Amplify Energy Corp. Price & Performance (AMPY)

Good morning, and welcome to the Amplify Energy conference call to discuss operating and financial results for the fourth quarter of twenty twenty four. Before we get started, we would like to remind you that some of our remarks may contain forward looking statements, which reflect management's current views of future events and are subject to various risks, uncertainties, expectations and assumptions. Although management believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurances that such expectations will prove to be correct and undertakes no obligation and does not intend to update these forward looking statements to reflect events or circumstances occurring after this earnings call. Please refer to our press release and SEC filings for a list of factors that may cause actual results to differ materially from those in the forward looking statements made during this call. In addition, the unaudited financial information that will be highlighted here is derived from our internal financial books, records and reports. For additional detailed disclosure, we encourage you to read our Form 10 ks, which was filed yesterday afternoon, and our definitive proxy statement regarding the Juniper acquisition, which was filed on 03/04/2025. Also, non GAAP financial measures may be disclosed during this call.

Reconciliations of those measures to comparable GAAP measures may be found in our earnings release or on our website at www.amplifyenergy.com. During the call, Martin Wilshire, Amplify's President and Chief Executive Officer, will provide an update regarding our strategic initiatives, including our announced transaction with Juniper, two recent deals in East Texas and an overview of our activities at Beta. Next, Dan Furby, Senior Vice President and Chief Operating Officer, will provide an overview of fourth quarter operational performance and provide a preview of 2025 activities. Following that, I will discuss fourth quarter financial results, provide an update on our balance sheet and liquidity and provide additional details on our hedge book. Finally, Martin will provide final thoughts before opening the call up for questions. With that, I will hand it over to Martin.

Thank you, Jim. I'd like to start with an update on our recently announced transaction with certain portfolio companies of Juniper Capital, discuss our recent Hainesville transactions in East Texas and provide an update on our key development activity at Beta. On 01/15/2025, Imply announced that it entered into a definitive merger agreement with privately held Juniper Capital to combine with certain of its portfolio companies owning oil weighted assets and leasehold interest in the DJ And Powder River Basins. We're extremely excited about this deal and believe it is an important step in our strategic development. The deal provides numerous benefits to the organization by increasing our scale and operating margins, expanding our inventory of attractive drilling locations and providing us with a new core area for potential M and A activity. In regards to scale and upside, using flat pricing of $70 per barrel for oil and $3.5 for natural gas, year end 2024 proved developed reserves for these assets are 18,000,000 barrels of oil equivalent with a PV-ten value of approximately $335,000,000 and total proved reserves are 50,000,000 barrels of oil equivalent with a combined PV10 value of $614,000,000 Amplify believes there is additional upside potential on the expansive acreage position, which is comprised of approximately 287,000 net acres and adjacent to some of the largest publicly traded U. S. Oil companies.

The Juniper transaction is also expected to provide substantial synergies from an overhead and tax perspective with an expected G and A increase of approximately $1,000,000 versus $7,000,000 to $8,000,000 for the existing portfolio companies and tax synergies from the stepped up tax basis of the acquired companies. With the combined impact of the asset cash flows and deal synergies, we expect the transaction to increase significantly accretive to free cash flow in 2025 and over a five year time horizon. The large acreage position and operating footprint in these premier Rocky Mountain basins also provide the company with a new core area for future consolidation opportunities with the potential for accretive bolt on acquisitions from small private companies or non core assets of larger operators. Additionally, the more broadly scaled pro form a asset base will afford Amplify flexibility to consider portfolio rationalization opportunities to improve operational focus and manage cash flow. Finally, the transaction has the added benefit of bringing on a new long term partner in Juniper Capital, who has demonstrated a strong track record of delivering substantial value to their stakeholders. We anticipate the Juniper transaction will close in the second quarter of twenty twenty five.

In addition to the Juniper transaction, the Amplify team has recently closed on two separate transactions in East Texas, allowing the company to bring forward value associated with our Haynesville acreage. Between the two transactions, Amplify generated 7,600,000 in net proceeds, while retaining an overriding royalty interest in the properties with a 10% non operated working interest in future development. We believe the acreage conveyed has over 30 undeveloped tangible locations with compelling economics. Although smaller in scope, these deals demonstrate management's commitment to creatively realizing value associated with our more mature assets. At Beta, we intend to build up the successes of the 2024 development program. The first two wells we brought online, the A50 and the C59, continue to perform above our pre drill type curves with IRRs in excess of 100%. Based on this, we were able to add 23 additional PUD locations to our year end reserves with a PV10 value of approximately $180,000,000 with a $70 flat WTI price for oil. In 2025, we plan to complete six additional beta wells, which includes the C48 and the A45 that were deferred from the 2024 program. While we are currently planning for five wells per year in 2026 and beyond, with continued success from the 2025 program, we will have the flexibility to accelerate drilling in future years to capture incremental value from this enormous resource.

