BATTALION OIL CORP

**1.**FINANCIAL STATEMENT PRESENTATION

Basis of Presentation and Principles of Consolidation

Battalion Oil Corporation (“Battalion” or the “Company”) is an independent energy company focused on the acquisition, production, exploration and development of onshore liquids-rich oil and natural gas assets in the United States (“U.S.”). The consolidated financial statements include the accounts of all majority-owned, controlled subsidiaries. The Company operates inone segment which focuses on oil and natural gas acquisition, production, exploration and development. Allocation of capital is made across the Company’s entire portfolio without regard to operating area. All intercompany accounts and transactions have been eliminated.

These unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the financial position as of, and the results of operations for, the periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for the full year and accordingly, certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), has been condensed or omitted. During interim periods, Battalion follows the accounting policies disclosed in its Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 23, 2026. Please refer to the notes in the Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”) when reviewing interim financial results. The Company has evaluated events or transactions through the date of issuance of these unaudited condensed consolidated financial statements.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Estimates and assumptions that, in the opinion of management of the Company, are significant include oil and natural gas revenue accruals, capital and operating expense accruals, oil and natural gas reserves, depletion relating to oil and natural gas properties, asset retirement obligations (“AROs”), and fair value estimates. The Company bases its estimates and judgments on historical experience and on various other assumptions and information believed to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ from the estimates and assumptions used in the preparation of the Company’s unaudited condensed consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. Amounts in the unaudited condensed consolidated balance sheets included in*“Cash and cash equivalents”* and*“Restricted cash”* reconcile to the Company’s unaudited condensed statements of cash flows as follows (in thousands):

Restricted cash at June 30, 2026 consists of $5.2 million of Reinvestment Proceeds (as defined below in Note 5,“Debt”) and funds to collateralize company credit cards. Restricted cash at December 31, 2025 consists of funds to collateralize company credit cards.

Accounts Receivable and Allowance for Credit Losses

The Company’s accounts receivable are primarily receivables from joint interest owners and oil and natural gas purchasers. Accounts receivable are recorded at the amount due, less an allowance for credit losses, when applicable. Payment of the Company’s accounts receivable is typically received within 30-60 days. The Company’s historical credit losses have been de minimis and are expected to remain so in the future assuming no substantial changes to the business or creditworthiness of the Company’s counterparties.

Concentrations of Credit Risk

The Company’s primary concentrations of credit risk are the risks of uncollectible accounts receivable and of nonperformance by counterparties under the Company’s derivative contracts. Each reporting period, the Company assesses the recoverability of material receivables using historical data, current market conditions and reasonable and supportable forecasts of future economic conditions to determine expected collectability of its material receivables.

At June 30, 2026, the Company’s exposure to credit risk under its derivative contracts is currently limited totwo counterparties – a major financial institution that is a lender under the 2026 Term Loan Agreement (as defined in Note 5, “Debt”) and a large multi-strategy alternative investment manager, both of which have investment grade credit ratings. The Company has master netting agreements with both counterparties which provide for offsetting of amounts payable or receivable between the Company and the counterparty. To manage counterparty risk associated with derivative contracts, the Company selects and monitors counterparties based on an assessment of their financial strength and/or credit ratings.

Recently Issued Accounting Pronouncements and Legislation

In April 2026, the FASB issued ASU 2026-01,Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock(“ASU 2026-01”), which requires that paid-in-kind (“PIK”) dividends on equity-classified preferred stock, including preferred stock that is classified as temporary equity, be initially measured on the basis of the PIK dividend rate stated in the preferred stock agreement. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted and may be applied using a prospective or modified retrospective approach. The Company elected to early adopt ASU 2026-01 using a prospective approach on January 1, 2026. There was no impact to beginning

balances as of January 1, 2026 as a result of the adoption. Pursuant to ASU 2026-01, the Company recognizes dividends at the contractual rate of 16% of liquidation preference with no remeasurement for changes in fair value.

In November 2024, the FASB issued ASU 2024-03,Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)(“ASU 2024-03”), which requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within the fiscal year beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.

2. SEGMENTS

The Company has determined that it operates asone reportable segment which focuses on oil and natural gas acquisition, production, exploration and development. The Company evaluates performance based on consolidated net income or loss. The Company’s chief executive officer and chief operating officer together function as the Company’s chief operating decision maker (the “CODM”). The CODM evaluates and manages performance and resource allocation based on consolidated production and operating expenses. Significant expenses provided to the CODM for review consist of lease operating, workover and other, and gathering and other expenses. The Company’s significant segment expenses are derived from and can be found within the unaudited condensed consolidated statement of operations. The measure of segment assets for the Company’s single reportable segment is “Total assets” as reported on the unaudited condensed consolidated balance sheets.

