Amplify Energy (AMPY) - 2024 Q3 - Quarterly Results

Executive Summary Key Highlights Amplify Energy reported strong Q3 2024 operating and financial results, with Beta development exceeding projections and increased liquidity - Achieved average total production of 19.0 MBoepd in Q3 2024[1] - Drilled and completed the C59 development well at Beta, achieving an IP30 oil rate of approximately 590 Bopd (gross), exceeding Company projections[1] - Completed semi-annual borrowing base redetermination, increasing liquidity by $10.0 million to $145.0 million[1] Q3 2024 Key Financial Highlights | Metric | Q3 2024 (Millions) | | :---------------------------------- | :------------------ | | Net cash provided by operating activities | $15.7 | | Net income | $22.7 | | Adjusted EBITDA | $25.5 | | Free cash flow | $3.6 | CEO Commentary Martyn Willsher highlighted strong operating and financial performance, particularly the successful Beta development program, expressing confidence in future inventory and retaining Wyoming assets - The C59 well's 30-day IP rate of 590 gross barrels of oil per day exceeded projections, with an expected payout in six to nine months[1] - Company is in the process of completing the C48 well at Beta, expected online in mid-November[1] - Decision to retain Wyoming assets to maximize shareholder value in the current commodity price environment, despite evaluating monetization proposals[1] - Expressed confidence in the future inventory and development plan for the Beta field, based on successful drilling from both Ellen and Eureka platforms[1] Financial Performance Overview Key Financial Results Net income significantly increased due to a non-cash unrealized gain on commodity derivatives, while Adjusted EBITDA and free cash flow decreased Key Financial Results (QoQ Comparison) | Metric | Q3 2024 ($ Millions) | Q2 2024 ($ Millions) | Change ($ Millions) | Change (%) | | :------------------ | :------------------- | :------------------- | :------------------ | :--------- | | Net Income | $22.7 | $7.1 | $15.6 | 219.7% | | Adjusted EBITDA | $25.5 | $30.7 | -$5.2 | -16.9% | | Free Cash Flow | $3.6 | $9.2 | -$5.6 | -60.9% | - Increase in net income primarily attributable to a non-cash unrealized gain on commodity derivatives in Q3 2024 compared to an unrealized loss in Q2 2024[2] - Q2 Adjusted EBITDA and Free Cash Flow benefited from a one-time $7.0 million accounting adjustment related to the release of suspense from prior quarters[2] - Amplify has generated positive free cash flow in 17 of the last 18 fiscal quarters[2] Revolving Credit Facility Update Borrowing base redetermination increased elected commitments to $145.0 million, improving net debt to LTM Adjusted EBITDA to 1.1x - Borrowing base and elected commitments under the revolving credit facility increased to $145.0 million[3] - As of September 30, 2024, Amplify had $120.0 million outstanding under its revolving credit facility[3] - Net Debt to LTM Adjusted EBITDA improved to 1.1x from 1.2x quarter-over-quarter[3] Corporate Production and Pricing Average daily production slightly decreased in Q3 2024 due to a prior-period adjustment and planned shut-in, with consistent product mix Corporate Production Volumes (QoQ) | Metric | Q3 2024 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Average daily production (MBoepd) | 19.0 | 20.3 | -1.3 | | Total - MBoe | 1,752 | 1,843 | -91 | | % - Liquids | 60% | 60% | 0% | - Q2 production benefited from a one-time, prior-period accounting adjustment of approximately 1.2 Mboepd[5] - Third quarter production was relatively flat compared to the prior quarter when adjusted for the one-time benefit, despite a planned multi-day shut-in at Beta[5] - Product mix for Q3 2024 was 43% crude oil, 17% NGLs, and 40% natural gas[5] - Total oil, natural gas and NGL revenues for Q3 2024 were approximately $68.1 million before derivatives, with a net gain on commodity derivatives of $6.4 million[7] Production