In summary, our accomplishments in 2024 have provided strong foundation for the future success of Amplify and we intend to build up that success with our strategic initiatives in 2025. The completion of the Juniper transaction will provide substantial upside and scale to the organization and complement the outstanding development potential of the beta asset. We also intend to remain focused on maximizing the value of our existing asset base through accretive capital projects, cost reduction efforts and the evaluation of portfolio optimization opportunities. With that, I will hand it over to Dan.

Thank you, Martin. During the fourth quarter of twenty twenty four, average daily production was approximately 18.5 MBOE per day, a decrease of 0.5 MBOE per day from the prior quarter. Production was impacted primarily by gas volumes mostly in East Texas due to purchaser interruptions and residue gas realizations after processing, which resulted in higher NGL realization as a percentage of our total production. Oil volumes were incrementally higher from the previous quarter despite platform shutdowns at beta early in the quarter following the completion of the emission reduction and electrification facility projects and 10 ESP failures in the fourth quarter of beta, which significantly impacted our base production. The multi year electrification and emissions reduction project has now been completed and all of the failed wells have had ESPs replaced by the January 2025. And we are projecting beta production to be significantly higher in the fourth quarter for the impact of the 2025 drilling program. As of 03/02/2025, our current seven day average production rates at beta was 4,834 gross or 3,635 net barrels oil per day with minimal contribution from the recently completed C48 well, which we continue to draw down since completing in mid February.

Our current production rates at Beta represent an approximate 9% increase from fourth quarter twenty twenty four volumes. Our production commodity mix for the quarter was 45% oil, 17% NGL and 38% natural gas. Looking forward to 2025, our production guidance range is 19,000 to 21,000 barreled oil equipment per day. The midpoint of our oil production guidance represents a 7% increase from 2024 oil production, driven by our development of data, which is projected to more than offset the natural oil decline of our base assets. For the fourth quarter, lease operating expenses were approximately $35,100,000 a $1,800,000 increase in the prior quarter. The 5% increase in LOE from the prior quarter was mostly driven by the additional unfanned workovers at Beta due to the failed ESPs. With those wells now back online, Amplify expects those costs to normalize. These operating expenses for the fourth quarter also do not reflect $900,000 of income generated by Magnify Energy Services. Continue improving our cost structure throughout 2025 and are guiding lease operating expense to a midpoint of $143,000,000 which is approximately flat when compared to 2024 despite expected increases in total production and cost pressures we are seeing from electric utility rates at fair oil, which represent a large portion of our total oil release.

We are also guiding Magnify EBITDA to a midpoint of 5,000,000 in 2025, up from $3,000,000 of EBITDA generated in 2024. The company's total capital investment for the fourth quarter was $15,300,000 Approximately $10,000,000 of this capital was invested at Beta in our development drilling program and the completion of electrification and emission reduction facility project. The remaining capital was invested in non operated drilling in the Eagle Ford and East Texas as well as various capital workovers and facility projects across our assets. Our 2025 capital program is budgeted to be between $70,000,000 and $80,000,000 The majority of our capital will be invested in beta with $30,000,000 allocated to development program and additional capital to further upgrade our drilling rigs. In 2024, we completed two wells with excellent results, which increased overall beta production by approximately 15%. Based on these results, we intend to complete six wells in 2025 with high expectations of production growth. The C48 well, the first of the six wells to be completed in 2025, was drilled in the fourth quarter of twenty twenty four and completed in mid February due to equipment availability issues. The C48 is our first horizontal completion in the SeaSant.

Similar to the A50 and C59 wells drilled in 2024, the completion of the C48 well was initially designed to target the Sea Sand. However, drilling conditions encountered in the Sea Sand and the attractive geologic characteristics observed in the laws of the Sea Sand led to the decision to complete the well as a CSAN producer. We are currently drawing the well down and we'll share the details of this production when we have at least a month of production data. The remaining five completions in 2025 are planned as DSAN wells. However, we always have the option to complete any of the A through D sand formations in this Sac Pei Reservoir based upon the log data we acquire while drilling. The planned 2025 completion also includes the 8.15 well, which was the first well spotted in our drilling program at Beta in early twenty twenty four, but was deferred due to equipment problems leading to wellbore instability issues. Capital cost for the new wells in the 2025 program is estimated to be between $5,000,000 to $6,000,000 per well. And like the A50 and C59 wells drilled in 2024, we expect quick paybacks and rates of return of approximately 100%.

