As of December 31, 2022 and 2021, the Company’s debt consisted of the following (in thousands):

(1)	As of December 31, 2022, amount primarily reflects amortization payments of $35.0 million under the Amended Term Loan Agreement due within one year. As of December 31, 2021, amount represents the balance owed under the Paycheck Protection Program Loan.

(2)

Amounts primarily reflect unamortized debt issuance costs of approximately $13.0 million and $14.2 million at December 31, 2022 and December 31, 2021, respectively, but also include amounts associated with an embedded derivative separately presented and further described in Note 6. Fair Value Measurements. For the years ended December 31, 2022 and 2021, we recorded approximately $5.4 million and $0.4 million, respectively, in interest expense reflecting the amortization/accretion of these amounts.

Term Loan Credit Facility

On November 24, 2021, the Company and its wholly owned subsidiary, Halcón Holdings, LLC (Borrower) entered into an Amended and Restated Senior Secured Credit Agreement (Term Loan Agreement) with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders. The Term Loan Agreement amended and restated in its entirety the senior secured revolving credit agreement, as amended, (the Senior Credit Agreement) entered into in 2019.

On November 14, 2022, the Company paid approximately $2.4 million and entered into a further Amended Credit Agreement (the “Amended Term Loan Agreement”) with its lenders which modified certain provisions of its original Term Loan Agreement including, but not limited to, the following:

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Current Ratio. Our Current Ratio financial covenant decreased to 0.90 to 1.00 as of September 30, 2022, to 0.70 to 1.00 for the quarter ended December 31, 2022, and to 0.75 to 1.00 for the quarter ended March 31, 2023, returning to 1.00 to 1.00 for the quarter ended June 30, 2023 and for each fiscal quarter thereafter as further described below.

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Interest Rate. We converted our benchmark interest rate from LIBOR to a Secured Overnight Financing Rate (SOFR) plus 0.15% and increased the applicable margin on borrowings by 0.50%, such that borrowings under

the Amended Term Loan Agreement will now bear interest at a rate per annum equal to the SOFR benchmark rate plus 7.65%.

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Prepayment Premium. We reset the prepayment periods (for outstanding borrowings) beginning on the amendment date with the following prepayment premiums, subject to the conditions described in the table and further discussion below:


Period (after amendment date)			Premium
Months 0 - 12			Make-whole amount equal to 12 months of interest plus 2.00%
Months 13 - 24			2.00%
Thereafter			0.00%

In the following scenarios, our prepayment premiums would differ from those noted in the table above: (i) if within 6 months after the November 14, 2022 amendment date the Company raises a minimum of $20 million of new capital in the form of equity, equity-linked, preferred equity, or unsecured debt, in all cases bearing no cash dividend or cash interest, to bolster liquidity or repay debt, our prepayment premiums will reset to those in the original Term Loan Agreement, or (ii) if a change of control results in prepayment within the second anniversary of the amendment date, a 2% payment premium will apply.

As of December 31, 2022, we had $235.0 million of indebtedness outstanding and approximately $1.4 million of letters of credit outstanding under the Amended Term Loan Agreement. An additional $3.6 million is available for the issuance of letters of credit. We have a variable interest rate on our borrowings based on SOFR subsequent to the November 2022 amendment (LIBOR prior to the amendment) plus an applicable margin of 7.5%. The weighted average interest rate on our borrowings for the year ended December 31, 2022 was approximately 9.1%. The maturity date of the Amended Term Loan Agreement is November 24, 2025.

The Company may be required to make mandatory prepayments of the loans under the Amended Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales, or with excess cash on hand in excess of certain maximum levels beginning in 2023. For each fiscal quarter after January 1, 2023, the Company shall make mandatory prepayments when the Consolidated Cash Balance, as defined in the Amended Term Loan Agreement, exceeds $20.0 million. Until December 31, 2024, the forecasted approved plan of development (APOD) capital expenditures for the succeeding fiscal quarter are excluded for purposes of determining the Consolidated Cash Balance.

The Company is required to make scheduled amortization payments in the aggregate amount of $120.0 million from the fiscal quarter ending March 31, 2023 through the fiscal quarter ending September 30, 2025. Amounts outstanding under the Amended 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. As part of the Amended Term Loan Agreement there are certain restrictions on the transfer of assets, including cash, to Battalion from the guarantor subsidiaries.

The Amended Term Loan Agreement also contains certain financial covenants (as defined), including the maintenance of the following ratios;

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an Asset Coverage Ratio of not less than 1.80 to 1.00 as of December 31, 2022 and each fiscal quarter thereafter;

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Total Net Leverage Ratio of not greater than 3.00 to 1.00 as of December 31, 2022, 2.75 to 1.00 as of March 31, 2023 and 2.50 to 1.00 as of each fiscal quarter thereafter; and

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a Current Ratio of not less than 1.00 to 1.00, each determined as of the last day of any fiscal quarter period, other than as amended in November 2022 to 0.70 to 1.00 as of December 31, 2022, and to 0.75 to 1.00 as of March 31, 2023.

As of December 31, 2022, the Company was in compliance with the financial covenants under the Amended Term Loan Agreement.

The Amended Term Loan Agreement also contains an APOD for the Company’s Monument Draw acreage through the drilling and completion of certain wells. The Amended Term Loan Agreement contains a proved developed producing production test and an APOD economic test which the Company must maintain compliance with; otherwise, subject to any available remedies or waivers, the Company is required to immediately cease making expenditures in respect of the APOD other than any expenditures deemed necessary by the Company in respect of no more than six additional APOD wells.

The Amended 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.

In conjunction with the Term Loan Agreement, the Company agreed to pay a premium to the lenders upon a future change of control event in which a majority of the board of directors or the Chief Executive Officer or the Chief Financial Officer positions do not remain held by the same persons as before the change of control event (Change of Control Call Option). The premium is reduced over time through the payment of interest and certain fees. The Company determined that the Change of Control Call Option was an embedded derivative, concluded the embedded derivative was not clearly and closely related to the host debt instrument, and recorded the fair value separately on the consolidated balance sheet within “Other noncurrent liabilities.” The Change of Control Call Option will be subsequently remeasured at fair value each reporting period with fair value changes recorded in “Interest expense and other” on the consolidated statements of operations. Refer to Note 6, “Fair Value Measurements,” for a discussion of the valuation approach used, the significant inputs to the valuation, and for a reconciliation of the change in fair value of the Change of Control Call Option.

Debt Maturities

Aggregate maturities required on debt at December 31, 2022 due in future years are as follows (in thousands):


2023	$	35,067
2024		50,067
2025		150,056
Total	$	235,190