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Amplify Energy Corp.
5/13/2025
Welcome to Amplify Energy's first quarter 2025 Investor Conference Call. Amplify's operating and financial results were released yesterday after markets closed on May 12, 2025 and are available on Amplify's website at .amplifyenergy.com. During this conference call, all participants will be in a listed-only mode. Today's call is being recorded. A replay of the call will be accessible until May 27, 2025 by dialing -654-1563 and then entering access code -587-98. A transcript and a recorded replay of the call will also be available on our website after the call. I would now like to turn the Congress over to Jim Fru, Senior Vice President and Chief Financial Officer of Amplify Energy Corps.
Good
morning and welcome to the Amplify Energy Conference Call to discuss operating and financial results for the first quarter of 2025. 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 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 undertake no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after the circumstance call. Please refer to our past release and SEC files 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 10Q, which was filed yesterday afternoon. Also, non-GAAP financial measures may be disclosed during this call. Reconciliation of those measures to comparable GAAP measures may be found in our range release or on our website at .amplifyenergy.com. During the call, Martin Wiltschrift, Amplify's President and Chief Executive Officer, will provide an update regarding our first quarter performance with a specific focus on the most recent beta-seal development results, updated data, and recent acreage manipulations in East Texas. Next, Dan Furby, Senior Vice President and Chief Operating Officer, will provide an overview of first quarter operation performance. Following that, I will discuss first 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 Dan Furby. Thank
you, Jim. Amplify had a strong first quarter 2025, generating $19.4 million of adjusted EBITDA, $25.5 million of operating cash flow, and producing 17,900 BOE per day. At Beta, we continued to build off the success of the 2024 development program, which was anchored by the strong results from the A50 and the C59 g-stand completions, which continued to perform above our pre-drill type curves, with IRRs in excess of 90% at $60 oil prices. Following up from those successes, we recently completed the C64 well in the g-stand, which through its first 20 days of production has been the strongest loan to program, with an IP20 of approximately 800 BOE per day. With the recent completions of the C48 and C54, the field now has four new development wells online, which after offsetting the ACID's basic line have increased beta production by approximately 35% since early 2024. Due to the success of the Beta development program, at year end 2024, Amplify had 25 plant locations that are year end reserves, 21 of which were in the g-stand. Based on the type curve utilized in those reserves, these plant locations have a PV10 value approximately $144 million at a $65 flat WTI price of oil. However, all of our g-stand completions to date have significantly outperformed the type curve, which indicates material outside of this valuation estimate as we continue to generate consistently outstanding results from our g-stand completions. In East Texas, the company monetized portions of its Hanesville acreage positions to bring forward cash flow. As previously announced, in January 2025, Amplify sold 90% of its interest in certain units with Hanesville rights in Harrison Town, Texas for $6.3 million in net proceeds. In May 2025, Amplify completed a separate transaction to monetize 90% of its interest in additional units with Hanesville rights in Panoa and Shelby counties, generating an additional $1.5 million in proceeds. In aggregate, Amplify has now completed three Hanesville acreage transactions since November 2024, generating $9.2 million net in total proceeds, while also retaining a 10% working interest in more than 30 gross non-operated development opportunities to realize additional upside value in future periods. Turning to guidance, in light of the recent material reduction in oil prices, we conducted a comprehensive review of our remaining uncommitted 2025 capital budget and have elected to temporarily defer three development projects of data, resulting in capital savings of approximately $50 million. While our beta development projects have outstanding economics at current oil prices, we have flexibility in the timing of these projects and are committed to maintaining strong free cash flow and a healthy balance sheet for our investors. We are also conducting a thorough review of additional cost savings opportunities, targeting reductions in additional capital projects, operating costs, and overhead. In summary, with the additional strong results of the C54 well, we continue to be very optimistic about the long-term potential of our beta development program. While we are temporarily deferring some beta projects due to commodity price uncertainty, our long-term development strategy remains intact and we will prioritize adding back beta wells as market conditions improve. In the meantime, we intend to continue focusing on reducing costs across the organization maintaining strong free cash flow and evaluating portfolio optimization opportunities which could enable us to accelerate beta development. With that, I'll hand it over to Dan. Thank you Martin. During the first quarter of 0.25 average daily production was approximately 17.9 MVOE per day, a decrease of 0.6 MVOE per day from the prior quarter, with a production commodity of 46% oil, 16% NGL, and 38% natural gas. The decrease in production from the prior quarter was driven by natural gas and NGL volume, affected by a gas imbalance adjustment in the expected in-end adverse weather in Oklahoma causing widespread power outages. These negative impacts in production occurred early in the quarter and were factored in for a pleasantly announced annual production guidance. Total production is expected to increase in the subsequent quarters as the gas imbalance in East Texas was resolved in the first quarter. Volumes from the non-operated development projects in East Texas and Eagleburg are scheduled to come online