What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-13 compared with 2025-08-14 · 114 added, 79 removed, 146 unchanged (57% of the section changed)

MANAGEMENT’S DISCUSSION A ND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding our results of operations for the three and six months ended June 30, 2025 and 2024 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, 2024.

The following discussion is intended to assist in understanding our results of operations for the three and nine months ended September 30, 2025 and 2024 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, 2024.

The results presented in this Form 10-Q are not necessarily indicative of future operating results.

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all outstanding indebtedness under the 2021 Amended Term Loan Agreement in an aggregate amount of approximately $152.1 million, including accrued and unpaid interest, and to pay related fees and expenses related to the new credit agreement.

Borrowings under the 2024 Amended Term Loan Agreement bear interest at a rate per annum equal to a forward-looking term rate based on the 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%.

The 2024 Amended Term Loan agreement contains certain financial covenants (as defined in the 2024 Term Loan Agreement), including maintenance of the following ratios.

● Asset Coverage Ratio not to fall below 1.70x as of March 31, 2025 through and including June 30, 2025, 1.85x as of September 30, 2025 through and including December 31, 2025 and 2.00x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter;

● Total Net Leverage Ratio not to exceed 2.75x as of March 31, 2025 through and including June 30, 2025 and 2.50x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter;

Borrowings under the 2024 Amended Term Loan Agreement initially bore interest at a rate per annum equal to a forward-looking term rate based on the 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%.

On November 12, 2025, we entered into the Second Amendment to the Second Amended and Restated Senior Secured Credit Agreement (the “Second Amendment”), effective November 12, 2025, which amended the Applicable Margin (as defined in the 2024 Amended Term Loan Agreement) to be the rate per annum set forth below under the caption SOFR Loans Spread or ABR Loans Spread, as the case may be, based on the Total Net Leverage Ratio;

provided, that until the Adjustment Date (the date of delivery of financial statements pursuant to the 2024 Amended Term Loan Agreement) following the Second Amendment effective date, the Applicable Margin shall be the rate per annum set forth below in Category 1:

Total Net Leverage Ratio

SOFR Loans Spread

ABR Loans Spread

≤ 2.50 to 1.00

> 2.50 to 1.00 ≤ 3.00 to 1.00

> 3.00 to 1.00 ≤ 3.25 to 1.00

> 3.25 to 1.00

The Applicable Margin shall be adjusted quarterly on a prospective basis on each Adjustment Date based upon the Total Net Leverage Ratio in accordance with the table above.

The Second Amendment provides that the Borrower shall not permit the Total Net Leverage Ratio, as of the last day of each fiscal quarter (commencing with the fiscal quarter ending March 31, 2025), to be greater than the levels set forth in the following table for the applicable fiscal quarter:

Fiscal Quarter

Total Net Leverage Ratio

Fiscal quarters ending March 31, 2025 through and including June 30, 2025

Fiscal quarter ending September 30, 2025

Fiscal quarter ending December 31, 2025

Fiscal quarter ending March 31, 2026

Fiscal quarter ending June 30, 2026

Fiscal quarter ending September 30, 2026

Fiscal quarter ending December 31, 2026

Fiscal quarter ending March 31, 2027

Fiscal quarter ending June 30, 2027

Fiscal quarter ending September 30, 2027 and each fiscal quarter thereafter

Additionally, the Second Amendment provides that the Borrower shall not permit the Asset Coverage Ratio, as of the last day of any fiscal quarter (commencing with the fiscal quarter ending March 31, 2025) to be less than the applicable level set forth in the following table for the applicable fiscal quarter:

Fiscal Quarter

Asset Coverage Ratio

Fiscal quarters ending March 31, 2025 through and including December 31, 2026

Each fiscal quarter thereafter

The 2024 Amended Term Loan agreement contains certain financial covenants (as defined in the 2024 Term Loan Agreement and as amended in the Second Amendment), including maintenance of the following ratios.