3. OPERATING REVENUES

Substantially all of the Company’s oil, natural gas and natural gas liquids (“NGLs”) revenues are derived from the Delaware Basin in Pecos, Reeves, Ward and Winkler Counties, Texas. Revenue is presented disaggregated in the unaudited condensed consolidated statements of operations by major product, and depicts how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors in the Company’s single basin operations.

Revenue is recognized when the following five steps are completed: (1) identify the contract with the customer, (2) identify the performance obligation (promise) in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when the performance obligation is satisfied. Revenues from the sale of crude oil, natural gas and NGLs are recognized at a point in time when a performance obligation is satisfied by the transfer of control of each unit (e.g. barrel of oil, Mcf of gas) of commodity to the customer. Revenue is measured based on contract consideration allocated to each unit of commodity and excludes amounts collected on behalf of third parties. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue.

Because the Company’s performance obligations have been satisfied and an unconditional right to consideration exists as of the balance sheet date, the Company recognized amounts due from contracts with customers for sales of oil, natural gas and NGLs of $7.8 million and $8.5 million at June 30, 2026 and December 31, 2025, respectively, as*“Accounts receivable, net”* on the unaudited condensed consolidated balance sheets. The Company utilizes the practical expedient exempting the disclosure of the transaction price of unsatisfied performance obligations for (i) contracts with an original expected duration of one year or less and (ii) contracts where variable consideration is allocated entirely to a wholly unsatisfied performance obligation (each unit of product typically represents a separate performance obligation, and therefore, future volumes under the Company’s long-term contracts are wholly unsatisfied).

For additional information regarding the Company’s operating revenues, refer to its Annual Report.

4. OIL AND NATURAL GAS PROPERTIES

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas reserves (including such costs as leasehold acquisition costs, geological expenditures, treating equipment and gathering support facilities costs, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred. To the extent capitalized costs of evaluated oil and natural gas properties, net of accumulated depletion, exceed the discounted future net revenues of proved oil and natural gas reserves, net of deferred taxes, such excess capitalized costs are charged to expense.

Additionally, the Company assesses all properties classified as unevaluated property on a quarterly basis for possible impairment. The Company assesses properties on an individual basis or as a group, if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to depletion and the full cost ceiling test limitation.

At June 30, 2026 and 2025, using first-day-of-the-month average West Texas Intermediate (“WTI”) crude oil spot prices and Henry Hub natural gas prices for the respective prior 12-month periods, the Company’s net book value of oil and natural gas properties at June 30, 2026 and 2025, did not exceed the ceiling test value of the Company’s reserves. Oil and natural gas prices utilized for the ceiling test calculations at June 30, 2026 and 2025 were $72.93 per barrel and $71.20 per barrel of oil, respectively, and $3.64 per MMBtu and $2.86 per MMBtu for natural gas, respectively.

Changes in commodity prices, production rates, levels of reserves, future development costs, transfers of unevaluated properties to the full cost pool, capital spending, and other factors will determine the Company’s ceiling test calculation and impairment analyses in future periods. Additionally, because oil and natural gas prices are inherently volatile, sustained lower commodity prices would reduce the calculated first-day-of-the-month average prices which could result in non-cash impairment chargesof the Company’s oil and natural gas properties under its full cost ceiling test calculation, negatively impacting earnings and financial position.

West Quito Divestiture

On December 18, 2025, the Company entered into an agreement of sale and purchase with MCM Delaware Resources, LLC (“MCM”) (the “West Quito Divestiture Agreement”) to sell substantially all of its oil and natural gas properties and related assets in the West Quito Draw area located in the Southern Delaware Basin in Ward County, Texas for a total sales price of approximately $62.6 million, subject to adjustment for accounting between the effective date of December 1, 2025 and the closing date and other customary adjustments (the “West Quito Divestiture”).

Pursuant to the West Quito Divestiture Agreement, on February 24, 2026, the Company completed the closing of the West Quito Divestiture and MCM acquired from the Company approximately 7,600 gross (6,100 net) acres of leasehold interests in the West Quito Draw area, including production from interests in producing wells, for net proceeds of approximately $60.1 million, reflecting adjustment for accounting effective date of December 1, 2025 and other customary adjustments. The Company did not record a gain or loss related to the divestiture as it was not significant to the full cost pool. Subsequent to closing, the Company used $45.6 million of the net proceeds from closing to repay amounts outstanding under the 2024 Amended Term Loan Agreement on February 24, 2026 including $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026.

Sundown Acquisition

On March 10, 2026, the Company entered into a purchase and sale agreement to acquire certain oil and natural gas assets, comprising 7,090 net acres located in Ward County, Texas, from RoadRunner Resource Holding LLC (formerly, Sundown Energy LP) (“RoadRunner”), effective March 1, 2026, in an all-stock transaction (the “Sundown Acquisition”) for approximately $6.3 million. Under the terms of the agreement, and upon closing on March 19, 2026, the Company issued 485,000 shares of its common stock to RoadRunner in exchange for the assets. The acquired acreage is directly adjacent to the Company’s existing Monument Draw acreage. The transaction is subject to customary post-closing adjustments and is accounted for as an asset acquisition.

