Welcome to the Italian 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.
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 Vitalant's Chief Executive Officer, Richard Little. Mr. Little, you may begin.
Thank you, and thanks for joining Vitalient's Q3 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 17, Battalion announced the appointment of Kevin Andrews to replace its CFO, Reagan Altheizer, who decided to retire from the oil and gas industry. Again, I want to thank Reagan 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 3rd quarter is much of a recovery, but as prices improved modestly from the 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 Q3 was $39,800,000 of which 84% related to crude oil. And realized gains on derivative settlements totaled $5,300,000 for the Q3. We remain laser focused on cost reductions.
In 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 and A was $2.09 per BOE in the Q3 of 2020 compared to $4.92 per BOE in the Q3 of 2019. And lease operating workover expense was $7 per BOE in the Q3 of 2020 versus an $8.91 per BOE in the Q3 of 2019. The only answer to lower prices is even lower OpEx and our team is adept to finding ways to keep saving money.
I want to thank them for all their hard work. The company reported a net loss to common shareholders for the Q3 of $153,000,000 which includes a full cost ceiling test impairment of $128,000,000 which is associated almost entirely with a significant drop in the SEC trailing 12 month oil price deck. Italian also reported a net loss per basic and diluted share of $9.45 and adjusted trailing 12 month EBITDA of $93,900,000 as compared to $61,600,000 in the Q3 of 2019 or 50% growth over the prior period. This quarter, we continue to keep leverage below 2 times, affording us a flexible position to evaluate the optimum path forward. Our PDP remains well hedged through the first half of twenty twenty two between $45.50 per barrel and the September 30 mark to market value of $16,000,000 We recently completed our fall redetermination process and I'm encouraged by the results.
While other companies have seen their facilities substantially cut, we work with BMO to achieve a borrowing base of $190,000,000 which is slightly higher than the $185,000,000 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 and 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. I will turn it over to the operator now for questions.
Thank And we'll take a question from Noelle Park with Coker and Palmer. Please go ahead.
Good morning.
Good morning, Noel.
Just wanted to check, you did talk about some of the hedge monetization, and we've had so much variability volatility in oil prices just in the last couple of weeks again. In Q4 so far, have you monetized any of hedge book since the January quarter?
Yes. No. Matter of fact, we're seeing the opportunity is 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.
And because of that, we want to protect those volumes as well with more hedges.
Great. And I think I might have missed what you were saying about the borrowing. Can you just go through that again with the checking of the determination?
Sure. Happy to. So we were we were originally back in May at a 200 with a plan to step down to 185 by November. And we look through our redetermination our fall redetermination and felt the and the banks agreed that the value was there to not have to step down to 185,000,000 and hold it at 190,000,000. Dollars So we'll do that a lot through the next predetermination.
So that's the $5,000,000 improvement from where we were. Does that make sense?
Great. And as far as the pricing, is there any changes on the pricing rate for the 3rd segment change?
No, not at all.
Okay, great. Let me see. Yes, I guess just in general, we've seen a popular question you gave of adjacently management. We've seen a good bit more kind of activity going on. I don't know if you've seen some bolt on activity as well.
So 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? Yes. No, good question. I still think, as I think others
do as well, that it makes a lot of sense for the microcaps to consolidate. So we continue to stay active in that space, and we'll try to be involved in whatever happens in that space. Obviously, we are always going to try to do responsible M and 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. 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. So no, I think what's happening in our space should be expected and should be expected to continue.
Right. And generally, whenever we hear about deals and just what people are facing them for evaluation standpoint, A lot of times, it's pretty clear that people are only willing to pay for PD at most. And so I was wondering about sort of 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. So I guess I'd want your thoughts on a more PBT heavy acquisition as opposed to maybe one that had more running room? And also, if there's anything that could entice you over to the Midland side of the basin that you could
envision? No. Sorry, question again about the Midland Basin. You cut out.
Sorry. I was wondering if there was anything you could envision enticing you to look in the Midland Basin as well.
Okay. Yes. So
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, but I think what that does is make 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.
This team has extensive experience. We've talked about it on previous calls with experience in the Midland Basin as well. So we don't shy away from that either. So we do see opportunities and synergies that can be created in the Permian Basin, including Delaware and Midland.
Great. And just the last one for me, regards to the service cost environment. I had heard early in the year from many operators a lot of confidence that we're going to see service cost this low for the foreseeable future. But I have heard a couple operators as they look to a 2021 plan starting to bake a little bit of inflation. I just wondered where you came down on that question.
Yes. So no, I don't disagree with that. I think what we're going to see is operators trying to be as efficient with their capital at any one given calendar year. You're going to see a lot of activity in the 1st part of the year that quickly dies off, which is also why we're looking at increasing our or speeding up our activity before the 1st of the year. If you noticed in our 10 Q, we guided to a slightly higher than what we've guided to for the last three quarters.
And the reason for that is that we want to take advantage
of the pricing at the end
of the year before we get before the service companies get busy in 2021. Does that make sense?
Sure, Larry.
We had a question come in. Hang on. Noel, are you still there? Okay.
Noel is back on the line.
Noel, thanks. My questions are all have all been answered. Thank you so much.
Noel, you asked the question, but I want to make sure we're answering it accurately. So I'm going to say, Javier, my Finance Director, wants to clear up on the answers. So go ahead, Javier.
Hey, Noel. Good morning. How are
you? Great. Thanks.
Hey, you're asking about hedging, and it sounded like you were asking about opportunities in the market that we're seeing right now in Q4. And that's how Rich answered, just mentioned 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 monetize 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 devalued. So I just wondered maybe if you had hedged very low basically during the month of October or November so far. I'm sorry, if you had monetized any of your hedges during October, November.
Got you.
Okay. Understood. Yes, I just want to make sure
we were answering your question correctly, and it sounds like we did. So sorry for
bringing you back on, but just
want to make sure we had that right. Yes. Thanks, Noah. Before you go, I just
want to
thank you also for your write up and continuing to follow-up. So thanks a lot.
You bet. More interesting story. Excited to see what comes next. Yes. Thank you.
Thanks. Bye bye.
And I'll now turn the call back over to Richard Little for any additional or closing remarks.
Okay. Thank you. And again, I want to thank the people listening for their interest in the Stallion Oil. These no doubt continue to be very challenging in uncertain times, but we remain laser focused on reducing costs and finding strategic ways to increase scope and scale while returning value to our shareholders. So we look forward to speaking again.
Thank you.
And this does conclude today's call. We thank you for your participation. You may now disconnect.