● Asset Coverage Ratio not to fall below 1.85x as of September 30, 2025 through and including December 31, 2026 and 2.00x for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter;

● Total Net Leverage Ratio not to exceed 2.50x as of September 30, 2025 and not to exceed the levels set forth in the table above for each fiscal quarter thereafter, determined as of the last day of each fiscal quarter;

● Current Ratio not to fall below 1.00x, determined on the last day of each calendar month commencing with the calendar month ending March 31, 2025;

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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 on the Initial Closing Date plus the Incremental Term Loans, commencing with the fiscal quarter ending June 30, 2025.

Under the 2024 Amended Term Loan Agreement, we must make scheduled amortization payments in the aggregate amount of $16.9 million and $22.5 million in 2025 and 2026, respectively.

During the quarter ended June 30, 2025, we made a scheduled amortization payment in the amount of $5.6 million.

Under the 2024 Amended Term Loan Agreement, we must make scheduled amortization payments in the aggregate amount of $5.6 million for the remainder of 2025 and $22.5 million in 2026.

During the quarter and nine months ended September 30, 2025, we made scheduled amortization payments in the amount of $5.6 million and $11.3 million, respectively.

We recognized a loss on extinguishment of debt for the year ended December 31, 2024 in the amount of $7.5 million resulting from the credit agreement refinancing on December 26, 2024 which included a $3.6 million non-cash write-off of deferred financing costs, original issue discounts and embedded derivatives associated with the extinguished debt and $3.9 million in fees and debt issuance costs paid for the new debt.

Additionally, the Company deferred $4.3 million of original issue discount and financing costs on the unaudited condensed consolidated balance sheet at December 31, 2024 in conjunction with entry into the 2024 Term Loan Agreement and deferred an additional $1.8 million of original issue discount and financing costs on the unaudited condensed consolidated balance sheet at June 30, 2025 in conjunction with the issuance of the Incremental Term Loans in January 2025.

Additionally, the Company deferred $4.3 million of original issue discount and financing costs on the unaudited condensed consolidated balance sheet at December 31, 2024 in conjunction with entry into the 2024 Term Loan Agreement and deferred an additional $1.8 million of original issue discount and financing costs on the unaudited condensed consolidated balance sheet in conjunction with the issuance of the Incremental Term Loans in January 2025.

H 2 S Treating Joint Venture.

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On August 11, 2025, we received notice from WAT that it decided to cease taking deliveries of gas and to cease operations effective immediately.

In response, we are temporarily shutting in a portion of our Monument Draw field production.

The cessation of operations is expected to materially increase processing costs and decrease production and revenue projections in the near-term.

Management is actively working to identify and execute on a plan for alternative gas processing.

In addition to general facility downtime, the AGI Facility had continued to experience interruptions in processing due to the completion of improvement and maintenance projects, including pump and other facility equipment replacement.

The continued processing delays and interruptions resulted in higher processing fees than forecasted as we pay higher processing rates with other service providers.

In response, we temporarily shut-in a portion of our Monument Draw field production.

As of September 30, 2025 and as of the date of this filing, the WAT facility remains out of service.

The cessation of operations has increased processing costs as we pay higher processing rates with other service providers and resulted in decreased production and revenue for the quarter ended September 30, 2025.

Management continues to actively work to identify and execute on a plan for alternative gas processing.

Under a gas treating agreement (“GTA”) with the AGI Facility, we paid a treating rate that varied based on volumes delivered to the AGI Facility and had a minimum volume commitment of 20 MMcf per day.

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Sufficient levels of available cash are required to fund capital expenditures necessary to offset inherent declines in our production and proven reserves.

We generated net income of $10.8 million for the six months ended June 30, 2025 and had negative working capital of $6.6 million at June 30, 2025.

At June 30, 2025, we had $44.6 million of cash and cash equivalents, no additional borrowing capacity under the 2024 Amended Term Loan Agreement (as defined in Note 5, “ Debt ” to the unaudited condensed consolidated financial statements) and a total of $22.5 million in debt repayments due through June 2026 under our 2024 Amended Term Loan Agreement .

