Q1 2024 Amplify Energy Corp Earnings Call
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Operator: Good day and welcome to Amplify Energy's first quarter 2024 investor conference call. Amplify's operating financial results were released yesterday after market close on May 8, 2024 and are available on its website at www.amplifyenergy.com.
Good day and welcome to amplify introduce first quarter 2024 Investor Conference call.
Operator: Amplifies operating financial results were released yesterday after market close on May eight 2024 and are available on amplify its website at www dot amplify energy dotcom.
Operator: During this conference call, all participants will be in a listen-only mode. Today's call is being recorded. A replay of the call will be accessible until May 23rd, 2024, by dialing 800-654-1563 and then entering access code 592-3333. 40315. I would now like to turn the call over to Jim Frew, Senior Vice President and Chief Financial Officer of Amplify Energy Corp.
Operator: During this conference call all participants will be in a listen only mode.
James G. Frew: Today's call is being recorded.
James G. Frew: A replay of the call will be accessible until may 23rd 2024.
James G. Frew: By Dialling 800 654.
Operator: 1563.
James G. Frew: And then entering access code 592.
Operator: 40315.
James G. Frew: I would now like to turn the conference over to Jim fruit.
James G. Frew: And your Vice President and Chief Financial Officer of Amplify Energy Corp. Please.
James G. Frew: Please go ahead.
James G. Frew: Good morning, and welcome to the Amplify Energy conference call to discuss operating and financial results for the first quarter of 2024. 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 views 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 undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this earnings call.
James G. Frew: Good morning, and.
James G. Frew: And welcome to the amplify energy conference call to discuss operating and financial results for the first quarter of 2024.
James G. Frew: Before we get started we would like.
James G. Frew: To remind you that some of our remarks may contain forward looking statements, which reflect management's current views of future events and are subject to various risks uncertainties expectations and assumptions.
James G. Frew: 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 undertakes no obligation and does not intend to update these forward looking statements to reflect events or circumstances occurring after this earnings call.
James G. Frew: Please refer to our press release and SEC filings 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 10-Q, which was filed yesterday afternoon. Also, non-GAAP financial measures may be disclosed during this call.
James G. Frew: Please refer to our press release and SEC filings for a list of factors that may cause actual results to differ materially from those in the forward looking statements made during this call.
James G. Frew: In addition, the unaudited financial information that will be highlighted here is derived from our internal financial books Records and reports.
James G. Frew: For additional detailed disclosure, we encourage you to read our Form 10-Q, which was filed yesterday afternoon.
James G. Frew: Also non-GAAP financial measures may be disclosed during this call.
James G. Frew: Reconciliations of those measures to comparable gap measures may be found in our earnings release or on our website at www.amplifyenergy.com. During the call, Martyn Willsher, Amplify's President and Chief Executive Officer, will review our first quarter performance and provide an update regarding our previously announced strategic initiative. Next, Dan Furbee, Senior Vice President and Chief Operating Officer, will provide an overview of first quarter operational 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 program. Finally, Martyn will conclude our prepared remarks with final thoughts before opening the call up for questions. With that, I will hand it over to Mark.
James G. Frew: Reconciliations of those measures to comparable GAAP measures, maybe found in our earnings release or on our website at www Dot amplify energy Dot com.
Martyn A. Willsher: Amplify had a strong first quarter of 2024. The company generated $24.9 million of adjusted EBITDA and $2.3 million of free cash flow during the quarter, with both exceeding expectations.
James G. Frew: During the call Martin Wilshere, Amplifies, President and Chief Executive Officer, who will review, our first quarter performance and provide an update regarding our previously announced strategic initiatives.
Daniel Furbee: Next Dan Furby, Senior Vice President and Chief operating Officer will provide an overview of our first quarter operational performance. Following that I will discuss first quarter financial results provide an update on our balance sheet and liquidity.
Martyn A. Willsher: Finally, Martin will conclude our prepared remarks with final thoughts before opening the call up for questions with that I will hand, it over to Mark.
Martyn A. Willsher: Due to our stronger than expected first quarter performance, combined with higher forecasted crude oil prices for the remainder of 2024, we have increased our annual guidance. You can find our updated guidance in our earnings release and investor presentation posted to our website last night. With respect to the strategic initiatives highlighted on our previous calls, the Barrow marketing process is progressing as expected.
Speaker Change: Thank you Jim.
Martyn A. Willsher: Amplify had a strong first quarter of 2024, the company generated $24 $9 million of adjusted EBITDA and $2 $3 million of free cash flow during the quarter with both exceeding expectations.
Martyn A. Willsher: Due to our stronger than expected first quarter performance combined with higher forecast of crude oil prices for the remainder of 2024.
Martyn A. Willsher: We have increased our annual guidance you can find our updated guidance in our earnings release and Investor presentation posted to our website last night.
Martyn A. Willsher: With respect to the strategic initiatives highlighted on our previous calls the barrel marketing process is progressing as expected as a reminder, we are exploring complete divestiture of the asset as well as considering alternative financing structures with the goal of maximizing shareholder value.
Martyn A. Willsher: As a reminder, we are exploring complete divestiture of the asset, as well as considering alternative financing structures with the goal of maximizing shareholder value. A successful monetization will accelerate our ability to reduce debt outstanding and to evaluate return of capital options. We will provide an update regarding this process on our next call. At Beta, we continue to make progress on our 2024 development program. Dan will provide more details in a moment, but we remain encouraged about the potential of the program, especially in light of current crude oil prices.