Joint Exploration and Development Agreement

On May 27, 2026, the Company entered into a joint exploration and development agreement (“JEDA”) with an energy investment firm, pursuant to which the investment firm will earn assigned working interests in certain wells and leasehold acreage in Monument Draw by funding its proportionate share of well costs, subject to a carried interest. Under the JEDA, the Company serves as operator and the investment firm as a non-operating working interest owner. The JEDA contemplates a primary tranche offour identified wells, in which both the Company and investment firm have committed to participate, and, following completion of that tranche, the Company may propose one or more subsequent tranches, each subject to the investment firm’s election to participate. Pursuant to the JEDA, the Company was required to spud an initial well prior to August 1, 2026, however, both parties agreed to delay the spud date of the initial well until mid-August 2026. Well costs and revenues for the initial tranche are allocated 50% to the Company and 50% to the investment firm on an 8/8 ths cost basis, with post-completion net revenue interest and operating cost allocations of approximately 55% to the Company and 45% to the investment firm, subject to adjustment for the investment firm’s earned working interest share. The Company bears a carried interest equal to 10% of its participating interest with respect to well costs chargeable to wells in the primary tranche and any subsequent tranche, such that the investment firm funds a portion of costs attributable to the Company’s retained interest in exchange for the assignment of working interest. The investment firm’s allocated percentage of certain net revenue interest (up to an additional 2.5%) varies based on the trading price of 2027 WTI crude oil (as measured by the applicable futures index) on the last trading day of 2026, with a threshold of $70.00 per barrel determining whether a 25% or 45% allocated percentage applies. As of June 30, 2026, the Company had incurred approximately $0.5 million of well costs under the JEDA, of which 50% will be billed to the investment firm in accordance with the cost-sharing provisions of the JEDA.

5. DEBT

The Company’s debt consisted of the following for the periods presented (in thousands):

Amended and Restated Credit Agreement

2024 Amended Term Loan Agreement

On December 26, 2024 (the “Initial Closing Date”), Halcón Holdings, LLC (the “Borrower”), a wholly-owned subsidiary of the Company, entered into a Second Amended and Restated Senior Secured Credit Agreement (the “2024 Term Loan Agreement”) with Fortress Credit Corp. (“Fortress”), as administrative agent, and certain other financial institutions party thereto, as lenders. The 2024 Term Loan Agreement amended and restated in its entirety the Company’s Amended and Restated Senior Secured Credit Agreement, dated November 24, 2021, with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders. Pursuant to the 2024 Term Loan Agreement, the lenders party thereto agreed to provide the Borrower with (i) an initial term loan facility in the aggregate principal amount of $162.0 million, funded on December 26, 2024 and (ii) an incremental term loan facility in the aggregate principal amount of up to $63.0 million to be made available to the Borrower from January 3, 2025 until the date that was the earliest to occur of (x) the date on which such incremental term facility is fully drawn, (y) the date on which such incremental term facility is terminated and (z) January 11, 2025, subject to the satisfaction of certain conditions. On January 9, 2025, the Borrower entered into a first amendment (the “First Amendment”) to its 2024 Term Loan Agreement (as amended, the “2024 Amended Term Loan Agreement”). Pursuant to the First Amendment, the Borrower incurred incremental term loans in the aggregate principal amount of $63.0 million (the “Incremental Term Loans”).

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.

The 2024 Amended Term Loan Agreement was scheduled to mature on December 26, 2028.

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 Secured Overnight Financing Rate (“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 weighted average interest rate on the Company’s borrowings under the 2024 Amended Term Loan Agreement for the quarter ended June 30, 2026 was 11.57%.

On November 12, 2025, the Company 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 (a) 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 applicable rate per annum set forth below in Category 1 and (b) the Applicable Margin shall be the applicable rate per annum set forth in Category 4 below at any time that an Event of Default (as defined in the 2024 Amended Term Loan Agreement) exists:

The Applicable Margin was to 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 provided that the Borrower should 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 quarter:

Additionally, the Second Amendment provided that the Borrower should 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:

On February 24, 2026, the Company entered into the Limited Consent, Third Amendment to Second Amended and Restated Senior Secured Credit Agreement and First Amendment to Fee Letter (the “Third Amendment”) to the 2024 Amended Term Loan Agreement. Pursuant to the Third Amendment, among other changes specified therein, (a) the lenders consented to the transactions contemplated by the West Quito Divestiture sale agreement; and (b) the Company was required, upon receipt of the net cash proceeds from the West Quito Divestiture, to prepay the outstanding principal amount of the 2024 Amended Term Loan Agreement borrowings in an aggregate amount equal to $40.0 million. The Company may retain the remaining net cash proceeds received from the West Quito Divestiture, subject to certain reinvestment requirements, set forth in the Third Amendment (the “Reinvestment Proceeds”). Pursuant to the Third Amendment and continuing pursuant to the terms of the 2026 Term Loan Agreement (as defined below), on February 24, 2026, $12.9 million of the proceeds from the sale were initially retained and held in a reinvestment account and recorded as restricted cash. At June 30, 2026, $5.2 million of Reinvestment Proceeds remained as restricted cash in a reinvestment account.