in the second quarter and beta production continues to grow after the repair of ESP failures occurring in the fourth quarter, 2024, and the benefit of the recently completed C54 well. Months to date, our current average production rates at beta are approximately 5,500 growths or 4,140 net barrels per day. This is after the effect of the C54 well. Our current production rates at beta represent an approximate 20% increase from our first quarter volume. Due to the reduction of our capital program in 2025, as described by Martin earlier, our annual production guidance range has been adjusted slightly for 2025 and is now 19,000 to 20,500 DOE per day. For the first quarter, these operating expenses were approximately $37.4 million, a $2.3 million increase in the prior quarter, and in line with internal projections. These operating expenses are expected to decrease in the second half of 2025 after the effects of cost- phasing projects being speeded in barrel oil and fewer expense workovers scheduled during the year. These operating expenses for the first quarter also do not reflect $900,000 of income generated by 9 to 5 energy services. We expect to continue improving our cost structure throughout 2025 and are guiding these operating expenses to a midpoint of $143 million. This is approximately flat from the third 2024, despite expected increase in total production and the cost of the oil. The company's total capital investment for the first quarter was $23.19 million, approximately 55% of the capital was invested in data in our development drilling program, recombination, and facility projects. Their main capital was invested in non-operated drilling in the Eagleburg-East Texas, as well as various capital workovers and facility projects across the past year. Our 2025 capital program is now expected to be between $55 and $70 million. The adjusted 2025 operations development plan is designed to continue unlocking the underlying value of the company's assets while adjusting for lower commodity prices to maintain strong free cash flow for the year. The main driver of the reduced capital is through the deferral of development activity of data. Even though the detailed completions of data have great even oil prices below $35 per barrel, data development is where we have the most flexibility with the 2025 data, with the option to add back wells this year should money prices improve. The C48 wells, the first of three wells to be completed in 2025, was completed in this February and is now in line. As discussed last quarter, the C48 was originally designed as a deep sand completion, but due to adverse drilling conditions encountered, we decided to complete the lower sea sand. The current production of the C48 deep sand completion is approximately 100 barrels of oil per day. Even though early results of this well are underperforming our initial expectations from when we decided to pivot to a sea sand completion, we believe the future production of this well will be higher once additional water injection is directed to the sea sand culmination in this area of the field, as the well logs and production indicate high oil saturation reservoirs. However, we are seeing lower oil graffities in the sea sand and lower reservoir thresholds, which are negatively affecting overall durability, but can be improved with additional water injection support in the future. The total pastoral cost of the C48 well was approximately $8.5 million, which is higher than our expected development costs due to the complications encountered while drilling. We still expect future development costs to be between $5 to $6 million per well. As a reminder, the D-Sand is our primary target and is where we are planning the majority of our near to midterm future completion. After the D-Sand, the S-Sand is considered our secondary target with excellent geophysical characteristics and significant remaining inventory. The C-Sand is our tertiary target of data. However, we may find parts of the field where we decide to set the C-Sand as part of our development program before the complete development of the primary secondary target. After the completion of the C48, the data drilling team made additional enhancements to our drilling procedures, including the implementation of managed reservoir drilling to help improve our ability to manage drilling hazards like the issues experienced in the C48. The changes were implemented in the drilling of the C54 well with excellent results. We completed the C54 well in mid-April and early results are outstanding with approximately 800 barrels oil per day average production over the first 20 days
since
first oil. This further demonstrates the excellent results of the D-Sand completion as we now have three D-Sand wells producing, all of which are projected to have greater than 90% IRRs and have $60 oil presence. We expect to spud our next development well, a D-Sand completion, in late July. Additional information regarding the basic development plan can be found in the company's invested presentation under the investor-related section of the website. In East Texas, we are participating in the completion of four non-operated development wells, which we expect to be in line in the late second quarter. The completion of this four-well path is expected to provide strong additional gas production through the second half of 2025. In the Equal First, we are participating in 14 grades .7 net new development wells and two grades .4 net recent weakness projects. These non-operated wells with highly agreed returns have been completed and are scheduled to come online this month. The company has also evaluated additional development opportunities recently offered by our partners in the evil group where we have interest. The majority of the remainder of our 2025 capital has not changed from our prior guidance and we will be investing in facility projects including the previously discussed $8 million pipeline upgrade project at Beta and a cool field and plant turnaround facility project at Bear Oil for approximately $5 million. Additionally, we are continuing to invest in small but accreted capital workover programs in Oklahoma, East Texas and Bear Oil, which include article list conversions, re-complete and well reactivation, as well as additional investments in Magnify Energy Services. With that, I will turn it over to Joe.