We have laid out some economic results to date of the A50 and C59 wells in the investor presentation available on Amplify website and the type curve for the wells we plan to complete in 2025. Our updated investor presentation also includes a map of our next 25 planned locations at data. This map represents the locations we currently have classified as pipes. However, based upon the estimated ultimate recovery of the field using original oil in place calculation and analogous field recovery factors, there will likely be additional development location after the completion of the initial 25 wells, which our technical team is continually evaluating. In addition to the development drilling at Beta, we also have capital allocated for facility investments with the largest component of this capital being an estimated $8,000,000 to upgrade a two mile pipeline that ships all produced fluid from platform urethra to platform l e. We perform extensive mechanical integrity test in each year to our critical equipment and pipelines and take a proactive approach to upgrade any equipment that our internal and external experts need necessary. Our 2025 budget includes an estimated $12,000,000 to $15,000,000 in the participation of very attractive non op drilling alongside experienced operators in both our East Texas and Eagle Ford position.

In East Texas, we are participating in the completion of four non op development wells, two Cotton Valley and two Haynesville, in which we have a 25% to 30% working interest. We expect these wells to be completed and online by mid year. In the Eagleburg, we are participating in 14 gross 0.7 net new development wells and two gross 0.4 net recompletion projects, all of which are scheduled to be completed in the first half of twenty twenty five. The majority of the remainder of our 2025 capital will be invested in active capital workover programs in Oklahoma, East Texas and Bairoil, which includes artificial lift conversions, recomplete and well reactivation, as well as facility upgrade projects primarily in Bairoil and additional investments in Magnify Energy Services. Some of the facility projects at Bear Oil are intended to improve the sufficiencies at our CO2 plant, which will reduce our power usage, resulting in an expected savings of over $500,000 per month starting in the second half of twenty twenty five. We expect these savings to persist in the following years, significantly increasing the profitability at Barrowave. In regards to Magnify, we intend to invest $1,400,000 in additional company owned compressors, vacuum trucks and other ancillary oilfield service equipment.

Since its conception in late twenty twenty three, Magnify generated 3,700,000 of adjusted EBITDA with a capital investment of only $1,700,000 We expect Magnify to generate approximately $5,000,000 of EBITDA in 2025 with a run rate EBITDA of approximately $6,000,000 by year end with an anticipated total cumulative investment of only approximately $3,000,000 In addition to the cash flow generation potential magnified, this business line is extremely valuable to amplify as it allows us to more efficiently operate and manage our mature asset base in Texas and Oklahoma. In regards to the Juniper assets, Juniper is currently drilling a two well pad in the DJ Basin and we anticipate fracking these wells sometime in the second quarter. We are currently working with the Juniper team to evaluate the potential for additional development in both the DJ and Powder River Basins in the second half of twenty twenty five and looking forward to 2026. With that, I will turn it over to Jim.

Thank you, Dan. I would now like to discuss the following items: fourth quarter financial performance, balance sheet and liquidity and hedging. With respect to fourth quarter financial performance, the company reported a net loss of approximately $7,400,000 compared to $22,700,000 of net income in the prior quarter. The change was primarily attributable to a non cash unrealized loss on commodity derivatives in the fourth quarter compared to an unrealized gain in the prior quarter. Excluding the impact of unrealized loss on commodity derivatives, in addition to other one time impacts, adjusted net income was $5,100,000 for the fourth quarter. For the year, net income was $13,000,000 and adjusted net income was $35,800,000 Adjusted net income was up 48% in 2024 compared to 2023. Fourth quarter adjusted EBITDA was $21,800,000 which was slightly below expectations. As Dan mentioned, we had some unexpected downtime at Beta due to increased well failures that reduced production and increased workover costs. However, we now have those wells back online and production has increased. Full year adjusted EBITDA was $103,000,000 in line with our guidance and up 17% compared to 2023. In total, fourth quarter lease offering expenses were approximately $35,100,000 which was in line with expectations.