The Third Amendment was accounted for as a partial extinguishment and as such, the Company recorded a loss on extinguishment of debt in the amount of $0.9 million to write-off the proportionate amount of deferred financing costs and debt discount associated with the February 24, 2026 principal prepayment. The Company deferred an additional $0.6 million of deferred financing costs at March 31, 2026 in conjunction with entry into the Third Amendment.

The Borrower could elect, at its option, to prepay any borrowing outstanding under the 2024 Amended Term Loan Agreement. Such voluntary prepayments, certain mandatory prepayments and change of control prepayments were subject to the following prepayment premium, as applicable:

In the event the Borrower shall receive a disapproval notice (as defined in the 2024 Term Loan Agreement) from the required lenders under the 2024 Amended Term Loan Agreement rejecting or otherwise disqualifying a proposed buyer in connection with a permitted change in control thereunder to be consummated within 12 months following the Initial Closing Date, such voluntary prepayments, certain mandatory prepayments and change of control prepayments are subject to the following prepayment premium, as applicable:

The Borrower was required to make scheduled quarterly amortization payments in an aggregate principal amount equal to 2.50% of the total aggregate principal amount of the loans outstanding and such payments commenced the fiscal quarter ending June 30, 2025.

Under the 2024 Amended Term Loan Agreement, the Borrower could have been required to make mandatory prepayments of the loans in connection with the incurrence of non-permitted debt, certain asset sales and with excess cash on hand in excess of certain maximum levels. Accordingly, upon closing the West Quito Divestiture, the Company used $45.6 million of the net proceeds from closing to repay amounts outstanding under the 2024 Amended Term Loan Agreement on February 24, 2026 including $40.0 million pursuant to the Third Amendment and prepayment of $5.6 million for the scheduled quarterly amortization payment for the quarterly period ending March 31, 2026.

In conjunction with entering into the 2024 Term Loan Agreement, the Company agreed to pay an exit fee equal to the amount resulting from multiplying 3.50% by the difference, if any, of (x) Total proved developed producing (“PDP”) PV-10 (the “PDP PV-10”) as of the date that is the earlier of (i) Payment in Full, (ii) the Maturity Date, or (iii) the loans and other obligations otherwise becoming immediately due and payable pursuant to Section 10.02 of the 2024 Term Loan Agreement (including whether, in the case of clauses (i) or (iii), such Payment in Full or acceleration, respectively, may be made in connection with a refinancing transaction or a disposition of all or substantially all of the assets of the Company) (such earlier date, the “Exit Fee Determination Date”), less (y) the Total PDP PV-10 reflected in the Initial Reserve Report after pro forma adjustment(s) for the West Quito Divestiture and any other disposition permitted by the credit agreement of otherwise consented to by the lenders (as defined in the 2024 Term Loan Agreement and as amended by the Third Amendment) (the “Exit Fee”). Upon evaluation of the payoff profiles associated with the Exit Fee, the Company concluded that such embedded features resulting from the application of this fee were not clearly and closely related to the host debt instrument. The fair value analysis for such derivative was performed and the fair value was deemed to bezero at commencement, March 31, 2026 and at December 31, 2025. The Exit Fee derivative was not included in the 2026 Term Loan Agreement (defined below). Refer to Note 6, “Fair Value Measurements,” for a discussion of the valuation approach used and the significant inputs to the valuation for the Exit Fee derivative.

2026 Term Loan Agreement

On June 30, 2026 (the “Closing Date”), Halcón Holdings, LLC (the “Borrower”), a wholly-owned subsidiary of the Company, entered into a Third Amended and Restated Senior Secured Credit Agreement (the “2026 Term Loan Agreement”), by and among the Company, the Borrower, the subsidiary guarantors party thereto, Fortress, as administrative agent, and certain other financial institutions party thereto, as lenders. The 2026 Term Loan Agreement amends and restates in its entirety the 2024 Amended Term Loan Agreement (defined above). All secured obligations under the 2024 Amended Term Loan Agreement were deemed continued and re-evidenced under the 2026 Term Loan Agreement.