At June 30, 2025, $30.0 million remained available for issuance on or before August 29, 2025 under a support letter from our investors.

We generated net income of $10.1 million for the nine months ended September 30, 2025 and had negative working capital of $3.9 million at September 30, 2025.

At September 30, 2025, we had $50.5 million of cash and cash equivalents, no additional borrowing capacity under the 2024 Amended Term Loan Agreement (as defined in

Note 5, “ Debt ” to the unaudited condensed consolidated financial statements) and a total of $22.5 million in debt repayments due through September 2026 under our 2024 Amended Term Loan Agreement .

At September 30, 2025, $30.0 million remained available for issuance on or before August 31, 2026 under a support letter from our investors.

We continue to execute on a plan to reduce operating and capital costs to improve cash flows.

Changes to our current business estimates and forecasts, based primarily on recent commodity prices and modifications to our planned drilling schedule to achieve better overall well economics, indicate that we will require additional liquidity to meet our debt covenant requirements for the next 12 months from the issuance of these unaudited condensed consolidated financial statements.

In response to these events and conditions, the Company has continued to execute on a plan to reduce operating and capital costs to improve cash flows.

The Company also has obtained a support letter from its three largest current related party investors to purchase additional preferred equity securities in an amount up to $30.0 million on or before August 31, 2026.

We believe that, based upon our operational forecasts, cash and cash equivalents on hand, cost reduction measures, and the sale of $30 million in additional preferred equity, it is probable that we will have sufficient liquidity to maintain compliance with our future debt covenants as described in Note 5, “ Debt, ” for the next 12 months from the issuance of these unaudited condensed consolidated financial statements.

Changes to our current business estimates and forecasts, based primarily on recent commodity prices and modifications to our planned drilling schedule to achieve better overall well economics, indicate that we are at risk of potential non-compliance with our debt covenant requirements for the next 12 months from the issuance of these unaudited condensed consolidated financial statements.

In response to these events and conditions, we have continued to execute on a plan to reduce operating and capital costs to improve cash flows.

The Company also continues to have a support letter from its three largest current related party investors to purchase additional preferred equity securities in an amount up to $30.0 million on or before August 31, 2026.

We believe that, based upon our operational forecasts, cash and cash equivalents on hand, cost reduction measures, and the support letter for the sale of $30.0 million in additional preferred equity, it is probable that we will have sufficient liquidity to maintain compliance with our future debt covenants as described in Note 5, “ Debt, ” for the next 12 months from the issuance of these unaudited condensed consolidated financial statements.

We will, however, continue to consider alternative liquidity sources which could include 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.

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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”).

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’ equity 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.

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Our noncompliance resulted from our reporting stockholders’ equity of $(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 continue to report negative stockholders’ equity at June 30, 2025 of $(5.2) million and additional losses from continuing operations.

We continue to report negative stockholders’ equity at September 30, 2025 of $(20.3) million and additional losses from continuing operations.

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 submission continues to be under review 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.

Such Plan was submitted by the required deadline and our Plan was accepted by the NYSE.

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.

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Debt Obligations.

Under our 2024 Amended Term Loan, 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 and such payments total $22.5 million through June 2026.

We must make a total of $22.5 million in debt repayments through September 2026 under our 2024 Amended 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 Amended Term Loan Agreement.

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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.

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.

Net increase in cash and cash equivalents is summarized as follows (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Cash flows provided by operating activities

Cash flows used in investing activities

Cash flows provided by financing activities

Cash flows provided by (used in) financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating Activities .

Net cash flows provided by operating activities for the six months ended June 30, 2025 and 2024, were $22.9 million and $33.7 million, respectively.

Items impacting the decrease in operating cash flows were primarily driven by lower operating revenues coupled with changes in working capital for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Net cash flows provided by operating activities for the nine months ended September 30, 2025 and 2024, were $50.9 million and $28.7 million, respectively.

Items impacting the increase in operating cash flows were primarily driven by changes in working capital for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Investing Activities.