Martyn A. Willsher: A successful barrel monetization will accelerate our ability to reduce debt outstanding and to evaluate return of capital options. We will provide an update regarding this process on our next call.
Martyn A. Willsher: Later, we continue to make progress on our 2024 development program, Dan will provide more details in a moment, but we remain encouraged about the potential of the program, especially in light of current crude oil prices our initiatives at both barrel and beta has the potential to demonstrate the significant upside of our assets that we believe is not currently fully valued.
Martyn A. Willsher: Our initiatives at both Beryl and Beta have the potential to demonstrate the significant upside of our assets that we believe is not currently fully valued. With respect to other initiatives, Amplify has been working hard to put a more robust insurance program in place to enhance our overall risk mitigation plan. A key part of that program was replacing our prior surety bonds. As a result of taking this holistic approach to our insurance program, we were able to successfully restructure our sinking fund obligations, which will lower our annual payments by approximately $7 million per year.
Martyn A. Willsher: With respect to other initiatives <unk> been working hard to put a more robust insurance program in place to enhance our overall risk mitigation plan a key part of that program was replacing our prior surety bonds. As a result of taking this holistic approach to our insurance program, we were able to successfully restructure our sinking fund obligations, which will lower our annual.
Martyn A. Willsher: Payments by approximately $7 million per year.
Martyn A. Willsher: Also of note, Amplify recently renegotiated its pre-existing iodine contracts in Oklahoma. We provide produced water to a third party for iodine extraction from the brine stream and are paid a royalty on the iodine produced. Starting in the second quarter but effective as of January 1st, 2024, Amplify will start realizing higher revenue from this partnership. Based on current iodine prices, we expect to generate an additional $2-3 million per year in iodine royalties, which are captured as other revenue in our updated guidance.
Martyn A. Willsher: Also of note recently renegotiated preexisting iodine contracts in Oklahoma, We provide produced water to a third party for iodine extraction from the Bryan stream and are paying a royalty on the iodine produced starting in the second quarter, but effective as of January one 2020 for amplify will start realizing higher revenue from this partnership.
Martyn A. Willsher: Based on current iodine prices, we expect to generate an additional $2 million to $3 million per year.
Martyn A. Willsher: Which are captured as other revenue in our updated guidance.
Martyn A. Willsher: In summary, we continue to focus on optimizing cash flow generation while simultaneously pursuing our strategic initiatives at Beryl and Beta. We believe this plan will unlock additional value in Amplify's portfolio and deliver substantial benefits and long-term value to our shareholders. With that, I'll hand it over to Dan.
Martyn A. Willsher: In summary, we continue to focus on optimizing cash flow generation, while simultaneously pursuing our strategic initiatives at barrel in beta.
Dan: Believe this plan will unlock additional value and amplifies portfolio and deliver substantial benefits and long term value to our shareholders.
Martyn A. Willsher: With that I'll hand, it over to Dan.
Daniel Furbee: Thank you, Martyn. Total production for the first quarter averaged approximately 20,200 BOE per day, consisting of 43% oil, 18% NGLs, and 39% natural gas. Oil volumes for the quarter were slightly higher than the previous quarter, despite a planned shutdown for facility upgrades of bare oil and planned shut-ins at beta necessary for the continued electrification and emission reduction project scheduled to be completed later this year. Though oil production increased versus the prior quarter, gas production was lower quarter for quarter, primarily due to third-party interruption and higher shrinks as a result of processing more ethane.
Dan: Thank you Martin total production for the first quarter averaged approximately 20200 Boe per day, consisting of 43% oil, 18% Ngls and 39% natural gas oil volumes for the quarter were slightly higher than the previous quarter. Despite a planned shutdown for facility upgrades of bear oil and plan shortly.
Daniel Furbee: The data necessary for the continued electrification and emission reduction projects scheduled to be completed later this year.
Daniel Furbee: The oil production increased versus prior quarter gas production was lower quarter over quarter, primarily due to third party interruption and higher shrink as a result of processing more ethane as a result, we have adjusted our production guidance accordingly.
Daniel Furbee: As a result, we have adjusted our production guidance accordingly. For the first quarter, lease offering expenses were $38 million. Gathering, processing, and transportation costs were $4.8 million, and production taxes were $4.9 million.
Daniel Furbee: For the first quarter lease operating expenses were $38 million gathering processing and transportation costs were $4 $8 million and production taxes were $4 $9 million in.
Daniel Furbee: In total, these costs were approximately $2.5 million higher than the previous quarter, driven by higher planned LOE costs in the first quarter for certain annual maintenance and one-time projects. We are forecasting our total lease offering expenses to decrease throughout the remainder of the year, with many of the one-off expense projects completed in the first quarter and several cost-saving initiatives starting to take effect. Our lease offering expenses were partially offset by approximately $600,000 of income generated by Amplify Energy Services. Gross income is expected to continue growing throughout the year as they expand this business by acquiring digital compressors and initiating water hauling services in the second half. The company's total capital investment for the quarter was approximately $19.1 million.
Daniel Furbee: In total these costs were approximately $2 $5 million higher the previous quarter, driven by higher plant costs in the first quarter for certain annual maintenance and onetime projects. We are forecasting our total lease operating expenses to decrease throughout the remainder of the year with many of the one off expense projects completed in the first quarter and several cost saving.