Pursuant to the 2026 Term Loan Agreement, the lenders party thereto agreed to provide the Borrower with (i) a term loan facility in the aggregate principal amount of $162.5 million, deemed funded on the Closing Date and (ii) on an uncommitted and absolutely discretionary basis, a delayed draw term loan facility in a maximum aggregate amount of up to $175.0 million, to be made available during the period from and including the Closing Date through and including the earliest to occur of (a) the date on which the delayed draw term loans have been fully drawn or (b) the date on which the discretionary delayed draw term loan commitments are terminated, subject to the satisfaction of certain conditions, each delayed draw term lender’s agreement, in its sole and absolute discretion, to provide a discretionary delayed draw term loan commitment thereunder, and Required Lenders (as defined in the Third Amended and Restated Credit Agreement) consent to such providing a discretionary delayed draw term loan commitment.

The maturity date of the 2026 Term Loan Agreement was extended to December 31, 2029. Until such maturity date, borrowings under the 2026 Term Loan Agreement shall bear interest at a rate per annum equal to a forward-looking term rate based on the Secured Overnight Financing Rate (“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 2026 Term Loan Agreement) plus an applicable margin of 6.50% (or, for ABR Loans, a base rate plus an applicable margin of 5.50%). The applicable margin is fixed at 6.50% and replaces the leverage-based pricing grid contained in the 2024

Amended Term Loan Agreement, under which the applicable SOFR margin ranged from 7.75% to 8.50% depending on the Total Net Leverage Ratio.

Entry into the 2026 Term Loan Agreement was accounted for as a modification and as such, the Company deferred an additional $0.4 million of deferred financing costs at June 30, 2026 in conjunction with entry into the 2026 Term Loan Agreement to be amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt.

The Borrower may elect, at its option, to prepay any borrowing outstanding under the 2026 Term Loan Agreement. Such voluntary prepayments, certain mandatory prepayments and change of control prepayments are subject to the following prepayment premium, as applicable:

The Borrower may be required to make mandatory prepayments of the loans under the 2026 Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales and with excess cash on hand in excess of certain maximum levels.

The Borrower is required to make scheduled amortization payments (i) commencing with the fiscal quarter ending June 30, 2027 through and including the fiscal quarter ending March 31, 2029, in an aggregate principal amount equal to 1.25% of the loans outstanding on the Closing Date, (ii) for the fiscal quarter ending June 30, 2029, an aggregate principal amount equal to 7.50% of the loans outstanding on the Closing Date, and (iii) for the fiscal quarter ending September 30, 2029, an aggregate principal amount equal to 10.00% of the loans outstanding on the Closing Date.

Amounts outstanding under the 2026 Term Loan Agreement are guaranteed by certain of the Borrower’s direct and indirect subsidiaries and secured by a security interest in substantially all of the assets of the Borrower and such direct and indirect subsidiaries, and of the equity interests of the Borrower held by the Company.

The 2026 Term Loan agreement contains certain financial covenants (as defined in the 2026 Term Loan Agreement), including the maintenance of the following ratios:

Under the 2026 Term Loan Agreement, the Company continues to be required to hedge approximately 85% to 50% of its anticipated oil and natural gas production, in varying percentages by year, on a rolling basis for the next four years. The 2026 Term Loan Agreement also contains certain events of default, including non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy.

6. FAIR VALUE MEASUREMENTS

The Company’s determination of fair value incorporates not only the credit standing of the counterparties involved in transactions with the Company resulting in receivables on the Company’s unaudited condensed consolidated balance sheets, but also the impact of the Company’s nonperformance risk on its own liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company separates the fair value of its financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. There wereno transfers between fair value hierarchy levels for any period presented. The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities associated with commodity-based derivative contracts that were accounted for at fair value at June 30, 2026 and December 31, 2025 (in thousands):

Derivative contracts listed above as Level 2 include fixed-price swaps, collars, basis swaps and WTI NYMEX rolls that are carried at fair value. The Company records the net change in the fair value of these positions in*“Net (loss) gain on derivative contracts”* in the Company’s unaudited condensed consolidated statements of operations. The Level 2 observable data includes the forward curves for commodity prices based on quoted market prices and implied volatility factors related to changes in the forward curves. See Note 7,“Derivative and Hedging Activities,” for additional discussion of derivatives.

The Company’s derivative contracts are with major financial institutions and large multi-strategy alternative investment managers with investment grade credit ratings which are believed to have minimal credit risk. As such, the Company is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts; however, the Company does not anticipate such nonperformance.

As discussed in Note 5, “Debt,” the Company evaluated the 2024 Term Loan Agreement and identified the Exit Fee to be an embedded derivative not clearly and closely related to the host debt instrument. The fair value analysis for such derivative was performed and the fair value was deemed to bezero at commencement, at March 31, 2026 and at December 31, 2025. The fair value of the Exit Fee derivative was remeasured each reporting period. The valuation of the Exit Fee derivative included significant inputs such as the timing of potential exit scenarios, forward NYMEX strip pricing, forecasted capital and other expenditures and discount rates. The fair value of the Exit Fee derivative was classified as Level 3 in the fair value hierarchy. The Exit Fee was not included as a term of the 2026 Term Loan Agreement.

