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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-14 · 90 added, 58 removed, 135 unchanged (52% 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 months ended March 31, 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 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 results presented in this Form 10-Q are not necessarily indicative of future operating results.

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The 2024 Amended Term Loan Agreement matures on December 26, 2028.

All obligations under the 2021 Amended Term Loan Agreement were refunded, refinanced and repaid in full by the loans under the 2024 Term Loan Agreement as the net proceeds of the 2024 Term Loan Agreement were used to repay 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.

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%.

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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.

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 condensed consolidated balance sheet at December 31, 2024 in conjunction with entry into the 2024 Term Loan Agreement and deferred an additional $1.7 million of original issue discount and financing costs on the condensed consolidated balance sheet at March 31, 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 at June 30, 2025 in conjunction with the issuance of the Incremental Term Loans in January 2025.

H 2 S Treating Joint Venture.

The acid gas injection facility (“AGI Facility”) to which we are a party to a joint venture has been processing gas since March 9, 2024 and continues to process gas currently.

In addition to general facility downtime, the AGI Facility has experienced 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 have resulted in higher processing fees than forecasted as we pay higher processing rates with other service providers.

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

The acid gas injection facility (“AGI Facility”) to which we are a party to a joint venture has been processing gas since March 9, 2024.

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.

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.

The GTA has a tiered-rate structure based on actual volumes delivered .

Our current estimates of future treating fee reductions are subject to various operational and other risk factors, some of which are beyond our control, which could impact the timing and extent of these estimates .

Capital Resources and Liquidity

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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 $6.0 million for the three months ended March 31, 2025 and had working capital of $15.4 million at March 31, 2025.

At March 31, 2025, we had $73.6 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 March 2026 .

At March 31, 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 $10.8 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 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.

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.

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.

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Accordingly, we will continue to consider the matter while we simultaneously pursue strategic and financial alternatives that may render it unnecessary.

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’ 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.

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’ 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.

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.

The notice does not affect our ongoing business operations or our reporting requirements with the Securities and Exchange Commission.

Other Risks and Uncertainties.

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The unavailability or high cost of drilling rigs and/or frac crews, pressure pumping equipment, tubulars and other supplies, and of qualified personnel can materially and adversely affect our operations and profitability.

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 Amended Term Loan Agreement.

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 Amended 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.

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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 March 2026.

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

Three Months Ended

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

Six Months Ended

Cash flows provided by operating activities

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Operating Activities .

Net cash flows provided by operating activities for the three months ended March 31, 2025 and 2024, were $12.7 million and $3.9 million, respectively.

Items impacting the increase in operating cash flows were primarily driven by a decrease in operating expenses coupled with changes in working capital for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

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.

Investing Activities.

Net cash flows used in investing activities for the three months ended March 31, 2025 and 2024 were approximately $20.1 million and $31.8 million, respectively, primarily for drilling and completion activities.

During the three months ended March 31, 2025, we spent $19.8 million on oil and natural gas capital expenditures, of which $17.4 million related to drilling and completion costs and $2.1 million related to the development of our treating equipment and gathering support infrastructure.

In the first three months of 2025, we ran one operated rig in the Delaware Basin, drilled and cased four gross (4.0 net) operated wells, and did not complete and put online any operated wells.

During the three months ended March 31, 2024, we spent $31.8 million on oil and natural gas capital expenditures, of which $23.7 million related to drilling and completion costs, $7.2 million related to AGI Facility expenditures which were initially recorded as a contract asset and $0.5 million related to the development of our treating equipment and gathering support infrastructure.

In the first three months of 2024, we ran one operated rig in the Delaware Basin and drilled and cased two gross (2.0 net) operated wells.

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.

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.

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 three months ended March 31, 2025 and 2024 were $61.2 million and $19.3 million, respectively.

During the three months ended March 31, 2025, we received net proceeds of $61.3 million from the incurrence of the Incremental Term Loans on January 9, 2025.

During the three months ended March 31, 2024, we received $19.5 million from our preferred stock equity issuance and repaid $10.0 million under our 2021 Amended Term Loan Agreement.

Our net cash flows provided by financing activities during the three months ended March 31, 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 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.

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 expenses.

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

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

In thousands (except per unit and per Boe amounts)

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Operating Revenues.

Oil, natural gas and NGLs revenues were $47.4 million and $49.5 million for the three months ended March 31, 2025 and 2024.

The decrease in revenues is primarily attributable to a decrease in production volumes in 2025 compared to 2024.

Production averaged 11,900 Boe per day for the three months ended March 31, 2025 compared to 12,989 Boe per day for the three months ended March 31, 2024.

Production was lower in the first quarter period of 2025 compared to the same period in 2024 due largely to the timing new wells coming online as no new wells came online during the first quarter of 2025.

Average realized prices (excluding the effects of hedging arrangements) increased approximately $2.33 per Boe for three months ended March 31, 2025 when compared with the same period in 2024.

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.

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.

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.

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 $10.4 million and $11.6 million for the three months ended March 31, 2025 and 2024, respectively.

On a per unit basis, lease operating expenses were $9.67 per Boe and $9.80 per Boe for the three months ended March 31, 2025 and 2024, respectively.

The decrease in lease operating expenses on a per unit basis in the first quarter of 2025 compared to the first quarter of 2024 is primarily a result of lower water production and reduced repairs and maintenance costs.

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.

Workover and Other Expenses.

Workover and other expenses were $1.4 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively.

On a per unit basis, workover and other expenses were $1.34 per Boe and $0.75 per Boe for the three months ended March 31, 2025 and 2024, respectively.

The increase in workover and other expenses for the first quarter 2025 compared to the same period in 2024 relates to slightly higher workover activity during the first quarter of 2025.

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.

Taxes Other than Income.

Taxes other than income were $2.8 million and $3.0 million for the three months ended March 31, 2025 and 2024, respectively.

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.

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 $2.61 per Boe and $2.53 per Boe for the three months ended March 31, 2025 and 2024, respectively.

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.

Gathering and Other Expenses.

Gathering and other expenses were $12.0 million and $17.3 million for the three months ended March 31, 2025 and 2024, respectively.

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 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 $11.20 per Boe and $14.62 per Boe for the three months ended March 31, 2025 and 2024, respectively.

The decrease in gathering and other expenses per Boe for the three months ended March 31, 2025 compared to the same period in 2024 is primarily related to a full quarter of volumes being treated by the AGI facility during 2025.

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.

General and Administrative Expense.

General and administrative expense was $4.4 million and $4.0 million for the three months ended March 31, 2025 and 2024, respectively.

On a per unit basis, general and administrative expenses were $4.08 per Boe and $3.36 per Boe for the three months ended March 31, 2025 and 2024, respectively.

The increase in general and administrative expense for the three months ended March 31, 2025 compared with the same prior year period is primarily due to higher payroll and benefits costs.

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.

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 $12.7 million and $12.6 million for the three months ended March 31, 2025 and 2024, respectively.

On a per unit basis, depletion expense was $11.83 per Boe and $10.68 per Boe for the three months ended March 31, 2025 and 2024, respectively.

The increase in our depletion rate per Boe is primarily due to a period over period increase in future development costs associated with proved reserves combined with the associated period over period decrease in proved reserves.

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.

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.

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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 March 31, 2025, we recorded a net derivative gain of $9.3 million ($11.8 million net gain on unsettled contracts and $2.5 million net realized loss on settled contracts).

For the three months ended March 31, 2024, we recorded a net derivative loss of $24.2 million ( $19.8 million net loss on unsettled contracts and $4.4 million net realized loss on settled contracts ).

At March 31, 2025, we had a $24.5 million derivative asset ($15.7 million current) and a $21.0 million derivative liability ($14.7 million current).

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).

Interest Expense and Other.

Interest expense and other totaled $6.7 million and $7.0 million for the three months ended March 31, 2025 and 2024, respectively.

Interest expense and other primarily decreased in the current year periods compared to the same periods in the prior year due to a lower weighted average interest rate for the quarter ended March 31, 2025 on borrowings associated with our 2024 Amended Term Loan Agreement compared to the weighted average interest rate for the quarter ended March 31, 2024 on borrowings associated with our 2021 Amended Term Loan Agreement.

Our weighted average interest rate was approximately 12.21% for the quarter ended March 31, 2025 .

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

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 .

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