Net cash flows used in investing activities for the six months ended June 30, 2025 and 2024 were approximately $53.5 million and $45.7 million, respectively, primarily for drilling and completion activities.

During the six months ended June 30, 2025, we spent $53.1 million on oil and natural gas capital expenditures, of which $47.2 million related to drilling and completion costs and $5.0 million related to the development of our treating equipment and gathering support infrastructure.

In the first six 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.

During the six months ended June 30, 2024, we spent $44.8 million on oil and natural gas capital expenditures, of which $42.2 million related to drilling and completion costs and $2.0 million related to the development of our treating equipment and gathering support infrastructure.

Net cash flows used in investing activities for the nine months ended September 30, 2025 and 2024 were approximately $70.0 million and $52.6 million, respectively, primarily for drilling and completion activities.

During the nine months ended September 30, 2025, we spent $69.6 million on oil and natural gas capital expenditures, of which $59.9 million related to drilling and completion costs and $8.5 million related to the development of our treating equipment and gathering support infrastructure.

In the first nine months of 2025, we ran one operated rig in the Delaware Basin, drilled, cased, completed and put online six gross (5.5 net) operated wells.

During the nine months ended September 30, 2024, we spent $51.8 million on oil and natural gas capital expenditures, of which $46.8 million related to drilling and completion costs and $4.1 million related to the development of our treating equipment and gathering support infrastructure.

During the first half of 2024, our cash capital expenditures included amounts related to the drilling and completion activities that occurred in the fourth quarter of 2023.

In the first six months of 2024, we ran one operated rig in the Delaware Basin, drilled and cased four gross (3.73 net), and completed and put online two gross (1.925 net) operated wells.

In the first nine months of 2024, we ran one 1 operated rig in the Delaware Basin, drilled and cased four 4 gross (3.73 net), and completed and put online two 2 gross (1.925 net) operated wells.

We also received $7.0 million in proceeds from the sale of oil and natural gas assets that were deemed to be unnecessary for future operations.

Financing Activities.

Net cash flows provided by financing activities for the six months ended June 30, 2025 and 2024 were $55.5 million and $8.9 million, respectively.

During the six months ended June 30, 2025, we received net proceeds of $61.1 million from the incurrence of the Incremental Term Loans and repaid $5.6 million under our 2024 Amended Term Loan Agreement.

During the six months ended June 30, 2024, we received $38.8 million from our preferred stock equity issuances and repaid $39.9 million under our 2021 Amended Term Loan Agreement.

Our net cash flows provided by financing activities during the six months ended June 30, 2024 also reflect the receipt of $10.0 million distributed from escrow to the Company in accordance with the terms of a merger agreement that was subsequently terminated on December 20, 2024.

Net cash flows provided by financing activities for the nine months ended September 30, 2025 were $49.8 million compared to net cash flows used in financing activities for the nine months ended September 30, 2024 of $3.8 million.

During the nine months ended September 30, 2025, we received net proceeds of $61.1 million from the incurrence of the Incremental Term Loans and repaid $11.3 million under our 2024 Amended Term Loan Agreement.

During the nine months ended September 30, 2024, we repaid $52.3 million under our Amended Term Loan Agreement and received $38.8 million from our preferred stock equity issuances.

Our net cash flows provided by financing activities during the nine months ended September 30, 2024 also reflect the receipt of the $10.0 million distributed from the Merger escrow account to the Company.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

Preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

Preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

There have been no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

In thousands (except per unit and per Boe amounts)

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Other income (expenses):

Net gain (loss) on derivative contracts

Net gain on derivative contracts

Interest expense and other

Net income (loss)

Net (loss) income

Natural Gas - MMcf

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Stock-based compensation

(1) Determined using a ratio of six Mcf of natural gas to one barrel of oil, condensate, or natural gas liquids (“NGLs”) based on approximate energy equivalency.

(1) Determined using a ratio of nine Mcf of natural gas to one barrel of oil, condensate, or natural gas liquids (“NGLs”) based on approximate energy equivalency.