Daniel Furbee: Just starting to take effect.
Daniel Furbee: Our lease operating expenses were partially offset by approximately $600000 of income generated by magnify energy services.
Daniel Furbee: Magnify income is expected to continue growing throughout the year as it expands its business by acquiring this will compressors and initiating water hauling services in the second quarter.
Daniel Furbee: The company's total capital investment for the quarter was approximately $19 1 billion. The majority of this capital was invested at data as we continue our electrification and emission reduction facility project and initiated our development program.
Daniel Furbee: The majority of this capital was invested at Beta as we continue our electrification and emission reduction facility project and initiate our development program. The remaining capital was invested in facility upgrades at Fair Oil, various capital workovers across our asset base, and approximately $700,000 for Magnify. Capital for the remainder of 2024 will mostly be allocated to continued development and facility enhancements at Theta, high return workovers across our assets, and non-operated projects. With respect to our non-operated activity, in Eagle Bird, the company is expected to participate in 13 gross 0.7 net new development wells and 2 gross 0.4 net recompletion projects, while at East Texas, the company is evaluating participation in 3 gross 0.8 net well
Daniel Furbee: The remaining capital was invested.
Daniel Furbee: Cody upgrade that bear oil various capital workovers across our asset base and approximately $700000 per magnified.
Daniel Furbee: Capital for the remainder of 2024 will mostly be allocated to continued development and facility enhancements at beta high return workovers across our assets and non operated projects.
Daniel Furbee: With respect to our non operated activity in the Eagle Ford. The company is expected to participate in 13 gross seven net new development wells and two gross four net re completion projects, while at East, Texas. The company is evaluating participation and three gross eight net wells.
Daniel Furbee: At BATA, we completed the second phase of the electrification and emission reduction infrastructure project in the first quarter, which involved successfully replacing our diesel-driven injection pumps with electric pumps on the LE platform. We are now proceeding with the third and final phase of the project, which involves installing selective catalytic reducers, or SCRs, on our rig engines on the Ellen platform. Amplify remains on target to meet the compliance deadline in the fourth quarter of 2024, as prescribed by the district air quality regulations.
Daniel Furbee: That data, we completed the second phase of electrification and Mr reduction of infrastructure projects in the first quarter.
Daniel Furbee: Which involves successfully replacing diesel driven injection pumps with electric pumps on the OE platform. We are now proceeding with the third and final phase of the project, which involves installing selective catalytic reduces or SCR is on a rig engine on the <unk> platform.
Daniel Furbee: Amplify remains on target to meet the compliance deadline in the fourth quarter of 2024 as prescribed by the district Air quality regulations.
Daniel Furbee: After completing these projects, we do not anticipate additional material facility investments at Beta in the near future, which will significantly increase the free cash flow from Beta going forward. In conjunction with the cost savings to be realized by the large facility project at Beta, we also anticipate substantial production growth as a result of our 2024 development. The company spread the A45 well from the Ellen platform in March and successfully reached the objective formation.
Daniel Furbee: After completing these projects, we do not anticipate additional material facility investments that data in the near future, which will significantly increase the free cash flow from beta going forward.
Daniel Furbee: In conjunction with the cost savings to be realized by the large facility project that data. We also anticipate substantial production growth as a result of our 2020 for development.
Daniel Furbee: The company Spud the 845, well from the <unk> platform in March and successfully reached the objective formation.
Daniel Furbee: Amplify's formation logs reinforce the company's views that the target interval has high oil saturation and is expected to deliver excellent results. However, during drilling operations, Amplify experienced equipment issues, including a rig engine failure, causing an extended period of downtime with the hole open, leading to well stability issues. In turn, we were not able to run our casing to our planned depth in the production formation, leading us to set the cas
Daniel Furbee: Amplifies formation logs reinforce the company's views as a target interval has a high oil saturation and is expected to deliver excellent results during.
Daniel Furbee: During drilling operations amplify experienced equipment issues, including a rig engine failure, causing an extended period of downtime with the whole open leading to well stability issues in turn we were not able to run our casing to a planned step up the production formation, leading us to set the casing hi.
Daniel Furbee: This will require us to complete the well through a smaller casing design, resulting in an altered completion for the well. Due to equipment availability for the revised completion, and because commencement of the third phase of the electrification project is critical to achieve the project deadline, we are deferring the completion of the A45 well until the fourth quarter of 2024, when we are finished with the SCR installation on the Ellen rigging. We expect to spud our second development well this month, with its completion anticipated in June, and we plan to spud two additional development wells in the third quarter.
Daniel Furbee: This will require us to complete the well through a smaller casing design, resulting in offer completion for the well do.
Daniel Furbee: Due to equipment availability for the revised completion and because commencement of a third phase of electrification project is critical to achieve the project deadline, we have deferred the completion of a 45 well into the fourth quarter of 2024. When we're finished with the SCR installation on the Elliott rig ages.
Daniel Furbee: We expect to spud, our second development well this month with this completion anticipated June and we plan to slide two additional development wells in the third quarter.
Daniel Furbee: With our facility and development drilling investments in beta, we anticipate a significant increase in the profitability and overall value of the asset that will be realized as we execute these initiatives this year. Combine this with continued optimization projects and cost-saving efforts across our asset base, including the continued build-out of Amplify Energy's services. We continue to expect 2024 to be a transformational year for the company, where we start to realize the full value of Amplify's asset base. With that, I will turn it over to Jim.
