Amplify Energy Announces Fourth Quarter 2019 Results, Dividend Program Update, Year-end 2019 Proved Reserves and First Quarter and Full Year 2020 Guidance

Source Company Press Release
Company Amplify Energy Corp.
Tags Corporate: Corporate Results, Guidance, Overview/Strategy, Country: United States, Financial - Costs & Metrics: Capital Expenditures, Hedging, Operating Area: Eagle Ford, Segment: Shale/Tight News, Upstream: Upstream News, Upstream - Costs & Metrics: Reserves
Date March 05, 2020

mplify Energy Corp. (NYSE: AMPY) (“Amplify” or the “Company”) announced today its operating and financial results for the fourth quarter 2019, update to its dividend program, year-end 2019 proved reserves and provided guidance for the first quarter and full year 2020. 

Key Highlights

  • During the fourth quarter this year we generated the following:
    • Daily production of 29.9 MBoe/d, which was within the range of quarterly guidance
    • Net cash provided by operating activities of $21 million
    • Adjusted EBITDA of $27 million
    • Free cash flow of $11 million
  • Returned nearly $23 million of capital to shareholders through share repurchase program and December 2019 dividend payment
  • Pro forma(1) Net Debt to Last Twelve Months (“LTM”) EBITDA of 2.4x as of December 31, 2019
  • As of February 28, 2020, net debt was $274 million, inclusive of $6 million of cash on hand
  • Current hedge book net positive value of $58 million as of February 28, 2020
  • Amplify’s year-end 2019 proved developed reserves had a PV-10 value of approximately $705 million, which is 63% or $272 million higher than the Company’s current enterprise value of approximately $433 million(2).
  • Retained Evercore as its financial advisor to actively pursue consolidation transactions focused on enhancing Amplify’s low decline asset base, further strengthening the balance sheet and maximizing the Company’s dividend yield and return of capital to its investors

“As with most energy producers, Amplify is beginning 2020 in the face of significant headwinds following the recent commodity price decline,” said Ken Mariani, President and Chief Executive Officer of Amplify. “While the margins on our long-life, low-decline asset base are sensitive to commodity price fluctuations, Amplify took prudent and proactive steps to mitigate that risk by hedging more than 60% of total production and 77% of crude oil prior to the recent price decline.” 

Mr. Mariani continued, “In regards to our recent fourth quarter, Amplify’s results were below our expectations due to temporary issues, including startup delays with the Bairoil plant expansion and incremental submersible pump failures in Oklahoma due to weather and power fluctuations.  We believe that these operating issues have all been resolved going into 2020; however, in light of the significant reductions in commodity prices in the first quarter, we have carefully reevaluated our capital return and development programs.  While these issues may not be permanent, we believe the best course of action at this time is to conservatively manage Amplify’s balance sheet and liquidity to maximize long-term value for our stakeholders.  As such, we have decided to reduce our first quarter 2020 dividend to $0.10 per share, which while reduced, still provides for an effective dividend yield of approximately 10%, which is among the highest in our industry.  We have also decided to defer certain capital projects that were planned for later in the year and have set our initial 2020 capital budget between $40 million and $52 million.  We believe that this program is prudent in the current price environment and a cost-effective way to maximize production, reduce costs and continue to provide a robust dividend yield to our shareholders. Further, this program enables the Company to drive shareholder value by continuing to execute its corporate consolidation strategy.  As a key part of that strategy, I am pleased to announce we have retained Evercore as our financial advisor to help us evaluate new consolidation transactions.   While many E&Ps are facing similar issues in the current price environment and market volatility, we believe that Amplify is uniquely positioned to take advantage of the opportunities this market creates, and we look forward to updating shareholders on our progress throughout the year.”       