Estimated fair value amounts have been determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, cash equivalents and restricted cash, accounts receivable, and accounts payable approximates their carrying value due to their short-term nature. The estimated fair value of borrowings under the Company’s Amended Term Loan Agreement approximates carrying value because the variable interest rates approximate current market rates.

The Company follows the provisions of the FASB’s Accounting Standards Codification (“ASC”) 820,Fair Value Measurement for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. These provisions apply to the Company’s initial recognition of AROs for which fair value is used. The ARO estimates are derived from historical costs and management’s expectation of future cost environments; and therefore, the Company has designated these liabilities as Level 3. See Note 8,“Asset Retirement Obligations,” for a reconciliation of the beginning and ending balances of the liability for the Company’s AROs.

7. DERIVATIVE AND HEDGING ACTIVITIES

The Company is exposed to commodity price risks relating to its ongoing business operations. In accordance with the Company’s policy and the requirements under the Amended Term Loan Agreement, it generally hedges a substantial, but varying, portion of anticipated oil and natural gas production for future periods. Derivatives are carried at fair value on the unaudited condensed consolidated balance sheets as assets or liabilities, with the changes in the fair value included in the unaudited condensed consolidated statements of operations for the period in which the change occurs. The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts, as well as all payments and receipts on settled derivative contracts, in*“Net loss gain on derivative contracts”* on the unaudited condensed consolidated statements of operations. The Company’s hedge policies and objectives may change significantly as its operational profile changes. The Company does not enter into derivative contracts for speculative trading purposes.

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial or commodity hedging institutions deemed by management as competent and competitive market makers. At June 30, 2026, the Company did not post collateral under any of its derivative contracts as they are secured under the Company’s Term Loan Agreement.

The Company’s crude oil and natural gas derivative positions at any point in time may consist of fixed-price swaps, costless put/call collars, basis swaps and WTI NYMEX rolls further described as follows:

The following table summarizes the location and fair value amounts of all commodity derivative contracts in the unaudited condensed consolidated balance sheets at June 30, 2026 and December 31, 2025 (in thousands):

The following table summarizes the location and amounts of the Company’s realized and unrealized gains and losses on derivative contracts in the Company’s unaudited condensed consolidated statements of operations (in thousands):

At June 30, 2026, the Company had the following open crude oil and natural gas derivative contracts:

The Company presents the fair value of its derivative contracts at the gross amounts in the unaudited condensed consolidated balance sheets. The following table shows the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts at June 30, 2026 and December 31, 2025 (in thousands):

The Company enters into an International Swap Dealers Association Master Agreement (“ISDA”) with each counterparty prior to a derivative contract with such counterparty. The ISDA is a standard contract that governs all derivative contracts entered into between the Company and the respective counterparty. The ISDA allows for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of both parties, for transactions that occur on the same date and in the same currency.

8. ASSET RETIREMENT OBLIGATIONS

The Company records an ARO on oil and natural gas properties when it can reasonably estimate the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon costs. The Company records the ARO liability on the unaudited condensed consolidated balance sheets and capitalizes the cost in*“Oil and natural gas properties”* during the period in which the obligation is incurred. The Company records the accretion of its ARO

liabilities in*“Depletion, depreciation and accretion”* expense in the unaudited condensed consolidated statements of operations. The additional capitalized costs are depreciated on a unit-of-production basis.

The Company recorded the following activity related to its ARO liability (in thousands):

9. COMMITMENTS AND CONTINGENCIES

Commitments

On May 27, 2026, the Company entered into a JEDA with an energy investment firm, pursuant to which the investment firm will earn assigned working interests in certain wells and leasehold acreage in Monument Draw by funding its proportionate share of well costs, subject to a carried interest. Under the JEDA, the Company serves as operator and the investment firm as a non-operating working interest owner. See Note 4, “Oil and Natural Gas Properties – Joint Exploration and Development Agreement” for additional information.

On May 27, 2026, the Company entered into a drilling rig commitment forfour consecutive wells to commence during the third quarter of 2026 for approximately $3.3 million that will be incurred during the remainder of 2026. Termination of the drilling rig commitment prior to commencement of drilling operations would result in an early termination penalty of $0.8 million, which would be in lieu of paying the active drilling rig commitment of $3.3 million. Termination of the drilling rig commitment after commencement of mobilization would result in payment of the early termination fee of $0.8 million plus $0.5 million for each well not drilled under the contract.

The Company was previously a party to a gas treating agreement entered into during 2022 pursuant to which the Company had a minimum volume commitment of 20,000 Mcf per day under for an initial term offive years from the in-service date of the facility. Under this gas treating agreement, the Company paid a treating rate that varied based on volumes delivered to the facility. The gas treating agreement was terminated on January 19, 2026.

