Welcome to the Battalion Oil Q3 2020 earnings call. As a reminder, today's conference is being recorded. This conference call contains forward-looking statements. For a detailed description, see Battalion's earnings announcement released yesterday and posted to its website. This conference call also includes references to certain non-GAAP financial measures. The reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are also contained in the earnings release. Now, I'll turn it over to Battalion's Chief Executive Officer, Richard Little. Mr. Little, you may begin.
Thank you. Thanks for joining Battalion's third quarter 2020 earnings call. Before I kick it off, I'd like to take a minute to acknowledge the leadership change we previously disclosed. On August 17th, Battalion announced the appointment of Kevin Andrews to replace its CFO, Ragan Altizer, who decided to retire from the oil and gas industry. Again, I want to thank Ragan for his hard work in helping our team navigate financial restructuring and the transformation change that Battalion has come to represent. I'm excited to welcome the skills and insights Kevin has to offer and look forward to our future together. It's hard to imagine that what we experienced in the third quarter is much of a recovery, but as prices improved modestly from the lows in Q2, I'm pleased that we've returned to a typical operation in Q3.
As a result, we saw the production increase quarter-over-quarter by almost 20%, just over 17,000 BOE per day, of which oil represented 56% of that. Total revenue for the third quarter was $39.8 million, of which 84% related to crude oil. Realized gains on derivative settlements totaled $5.3 million for the third quarter. We've remained laser-focused on cost reductions, and this quarter we've demonstrated, like previous quarters, that we aim to do what we say. We've said we'd lower total cost to operate this business, and we've done it again. Adjusted G&A was $2.09 per BOE in the third quarter of 2020, compared to $4.92 per BOE in the third quarter of 2019. Lease operating workover expense was $7 per BOE in the third quarter of 2020 versus an $8.91 per BOE in the third quarter of 2019.
The only answer to lower prices is even lower OpEx, and our team is adept at finding ways to keep saving money, and I want to thank them for all their hard work. The company reported a net loss to common shareholders for the third quarter of $153 million, which includes a full-cost ceiling test impairment of $128 million, which was associated almost entirely with a significant drop in the SEC trailing 12-month oil price deck. Battalion also reported a net loss per basic and diluted share of $9.45, an adjusted trailing 12-month EBITDA of $93.9 million. That's compared to $61.6 million in the third quarter of 2019, or a 50% growth over the prior period. This quarter, we've continued to keep leverage below two times, affording us a flexible position to evaluate the optimum path forward.
Our PDP remains well hedged through the first half of 2022, between $45 and $50 per barrel, and the September 30th mark-to-market value of $16 million. We recently completed our fall redetermination process and are encouraged by the results. While other companies have seen their facilities substantially cut, we worked with BMO to achieve a borrowing base of $190 million, which is slightly higher than the $185 million that we had previously announced in connection with our spring redetermination back in May. I want to thank BMO for their continued support and confidence in our program during such a challenging time. We continue to improve our infrastructure to create better takeaway optionality, resulting in better netbacks and less flaring across the field.
I look forward to better times in our industry, but in the meantime, we continue to improve our operations and look for opportunities for responsible, strategic M&A to create scope and scale. I'm pleased with the hard work this team has done to continue to create value in this environment. Again, I want to thank you for your interest in Battalion, and we'll turn it over to the operator now for questions. Thank you.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Once again, ladies and gentlemen, to ask a question, please press star one on your telephone keypad. We'll take a question from Noel Parks with Coker & Palmer. Please go ahead.
Good morning.
Good morning, Noel.
Just wanted to check. I know you did talk about some of the hedge optimizations, and we've had so much vulnerability, variability ultimately in the oil prices just in the last couple of weeks again. In fourth quarter so far, have you monetized any of the hedge book since the end of third quarter?
No. Matter of fact, we're seeing the opportunity is on the ability to layer on more hedges. We do plan on putting in more activity toward the end of this year. We're going to take advantage of the market where it is right now. Because of that, we want to protect those volumes as well with new hedges.
Oh, great. I think I might have missed what you were saying about the borrowing base. Could you just go over that again? What's happening with redetermination?
Sure, happy to. We were originally back in May at a $200 million with a plan to step down to $185 million by November. We looked through our fall redetermination and felt, and the banks agreed, that the value was there to not have to step down to $185 million and hold it at $190 million. We'll [audio distortion] through the next redetermination. That's the $5 million improvement from where we were. Does that make sense?
Great. As far as the pricing, were there any changes on the pricing grid for the redetermination?
No, not at all.