(1) Pro forma numbers include Amplify and Midstates Petroleum Company, Inc. (“Midstates”) results as though the companies were combined for the full period
(2) Enterprise value is calculated based on a market cap of $159 million (38 million shares at $4.18 per share) plus net debt of $274 million as of February 28, 2020

Key Pro Forma(1) and Reportable(2) Financial Results

             
    Reportable (2)  Reportable (2)      Pro Forma (1) 
    Fourth Quarter   Third Quarter       Third Quarter  
$ in millions    2019  2019      2019 
Average daily production (MBoe/d)      29.9    28.8        32.7 
Total revenues    $77.9  $73.0      $80.5 
Total assets    $877.5  $914.6      NA 
Net Income (loss)    ($27.5)  $5.2      $6.8 
Adjusted EBITDA (a non-GAAP financial measure)  $27.0  $27.9      $31.5 
Net debt (3)    $285.0  $270.6      $270.6 
Net debt / LTM Adjusted EBITDA    NM  NM      1.7x 
Net cash provided by (used in) operating activities    $21.4  ($7.4)      NA 
Total capital    $11.9  $21.4      $24.1 

(1) Pro forma numbers include Amplify and Midstates results as though the companies were combined for the full period
(2) Reportable numbers include Amplify and Midstates results starting in August 2019 following closing of the merger
(3) As of December 31, 2019 and September 30, 2019, respectively

Dividend and Share Repurchase Program Update

Amplify’s quarterly dividend of $0.10 per share is expected to be paid on March 30, 2020 to shareholders of record as of the close of business on March 16, 2020.  This equates to a dividend yield of approximately 10% based on the closing share price of $4.18 on February 28, 2020.

Amplify also initiated a $25.0 million open market share repurchase program at the closing of the merger with Midstates on August 6, 2019.  As of February 28, 2020, the Company had repurchased approximately 4.2 million shares of common stock at an average price of $5.94 per share for a total cost of approximately $24.9 million (inclusive of fees). 

Revolving Credit Facility and Liquidity

As of February 28, 2020, Amplify had total debt of $280 million under its revolving credit facility, with a current borrowing base of $450 million.  Amplify’s liquidity was $176 million as of February 28, 2020, consisting of $6 million of cash on hand and available borrowing capacity of $170 million.  The next regularly scheduled borrowing base redetermination is expected to occur in April 2020.

Comparison of Fourth Quarter Guidance vs Actual Results

           
  4Q 2019 Guidance (1)    4Q19 
           
   Low     High     Actuals 
Net Average Daily Production           
Oil (MBbls/d)  11.2  12.4    11.2 
NGL (MBbls/d)  5.0  5.6    4.7 
Natural Gas (MMcf/d)  81.8  90.6    83.8 
Total (MBoe/d)  29.9  33.1    29.9 
           
Commodity Price Differential / Realizations (Unhedged)           
Oil Differential ($ / Bbl)  $2.00  $2.30    $2.56 
NGL Realized Price (% of WTI NYMEX)  20%  25%    28% 
Natural Gas Realized Price (% of Henry Hub)  70%  80%    76% 
           
Gathering, Processing and Transportation Costs           
Oil ($ / Bbl)  $0.30  $0.50    $0.67 
NGL ($ / Bbl)  $2.10  $2.40    $3.75 
Natural Gas ($ / Mcf)  $0.30  $0.40    $0.34 
Total ($ / Boe)  $1.20  $1.80    $1.80 
           
Average Costs           
Lease Operating ($ / Boe)  $11.75  $12.75    $12.97 
Taxes (% of Revenue) (2)  6.5%  7.5%    7.3% 
Recurring Cash General and Administrative ($ / Boe) (3)  $2.30  $2.60    $2.38 
           
Net Cash Provided by Operating Activities ($MM) (4)    $29      $21 
           
Adjusted EBITDA ($MM) (5)  $30  $35    $27 
Cash Interest Expense ($MM)  $3  $5    $4 
Capital Expenditures ($MM)  $8  $12    $12 
Free Cash Flow ($MM) (5)  $16  $21    $11 

(1) Guidance based on NYMEX strip pricing as of October 25, 2019; Average prices of $55.87 / Bbl for crude oil and $2.40 / Mcf for natural gas for fourth quarter of 2019
(2) Includes production, ad valorem and franchise taxes
(3) Recurring cash general and administrative cost guidance excludes reorganization expenses, non-cash compensation, severance and acquisition expenses 
(4) Net Cash Provided by Operating Activities guidance does not include certain restructuring and reorganization expenses or changes in working capital
(5) Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Please see “Use of Non-GAAP Financial Measures” for a description of Adjusted EBITDA and Free Cash Flow and the reconciliation to the most comparable GAAP financial measure 

Production Update

During the fourth quarter of 2019, Amplify produced 29.9 MBoe/d, which was at the low end of our guidance range for the quarter.  These results were primarily the result of ordinary course start-up complications following completion of the Bairoil plant expansion and incremental wells temporarily offline in the Mississippi Lime region for workovers as Amplify focuses on improving base production declines.  The company expects that many of the Mississippi Lime wells will be more cost effective following these workovers and will help drive production efficiencies in 2020.