This is an energy content correlation and does not reflect the value or price relationship between the commodities.

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Operating Revenues.

Oil, natural gas and NGLs revenues were $42.6 million and $49.1 million for the three months ended June 30, 2025 and 2024, respectively.

Oil, natural gas and NGLs revenues were $43.4 million and $45.1 million for the three months ended September 30, 2025 and 2024, respectively.

The decrease in revenues is primarily attributable to a decrease in average realized prices.

Production averaged 12,989 Boe per day for the three months ended June 30, 2025 compared to 12,857 Boe per day for the three months ended June 30, 2024.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $5.93 per Boe for three months ended June 30, 2025 when compared with the same period in 2024.

Oil, natural gas and NGLs revenues were $90.0 million and $98.6 million for the six months ended June 30, 2025 and 2024, respectively.

Production averaged 12,293 Boe per day for the three months ended September 30, 2025 compared to 12,076 Boe per day for the three months ended September 30, 2024.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $2.24 per Boe for three months ended September 30, 2025 when compared with the same period in 2024.

Oil, natural gas and NGLs revenues were $133.3 million and $143.7 million for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in revenues is primarily attributable to a combination of a decrease in our average realized prices and lower production volumes in 2025 compared to 2024.

Production averaged 12,448 Boe per day for the six months ended June 30, 2025 compared to 12,923 Boe per day for the six months ended June 30, 2024.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $2.00 per Boe for the six months ended June 30, 2025 when compared with the same period in 2024.

Production averaged 12,396 Boe per day for the nine months ended September 30, 2025 compared to 12,639 Boe per day for the nine months ended September 30, 2024.

Average realized prices (excluding the effects of hedging arrangements) decreased approximately $2.09 per Boe for the nine months ended September 30, 2025 when compared with the same period in 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.

Lease Operating Expenses.

Lease operating expenses were $10.7 million and $11.0 million for the three months ended June 30, 2025 and 2024, respectively, and $21.0 million and $22.6 million for the six months ended June 30, 2025 and 2024, respectively.

On a per unit basis, lease operating expenses were $9.03 per Boe and $9.41 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $9.33 per Boe and $9.61 per Boe for the six months ended June 30, 2025 and 2024, respectively.

The decrease in lease operating expenses on a per unit basis for the three and six months ended June 30, 2025 compared to the same periods of 2024 is primarily a result of contract negotiations with water disposal companies resulting in lower water production costs, lower chemical costs and aggressive preventative maintenance programs yielding decreased reactive repairs and maintenance costs.

Lease operating expenses were $12.4 million and $11.6 million for the three months ended September 30, 2025 and 2024, respectively, and $33.4 million and $34.2 million for the nine months ended September 30, 2025 and 2024, respectively.

On a per unit basis, lease operating expenses were $10.95 per Boe and $10.44 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $9.88 per Boe and $9.87 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

The increase in lease operating expenses for the three months ended September 30, 2025 compared to the same period of 2024 is primarily a result of increased water production from new wells yielding higher disposal costs.

The decrease in lease operating expenses for the nine months ended September 30, 2025 compared to the same period in 2024 primarily results from contract negotiations with service providers in all fields resulting in lower water production costs, lower chemical costs and aggressive preventative maintenance programs yielding decreased reactive repairs and maintenance costs.

Workover and Other Expenses.

Workover and other expenses were $2.3 million and $0.9 million for the three months ended June 30, 2025 and 2024, respectively, and $3.7 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively.

On a per unit basis, workover and other expenses were $1.95 per Boe and $0.81 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $1.66 per Boe and $0.78 per Boe for the six months ended June 30, 2025 and 2024, respectively.

The increase in workover and other expenses for the three and six months ended June 30, 2025 compared to the same periods of 2024 relates to increased workover activity during 2025 and include costs related to a non-recurring well cleanout program.

Workover and other expenses were $0.8 million and $1.2 million for the three months ended September 30, 2025 and 2024, respectively, and $4.6 million and $3.1 million for the nine months ended September 30, 2025 and 2024, respectively.