Volumes by Asset Beta field production increased significantly quarter-over-quarter, while other assets like Oklahoma and East Texas/North Louisiana saw decreases Production Volumes by Asset (MBOE) | Asset | Q3 2024 (MBOE) | Q2 2024 (MBOE) | Change (MBOE) | | :------------------------- | :------------- | :------------- | :------------ | | Bairoil | 294 | 301 | -7 | | Beta | 304 | 277 | 27 | | Oklahoma | 454 | 492 | -38 | | East Texas / North Louisiana | 638 | 709 | -71 | | Eagle Ford (Non-op) | 62 | 64 | -2 | | Total | 1,752 | 1,843 | -91 | Average Sales Prices Average realized sales prices for crude oil decreased, while NGLs and natural gas prices saw slight increases quarter-over-quarter Average Sales Price (Exclusive of Realized Derivatives) | Product | Q3 2024 Price | Q2 2024 Price | Change | | :--------- | :------------ | :------------ | :----- | | Crude Oil | $71.74/Bbl | $76.51/Bbl | -$4.77 | | NGLs | $21.63/Bbl | $20.05/Bbl | $1.58 | | Natural Gas| $1.84/Mcf | $1.78/Mcf | $0.06 | Costs and Expenses Total lease operating expenses decreased due to reclassification and optimization, while severance and ad valorem taxes increased Key Costs and Expenses (QoQ) | Expense Category | Q3 2024 ($ Millions) | Q2 2024 ($ Millions) | Change ($ Millions) | | :----------------------------------- | :------------------- | :------------------- | :------------------ | | Lease operating expenses | $33.3 | $36.3 | -$3.0 | | Severance and ad valorem taxes | $6.0 | $4.6 | $1.4 | | Gathering, processing & transportation | $4.3 | $4.9 | -$0.6 | | Cash G&A expenses | $6.2 | $6.6 | -$0.4 | | Depreciation, depletion & amortization | $8.1 | $7.8 | $0.3 | | Net interest expense | $3.8 | $3.6 | $0.2 | | Current income tax expense | $0.4 | $0.6 | -$0.2 | - Approximately $1.2 million of the decrease in lease operating expenses was due to a reclassification of certain expenses to taxes other than income[9] - Severance and ad valorem taxes as a percentage of revenue increased to 8.8% from 6.4% due to the reclassification[9] - Cash G&A expenses decreased primarily due to lower legal fees and are expected to remain at similar levels in Q4[10] Capital Investments Q3 2024 cash capital investment was $18.2 million, with 66% allocated to Beta development, potentially exceeding annual guidance Q3 2024 Capital Investments by Asset | Asset | Q3 2024 Capital ($ MM) | | :------------------------- | :--------------------- | | Bairoil | $1.2 | | Beta | $12.0 | | Oklahoma | $1.5 | | East Texas / North Louisiana | $2.3 | | Eagle Ford (Non-op) | $1.2 | | Magnify Energy Services | $0.0 | | Total Capital Invested | $18.2 | - Approximately 66% of Q3 2024 capital allocation was for Beta development drilling and facility projects[11] - Q4 2024 capital investments are expected to be allocated primarily to the drilling of the C48 development well and non-operated drilling opportunities[11] - Total capital for 2024 is expected to be at or slightly above the high end of the current annual guidance range of $60 to $65 million due to accelerated non-operated development costs[11] Hedging Strategy and Positions Amplify added crude oil hedges for 2025 and 2026 and monetized in-the-money gas hedges to maintain credit facility compliance - Executed crude oil swaps for 2025 and 2026 at weighted-average prices of $69.39 per barrel and $68.12 per barrel, respectively[14] - Monetized a small portion of in-the-money gas hedges to comply with the revolving credit facility[14] Commodity Derivative Contracts (as of Nov 6, 2024) | Contract Type | Metric | 2024 | 2025 | 2026 | | :------------ | :---------------------- | :-------- | :-------- | :-------- | | Natural Gas Swaps | Avg Monthly Volume (MMBtu) | 660,000 | 585,000 | 500,000 | | | Wtd Avg Fixed Price ($) | $3.74 | $3.75 | $3.79 | | Natural Gas Collars | Avg Monthly Volume (MMBtu) | 500,000 | 500,000 | 500,000 | | | Wtd Avg Ceiling Price ($) | $3.97 | $3.90 | $4.06 | | | Wtd Avg Floor Price ($) | $3.50 | $3.50 | $3.55 | | Oil Swaps | Avg Monthly Volume (Bbls) | 83,000 | 118,167 | 47,750 | | | Wtd Avg Fixed Price ($) | $74.34 | $71.09 | $69.76 | | Oil Collars | Avg Monthly Volume (Bbls) | 102,000 | 59,500 | | | | Wtd Avg Ceiling Price ($) | $80.20 | $80.20 | | | | Wtd Avg Floor Price ($) | $70.00 | $70.00 | | Operational Updates Beta Development and Facility Upgrade Amplify successfully drilled the C59 well at Beta, exceeding projections, with the C48 well expected online soon and electrification project completing in Q4 - Successfully drilled the C59 well from the Eureka platform, brought online in early October, achieving an IP-30 oil rate of approximately 590 Bopd[12] - The C48 well is in the process of being completed and is expected to come online in mid-November[12] - The company is refining its long-term development plans at Beta based on initial successes and anticipates communicating these plans in Q1 2025[12] - The final phase of the electrification and emissions reduction project at Beta, involving selective catalytic reducers, is scheduled for completion in Q4 2024[12] Wyoming Assets Monetization Evaluation Amplify evaluated proposals for monetizing its Wyoming assets but decided to retain them to maximize shareholder value in the current commodity price environment - Evaluated several proposals regarding the monetization of Wyoming assets[1] - Decided to retain the assets and continue to benefit from their cash flows, believing this maximizes shareholder value in the current commodity price environment[1] - Remains open to exploring future monetization opportunities as they develop[1] Corporate Information & Disclosures Sustainability Report Amplify Energy issued its second annual sustainability report, providing updated information on its ESG initiatives, practices, and related metrics - Issued its second annual sustainability report, available on www.amplifyenergy.com under the 'Sustainability' tab[4] - The report provides updated information about Amplify's environmental, social and governance ("ESG") initiatives, practices and related metrics[4] About Amplify Energy Amplify Energy Corp. is an independent oil and natural gas company focused on acquisition, development, exploitation, and production across multiple regions - Amplify Energy Corp. is an independent oil and natural gas company[17] - Operations are focused in Oklahoma, the Rockies (Bairoil), federal waters offshore Southern California (Beta), East Texas / North Louisiana, and the Eagle Ford (Non-op)[17] Quarterly Report on Form 10-Q Filing Amplify's detailed financial statements for Q3 2024 will be available in its Quarterly Report on Form 10-Q, expected to be filed with the SEC on November 6, 2024 - Amplify's financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2024[16] - The Form 10-Q is expected to be filed with the SEC on November 6, 2024[16] Conference Call Details Amplify hosted an investor teleconference on November 7, 2024, to discuss Q3 2024 results, with replays available - Amplify hosted an investor teleconference on November 7, 2024, at 10 a.m. Central Time[18] - A telephonic replay will be available for fourteen days, and a transcript and recorded replay will be available on the company's website[18] Forward-Looking Statements This press release contains forward-looking statements subject to various risks and uncertainties, including those related to the Southern California oil incident and commodity price volatility - Statements in the press release that address future activities, events, or developments are forward-looking statements[19] - These statements involve risks and uncertainties, including the impact of the Southern California oil incident, strategic alternatives, borrowing base redetermination, debt obligations, and commodity price volatility[19] - Readers are cautioned not to place undue reliance on these statements and are advised to review the 'Risk Factors' in the Company's SEC