The Bairoil plant expansion project came online in late October as anticipated, but due to start-up and compressor issues, the Company did not achieve consistent runtime until mid-January.  Bairoil also experienced compressor outages, unrelated to the plant expansion, that further reduced CO2 processing capacity and had a negative impact on production.  Although overall results were below expectations due to extended periods of low CO2 throughput, material increases in crude oil production at Bairoil were achieved intermittently during the fourth quarter when run times were stable.  Despite these initial delays, Amplify is encouraged by the potential observed when the plant expansion was fully operational and remains confident that the expansion project will achieve the expected oil production increase of approximately 900 Bbls/d over the next twelve months.

Mississippi Lime production was also below our expectations, as power and weather events, contributed to incremental submersible pump failures and temporarily increased the number of offline wells during the quarter.  To alleviate the production impact from offline wells, Amplify increased workover rig activity, operating between two to three workover rigs during November and December to get the wells back online and improve future well efficiency.  As a result of these efforts, production has stabilized, and the backlog of offline wells has been substantially reduced heading into 2020.

Operations and Capital Spending Outlook

Amplify’s capital spend for the fourth quarter was approximately $12 million.  Capital expenditures were at the high end of guidance due to additional costs related to the Bairoil expansion start-up, Beta capital workovers and increased development activity at the Company’s non-operated Eagle Ford assets. 

Amplify’s 2020 capital program is anticipated to be between $40 million and $52 million, with a midpoint estimate of $46 million. 

On an area-by-area basis, Amplify’s largest capital allocation in 2020 will be in Oklahoma, where Amplify anticipates spending approximately $14 million for additional rod lift conversions and ESP (electric submersible pump) optimizations.  The rod lift conversion project initiated in late 2018 has been successful in significantly reducing operating expenditures and recurring maintenance costs. 

Amplify anticipates spending approximately $11 million at Beta, primarily on capital workovers to return production from offline wells, along with facility maintenance.   

In the Eagle Ford, Amplify has budgeted a $11 million capex program that includes drilling and completing seventy-eight gross (1.7 net) wells in 2020.  As of year-end 2019, Amplify had received proposals for sixty gross (1.3 net) well projects.  The substantial increase in development in this area is a testament to the superior well return potential from Amplify’s acreage in the core of Karnes County, Texas.

At Bairoil, Amplify has budgeted approximately $7 million in 2020, split equally between facility work and capital workover activity. 

Lastly in East Texas, Amplify has budgeted $2 million for recompletions, saltwater disposal and facility projects and an additional $1 million to complete the non-operated Viper 2 Jones well, which offsets Amplify’s acreage.

    2020     
    Guidance    % of 
    Midpoint ($MM)    Total 
         
Eagle Ford (Non-Op) Drilling and Completion      11    24% 
East Texas (Non-Op) Drilling and Completion      1    2% 
Total Development Capital      12    26% 
         
Cost Reduction Initiatives      14    30% 
Capital Workovers      10    22% 
Facilities      10    22% 
Total 2020 Capital Program      46    100% 
         

2019 Year-End Proved Reserve Update

Proved reserves at December 31, 2019 were approximately 163 MMBoe, of which approximately 61% were crude oil and natural gas liquids and 39% were natural gas.  Approximately 80% of proved reserves were classified as proved developed with a total standardized measure of discounted future net cash flows of approximately $917 million.

