Form 4: Brookfield and Oaktree Entities Report Acquisition of Battalion Oil Corp Series A-4 Convertible Preferred Stock

Brookfield and Oaktree-affiliated entities jointly report the acquisition of 6,376 shares of Series A-4 Redeemable Convertible Preferred Stock in Battalion Oil Corp for approximately $6.2 million.

Summary

• Brookfield Oaktree Holdings, LLC, along with several affiliated entities, filed a Form 4 reporting the acquisition of Battalion Oil Corp's Series A-4 Redeemable Convertible Preferred Stock.
• On May 13, 2024, OCM HLCN Holdings, L.P. acquired 6,376 shares of Series A-4 Preferred Stock for approximately $6.2 million, pursuant to a Purchase Agreement.
• 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, OCM HLCN may convert all or any portion of the Series A-4 Preferred Shares into Common Stock.
• The issuer may force conversion if certain conditions related to the PDP PV-20 value and outstanding common stock are met.
• 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 positive. The investment by Brookfield and Oaktree suggests confidence in the company's future, but the terms of the preferred stock also reflect a degree of risk mitigation.

Positives

• Brookfield and Oaktree's investment signals confidence in Battalion Oil Corp's prospects.
• The conversion feature of the preferred stock provides potential upside for the investors.
• The issuer's right to force conversion under certain conditions could streamline the capital structure.

Risks

• The conversion price is subject to adjustment, which could impact the value of the investment.
• A Material Adverse Effect could prevent the issuer from forcing conversion.
• The value of the preferred shares is tied to the performance of Battalion Oil Corp and the underlying value of its assets.

Future Outlook

The document outlines the terms and conditions for the conversion and redemption of the Series A-4 Preferred Shares, providing a framework for future actions based on Battalion Oil Corp's performance and market conditions.

Industry Context

This investment reflects continued interest in the oil and gas sector, with private equity firms like Brookfield and Oaktree making strategic investments in companies like Battalion Oil Corp.

Comparison to Industry Standards

• Similar investments in convertible preferred stock are common in the energy sector, especially for companies seeking growth capital.
• The conversion price and terms are typical for this type of financing, often tied to the company's performance and asset value.
• Blackstone's investments in Vine Energy and Apollo's investments in Talos Energy are comparable examples of private equity firms using preferred equity to gain exposure to the energy market.

Stakeholder Impact

• Shareholders may see potential dilution if the preferred shares are converted into common stock.
• Employees may benefit from the increased financial stability provided by the investment.
• The investment could enable Battalion Oil Corp to pursue growth opportunities, benefiting suppliers and customers.

Next Steps

• OCM HLCN may choose to convert the preferred shares into common stock starting September 10, 2024.
• Battalion Oil Corp may choose to redeem the preferred shares at any time.
• The issuer may force conversion if the PDP PV-20 value divided by fully diluted common stock exceeds 130% of the conversion price.

Key Dates

Keywords

Series A-4 Preferred Stock, Convertible Preferred Stock, Battalion Oil Corp, Brookfield, Oaktree, OCM HLCN Holdings, Beneficial Ownership, Form 4, Acquisition