Okay, great. Let me see. Yeah, I guess, just in general, we've seen a popular question these days of executive management. We've seen a good bit more M&A activity going on, and also seen some bolt-on activity as well. Any thoughts you have about that, either as far as some of the valuations we've been seeing, or also any thoughts about what you see going on inside your basin?
No, good question. I still think, as I think others do as well, that it makes a lot of sense for the micro caps to consolidate. We continue to stay active in that space. We'll try to be involved in whatever happens in that space. Obviously, we are always going to try to do responsible M&A. We're not willing to overpay for anything, but we do think that there's a lot of synergies in just putting a lot of these companies together, and we still stay focused on that in our playground. I have been surprised with some of the larger independents on their mergers. Glad to see it. It still makes sense at a lot of different levels to create those synergies. No, I think what's happening in our space should be expected and should be expected to continue.
Right. Generally, whenever we hear about deals and just what people are paying for valuation standpoint, a lot of times it's pretty clear that people are only willing to pay for PDP at most. I was wondering about your thoughts about that, considering over the years with more drilling, there is some variation as far as how well developed various areas of the Delaware are. I guess I want your thoughts on a more PDP-heavy acquisition as opposed to maybe one that had more running room. Also, if there's anything that could entice you over to the Midland side of the basin that you could envision.
No. Say that question again about the Midland Basin you cut out.
Oh, sorry. I was wondering if there was anything you could envision enticing you to look in the Midland Basin as well?
Okay. Yeah. Thank you. Right now, I don't think you can expect to get a lot of value other than just PDP, but what you're starting to see is that people recognizing those that have the running room. We've got a lot of undeveloped acreage. We're excited about what our inventory looks like. I think what that does is makes us a more attractive merger partner because people can see the growth in that. When we think about Delaware versus Midland, we're really thinking about just the Permian Basin. You know this team has extensive experience, we've talked about it on previous calls, with experience in the Midland Basin as well. We don't shy away from that either. We do see opportunities and synergies that can be created in the Permian Basin, including Delaware and Midland.
Just the last one from me regards to the service cost environment. I had heard early in the year from many operators with a lot of confidence that unit and service cost is low for the foreseeable future. I have heard a couple operators as they look to a 2021 plan starting to bake in a little bit of inflation. I was wondering where you came down on that question.
Yeah. Noel, I don't disagree with that. I think what we're going to see is operators trying to be as efficient with their capital in any one given calendar year. You're going to see a lot of activity in the first part of the year that quickly dies off, which is also why we're looking at increasing or speeding up our activity before the first of the year. If you notice on our 10-Q, we guided to a slightly higher capital than what we guided to for the last three quarters. The reason for that is that we want to take advantage of the pricing at the end of the year before the service companies get busy in 2021. Does that make sense?
Sure does. Great. Thanks a ton.
We had a question come in. Hang on. Noel, are you still there? Okay.
Noel is back on the line.
No, thanks. My questions have all been answered. Thank you very much.
Noel, you asked a question, but I want to make sure we're answering it accurately.
Oh, okay.
Daniel, my Finance Director, wants to clear up one of the answers, so go ahead, Daniel.
Hey, Noel, good morning. How are you?
Hi. Great, thanks.
You were asking about hedging, and it sounded like you were asking about opportunities in the market that we're seeing right now in Q4. That's how Rich answered, just mentioning that we do see opportunities and there is room to add on more hedge volume. Were you asking about Q4, kind of current operations, current activity, or were you talking about hedges we unwound or monetized in Q3?
No, I was wondering if during Q4 you had looked at the hedge book and since we saw oil go a bit lower and devolved, so I just wondered if maybe you had hedged any more basically during the months of October or November so far. I'm sorry, if you had monetized any of your hedges during October or November.
Got you. Okay. Understood. Yeah, just want to make sure we were answering your question correctly. It sounds like we did. Sorry for bringing you back on. Just want to make sure we had that right.
Yeah. Thanks, Noel. Before you go, I just want to thank you also for your write-up and continuing to follow us, so thanks a lot.
You bet. Really interesting story. Excited to see what comes next.
Yep. Thank you.
Thanks. Bye-bye.
I'll now turn the call back over to Richard Little for any additional or closing remarks.
Okay, thank you. Again, I want to thank the people listening for their interest in Battalion Oil. These, no doubt, continue to be very challenging and uncertain times, we remain laser-focused on reducing costs and finding strategic ways to increase scope and scale while returning value to our shareholders. We look forward to speaking again. Thank you.
This does conclude today's call. We thank you for your participation. You may now disconnect.