             
  Estimated Net Proved Reserves    Producing Wells 
             
    % Oil and  % Proved  Standardized     
Region  MMBoe  NGL  Developed  Measure (1)  Gross  Net 
        (in millions)     
             
Oklahoma    60  50%  68%   $  276    426    322 
Rockies    37  100%  88%    231    267    267 
California    20  100%  68%    200    55    55 
East Texas/ North Louisiana    43  23%  98%    156    1,601    900 
Eagle Ford    3  90%  58%    54    294    23 
Total    163  61%  80%   $  917    2,643    1,567 

(1) Standardized measure is calculated using SEC pricing, before market differentials, of $55.69/Bbl for oil and NGLs and $2.58/MMBtu for natural gas

First Quarter and Full Year 2020 Guidance

The following guidance included in this press release is subject to the cautionary statements and limitations described under the "Forward-Looking Statements" caption at the end of this press release.  Amplify's 2020 guidance is based on its current expectations regarding capital expenditure levels and on the assumption that market demand and prices for oil and natural gas will continue at levels that allow for economic production of these products.

A summary of the guidance is presented below:

               
  1Q 2020E (1)    FY 2020E (1) 
               
   Low     High     Low     High 
Net Average Daily Production               
Oil (MBbls/d)  10.3  11.4    10.3  11.6 
NGL (MBbls/d)  4.4  4.9    4.2  4.7 
Natural Gas (MMcf/d)  75.1  83.0    71.3  80.4 
Total (MBoe/d)  27.2  30.1    26.3  29.7 
               
Commodity Price Differential / Realizations (Unhedged)               
Oil Differential ($ / Bbl)  ($2.00)  ($2.50)    ($2.00)  ($2.50) 
NGL Realized Price (% of WTI NYMEX)  23%  28%    23%  28% 
Natural Gas Realized Price (% of Henry Hub)  70%  75%    72%  77% 
               
Gathering, Processing and Transportation Costs               
Oil ($ / Bbl)  $0.30  $0.45    $0.30  $0.45 
NGL ($ / Bbl)  $3.00  $3.50    $3.00  $3.50 
Natural Gas ($ / Mcf)  $0.35  $0.45    $0.35  $0.45 
Total ($ / Boe)  $1.50  $2.00    $1.50  $2.00 
               
Average Costs               
Lease Operating ($ / Boe)  $13.00  $14.00    $13.00  $14.00 
Taxes (% of Revenue) (2)  6.5%  7.5%    6.5%  7.5% 
Recurring Cash General and Administrative ($ / Boe) (3)  $2.30  $2.60    $2.30  $2.60 
               
Cash Interest Expense ($MM)  $4  $5    $14  $18 
Capital Expenditures ($MM)  $13  $19    $40  $52 

(1) Guidance based on NYMEX strip pricing as of February 24, 2020; Average prices of $52.08 / Bbl for crude oil and $2.03 / Mcf for natural gas for 2020
(2) Includes production, ad valorem and franchise taxes
(3) Recurring cash general and administrative cost guidance excludes reorganization expenses and non-cash compensation

Hedging Update

Since Amplify’s previous hedge update on November 6, 2019, the Company has made opportunistic additions to its hedge position between 2020 and 2022.  As of February 28, 2020, Amplify’s mark-to-market value was a net asset position of $58 million and based on the midpoint of full year 2020 guidance the Company has hedged approximately 61% of 2020 production.  The following table reflects the hedged volumes under Amplify’s commodity derivative contracts and the average fixed or floor prices at which production is hedged for January 2020 through December 2022, as of March 5, 2020.

             
             
    2020    2021    2022 
             
Natural Gas Swaps:             
Average Monthly Volume (MMBtu)    600,000    487,500    300,000 
Weighted Average Fixed Price ($)    2.53    2.48    2.46 
             
Natural Gas Collars:             
Two-way collars             
Average Monthly Volume (MMBtu)    520,000    162,500   
Weighted Average Floor Price ($)    2.64    2.58   
Weighted Average Ceiling Price ($)    2.96    2.84   
             
Three-way collars             
Average Monthly Volume (MMBtu)    76,000     
Weighted Average Ceiling Price ($)    3.45     
Weighted Average Floor Price ($)    2.65     
Weighted Average Sub-Floor Price ($)    2.15     
             
Natural Gas Basis Swaps:             
Average Monthly Volume (MMBtu)    600,000    500,000   
Weighted Average Spread ($)    (0.46)    (0.40)   
             
Oil Swaps:             
Average Monthly Volume (Bbls)    213,050    116,250    30,000 
Weighted Average Fixed Price ($)    57.28    56.05    55.32 
             