Daniel Furbee: With our facility and development drilling investment the beta we anticipate a significant increase in the profitability overall value of the asset that will be realized as we execute these initiatives this year coupled.
Daniel Furbee: Couple this with continued optimization projects and cost saving efforts across our asset base, including the continued buildout of Magnify energy services. We continue to expect 2024 to be a transformational year for the company, where we start to realize the full value of <unk> asset base.
Daniel Furbee: With that I will turn it over to Jim.
Jim: Thank you Dan.
James G. Frew: I would now like to discuss the following items: First Quarter Financial Performance, Balance Sheet and Liquidity, and Hedging, with respect to first quarter financial performance. The company reported a net loss of approximately $9.4 million compared to $43.6 million of net income in the prior quarter. The change was primarily attributable to a non-cash, unrealized loss on commodity derivatives due to prices increasing throughout the first quarter. As Martyn previously mentioned, first quarter adjusted EBITDA was $24.9 million, which exceeded our expectations.
Jim: I would now like to discuss the following items first quarter financial performance balance sheet and liquidity and hedging.
James G. Frew: With respect to first quarter financial performance. The company reported a net loss of approximately $9 4 million compared to $43 $6 million of net income in the prior quarter.
James G. Frew: The change was primarily attributable to a noncash unrealized loss on commodity derivatives due to prices increasing throughout the first quarter.
James G. Frew: As Mark previously mentioned first quarter, adjusted EBITDA was $24 9 million, which exceeded our expectations.
James G. Frew: First quarter revenue was also higher than expected due to strong crude oil prices combined with less downtime at beta versus our plan. The futures curve for crude oil is above our initial guidance assumptions, which is providing a strong tailwind for 2024 with respect to lease operating costs.
James G. Frew: First quarter revenue was also higher than expected due to strong crude oil prices combined with less downtime at beta versus our plan.
James G. Frew: The futures curve for crude oil is above our initial guidance assumptions, which is providing a strong tailwind for 2024.
James G. Frew: With respect to lease operating costs.
James G. Frew: In the first quarter, these operating expenses were approximately $38.3 million and averaged $20.78 per BOE. LOE was higher than the prior quarter, in large part, due to a one-time adjustment that occurred in the fourth quarter, in addition to scheduled maintenance and other routine annual expenses. Amplify expects quarterly LOE for the remainder of the year to be lower than the first quarter, with full-year LOE remaining within the original guidance range. First quarter GPT costs were $4.8 million or $2.59 per BOE. First quarter GPT was down 3% versus the prior quarter. We expect these lower costs will continue into 2024.
James G. Frew: First quarter. These operating expenses were approximately $38 $3 million.
James G. Frew: And averaged $20 78 per Boe.
James G. Frew: LOE was higher than the prior quarter in large part to a one time adjustment that occurred in the fourth quarter. In addition to scheduled maintenance and other routine annual expenses.
James G. Frew: Amplify expects quarterly low for the remainder of the year to be lower than the first quarter with full year low.
James G. Frew: Painting within the original guidance range.
James G. Frew: First quarter GPT costs were $4 8 million or $2 59.
James G. Frew: Per Boe.
James G. Frew: First quarter, GPT was down 3% versus the prior quarter.
James G. Frew: We expect these lower costs will continue into 2024.
James G. Frew: Cash G&A in the first quarter was $7.9 million, or $4.05 per BOE, which was up $1.7 million from the prior quarter. This increase was in line with expectations and primarily due to year-end processes that impact various cost drivers annually in the first quarter and a one-time cost associated with the early termination of our Tulsa office lease. Adjusting for the Early Lease Termination Cost
James G. Frew: Cash G&A in the first quarter was $7 9 million or $4 <unk> per Boe.
James G. Frew: Which was up $1 7 million from the prior quarter.
James G. Frew: This increase was in line with expectations and primarily due to year end processes that impact various cost drivers annually in the first quarter and a one time costs associated with the early termination of our Tulsa office lease.
James G. Frew: Adjusting for the early lease termination cost G&A was flat compared to Q1 2023.
James G. Frew: GNA was flat compared to Q1 2023. The company anticipates that quarterly cash G&A expenses will be materially lower throughout the remainder of the year. And as a result, we have not adjusted our original G&A guidance.
James G. Frew: The company anticipates that quarterly cash G&A expenses will be materially lower throughout the remainder of the year and as a result, we have not adjusted our original G&A guidance range.
James G. Frew: In the first quarter, we incurred $3.5 million of interest expense, down $0.3 million compared to the prior quarter and down $2.2 million versus the same quarter a year ago. Amplify invested $19.1 million of capital in the first quarter. In addition to ramping up activity at beta, the company also elected to accelerate a short turnaround at Bayer Oil, originally planned to occur in the second quarter. Amplify instead opted to conduct the turnaround in the first quarter to take advantage of the downtime associated with another project.
James G. Frew: In the first quarter, we incurred $3 $5 million of interest expense down $3 million compared to the prior quarter and down $2 2 million versus the same quarter a year ago.
James G. Frew: Amplify invested $19 $1 million of capital in the first quarter.
James G. Frew: In addition to ramping up activity at beta the company also elected to accelerate a short turnaround at Barnwell.
James G. Frew: Originally planned to occur in the second quarter.
James G. Frew: Amplify opted to conduct the turnaround in the first quarter to take advantage of the downtime associated with another project.
