Form 4: Luminus Management Acquires $9.6 Million in Battalion Oil Convertible Preferred Stock

Luminus Management, through Luminus Energy Partners Master Fund, Ltd., acquired 9,835 shares of Series A-4 Redeemable Convertible Preferred Stock in Battalion Oil Corp for approximately $9.6 million on May 13, 2024.

Summary

• Luminus Management LLC, along with related entities and individuals, filed a Form 4 regarding a transaction in Battalion Oil Corp [BATL].
• On May 13, 2024, Luminus Energy Partners Master Fund, Ltd. acquired 9,835 shares of Series A-4 Redeemable Convertible Preferred Stock from Battalion Oil Corp.
• The aggregate purchase price for these shares was approximately $9.6 million.
• The Series A-4 Preferred Shares are convertible into common stock at a conversion price of $6.42 per share, subject to adjustments.
• Commencing on September 10, 2024, Master Fund may convert all or any portion of the Series A-4 Preferred Shares into Common Stock.
• The issuer may also force conversion if certain financial conditions are met, related to PDP PV-20 value and the number of outstanding common shares.
• The Series A-4 Preferred Shares are also subject to redemption by the Issuer at any time following the Issuance Date.
• In the event of a change of control transaction, the Series A-4 Preferred Shares are subject to redemption or conversion.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The investment by Luminus Management is a positive signal for Battalion Oil Corp, but the terms of the agreement also include risks and conditions that could impact the investment's value.

Positives

• Luminus Management's investment signals confidence in Battalion Oil Corp's prospects.
• The conversion feature provides Luminus with potential upside from common stock appreciation.
• Battalion Oil Corp gains $9.6 million in capital.

Risks

• The conversion price is subject to adjustment, which could impact the value of the preferred shares.
• The issuer's ability to force conversion depends on meeting specific financial conditions.
• A Material Adverse Effect could prevent the issuer from forcing conversion.
• The Series A-4 Preferred Shares are subject to redemption by the Issuer at any time following the Issuance Date.

Future Outlook

The document outlines the terms for potential conversion or redemption of the preferred shares, indicating possible future changes in Battalion Oil Corp's capital structure and Luminus Management's stake in the company.

Management Comments

• Jonathan Barrett, President of Luminus Management, signed the document on behalf of Luminus Management LLC and Luminus Energy Partners Master Fund, Ltd., disclaiming beneficial ownership except to the extent of pecuniary interest.

Industry Context

This investment reflects continued interest in the oil and gas sector, with investors like Luminus Management seeking opportunities through structured investments like convertible preferred stock. The terms of the agreement, including conversion and redemption rights, are typical for this type of financing in the energy industry.

Comparison to Industry Standards

• Convertible preferred stock is a common financing tool in the oil and gas industry, particularly for companies seeking capital for development or acquisitions.
• The conversion price and redemption terms are generally negotiated based on the company's financial condition, asset base, and future prospects.
• Similar transactions can be seen with other energy companies, where private equity firms or hedge funds provide capital in exchange for preferred equity with conversion options.

Stakeholder Impact

• Shareholders: Potential dilution if preferred shares are converted to common stock.
• Employees: The capital injection could support operations and job security.
• Creditors: Improved financial stability for Battalion Oil Corp.
• Suppliers: Increased business opportunities with Battalion Oil Corp.

Next Steps

• Luminus Management will monitor Battalion Oil Corp's performance and may choose to convert the preferred shares into common stock starting September 10, 2024.
• Battalion Oil Corp will manage its operations to potentially meet the conditions for forced conversion of the preferred shares.

Key Dates