Oil Collars:             
Two-way collars             
Average Monthly Volume (Bbls)    14,300     
Weighted Average Floor Price ($)    55.00     
Weighted Average Ceiling Price ($)    62.10     
             
Three-way collars             
Average Monthly Volume (Bbls)    30,500     
Weighted Average Ceiling Price ($)    65.75     
Weighted Average Floor Price ($)    50.00     
Weighted Average Sub-Floor Price ($)    40.00     
             
NGL Swaps:             
Average Monthly Volume (Bbls)    65,425    22,800   
Weighted Average Fixed Price ($)    25.20    24.25   
             

Amplify posted an updated hedge presentation containing additional information on its website, amplifyenergy.com, under the Investor Relations section.

Annual Report on Form 10-K

Amplify’s financial statements and related footnotes will be available in its Annual Report on Form 10-K for the year ended December 31, 2019, which Amplify expects to file with the Securities and Exchange Commission on or before March 5, 2020.

Conference Call

Amplify will host an investor teleconference today at 10:00 a.m. Central Time to discuss these operating and financial results.  Interested parties may join the webcast by visiting Amplify's website, amplifyenergy.com, and clicking on the webcast link or by dialing (833) 883-4379 at least 15 minutes before the call begins and providing the Conference ID: 6466309.  The webcast and a telephonic replay will be available for fourteen days following the call and may be accessed by visiting Amplify’s website, amplifyenergy.com, or by dialing (855) 859-2056 and providing the Conference ID: 6466309.

Investor Relations Schedule

Amplify currently anticipates participating at the following events through April 2020:

  • ROTH Conference – Orange County, CA – March 16-17
  • IPAA OGIS – New York, NY – April 20-21

Selected Operating and Financial Data (Tables) 

Amplify Energy Corp.