James G. Frew: As a result, first quarter capital was slightly higher than expected, but because it was an acceleration, the company is electing not to adjust capital in our 2024 guidance. As Dan mentioned, we are also participating in development wells in Eagleford and evaluating several in East Texas, and we would expect to see production from those wells starting in 2025. Free cash flow, defined as adjusted EBITDA, less CapEx, and cash interest expense, was $2.3 million for the first quarter of 2024.
James G. Frew: As a result first quarter capital was slightly higher than expected.
James G. Frew: There was an acceleration the company has elected not to adjust capital in our 2020 for guidance.
James G. Frew: As Dan mentioned, we are also participating in development wells in the Eagle Ford and evaluating several in East, Texas, and we expect to see production from those wells starting in 2025.
James G. Frew: Free cash flow defined as adjusted EBITDA less capex and cash interest expense was $2 3 million for the first quarter of 2024.
James G. Frew: Despite accelerating capital into the first quarter, this result exceeded expectations, and Amplify has increased its annual free cash flow guidance range. Amplify has now generated positive free cash flow in 15 of the last 16 quarters, illustrating the strong sustainable cash generating potential of our mature diversified asset base. On May 2nd, 2024, we completed the regularly scheduled semi-annual redetermination of our borrowing base, which was reaffirmed at $150 million with elected commitments of $135 million. The next redetermination is expected to occur in the fourth quarter of 2024.
James G. Frew: Despite accelerating capital into the first quarter. This result exceeded expectations and amplify has increased our annual free cash flow guidance range.
James G. Frew: Amplify has now generated positive free cash flow in 15 of the last 16 quarters illustrating the strong sustainable cash generating potential of our mature diversified asset base.
James G. Frew: On May 2nd 2024, we completed the regularly scheduled semi annual redetermination of our borrowing base, which was reaffirmed at $150 million with elected commitments of $135 million.
James G. Frew: The next Redetermination is expected to occur in the fourth quarter of 2024.
James G. Frew: As of March 31st, Amplify had net debt of approximately $112 million, consisting of $150 million outstanding under our revolving credit facility and $3 million of cash and cash equivalents. At the end of the first quarter, the company's liquidity was $23 million, and net debt to last 12 months' adjusted EBITDA was 1.3 times. The increase in net debt versus the prior quarter was primarily due to expected changes in working capital and increased investment activity.
James G. Frew: As of March 31, amplify had net debt of approximately $112 million.
James G. Frew: Consisting of $150 million outstanding under our revolving credit facility and $3 million of cash and cash equivalents.
James G. Frew: At the end of the first quarter, the Companys liquidity was $23 million and net debt to last 12 months adjusted EBITDA was one three times.
James G. Frew: The increase in net debt versus the prior quarter was primarily due to expected changes in working capital and increased investment activity.
James G. Frew: As of May 8th, our forecasted crude oil production was approximately 70 to 75% hedged for 2024, 45 to 50% hedged for 2025, and 10 to 15% hedged in 2026. On the gas side, we are 80% to 90% hedged for 2024 through 2025 and 55% to 60% hedged in 2026. In the first quarter, we added gas hedges covering a portion of our expected 2026 production, and Crude Hedges covering a portion of our expected 2024 production. We will continue monitoring the market to supplement our strong hedge positions going forward. With that, I'll turn the call back to Martyn.
James G. Frew: As of May eight our forecasted crude oil production was approximately 70% to 75% hedged for 2024.
James G. Frew: 45% to 50% hedged for 2025, and 10% to 15% hedged in 2026.
James G. Frew: On the gas side, we are 80% to 90% hedged for 2024 through 10 to 25 and 55% to 60% hedged in 2026.
James G. Frew: In the first quarter, we added gas hedges covering a portion of our expected 2026 production.
Martyn: And crude hedges covering a portion of our 2020 for expected production.
Martyn: We will continue monitoring the market to supplement our strong hedge positions going forward.
Martyn: With that I'll turn the call back to Mark.
Martyn A. Willsher: Jim, as I mentioned earlier on this call, we are increasing guidance based on better than expected first quarter results and continued strength in crude oil prices. Amplify's updated guidance is now based on flat commodity prices for WTI crude oil of $78 a barrel and Henry Hub natural gas of $2.25 per MMBTU.
Martyn: Thank you Jim.
Martyn: As I mentioned earlier on this call we are increasing guidance based on better than expected first quarter results and continued strength in crude oil prices and provide updated guidance is now based on flat commodity prices, but WTS crude oil of $78, a barrel and Henry hub natural gas of $2 25 per <unk>.
Martyn A. Willsher: As previously disclosed, the company expects to invest 85 to 95% of its capital in the first three quarters of the year, primarily in connection Additional guidance details were provided in our earnings release and can be found in the latest investor presentation currently available on our website. In summary, 2024 is off to a good start. With a strong balance sheet, compelling strategic initiatives underway, and a motivated and capable workforce, we are optimistic about our future.
Martyn A. Willsher: As previously disclosed the company expects to invest 85% to 95% of its capital in the first three quarters of the year, primarily in connection with the beta projects additional guidance details were provided in our earnings release and can be found in the latest investor presentation. Currently available on our web site. In summary, 2024 is off to a good start with a strong balance.
Martyn A. Willsher: She'd compelling strategic initiatives underway and a motivated and capable workforce. We are optimistic about our future. We believe the barrel monetization and beta development have the potential to provide a catalyst for market outperformance, while also enhancing our flexibility as we consider and evaluate potential capital return options, we will continue to find ways.