The Company has entered into various long-term gathering, transportation and sales contracts with respect to its oil and natural gas production from the Delaware Basin in West Texas. As of June 30, 2026, the Company had in place multiple long-term crude oil and natural gas contracts in this area and the sales prices under these contracts are based on posted market rates. Under the terms of these contracts, the Company has committed a substantial portion of its production from this area for periods ranging fromone totwenty years from the date of first production*.*

Contingencies

In addition to the matters described below, from time to time, the Company may be a plaintiff or defendant in a pending or threatened legal proceeding arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be determined, the Company’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material effect on the Company’s unaudited condensed consolidated operating results, financial position or cash flows.

Surface owners of properties in Louisiana, where the Company formerly operated, often file lawsuits or assert claims against oil and natural gas companies claiming that operators and working interest owners are liable for environmental damages arising from operations conducted on the leased properties. These damages are frequently

measured by the cost to restore the leased properties to their original condition. Currently and in the past, the Company has been party to such matters in Louisiana. With regard to pending matters, the overall exposure is not currently determinable. The Company intends to vigorously oppose these claims.

10. STOCKHOLDERS’ EQUITY (DEFICIT)

Redeemable Convertible Preferred Stock

During 2023 and 2024, the Company issued, in private placements, an aggregate of 138,000 shares of preferred stock (collectively, the “Redeemable Convertible Preferred Stock”) to certain funds managed by Luminus Management, LLC, Brookfield Oaktree Holdings, LLC, and Gen IV Investment Opportunities, LLC (“Gen IV”), the Company’s largest three stockholders at the time of issuance. For accounting purposes, upon issuance of the Redeemable Convertible Preferred Stock, the Company recorded the net proceeds as mezzanine equity (temporary equity) on the unaudited condensed consolidated balance sheets because it was not mandatorily redeemable but did contain a redemption feature at the option of the preferred holders that was considered not solely within the Company’s control. The Redeemable Convertible Preferred Stock was originally recorded net of original issue discount and accrued offering costs as mezzanine equity (temporary equity) and* *subsequently a non-cash deemed dividend was recorded to increase the carrying value of the preferred stock to its redemption amount. At March 25, 2026, the holders of the Redeemable Convertible Preferred Stock (neither individually nor collectively) no longer controlled the Company’s board of directors. Thus, the Company recorded a deemed dividend in the amount of$8.3 million to increase the carrying value of the Redeemable Convertible Preferred Stock to its redemption amount on that date and such was reclassified from temporary equity to permanent equity at the total remeasured carrying amount of$234.6 million on the unaudited condensed consolidated balance sheet as of March 31, 2026 because previously identified redemption features that were not solely within the control of the Company no longer existed.

*Voting Rights.*Holders of shares of the Redeemable Convertible Preferred Stock have no voting rights with respect to the shares of Redeemable Convertible Preferred stock.

Dividends. Holders of Redeemable Convertible Preferred Stock are entitled to receive cumulative dividends at a fixed rate of 14.5% per annum on the Liquidation Preference ($1,000 per share increased for any PIK accruals), compounding and accruing quarterly in arrears. PIK dividends shall automatically accrue at a fixed rate of 16.0% per annum on the Liquidation Preference and be added to the Liquidation Preference (a “PIK Accrual”).

Conversion Features. In addition to the conversion rights noted in “Redemption Features (Change of Control)” below, Holders of Redeemable Convertible Preferred Stock may convert their shares into common stock at a conversion ratio (the “Conversion Ratio”) equal to the then applicable Liquidation Preference at the time of conversion divided by the then applicable Conversion Price (initially equal to an 18% premium to the volume weighted average price of common stock for the 20 trading days immediately preceding the closing date). Additionally, the Company has the right, at its option, to convert outstanding shares of Redeemable Convertible Preferred Stock into common stock at the Conversion Ratio should the Company meet certain calculated valuation metrics which when divided by the number of outstanding shares of common stock equals or exceeds 130% of the Conversion Price.

*Redemption Features (Issuer).*The Company has the option to redeem the Redeemable Convertible Preferred Stock in cash for an amount per share of Preferred Stock equal to (the “Redemption Price”):

Redemption Features (Change of Control). In the event of a change of control, holders have the right to receive:

On March 30, 2026, the Company issued 1,800,000 shares of its common stock to Luminus Energy Partners Master Fund, Ltd. upon the conversion of 7,803 shares of the Company’s Series A-2 Redeemable Convertible Preferred Stock (the “Series A-2 Preferred Stock”) (the “Series A-2 Conversion”). The conversion was calculated in accordance with the terms of the Series A-2 Preferred Stock, including adjustments provided in respect of any Unpaid Dividend Accrual (as defined in the Company’s Certificate of Incorporation, as amended) and using a conversion price of $6.21 per share.

At June 30, 2026, there were 130,197 shares of Redeemable Convertible Preferred Stock outstanding with total liquidation preference of $198.3 million.