Thank you Dan. I would now like to discuss the following items. First quarter financial performance, balance sheet and liquidity and hidden. With respect to first quarter financial performance, the company reported a net loss of approximately $5.9 million compared to a $7.4 million net loss in the prior quarter. The change was primarily attributable to a non-cash unrealized loss on commodity derivatives in the first quarter, partially offset by a gain on the sale of our East Texas properties. Excluding the impact of the non-cash unrealized loss on commodity derivatives, the East Texas Devector and other one-time impacts, adjusted net income was $3.8 million for the first quarter. First quarter adjusted EBITDA was $19.4 million, a decrease of approximately $32.4 million compared to the prior quarter. The decrease was primarily due to higher lease operating expenses and GMA costs that are typically higher in the first quarter, partially offset by stronger gas price realization. In total, first quarter lease operating expenses were approximately $37.4 million or $23.28 per DOE. As Dan said, our lease operating expenses does not reflect the $0.9 million of income generated by magnify in the first quarter. First quarter production taxes were $4.4 million, down $1 million versus the prior quarter. In addition to benefiting from lower production, we realized a one-time benefit of reversing an accrual for 2024 lease permission charges. First quarter GPT costs were $4.3 million or $2.67 per DOE. GPT costs per DOE have remained relatively constant through recent quarters, and we expect that to remain true for the balance of 2025. Cash GMA expenses were $7.3 million for the first quarter. Though GMA is usually higher in the first quarter, Q1 2025 cash GMA was down 7% versus Q1 2024. We expect cash GMA to be within our balance range for the remainder of 2025. With respect to capital, amplify invested $23.1 million in the first quarter, which was in line with expectations. The company's capital allocation was approximately 55% for the beta development during, re-completions and facilities, and 30% for non-operated development projects in East Texas and the Eagle Creek. The remaining capital was distributed across the entire state. Free cash flow, defined as adjusted EBITDA, left cap X, and -in-shift expense, was -7.2 million for the first quarter of 2025, but in line with expectations due to planned capital investments in the first quarter. As of March 31st, Amplify had $125 million of debt outstanding under its revolving credit facility. At the end of the first quarter, the company's equity was $20 million, and net debt for the last 12 months adjusted EBITDA was 1.3 times. The company is currently working on its spring semi-annual re-determination of its borrowing base, and expects that process to be completed by the end of May.
Recently, Amplify added to our head position, further protecting future cash
flows. In the first quarter, Amplify executed crude oil swaps covering the first half of 2026, at a weighted average price of $62.55 per barrel. Additionally, we placed crude oil swaps covering the first half of 2027, at a weighted average price of $61.93 per barrel. The company also added natural gas swaps covering 2026, at a weighted average price of $4.12 per MMVTU, collars for the first quarter of 2026 with a weighted average floor of $4.50 per MMVTU, and a weighted average ceiling of $5.73. And natural gas collars for 2027, with a weighted average floor of $3.57 per MMVTU, and a weighted average ceiling of $4.58 per MMVTU. As of May 12th, our forecasted PDP crude oil production was approximately 75 to 80% hedged for 2025, 50 to 60% hedged in 2026, and 10 to 15% hedged in 2027. On the gas side, our forecasted PDP production is hedged 80 to 90% for 2025 and 2026, and 50 to 55% hedged in 2027. We will continue monitoring the market, and we will look for opportunities to add to our strong hedged positions. With that, I'll turn the call back to Mark.