filings[19] Use of Non-GAAP Financial Measures The report includes non-GAAP financial measures like Adjusted EBITDA and free cash flow, used by management and external users to assess performance - Non-GAAP financial measures used include Adjusted EBITDA, free cash flow, net debt, and cash G&A[20] - These measures are used by management and external users to assess operating performance, cash generation, and capital structure[21] - Reconciliations to GAAP measures are provided, and non-GAAP measures may not be comparable to similarly titled measures of other companies[20][21] Adjusted EBITDA Definition Adjusted EBITDA is defined as net income adjusted for various non-cash and non-recurring items, used to assess operating performance and cash generation - Adjusted EBITDA is defined as net income (loss) plus various non-cash and non-recurring items, including interest expense, income tax, DD&A, and commodity derivative adjustments[21] - It is used to assess operating performance, ability to generate cash for debt, and viability of projects[21] Free Cash Flow Definition Free cash flow is defined as Adjusted EBITDA less cash interest expense and capital expenditures, indicating success in providing cash return on investment - Free cash flow is defined as Adjusted EBITDA, less cash interest expense and capital expenditures[22] - It is an important non-GAAP measure for investors, indicating the company's success in providing a cash return on investment[22] Net Debt Definition Net debt is defined as the total principal drawn on the revolving credit facility less cash, used to evaluate capital structure and financial leverage - Net debt is defined as the total principal amount drawn on the revolving credit facility less cash and cash equivalents[22] - This measure provides useful additional information to investors to evaluate the Company's capital structure and financial leverage[22] Cash G&A Definition Cash G&A is defined as general and administrative expense, excluding share-based compensation and other non-recurring items, for G&A spend analysis - Cash G&A is defined as general and administrative expense, less share-based compensation expense, acquisition and divestiture costs, bad debt expense, and severance payments[22] - It allows for analysis of G&A spend without regard to share-based compensation and other non-recurring expenses[22] Detailed Financial and Operating Data (Tables) Statements of Operations Data Statements of Operations show a significant increase in net income for Q3 2024, driven by an unrealized gain on commodity derivatives Statements of Operations Data (QoQ) | Metric (Amounts in $000s) | Q3 2024 | Q2 2024 | | :------------------------ | :------ | :------ | | Total Revenues | $69,858 | $79,503 | | Total Costs and Expenses | $37,258 | $65,951 | | Operating Income (loss) | $32,600 | $13,552 | | Net Income (loss) | $22,652 | $7,119 | | Basic and diluted EPS | $0.54 | $0.17 | - Unrealized gain on commodity derivatives was $(18,672) thousand in Q3 2024, compared to $4,905 thousand in Q2 2024, significantly impacting net income[24] - Lease operating expense decreased from $36,311 thousand in Q2 to $33,255 thousand in Q3[24] Operating Statistics Operating statistics show decreased total oil and natural gas sales and production volumes, with varied changes in average sales prices and unit costs Operating Statistics Summary (QoQ) | Metric | Q3 2024 | Q2 2024 | | :-------------------------------------- | :---------- | :---------- | | Total oil and natural gas sales - Unhedged | $68,135 | $72,346 | | Total Production - MBoe | 1,752 | 1,843 | | Total Production - MBoe/d | 19.0 | 20.3 | | Average sales price (Oil - per Bbl) | $71.74 | $76.51 | | Average sales price (NGL - per Bbl) | $20.29 | $18.99 | | Average sales price (Natural gas - per Mcf) | $1.85 | $1.79 | | Lease operating expense - per Boe | $18.98 | $19.70 | | Gathering, processing and transportation - per Boe | $2.45 | $2.66 | Asset Operating Statistics Beta asset showed increased production and decreased lease operating expenses, while other assets generally saw production decreases Production Volumes by Asset (MBOE) (QoQ) | Asset | Q3 2024 (MBOE) | Q2 2024 (MBOE) | | :------------------------- | :------------- | :------------- | | Bairoil | 294 | 301 | | Beta | 304 | 277 | | Oklahoma | 454 | 492 | | East Texas / North Louisiana | 638 | 709 | | Eagle Ford (Non-op) | 62 | 64 | | Total | 1,752 | 1,843 | Lease Operating Expense by Asset ($M) (QoQ) | Asset | Q3 2024 ($M) | Q2 2024 ($M) | | :------------------------- | :----------- | :----------- | | Bairoil | $13,164 | $13,423 | | Beta | $9,520 | $11,889 | | Oklahoma | $3,644 | $3,896 | | East Texas / North Louisiana | $5,592 | $5,386 | | Eagle Ford (Non-op) | $1,335 | $1,717 | | Total | $33,255 | $36,311 | Capital Expenditures by Asset ($M) (QoQ) | Asset | Q3 2024 ($M) | Q2 2024 ($M) | | :------------------------- | :----------- | :----------- | | Bairoil | $1,224 | $3 | | Beta | $12,047 | $15,991 | | Oklahoma | $1,449 | $788 | | East Texas / North Louisiana | $2,303 | $472 | | Eagle Ford (Non-op) | $1,157 | $436 | | Magnify Energy Services | $44 | $314 | | Total | $18,224 | $18,004 | Balance Sheet Data The balance sheet shows increased total assets and shareholders' equity, with cash and cash equivalents decreasing to zero and long-term debt slightly increasing Balance Sheet Data (QoQ) | Metric (Amounts in $000s) | Sep 30, 2024 | Jun 30, 2024 | | :------------------------ | :----------- | :----------- | | Cash and Cash Equivalents | $0 | $502 | | Total Current Assets | $70,157 | $62,018 | | Total Assets | $739,216 | $720,375 | | Total Current Liabilities | $66,168 | $73,516 | | Long-term Debt | $120,000 | $118,000 | | Total Liabilities | $324,546 | $330,086 | | Total Shareholders' Equity| $414,670 | $390,289 | Statements of Cash Flows Data Net cash provided by operating activities slightly increased in Q3 2024, while net cash used in investing and provided by financing activities decreased Statements of Cash Flows Data (QoQ) | Metric (Amounts in $000s) | Q3 2024 | Q2 2024 | | :------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $15,737 | $15,389 | | Net cash provided by (used in) investing activities | $(18,078) | $(20,853) | | Net cash provided by (used in) financing activities | $1,839 | $2,977 | Reconciliation of Non-GAAP Financial Measures Detailed reconciliations are provided for Adjusted EBITDA, Free Cash Flow, and Cash G&A, along with a table for Revenue Payables in Suspense Adjusted EBITDA and Free Cash Flow Reconciliation (from Operating Activities) | Metric (Amounts in $000s) | Q3 2024 | Q2 2024 | | :------------------------ | :------ | :------ | | Net cash provided by operating activities | $15,737 | $15,389 | | Adjusted EBITDA | $25,544 | $30,749 | | Free Cash Flow | $3,599 | $9,151 | Adjusted EBITDA and Free Cash Flow Reconciliation (from Net Income) | Metric (Amounts in $000s) | Q3 2024 | Q2 2024 | | :------------------------ | :------ | :------ | | Net income (loss) | $22,652 | $7,119 | | Adjusted EBITDA | $25,544 | $30,749 | | Free Cash Flow | $3,599 | $9,151 | Cash General and Administrative Expense Reconciliation | Metric (Amounts in $000s) | Q3 2024 | Q2 2024 | | :------------------------ | :------ | :------ | | General and administrative expense | $8,251 | $8,358 | | Less: Share-based compensation expense | $1,815 | $1,767 | | Less: Acquisition and divestiture costs | $186 | $9 | | Less: Bad debt expense | $26 | $0 | | Total Cash General and Administrative Expense | $6,224 | $6,582 | Revenue Payables in Suspense (Nine Months Ended Sep 30, 2024) | Metric (Amounts in $000s) | Nine Months Ended Sep 30, 2024 | | :------------------------ | :----------------------------- | | Oil and natural gas sales | $4,023 | | Other revenues | $4,829 | | Severance tax and other deducts | $(433) | | Total net revenue | $8,419 | | Total Production (Mboe) | 138 |