and safety of our workforce and our families first. Like everyone else, we're not sure when the market will turnaround or how quickly we'll recover, but I assure you that we'll keep our eyes on the ball and we'll prepare ourselves and this company for responsible growth when the opportunity does present itself. So again, thank you for your time today.

And that will conclude today's conference. Thank you for your participation. You may now disconnect.