Martyn A. Willsher: We believe the bearable monetization and beta development have the potential to provide a catalyst for market outperformance while also enhancing our flexibility as we consider and evaluate potential capital return options. 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. We remain confident that the initiatives Amplify is actively pursuing this year have the potential to be transformative for the company. With that, Operator, we are now open to questions.
Martyn A. Willsher: To enhance shareholder value through diligent asset management, a relentless focus on managing our cost structure and prudent capital allocation, we remain confident.
Operator: Thank you. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Once again, to ask a question, please press star 1. Our first question will come from Jeff Grampp with Alliance Global Partners. Please go ahead.
Martyn A. Willsher: Confident that the initiatives amplify is actively pursuing this year have the potential to be transformative for the company with that.
Speaker Change: Later, we are now open for questions.
Jeffrey Scott Grampp: Thank you if you would like to ask a question at this time. Please press star one on your telephone keypad.
Jeffrey Scott Grampp: Remove yourself at any time by pressing star two.
Jeffrey Scott Grampp: Once again to ask a question please press star one.
Jeffrey Scott Grampp: Our first question will come from Jeff Gramm with Alliance Global Partners. Please go ahead.
Jeffrey Scott Grampp: To start off with beta and the mechanical issue that appeared here, specifically wondering if there's any anticipated impact on production from the well, given the change in completion plan, and then prospectively, if there's any kind of learnings that can be applied to the next wells to, I guess, kind of de-risk or mitigate any potential issues re-arising on future drilling. Thanks.
Jeffrey Scott Grampp: To start off first with <unk>.
Jeffrey Scott Grampp: With beta and the mechanical issue that that appear here specifically wondering.
Speaker Change: If theres any.
Jeffrey Scott Grampp: Anticipated impact to production from the well given the change in completion plan and then prospectively, if theres any kind of learnings that can be applied to the next wells too I guess kind of derisked or mitigate any potential issues re arising on future drilling.
Daniel Furbee: Yeah, Jeff. Hi, this is Dan.
Jeffrey Scott Grampp: Hi, Jeff Hi, this is Dan.
Dan: Yes, the issues, we had with the well to answer your second part of your question. It was.
Daniel Furbee: Equipment failures on a rig.
Daniel Furbee: Yeah, the issues we had with the well, to answer the second part of your question, were equipment failures on our rig. The good thing is we've replaced all the components that failed during this operation, so we do not foresee those issues in the future. For the altered completion, yeah, we just did it. Not much different, just a smaller casing design, and we do not expect any real material differences in productivity this well.
Dan: The good thing is we've replaced all of the components that failed.
Daniel Furbee: During this operation so we do not foresee those issues in the future.
Daniel Furbee: <unk> for the ultra completion, yes, we just.
Daniel Furbee: Not much different just a smaller casing design and we do not expect in raw.
Daniel Furbee: There are differences in the productivity of this well and like we said we are encouraged by we did logged a zone that we intend to produce from and expect that to perform very well.
Daniel Furbee: And like we said, we're encouraged by it. We did log the zone that we intend to produce from and expect that to perform very well. The real impact of this is that this one will all be coming on, you know, towards the end of the year as opposed to this time of year, and the remaining drilling we have is still on schedule.
Daniel Furbee: The real impact of this is this one will be coming on towards the end of the year as opposed to.
Daniel Furbee: This time of year and the remaining drilling we have is still on schedule.
Daniel Furbee: Sure.
Jeffrey Scott Grampp: understood. Great. I appreciate that detail.
Speaker Change: Understood great.
Speaker Change: I appreciate that detail. So my follow up with respect to the bare oil limited turnaround can you talk a little bit more about the strategy to change that timing and then can you can you clarify I apologize. If this was mentioned but is there expected to be another kind of more traditional turnaround later this year or what's kind of the.
Jeffrey Scott Grampp: My follow-up question, with respect to the bare oil limited turnaround, can you talk a little bit more about the strategy to change that timing? And then can you clarify, apologies, this was mentioned, but is there expected to be another kind of more traditional turnaround later this year? Or what's the kind of timeline that you guys might expect for when another turnaround may be needed at bare oil?
Jeffrey Scott Grampp: The timeline that you guys might might expect for.
Jeffrey Scott Grampp: Another turnaround maybe needed a barrel oil.
Daniel Furbee: Hey Jeff, good morning.
Speaker Change: Hey, Jeff Good morning.
Jeff: So we've been looking at the turnaround strategy traditionally we've done these every year, but we.
Daniel Furbee: So, we've been looking at the turnaround strategy. Traditionally, we do these every year, but we've kind of stretched them out a little bit towards more like 18 months or 12 months. And because we've added additional capacity for compression and replaced some things over the years, we're actually able now to go potentially as long as two years in between turnarounds. In this particular instance, we were replacing a section of line that we needed to replace.
Daniel Furbee: Kind of stretch them out a little bit towards more like 18 months, some 12 months.
Daniel Furbee: And because we've added additional capacity on compression and replace some things over the years, we're actually able now to probably go potentially as long as two years in between turnarounds.
Daniel Furbee: In particular, we were replacing a section of line that we needed to replace and so instead of we wanted to get that out of the way and so we did it in March. It was planned in late May June originally so basically all we did was accelerate and instead of what's usually a 7% to eight 7% to 10 day turnaround we did it.