On a per unit basis, workover and other expenses were $0.74 per Boe and $1.12 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $1.35 per Boe and $0.89 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in workover and other expenses for the three months ended September 30, 2025 compared to the same period in 2024 is the result of less workover activity during the third quarter of 2025.

The increase in workover and other expenses for the nine months ended September 30, 2025 compared to the same periods of 2024 relates to increased workover activity during 2025 and includes costs related to a non-recurring well cleanout program that meaningfully increased production combined with a higher volume of ESP maintenance.

Taxes Other than Income.

Taxes other than income were $2.5 million and $3.3 million for the three months ended June 30, 2025 and 2024, respectively, and $5.3 million and $6.3 million for the six months ended June 30, 2025 and 2024, respectively.

Taxes other than income were $2.6 million and $2.5 million for the three months ended September 30, 2025 and 2024, respectively, and $7.9 million and $8.9 million for the nine months ended September 30, 2025 and 2024, respectively.

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 $2.13 per Boe and $2.86 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $2.36 per Boe and $2.70 per Boe for the six months ended June 30, 2025 and 2024, respectively.

On a per unit basis, taxes other than income were $2.32 per Boe and $2.28 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $2.35 per Boe and $2.56 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

Gathering and Other Expenses.

Gathering and other expenses were $11.0 million and $12.1 million for the three months ended June 30, 2025 and 2024, respectively, and $23.0 million and $29.4 million for the six months ended June 30, 2025 and 2024, respectively.

Gathering and other expenses were $10.2 million and $12.4 million for the three months ended September 30, 2025 and 2024, respectively, and $33.2 million and $41.9 million for the nine months ended September 30, 2025 and 2024, 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 H 2 S in our sour gas produced, and the amounts paid to treat our sour gas volumes, either through our own hydrogen sulfide treating plant or through third parties.

On a per unit basis, gathering and other expenses were $9.27 per Boe and $10.36 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $10.19 per Boe and $12.51 per Boe for the six months ended June 30, 2025 and 2024, respectively.

The decrease in gathering and other expenses per Boe for the three and six months ended June 30, 2025 compared to the same periods of 2024 is primarily related to progress made at the central production facilities yielding lower labor and repair costs as well as increased throughput and overall production volumes being treated by the AGI facility during 2025.

The AGI facility did not come online until March 2024.

On a per unit basis, gathering and other expenses were

$9.02 per Boe and $11.20 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $9.80 per Boe and $12.09 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in gathering and other expenses per Boe for the three and nine months ended September 30, 2025 compared to the same periods of 2024 is primarily related to progress made at the central production facilities yielding lower labor and repair costs as well as increased throughput and overall production volumes being treated by the AGI facility during 2025.

Although the AGI facility ceased operations on August 11, 2025, we were able to secure favorable treating rates at alternative facilities.

The AGI facility treated natural gas production from March 2024 to August 11, 2025.

General and Administrative Expense.

General and administrative expense was $2.6 million and $3.3 million for the three months ended June 30, 2025 and 2024, respectively, and $6.9 million and $7.3 million for the six months ended June 30, 2025 and 2024, respectively.

On a per unit basis, general and administrative expenses were $2.17 per Boe and $2.82 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $3.08 per Boe and $3.09 per Boe for the six months ended June 30, 2025 and 2024, respectively.

The decrease in general and administrative expense for the three and six months ended June 30, 2025 compared with the same prior year periods is primarily due to lower merger costs.

General and administrative expense was $3.1 million and $3.8 million for the three months ended September 30, 2025 and 2024, respectively, and $10.0 million and $11.1 million for the nine months ended September 30, 2025 and 2024, respectively.

On a per unit basis, general and administrative expenses were $2.73 per Boe and $3.46 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $2.96 per Boe and $3.21 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in general and administrative expense for the three and nine months ended September 30, 2025 compared with the same prior year periods is primarily due to lower merger costs.

Depletion, Depreciation, and Amortization Expense.