As I just mentioned, we did have higher LOE at beta due to an increase in expense workovers. However, that was offset by lower LOE at Fair Oil due to a one time benefit as the result of an accounting adjustment. For the year, total LOE was $143,000,000 or $19.95 per BOE, which was in line with our guidance. With respect to other costs, fourth quarter GPT costs were $4,500,000 or $2.62 per BOE, while production taxes were $5,400,000 or 8% of oil and gas revenue. Cash G and A in the fourth quarter was $6,300,000 and we incurred $3,700,000 of interest expense. GPT, production taxes, cash G and A and interest expense were all in line with expectations. With respect to capital, Amplify invested $15,300,000 in the fourth quarter, which was slightly higher than expectations. The company's capital allocation was approximately 65% for the beta facility projects and development drilling with the remainder distributed across the company's other assets. Free cash flow, defined as adjusted EBITDA less CapEx and cash interest expense, was $2,900,000 for the fourth quarter of twenty twenty four. Amplify has now generated positive free cash flow for ten consecutive quarters, illustrating the strong, sustainable cash generating potential of our mature diversified asset base.

As of December 31, Amplify had $127,000,000 of debt outstanding under its revolving credit facility. Fourth quarter net debt increased from the prior quarter due to expected changes in working capital and increased development activity, primarily at beta. At year end, the company's net debt to last twelve months adjusted EBITDA was 1.2 times. As a result of the announced transaction with Juniper Capital, Amplify is currently working on integrating the newly acquired Rockies assets into the Amplify organization. Furthermore, the company is pursuing additional financing in connection with the transaction prior to close. Amplify intends to update the market with developments on the transaction as they progress. Recently, Amplify took advantage of volatility in the market to add to our hedge position, further protecting future cash flows. Amplify executed crude oil swaps covering the second half of twenty twenty five through year end 2026 at an average price of $68.1 per barrel. We also added natural gas collars for a portion of 2027 with a weighted average floor of $3.63 per MMBtu and a weighted average ceiling of $3.98 per MMBtu. As of March 5, our forecasted PDP crude oil production was approximately 70% to 75% hedged for 2025 and twenty five percent to 30% hedged in 2026.

On the gas side, our forecasted PDP production is hedged 85% to 90% for 2025 and 2026 and fifteen percent to 20% hedged in 2027. We will continue monitoring the market and we will look for opportunities to add to our strong hedge positions. And with that, I'll turn the call back to Martin.

Thank you, Jim. Yesterday, we provided a standalone operational and financial guidance for Amplify in 2025. Following the close of the Juniper transaction, we will update guidance for the combined company. As noted in our press release, we have provided additional information about the Juniper assets in our 2025 beta development plan in our latest investor presentation available on our Investor Relations website. As we look ahead, we are excited about Amplify's future. Amplify remains committed to exploiting the long term value potential of the beta field and we anticipate strong growth for oil production from the area in 2025. This enthusiasm is warranted by the strong results from the A50 and C59 wells, which have breakeven prices below $35 per barrel and compare favorably to the economics of the best oil development plays in the country. The successful closing of the Juniper transaction anticipated in the second quarter will provide substantial benefits to the company and creates the flexibility to consider a range of value maximizing opportunities for our existing assets. In summary, our team is excited for the opportunities in front of us, and we believe we have all the elements in place to make 2025 a very successful year for the company and its stakeholders.

With that, operator, we are now open for And our first question today will come from Jeff Grampp with Alliance Global Partners. I want to start first in beta. I want to dig in on this CSAN versus DSAN kind of dynamic with the upcoming well result. Can you give us a little bit of context, I guess, like how much legacy development or production is derived from the seasan? How productive is that across the acreage position? And also wondering if we should be adjusting our expectations for well performance at all on this upcoming well relative to the first couple of well results in the type curve data that we have out there? Thanks.

Hey, Jeff. This is Dan. Sea sand historical development versus Sea sand, so going back in history, majority of all these wells are drilled in the 80s by Shell and they were drilled as more or less vertical wells. As we talked about before, cutting through all sands A through D, even some through A through F, and all productions comingled. So C and D sand performance in terms of a standalone horizontal well, like we drilled in flat two D sand wells horizontally, not a lot of data to go off of. Our type curves were derived off of volumetrics and some other reservoir calculations. That's how we did the desan. The seasan results, we expect good results. The reservoir looks good. Like we said, we completed well a couple of weeks ago. These wells typically take a couple of weeks. You flow back water for a while, then you start seeing oil cut and then you draw down the pressure, the oil increases over time. So we're currently drawing down the pressure. We see a good oil cut right now. And in terms of expectation of the C versus the D sand, like I said, there's not analog wells to golf of a standalone C horizontal versus D horizontal either.

But the reservoir characteristics of the C versus the D is not as good, but we still expect that the C sound will be an attractive target that will yield good results across the field.