Daniel Furbee: And so, instead of, we wanted to get that out of the way. And so, we did it in March, although it was planned in late May or June originally.
Daniel Furbee: So, basically, all we did was accelerate it. And instead of what's usually a seven to ten day turnaround, we did it in two to three days. And so, we don't anticipate another turnaround until sometime next year. Hence, there won't be another turnaround this year. This is basically the replacement. So, it's a much shorter, less costly, more efficient turnaround that also has less overall impact on total crude production for the year. Because when you're down seven to ten days on a CO2 flood, it takes a little while to ramp back up.
Daniel Furbee: In two to three days.
Daniel Furbee: And so we don't anticipate another turnaround until sometime next year. So there won't be another turnaround. This year. This is basically the replacement. So it's a much shorter less costly more efficient turnaround that also has less overall impact on total crude production for the year, because when youre down seven to 10 days on a on a cotwo.
Daniel Furbee: It takes a little while to ramp back up so this was less impactful.
Daniel Furbee: So, this was less impactful by doing it this way. And like I said, because we can do compressor annuals and things like that during the year now, because we have redundancy, it's allowed us to kind of do things a little bit more efficiently overall.
Daniel Furbee: By doing it this way and like I said, because we can do compress of annuals and things like that during the year now because we have redundancy.
Daniel Furbee: It's allowed us to kind of do things a little bit more efficiently overall.
Jeffrey Scott Grampp: I understand. I appreciate those details, and thanks for the time.
Speaker Change: Understood appreciate those details and thanks for the time.
Speaker Change: Thanks, Jeff.
Operator: Thank you. As a reminder, to ask a question, please press star 1. Our next question comes from Subhash Chandra with Benchmark. Please go ahead.
Jeffrey Scott Grampp: Thank you as a reminder to ask a question. Please press star one.
Subhasish Chandra: Our next question comes from <unk> Chandra with benchmark. Please go ahead.
Subhasish Chandra: Yeah, good morning everyone. Question on beta, so production has now ticked up, you know, every quarter over the past year since the restart. You know, what do you think of base production at this point, and is any of it still being hindered by some of the, you know, the modifications being made to the platform to where, you know, it might argue for a higher base production next year independent of the development work?
Subhasish Chandra: Yes, good morning, everyone.
Subhasish Chandra: Question on data so production now has ticked up.
Subhasish Chandra: Every quarter over the past year since the restart what do you think of base production at this point and is any of it still being hindered with some of the.
Subhasish Chandra: The modifications being made to the platform to where it might argue for a higher base of production next year independent of the development work.
Daniel Furbee: Yeah, this is Dan. So outside of the development, we still have a handful of wells pre-shutdown that still need workovers. So there is some incremental production that could be realized from beta from that. But as of now, I think where we're at now is probably our base production before development and maybe some incremental.
Subhasish Chandra: Yes. This is Dan so outside of the developments.
Daniel Furbee: We still have a handful of wells.
Daniel Furbee: Pre shutdown that still need workovers.
Daniel Furbee: So there is some incremental production that could be realized from data from that but as of now I think where we're at now is probably our base production before development and maybe some incremental.
Daniel Furbee: The large facility projects we keep talking about, and we've been working on for some time now, that's going to mostly drive cost-saving initiatives. And those cost savings are going to come from essentially reducing all our diesel usage for power generation, being supplemented with just produced gas generated power through our generators, and then also supplemented with shore power we purchase. In addition to that, we won't have to buy nearly as many NOx credits that we currently have to buy under the South Coast Air Quality District, so that'll reduce costs as well.
Daniel Furbee: March facility projects, we keep talking about been working on for some time now that's going to mostly drive cost saving initiatives.
Daniel Furbee: And there is cost savings are going to come from we're essentially going to reduce all of our diesel usage for power generation.
Daniel Furbee: Being supplemented with just produce gas generated power through our generators and then also supplemented with short power repurchase. In addition of that we won't have to buy.
Daniel Furbee: Nearly as much.
Daniel Furbee: <unk> credits that we currently have to buy under the South coast Air quality District.
Daniel Furbee: So that will reduce costs as well so so thats, mostly on the cost savings side.
Subhasish Chandra: Okay, gotcha. And from, I guess, the discussion on the direction, LOE, and CapEx, it doesn't sound like there were a lot of A45-related costs in the LOE CapEx in the first quarter. Is that a fair comment? That wasn't the reason for some of the overages.
Speaker Change: Okay Gotcha.
Daniel Furbee: And from I guess the.
Subhasish Chandra: The discussion on.
Subhasish Chandra: The direction of LOE and Capex.
Speaker Change: Doesn't sound like there was a lot of $8 45 related.
Subhasish Chandra: Costs in the low capex in the first quarter.
Subhasish Chandra: Is that a fair comment that.
Subhasish Chandra: That wasn't the reason for some of the Overages.
Daniel Furbee: Yeah, I think there were obviously some capital costs related to the AFE. We started the 845 in March, so that part of that was in March, and there'll be some in April as well. Most of this is because, one, we accelerated the turnaround; two, we've accelerated projects at Beta specifically on the facility side, and we've actually managed to shrink what was originally going to be 15 days of downtime during the year. We'll have less downtime during the year because we've kind of taken advantage of some other opportunities to move forward some of that facilities project, and so it's less impactful as we go forward through the year.
Speaker Change: Yes, I think there is obviously some capital costs related to the <unk>, we started the <unk>.
