Quarterly / Earnings Reports | Third Quarter (3Q) Update | Deals - Acquisition, Mergers, Divestitures

Amplify Energy Details Q3 2019 Results

Share Print Bookmark    |    Wednesday,November 06,2019

Amplify Energy Corp. reported its Q3 2019 results.

Key Amplify Third Quarter Operational Highlights

• During the third quarter this year we generated the following:
  • Pro forma⁽¹⁾ daily production of 32.7 MBoe/d, in line with midpoint guidance of 32.6 MBoe/d
  • Reportable⁽²⁾ net cash provided by operating activities of $(7.4) million for the quarter
  • Pro forma⁽¹⁾ adjusted EBITDA of $31.5 million, in line with midpoint guidance of $31 million
  • Pro forma⁽¹⁾ free cash flow of $3 million that was at the high end of the guidance range of $(2) million to $4 million
• Paid initial quarterly dividend of $0.20 per share or $8.2 million in aggregate on September 18, 2019
• Net Debt to Last Twelve Months ("LTM") pro forma⁽¹⁾ EBITDA of 1.7x as of September 30, 2019
• As of November 1, 2019, net debt was $267 million, inclusive of $11 million of cash on hand

Ken Mariani, President and Chief Executive Officer of Amplify, said: "This quarter has been an exciting one for Amplify, as our team has worked tirelessly to integrate the Midstates assets and systems into our own. I'm very pleased to report that the effort has been extremely successful, and we are on track to be fully integrated by mid-November. I'm also excited to report that our Bairoil expansion project was completed on schedule and we are steadily bringing online previously shut-in wells as planned, with production expected to steadily increase over the next twelve to eighteen months"

"Amplify's third quarter results were positively impacted by our cost control initiatives, which resulted in lease operating expenses and capital spending that were both below the low end of our guidance range. In addition, with the merger and the majority of our 2019 capital expenditures behind us, we are now in a position to demonstrate the robust free cash flow generation potential of our platform."

Midstates Merger Integration Update

On August 6, 2019, the Company announced the closing of the merger with Midstates Petroleum Company, Inc. The combined company changed its name to Amplify Energy Corp., and currently trades on the New York Stock Exchange under the ticker symbol "AMPY". As previously announced, the Company expected to achieve annual synergies in excess of $21 million as a result of the merger. With the integration substantially complete, Amplify has already achieved the majority of these cost savings and anticipates full synergy realization by the first quarter of 2020.

Dividend and Share Repurchase Program Update

Amplify's recurring quarterly dividend of $0.20 per share is expected to be paid on December 18, 2019 to shareholders of record as of the close of business on December 4, 2019. This implies a dividend yield of approximately 11% based on the closing share price of $7.48 on November 1, 2019.

Amplify also initiated an open market share repurchase program at the closing of the merger, with Board approval to repurchase up to $25.0 million of the Company's outstanding shares of common stock. Since the inception of the open market share repurchase program, the Company has repurchased approximately 2.4 million shares of common stock at an average price of $6.06 for a total cost of approximately $14.5 million (inclusive of fees). As a result, Amplify has $10.5 million of repurchase capacity under the program.

Revolving Credit Facility Update and Liquidity

Amplify's fall 2019 borrowing base redetermination process will be finalized during the fourth quarter, and the Company anticipates a decrease in its borrowing base due to a reduction in bank price forecasts. Despite this decrease, Amplify will maintain more than sufficient liquidity moving forward and will be generating significant free cash flow that will further increase its liquidity position.

As of November 1, 2019, Amplify had total debt outstanding of $278 million under its revolving credit facility, with a current borrowing base of $530 million. Amplify's liquidity was $261 million, consisting of $11 million of cash on hand and available borrowing capacity of $250 million (including the impact of $1.65 million in outstanding letters of credit).

Bairoil Plant Expansion Project Update

The Bairoil plant expansion project was completed in October, which was consistent with the Company's anticipated project completion timing. A significant amount of the final costs for the expansion were incurred in the third quarter of 2019, with the remaining $3.6 million to be incurred in the fourth quarter of 2019. Amplify has initiated the additional gas recycling at the Bairoil plant, and will provide an update on production in a future earnings call. As a reminder, the Company's previous guidance on production called for oil production to increase by approximately 900 Bbl/d, with the increase to be fully realized over a twelve to eighteen-month period following the project completion.

Third Quarter Production and Capital Spending Update

During the third quarter of 2019, Amplify's pro forma⁽¹⁾ daily production was 32.7 MBoe/d, which was slightly above the midpoint of the guidance range of 30.9 to 34.3 MBoe/d for the quarter. Third quarter production was strong despite weather impacts on the Company's Oklahoma operations and lower gas production in the Eagle Ford due to high gas sales line pressure. As discussed above, beginning in the third quarter of 2019 non-processed liquids at Bairoil were sold as condensate instead of NGLs, and as such, all production out of Bairoil will now be accounted for as oil moving forward. In addition, Amplify has restructured its hedge positions to reflect this change in the production mix and protect economics.

Amplify's pro forma⁽¹⁾ capital spend for the third quarter was approximately $24 million, which was below the low end of quarterly guidance of $26 million to $30 million. This is primarily driven by lower than expected maintenance capital costs at the offshore California and East Texas operations related to certain capital workovers and infrastructure projects. Of the $24 million, the majority of the capital spend of approximately $16 million (68% of total) was attributed to the plant expansion project at Bairoil, which came online during October.

Amplify's fourth quarter capital spend guidance range is $8 million to $12 million, which will primarily include the remaining capital of $3.6 million for the Bairoil plant expansion and $3 million on the ongoing rod-lift conversion program in Oklahoma. In addition, Amplify anticipates spending a small portion of its fourth quarter capital budget to participate in a drilling opportunity in East Texas. The Company believe this to be a low risk opportunity with attractive economics and will allow for further evaluation and delineation in this area.