Selected Financial Data - UnauditedStatements of Operations DataThree Months Three Months EndedEnded(Amounts in $000s, except per share data)December 31, 2019September 30, 2019Revenues:Oil and natural gas sales$  77,629$  72,426Other revenues  300  533  Total revenues  77,929  72,959Costs and Expenses:Lease operating expense  35,739  32,977Gathering, processing and transportation  4,968  4,459Exploration  27  3Taxes other than income  5,660  5,135Depreciation, depletion and amortization  16,147  15,617Impairment expense  2,246  -General and administrative expense  8,380  27,034Accretion of asset retirement obligations  1,488  1,428Realized (gain) loss on commodity derivatives  (1,956)  (4,109)Unrealized (gain) loss on commodity derivatives  27,887  (24,616)Other, net  397  224  Total costs and expenses  100,983  58,152Operating Income (loss)  (23,054)  14,807Other Income (Expense):Interest expense, net  (3,068)  (5,276)Other income (expense)  (1,013)  (104)Loss on lease  (10)  (4,237)Total Other Income (Expense)  (4,091)  (9,617)Income (loss) before reorganization items, net and income taxes  (27,145)  5,190Reorganization items, net  (373)  (33)Net income (loss)$  (27,518)$  5,157Earnings per share:Basic and diluted earnings (loss) per share$  (0.71)$  0.15
Selected Financial Data - Unaudited 
Operating Statistics 
Three Months  Three Months 
Ended   Ended  
(Amounts in $000s, except per share data)  December 31, 2019  September 30, 2019 
Oil and natural gas revenue: 
Oil Sales    56,191    55,011 
NGL Sales    6,840    4,306 
Natural Gas Sales    14,598    13,109 
  Total oil and natural gas sales - Unhedged    77,629    72,426 
Production volumes: 
Oil Sales - MBbls    1,033    1,017 
NGL Sales - MBbls    436    383 
Natural Gas Sales - MMcf    7,713    7,482 
  Total - MBoe    2,755    2,647 
  Total - MBoe/d    29.9    28.8 
Average sales price (excluding commodity derivatives): 
Oil - per Bbl    54.40    54.11 
NGL - per Bbl    15.68    11.25 
Natural gas - per Mcf    1.89    1.75 
  Total - per Boe    28.18    27.37 
Average unit costs per Boe: 
Lease operating expense    12.97    12.46 
Gathering, processing and transportation    1.80    1.68 
Taxes other than income    2.05    1.94 
General and administrative expense    3.04    10.21 
Depletion, depreciation, and amortization    5.86    5.90 
Selected Financial Data - Unaudited 
Balance Sheet Data 
(Amounts in $000s, except per share data)  December 31, 2019  September 30, 2019 
Total current assets    52,587    76,915 
Property and equipment, net    803,723    804,357 
Total assets    877,539    914,629 
Total current liabilities    61,088    59,762 
Long-term debt    285,000    278,000 
Total liabilities    443,333    434,584 
Total equity    434,206    480,045 
Selected Financial Data - Unaudited 
Statements of Cash Flows Data 
Three Months   Three Months  
Ended  Ended 
(Amounts in $000s, except per share data)  December 31, 2019  September 30, 2019 
Net cash provided by (used in) operating activities    21,395    (7,411) 
Net cash provided by (used in) investing activities    (11,596)    (9,514) 
Net cash provided by (used in) financing activities    (17,207)    5,631 
Selected Operating and Financial Data (Tables) 
Reconciliation of Unaudited GAAP Financial Measures to Non-GAAP Financial Measures 
Adjusted EBITDA and Free Cash Flow 
Three Months  Three Months 
Ended  Ended 
(Amounts in $000s, except per share data)  December 31, 2019  September 30, 2019 
Reconciliation of Adjusted EBITDA to Net Cash Provided from Operating Activities: 
Net cash provided by operating activities    21,395    (7,411) 
Changes in working capital    1,291    5,616 
Interest expense, net    3,068    5,276 
Gain (loss) on interest rate swaps    1,156    (448) 
Cash settlements paid (received) on interest rate swaps    (29)    (113) 
Amortization and write-off of deferred financing fees    (1,112)    512 
Reorganization items, net    373    33 
Exploration costs    27    3 
Acquisition and divestiture related costs    650    12,833 
Severance payments    821    6,389 
Plugging and abandonment cost    2    278 
Non-cash loss on office lease    10    4,237 
Other    (672)    719 
Adjusted EBITDA:    26,980    27,924 
Pro forma adjustments    -    3,547 
Pro forma Adjusted EBITDA:    26,980    31,471 
Reconciliation of Free Cash Flow to Net Cash Provided from Operating Activities: 
Adjusted EBITDA:    26,980    27,924 
Less: Cash interest expense    4,173    4,205 
Less Capital expenditures    11,901    21,353 
Free Cash Flow:    10,906    2,366 
Add: Pro forma adjustments    -    825 
Pro forma Free Cash Flow:    10,906    3,192 
Selected Operating and Financial Data (Tables) 
Reconciliation of Unaudited GAAP Financial Measures to Non-GAAP Financial Measures 
Adjusted EBITDA and Free Cash Flow 
Three Months  Three Months 
Ended  Ended 
(Amounts in $000s, except per share data)  December 31, 2019  September 30, 2019 
Reconciliation of Adjusted EBITDA to Net Income (Loss): 
Net income (loss)    (27,518)    5,157 
Interest expense, net    3,068    5,276 
Depreciation, depletion and amortization    16,147    15,617 
Impairment expense    2,246    - 
Accretion of asset retirement obligations    1,488    1,428 
(Gains) losses on commodity derivatives    25,931    (28,725) 
Cash settlements on expired commodity derivatives    1,956    4,109 
Acquisition and divestiture related costs    650    12,833 
Reorganization items, net    373    33 
Share/unit-based compensation expense    324    1,178 
Non-cash loss on lease    10    4,237 
Exploration costs    27    3 
Loss on settlement of AROs    2    224 
Bad debt expense    35    165 
Severance payments    821    6,389 
Write-off of merger related expenses    1,420    - 
Adjusted EBITDA:    26,980    27,924 
Pro forma adjustments    -    3,547 
Pro forma Adjusted EBITDA:    26,980    31,471 
Reconciliation of Free Cash Flow to Net Income (Loss): 
Adjusted EBITDA:    26,980    27,924 
Less: Cash interest expense    4,173    4,205 
Less Capital expenditures    11,901    21,353 
Free Cash Flow:    10,906    2,366 
Add: Pro forma adjustments    -    825 
Pro forma Free Cash Flow:    10,906    3,192

 
Source: EvaluateEnergy® ©2024 EvaluateEnergy Ltd