Depletion for oil and natural gas properties is calculated using the unit of production method, which depletes the capitalized costs of evaluated properties plus future development costs based on the ratio of production for the current period to total reserve volumes of evaluated properties as of the beginning of the period.

Depletion expense was $13.6 million and $12.8 million for the three months ended June 30, 2025 and 2024, respectively, and $26.2 million and $25.4 million for the six months ended June 30, 2025 and 2024, respectively.

On a per unit basis, depletion expense was $11.47 per Boe and $10.95 per Boe for the three months ended June 30, 2025 and 2024, respectively, and $11.64 per Boe and $10.82 per Boe for the six months ended June 30, 2025 and 2024, respectively.

Depletion expense was $13.2 million and $12.1 million for the three months ended September 30, 2025 and 2024, respectively, and $39.4 million and $37.6 million for the nine months ended September 30, 2025 and 2024, respectively.

On a per unit basis, depletion expense was $11.64 per Boe and $10.91 per Boe for the three months ended September 30, 2025 and 2024, respectively, and $11.64 per Boe and $10.85 per Boe for the nine months ended September 30, 2025 and 2024, respectively.

The increase in our depletion rate per Boe is primarily due to a period over period increase in net oil and natural gas properties combined with the associated period over period decrease in proved reserves.

Net gain (loss) on derivative contracts.

Net 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 June 30, 2025, we recorded a net derivative gain of $11.5 million ($7.2 million net unrealized gain on unsettled contracts and $4.3 million net realized gain on settled contracts).

For the three months ended June 30, 2024, we recorded a net derivative gain of $1.2 million ($4.4 million net unrealized gain on unsettled contracts offset by a $3.2 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).

For the six months ended June 30, 2024, we recorded a net derivative loss of $22.9 million ($15.3 million net unrealized loss on unsettled contracts and $7.6 million net realized loss on settled contracts).

At June 30, 2025, we had a $20.1 million derivative asset ($13.7 million current) and a $9.2 million derivative liability ($4.5 million current).

For the three months ended September 30, 2025, we recorded a net derivative gain of $5.2 million ($1.1 million net unrealized gain on unsettled contracts and $4.1 million net realized gain on settled contracts).

For the three months ended September 30, 2024, we recorded a net derivative gain of $26.9 million ($28.1 million net gain on unsettled contracts and $1.2 million net realized loss on settled contracts).

For the nine months ended September 30, 2025, we recorded a net derivative gain of $26.0 million ($20.1 million net unrealized gain on unsettled contracts and $5.9 million net realized gain on settled contracts).

For the nine months ended September 30, 2024, we recorded a net derivative gain of $3.9 million ($12.7 million net gain on unsettled contracts and $8.8 million net realized loss on settled contracts).

At September 30, 2025, we had a $18.5 million derivative asset ($15.1 million current) and a $6.6 million derivative liability ($1.9 million current).

Interest Expense and Other.

Interest expense and other totaled $6.6 million and $6.5 million for the three months ended June 30, 2025 and 2024, respectively and $13.3 million and $13.5 million for the six months ended June 30, 2025 and 2024, respectively.

Our weighted average interest rate was approximately 12.20% for the three and six months ended June 30, 2025 .

Comparatively, our weighted average interest rate was approximately 12.95% for the quarter ended June 30, 2024 and 12.97% for the six months ended June 30, 2024.

For the third quarter of 2025, our interest rate will be approximately 12.20% on outstanding borrowings .

Interest expense and other totaled $6.7 million and $6.3 million for the three months ended September 30, 2025 and 2024, respectively and $20.0 million and $19.8 million for the nine months ended September 30, 2025 and 2024, respectively.

Our weighted average interest rate was approximately 12.19% and 12.20% for the three and nine months ended September 30, 2025, respectively .

Comparatively, our weighted average interest rate was approximately 12.98% for the quarter ended September 30, 2024 and 12.97% for the nine months ended September 30, 2024.

For the fourth quarter of 2025, our interest rate will be approximately 11.90% on outstanding borrowings .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis