BATL

Business Context and Reporting Period

This Form 8-K, filed on April 17, 2024, reports events occurring on April 16, 2024, for Battalion Oil Corporation (NYSE American: BATL). The filing details the entry into a Fourth Amendment to the Merger Agreement with Fury Resources, Inc. ("Parent") and San Jacinto Merger Sub, Inc. ("Merger Sub"), following a failure by Parent to meet a prior funding deadline.

Key Financial Metrics and Transaction Terms

This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, or operating margins. The financial data presented relates exclusively to the terms of the merger agreement and associated guarantees:

• Initial Escrow Deposit: $10,000,000 (previously deposited by Parent).
• Required Aggregate Financing: At least $200,000,000 (including escrow and other resources).
• Revised Closing Failure Fee: Increased to the Initial Deposit Amount ($10,000,000) plus $20,000,000, totaling $30,000,000, contingent on Parent delivering Qualifying Additional Financing Documents.
• Proxy Costs Covenant: Parent obligated to pay $125,000 if Qualifying Additional Financing Documents are not delivered by April 22, 2024.
• Guarantee Amounts:
  • Amended and Restated Limited Guarantee: Base guarantee of $1,000,000, potentially increasing by an additional $1,000,000 under specific termination or non-compliance conditions.
  • Funding Limited Guarantee: A separate guarantee limited to $4,000,000, covering obligations if the Merger Agreement is terminated under specific rights after financing documents are delivered.

Material Changes Versus Prior Period

The Fourth Amendment introduces significant changes to the Merger Agreement following Parent's failure to provide Evidence of Funding by the original April 10, 2024 deadline:

• Fee Increase: The Closing Failure Fee was increased from $25,000,000 (Initial Deposit + $15M) to $30,000,000 (Initial Deposit + $20M) if Parent secures qualifying financing.
• Termination Rights: Battalion Oil now has the right to terminate the agreement if Parent fails to deliver Qualifying Additional Financing Documents by 5:00 p.m. Central Time on April 26, 2024.
• Proxy Statement Condition: The Company is not required to file or mail the definitive Proxy Statement until Parent delivers Qualifying Additional Financing Documents.
• Guarantee Expansion: The cap on reimbursement for legal costs and expenses incurred by the Company to enforce the guarantee was removed. Additionally, a new $4,000,000 Funding Limited Guarantee was executed.
• Definition Changes: The definition of "Qualifying Additional Financing Documents" was amended to require that aggregate financing be sufficient to consummate the merger and pay all related fees, as determined by the Company.

Guidance, Outlook, and Risks

Management Commentary and Outlook: The Board approved the Fourth Amendment to facilitate Parent's efforts to obtain equity financing necessary to close the merger. The definitive Proxy Statement will only be distributed once financing is secured.

Risks and Contingencies:

• Termination Risk: If Parent fails to deliver financing documents by April 26, 2024, the Company may terminate the agreement.
• Stock Price Volatility: The filing warns that the Company's stock price may decline significantly if the Merger is not consummated.
• Regulatory and Approval Risks: Completion depends on stockholder approval, regulatory approvals, and the satisfaction of various conditions.
• Management Distraction: Risks related to the transaction diverting management's attention from ongoing operations.
• Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections due to numerous uncertainties.

Important Facts for Investor Verification

• Verify the status of Parent's equity financing efforts and whether Qualifying Additional Financing Documents will be delivered by the April 26, 2024 deadline.
• Review the full text of the Fourth Amendment (Exhibit 2.1) and the new guarantees (Exhibits 2.2 and 2.3) to understand the specific conditions triggering the $30,000,000 fee and the $5,000,000 total potential guarantee exposure.
• Monitor for the filing of the definitive Proxy Statement, which is contingent upon the delivery of financing documents.
• Assess the risk of the transaction failing entirely, which could lead to a significant decline in Battalion Oil's stock price.
• Confirm the identity and financial capacity of Abraham Mirman, the Guarantor, regarding the $4,000,000 Funding Limited Guarantee and the Amended and Restated Limited Guarantee.