Thank you, Jim. As we look ahead, we are excited about Amplify's future. Amplify remains committed for exploiting the long-term value potential of the beta field, and we anticipate strong results for oil production from the area in 2025. This enthusiasm is warranted by the results from the two wells we brought online in 2024, and the recently completed C54 well. All of these wells have price-even prices below $35 per barrel and compare favorably to the economics of the best oil development place in the country. The strong cash flow profile of these wells provides substantial benefits to the company and creates the flexibility to consider a range of value-maximizing opportunities for existing assets. We will continue to find ways to enhance shareholder value through diligent asset management, a relentless focus on managing our cost structure, and prudent capital allocation. In summary, our diversified portfolio of mature, low-declined assets and robust hedge work protect our cash flow profile during commodity downturns, allowing us the flexibility to scale up or down investments in either oil or gas projects, depending on market conditions. We remain confident that we still have all the elements in place to make 2025 a successful year for the company and its stakeholders. With
that, operator, we are now open for questions. If you would like to ask a question, please
press star and one on your telephone keypad now, and you'll be placed into the queue in the order received. If you would like to remove yourself from the queue at any time, press pound and one to remove yourself from the queue. Once again, if you would like to ask a question, please press star and one on your phone now.
We'll
pause
just a minute to allow everyone an opportunity to signal. And our first question comes from Subash Chandra from Benchmark.
Please go ahead, Subash. Yeah, thanks. Good morning. So two questions. First on the bank debt, do you have a goal in mind to exit the year? And second is to bring back development as beta, $35 break even, we're obviously well above that, but you're looking for a better oil price. What would that oil price be to
go back to the program? Thank you. Yeah, it's about, yeah,
I think obviously, our expectations that will generate positive pre-task load is here. And our goal is to continue to pay down the debt. That's been our consistent hope. As we pass out long term, our goal is to be half a turn to one turn of leverage. So there's a lot of ways to get there, but that's the goal. You know, as it relates to, you know, the drilling, we'll have something to expand on that. So part of it is commodity price, part of it is liquidity, right? So there are a lot of leverage we can pull there to create that opportunity. But we think the results have been really good and really supportive and we want to continue to aggressively do that, but we want to do it prudently, right? So as oil prices come down and we forecast out our cap flow, we want to be thoughtful about our development pace, but we will look at all kinds of leverage we can pull to ramp that back up because the results have been so good. Yeah,
I'll just add on number two that, you know, while we're, you know, we're very excited about especially this most recent well with the changes we've made operationally. I think that that well went as smoothly as we've seen today and we're very proud of the team and the changes they've made to really obviously, you know, execution of that program is key to the long-term success of the company and I think we've executed better on that well than we have on any other well today. And so really excited about continuing to develop data. To Jim's point, obviously we're going to be managing the balance sheet, but there's other things we can do. Obviously commodity prices could help if they move up a little bit in the 60s and liquidity has a significant enough cushion that will certainly add wells back, but, you know, we could also look at other portfolio optimization opportunities that could, you know, create some additional liquidity and use that to drive further beta development. That's something that we're actively looking at as we move forward. So a few different levers here that we could pull because obviously we are committed to further beta development as we move forward. Yeah, and so to that point on portfolio optimization, you mentioned that in the press release and you just mentioned it again. I'll be talking more Hinkville or are there other opportunities? I think we're looking at all of the potential opportunities in our portfolio other than obviously beta that, you know, we're the most excited about developing, you know, anything else that would create liquidity and, you know, we could redeploy the funds into higher return of investment projects that have beta and I think we owe it to ourselves and to our shareholders to work at all of those opportunities and that's what we're
doing. Yeah, thanks Martin, thank you. And at this time there are no further questions. I want
to turn the call back for Martin for closing remarks. Thank you. I'd just like to express my appreciation to all of our employees for their outstanding efforts and dedication and really to all of our stakeholders for the continued support. It's obviously been a difficult start to the year for and with commodity prices and really just wanted to say thank you to everyone who's continued to, you know, support us and that we're, you know, actively listening to and talking to our shareholders and we'll continue to work with all of you moving forward. So as always if you have any follow-up questions please don't hesitate to reach out to us directly. Thank you. This does conclude today's Amplify Energy Investor
Conference. Thank you for your participation. You may now disconnect. The host has ended this call. Goodbye.