Daniel Furbee: <unk> 45 in March so that part of that was in March and there'll be some in April as well most of this is because in.
Daniel Furbee: One we accelerated the turnaround two we've accelerated projects that made us specifically on the facility side and we've actually managed to what was originally going to be 15 days of downtime during the year, we've managed to shrink that and we will have less downtime during the year, because we've kind of taken advantage of some other opportunities to to move forward some of that facilities project and.
Daniel Furbee: So it's a less impactful as we go forward through the year. So it had a little bit of a tumultuous impact on Q1, especially on the low end and.
Daniel Furbee: So, it had a little bit of a tumultuous impact on Q1, especially on the LOE and capital sides, but if you look at our overall guidance, we're not changing overall guidance, it's just an acceleration as we've had to kind of change timing as we've seen opportunities to bring things forward and then thus bring forward the impact of these changes at the same time.
Daniel Furbee: <unk> capital side, but if.
Daniel Furbee: If you look at our overall guidance, we're not changing overall guidance is just an acceleration as we've had to kind of change timing as we've seen opportunities to bring things forward and then thus bringing forward the impact of these changes at the same time.
Subhasish Chandra: Okay, gotcha. If I can just ask about the sinking fund, so the $16 million goes to $9 million, is that fair? And when does that start? And is there any sort of, you know, offsetting balances? You know, I don't know how this stuff works, but maybe something on the credit facility or something? Or is this a pretty clean $16 goes to $9 on cash outlays?
Speaker Change: Okay got you if I can just asked on the sinking fund. So the 16 million goes to $9 million is that fair and when does that start and is there any sort of <unk>.
Subhasish Chandra: Offsetting balances I.
Subhasish Chandra: I don't know how the stuff works, but maybe something on the credit facility or something or is this a pretty clean 16 goes to nine on cash outlays.
Daniel Furbee: Yeah, no. I think you said it perfectly the first time. There's basically a federal portion of this and the state portion of this, and the federal portion is eight, and the state portion is one. It was essentially, so what was 16 is now nine, and I anticipate that's kind of where we'll be going forward, and so that's really the change that we made was basically replacing the surety group that had been in there for several years and basically reallocating ourselves with a different group as we as we kind of move forward and you know getting the right people in the right group to kind of manage that process going forward.
Speaker Change: Yes, no I think you said it perfectly the first time there is basically there is a federal portion of us in this state portion of this and the federal portion of eight.
Subhasish Chandra: Okay, good to know. If I just ask one last question, and I'll hop back in the queue. So Bear Oil is one of the final bids. So that process will take place, basically. We're kind of wrapping up.
Subhasish Chandra: The state portion is one it was essentially so what was <unk> 16 is now nine.
Subhasish Chandra: And I anticipate that kind of work.
Subhasish Chandra: Going forward and so that's really the change that we made was basically replacing the surety group that had been in there for several years.
Subhasish Chandra: Basically reallocating ourselves with a different group as we as we kind of move forward in getting the right people and the right group to kind of manage that process going forward.
Subhasish Chandra: Okay.
Speaker Change: Can I just ask one last one then I'll hop back in the queue so barrel of oil.
Subhasish Chandra: One of the final bids due.
Daniel Furbee: So that process will take place basically, we're kind of wrapping up kind of the middle of towards the end of data rooms at this point, you know, bids will be due towards the end of March and towards the end of May. There's traditionally a first round, a second round, and then you'll negotiate a PSA. And obviously, we've got the added complication of the fact that we're doing kind of a dual process with a monetization structure as well.
Daniel Furbee: So we anticipate this will happen over the summer and potentially in advance of the next round or call. And so we'll obviously update the market at the appropriate time. But, but that that is coming soon.
Subhasish Chandra: So that process will take place basically.
Daniel Furbee: Kind of wrapping up kind of our middle of towards the end of data rooms. At this point bids will be due towards the end of March and towards the end of May.
Daniel Furbee: Traditionally our first round second round, and then Youll negotiate a PSA and obviously, we've got the added complication of the fact that we're doing kind of a.
Daniel Furbee: A dual process with a monetization structure as well so we anticipate this will happen over the summer.
Daniel Furbee: And potentially in advance over the next call.
Daniel Furbee: And so we'll obviously update the market at the appropriate time, but.
Daniel Furbee: That is coming soon.
Speaker Change: Thank you all for your time.
Operator: At this time, I would like to turn the call back to management for any additional or closing remarks.
Speaker Change: At this time I would like to turn the call back to management for any additional or closing remarks.
Martyn A. Willsher: With that, I'd just like to say thank you to all of our employees for their outstanding efforts and dedication so far this year, and I'd also like to express my appreciation to all of our stakeholders for their continued support. Thank you for participating in the call today, and, as always, if there are any questions, please don't hesitate to reach out.
Speaker Change: Thank you.
Speaker Change: I'd just like to say, thank you to all of our employees for their outstanding efforts and dedication. So far this year I'd also like to express my appreciation to all of our stakeholders for their continued support.
Martyn A. Willsher: Thank you for participating on the call today and as always if there are any questions. Please don't hesitate to reach out. Thank you everyone.
Martyn A. Willsher: Sure.
Operator: Thank you. This does conclude the Amplify Energy's first quarter 2024 investor conference call.
Speaker Change: Thank you. This does conclude the amplify entities first quarter 2024 Investor Conference call.
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