Great. Thanks. That's really helpful. And my follow-up, for the planned new drills for this year, can you give us a flavor of how much of a step out are these relative to the prior wells we've drilled? Or are we going into new fault blocks? Are we just kind of offsetting areas that have been kind of proven already? Or what's kind of the, I guess, risk appetite for offset wells versus kind of jumping into new fault blocks?

Yes. Low risk compared to what we've done so far, the two wells we brought on the DSAM A50 and C59, each of those were drilled in the two main fault blocks we're targeting. So, we call it the main fault block and our southern fault block. The first well we're drilling that we're spotting here very soon will be in the same fault block as the C59 and expect to be very low risk in terms of the reservoir and the quality. And then the Bostar well will be in that fault block or what we call the main fault blocks where the A50 is and a lot of well results there as well. So we do not see these as step outs from what we've done so far. And we'll move to our next question from Subhash Chandra with Benchmark.

Is there oil price where you might review your 25 CapEx plan?

Hey, good morning Subhash. This is Martin. I think obviously we've seen a lot of volatility in the oil price. I mean, I think six weeks ago it was north of $75 a barrel and now it's $66 60 7 dollars a barrel. So with our beta development specifically, I think we're still comfortable on that price range. But obviously if prices were to continue to go down from a free cash flow management perspective, we'll continue to look at it. We do have a lot of development this year coming online in both the Eagle Ford and East Texas as well, which is the East Texas is obviously gassier. So we wouldn't anticipate any adjustments on those particular projects. So I think as you get into the second half of the year, you maybe kind of take a look at things as prices really continue to go down. But, at present, we're very comfortable with what we have planned, especially with the hedging we have on the oil and gas side for this year.

Okay. And maybe if maybe this is a difficult question to answer, but do you think by the time the deal closes as much stub CapEx from the Juniper portfolio? Or do you think their portfolio is more front end loaded and less in the back half?

So they're currently finishing up the drilling of the two DJ wells that Dan mentioned. I actually expect those we can finish drilling this weekend. From there, we expect to complete those on after the merger closes sometime kind of the second half of the second quarter. From there, we obviously have the flexibility on what we will do for the remainder of 2025 and 2026. Luckily, there's not a lot of near term lease issues, some things that we want to consider in the DJ specifically. But for the most part that acreage position is either held by production or long term leases. So we have a lot of flexibility there in terms of what we would want to do from a drilling perspective. And certainly, we're going to consider that as we put together the plan for the remainder of 'twenty five and or the plan to kind of get going in 'twenty six.

Okay. Thanks. Yes, I guess, and finally, the Magnify twenty five outlook, that's a stand alone, not a pro form a outlook. But what do you think the potential is for Magnify with the Juniper assets, if any?

So, it's definitely something we'll start looking at. Right now, our Magnify services are limited to East Texas and Oklahoma. It started in East Texas really as a lot of competition for services with some of the Haynesville activity, especially the Haynesville moving our way. And we found it better to bring that stuff in house. We saw compressor rates going up. We saw swab grades going up, slick line units, all those different items. So we delved into it there. And yes, you're right, we're not expanding beyond Oklahoma and East Texas in our budget currently. But I think this year we'll take a hard look at the entire Wyoming area we have now with kind of that region being the Powder DJ and or their oil asset up there. We kind of have a large aggregate of assets in one area and see something we'll be looking at for Magnify.

And it appears we have no further questions at this time. I will now turn the program back to our presenters for closing remarks.

Great. Thank you. Before Before I get to my final remarks, I do want to touch on one question I received earlier and make sure that it was it's clear. Regarding the A45, we've deferred that from Q4. One of the reasons or the key reason is that our development program this year is going to be Eureka weighted. So A45 was drilled off the Ellen platform. And so the next three wells that we'll be drilling in the 2025 Ellen Perm are all off Eureka. There is it does take a little bit of time and money to switch from Eureka to Ellen. And so the reason why that well, while we went ahead and finished the C48, the A45 will be later in the year because we're going to drill off Eureka for the first call it two, three quarters of the year and then move to Ellen later in the year. So that was one clarification I wanted to provide on the 25 beta development program. With that, I'd just like to to express my appreciation to all of our employees for their outstanding efforts and dedication this year, as well as the continued support of our stakeholders.

We really appreciate you participating in the call today. And as always, if you have follow-up questions, please reach out to us directly. Thank you.

This does conclude today's Amplify Energy's investor conference call. Thank you for your participation. You may now disconnect.