Common Stock

On March 3, 2026, the Company entered into a definitive agreement to sell in a private placement to an institutional investor 1,800,000 shares of its common stock and 927,273 prefunded warrants for the purchase of common stock at $5.50 per share for total proceeds of $15.0 million. The offering closed on March 4, 2026, on satisfaction of customary closing conditions. On April 7, 2026, the warrants were exercised and the Company issued 927,273 shares of common stock.

On March 19, 2026, the Company issued 485,000 shares of its common stock to RoadRunner in exchange for the certain assets to be acquired under the purchase and sale agreement. See Note 4, “Oil and Natural Gas Properties – Sundown Acquisition” for additional information.

On March 30, 2026, the Company issued 1,800,000 shares of its common stock pursuant to the conversion of 7,803 shares of Series A-2 Preferred Stock in the Series A-2 Conversion discussed above.

At-the-Market Program

On May 5, 2026, the Company entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”) pursuant to which the Company may issue and sell, from time to time, up to $150.0 million of shares of its common stock, through or to the Agent, acting as agent or principal, under the Sales Agreement in at-the-market transactions (the “ATM Program”). Sales under the ATM Program, if any, are made by means of ordinary brokers’ transactions at market prices prevailing at the time of sale, or at prices related to prevailing market prices. Under the Sales Agreement, the Company has provided the Agent with customary indemnification rights and the Agent is entitled to commission of up to 3.0% of the gross proceeds from each sale of common stock under the ATM Program effectuated through or to the Agent. For the period May 6, 2026 through June 30, 2026, the Company sold and issued 17,396,701 shares under the ATM Program for net proceeds of $30.3 million, after deducting sales commissions and other offering costs. As of June 30, 2026, the Company had $118.9 million of aggregate gross sales remaining under the Sales Agreement. Subsequent to June 30, 2026 through July 29, 2026 when sales under the ATM Program were suspended, the Company sold an additional 14,895,784 shares under the ATM Program for net proceeds of $25.6 million, after deducting sales commissions and other offering costs.

11. EARNINGS PER SHARE

The following represents the calculation of earnings (loss) per share (in thousands, except per share amounts):

The Company computes earnings per share in accordance with ASC Topic 260,Earnings per Share (“ASC 260”), which requires earnings per share for each class of stock (common stock and participating preferred stock) to be calculated using the two-class method which allocates earnings for the reporting period between common shareholders and other security holders based on their respective participation rights in undistributed earnings. Diluted earnings per share resulted in the same dilution calculated using the two-class method as using the if-converted method. For additional information on the Company’s preferred stock, which is considered a participating security, see Note 10,“Stockholders’ Equity (Deficit)”.

For the three and six months ended June 30, 2026 and 2025, common stock equivalents, including options and restricted stock units (“RSUs”), totaling 106,257 were anti-dilutive and not included in the computation of diluted earnings per share of common stock.

12. ADDITIONAL FINANCIAL STATEMENT INFORMATION

Certain balance sheet amounts are comprised of the following (in thousands):

Certain income statement amounts are comprised of the following (in thousands) for the periods presents:

13. SUBSEQUENT EVENTS

On August 7, 2026, the Company entered into a Preferred Stock Repurchase and Conversion Agreement (the “Repurchase Agreement”) with Gen IV, pursuant to which (i) the Company agreed to repurchase from Gen IV 5,138 shares of the Company’s Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share, and 6,578.11 shares of the Company’s Series A-1 Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A-1 Preferred Stock”), for an aggregate purchase price of $19.0 million (the “Repurchase”), and (ii) Gen IV elected to

convert 1,231.89 shares of Series A-1 Preferred Stock,6,630 shares of the Company’s Series A-2 Redeemable Convertible Preferred Stock, par value $0.0001 per share,3,789 shares of the Company’s Series A-3 Redeemable Convertible Preferred Stock, par value $0.0001 per share, and 3,789 shares of the Company’s Series A-4 Redeemable Convertible Preferred Stock, par value $0.0001 per share into an aggregate 3,494,259 shares of the Company’s common stock, par value $0.0001 per share (the “Conversion”).

Following the closing of the transactions contemplated by the Repurchase Agreement, Gen IV no longer holds any shares of preferred stock of the Company. The shares of preferred stock repurchased by the Company will be retired and cancelled.

In connection with the Repurchase Agreement, on August 7, 2026, the Company and Gen IV entered into a Voting and Lock-Up Agreement (the “Voting Agreement”), pursuant to which Gen IV agreed, among other things, for a period of 12 months from the date of the Voting Agreement (or, if earlier, until Gen IV and its affiliates no longer hold any Voting Securities (as defined in the Voting Agreement) (i) to vote, and to cause its affiliates to vote, the Voting Securities in favor of (A) the election of any director nominees of the Company in an uncontested election and (B) the ratification of the Company’s independent registered public accounting firm, in each case as recommended by the Company’s board of directors, and (ii) to a customary lock-up with respect to its Lock-Up Securities (as defined in the Voting Agreement), subject to customary exceptions.