Quarterly / Earnings Reports | Second Quarter (2Q) Update

Amplify Energy Details Q2 Results, Ops; Seals Merger Deal with Midstates

Share Print Bookmark    |    Tuesday,August 06,2019

Amplify Energy Corp. detailed its operating and financial results for the second quarter 2019.

Key Transaction Highlights and Events

• On August 2, 2019, Amplify's and Midstates Petroleum Company, Inc.'s ("Midstates") (NYSE: MPO) respective shareholders approved the merger of equals which was announced on May 6, 2019
  
  
• Amplify and Midstates expect to close the merger before markets open on August 6, 2019
  
  
  • In the closing press release, Amplify will provide pro-forma guidance for the combined company and details on return of capital plans for its investors
    
    
  • Amplify will also provide an updated investor presentation with additional detail on the pro-forma company highlights and the total value proposition
    
    
  • In addition, Amplify will host a conference call at 10:00 am CT on Tuesday, August 6, 2019 to discuss these details and will hold a Q&A session after the prepared remarks
    
    
  • The merger will close before market on August 6, 2019 and will trade on NYSE as "MPO" during the trading day on August 6, 2019, with the ticker changing to "AMPY" on NYSE starting on August 7, 2019
    
    
• Strategic and financial highlights of the proposed combination:
  
  
  • Creates a diversified platform of long-life, low-risk and shallow decline assets with an attractive 50/50 liquids and gas production mix
    
    
  • Strong pro-forma balance sheet and liquidity allows for capital return programs
    
    
  • Creates a best-in-class free cash flow generating company with top-tier G&A efficiency
    
    
  • Expected to achieve approximately $21 million of annual G&A synergies
    
    
  • Enhanced scale expected to drive down cost of capital and operating expenses

Key Amplify Second Quarter Operational Highlights

• During the second quarter this year we generated the following:
  
  
  • Daily production of 21.1 MBoe/d, compared to midpoint guidance of 21.4 MBoe/d
    
    
  • Net cash provided by operating activities of $22 million for the quarter, compared to the midpoint of guidance of $17 million
    
    
  • Adjusted EBITDA of $19 million, at the low end of the guidance range of $19 million to $23 million
    
    
  • Free cash flow of $(10) million that was below the guidance range of $(7) million to $(3) million
    
    
• Released $90.0 million in cash from the plugging and abandonment trust related to the Company's offshore California properties (the "Beta Decommissioning Trust Account")
  
  
• Net Debt to Last Twelve Months ("LTM") EBITDA of 1.4x as of June 30, 2019
  
  
• As of August 1, 2019, net debt was $164 million, inclusive of $86 million of cash on hand

Ken Mariani, President and Chief Executive Officer of Amplify, said: "I am very pleased that the shareholders of Amplify and Midstates overwhelmingly approved our merger of equals. This merger will create an industry leading free cash flow generating company, with the flexibility to return capital to shareholders. We intend to maintain free cash flow through internal development projects or through opportunistic external growth transactions. I look forward to providing additional details to the market in tomorrow's closing press release and conference call.

"Amplify's second quarter results were impacted by a significant drop in natural gas and NGL realizations, along with a delay in restoring NGL production at our Bairoil facility after the annual turnaround. However, our Bairoil facility is now producing at its highest levels of the year, and we are excited about the incremental production anticipated from our processing plant expansion project, which is scheduled to come online during the fourth quarter of 2019. Recent commodity price reductions are likely to be a headwind in the near-term, but with our robust hedge portfolio we are confident in our ability to generate significant free cash flow in the second half of 2019 and beyond."

Second Quarter Production and Capital Spending Update

During the second quarter of 2019, Amplify produced 21.1 MBoe/d, which was within our guidance range for the quarter. Second quarter production for East Texas included additional gas volumes related to prior periods as a result of a BTU adjustment which caused prior period production to appear lower than actual. The Bairoil plant turnaround was completed on schedule during the second quarter, but NGL production was impacted more than anticipated due to delays returning the fractionation towers to maximum capacity. This issue was resolved in June, and Bairoil has produced above pre-shutdown levels since that time. In addition, thirty-two Eagle Ford wells were brought online during the quarter and produced at expected levels. Average IP-30's for those wells were over 1,200 Boe/d.

Amplify's capital spend for the second quarter was approximately $25 million, which was at the high end of quarterly guidance of $21 million to $25 million. This is primarily due to certain accelerated capital costs for the Bairoil plant expansion and some small overages related to the non-operated Eagle Ford wells.

Amplify will provide additional details in the closing press release on capital plans for the remainder of 2019, along with updated guidance for the pro-forma Company.

Key Financial Results

Midstates Merger Update

On August 2, 2019, Amplify's and Midstates' shareholders approved the proposed merger of equals with Midstates. Amplify anticipates the merger will close on August 6, 2019, and the Company will provide pro-forma guidance along with details regarding expected return of capital plans in a closing press release.

Revolving Credit Facility Update and Liquidity

Amplify has amended its credit facility to incorporate the Midstates assets and finalized a revised credit facility that will be effective at the closing of the merger. Amplify will announce the details of the revised credit facility in the closing press release. Midstates' existing credit facility will be terminated at closing, with any remaining borrowings repaid from Amplify's revised credit facility.

As of August 1, 2019, Amplify had total debt of $250 million under its revolving credit facility, with a current borrowing base of $425 million. Amplify's liquidity was $260 million, consisting of $86 million of cash on hand and available borrowing capacity of $173 million (including the impact of $1.65 million in outstanding letters of credit).

Comparison of Second Quarter Guidance vs Actual Results

Hedging Update

Since Amplify's previous hedge update on May 9, 2019, the Company has made further additions to its hedge position. 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 July 2019 through December 2022, as of August 5, 2019.