Q1 2025 Amplify Energy Corp Earnings Call
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Welcome to Amplify Energy's first quarter, 2025 Investor Conference call.
Amplify's operating and financial results were released yesterday after market closed on May 12th, 2025, and are available on Applify's website at www.amplifyenergy.com
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 27th, 2025 by dialing 800.
654-1563 and then entering access code 524-587-98. A transcript and a recorded replay of the call will also be available on our website after the call.
Speaker Change: I would now like to turn the conference over to Jim Frew, Senior Vice President and Chief Financial Officer of Amplify Energy Core.
Jim Frew: Good morning, and welcome to the Amplify Energy Conference call to discuss operating and financial results for the first quarter of 2025. Before we get started, we would like to remind you that some of our remarks may contain forward-looking statements which reflect management's current views of future events and are subject to various risks, uncertainties, expectations, and assumptions.
Jim 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.
Jim Frew: In addition, the unaudited financial information that will be highlighted here is derived from our internal financial books, records, and reports.
Jim Frew: For additional detailed disclosure, we encourage you to read our Form 10-Q, which was filed yesterday afternoon.
Jim Frew: Also, non-GAAP financial measures may be disclosed during this call. Reconciliations of those measures to comparable GAAP measures may be found in our earnings release or on our website at www.amplifyenergy.com.
Jim Frew: During the call, Martyn Willsher, Amplify's President and Chief Executive Officer, will provide an update regarding our first quarter performance with specific focus on the most recent beta field development results, updated guidance, and recent acreage monetizations in East Texas.
Jim Frew: Next, Dan Furbee, Senior Vice President and Chief Operating Officer, will provide an overview of first quarter operation performance.
Speaker Change: Following that, I will discuss first quarter financial results, provide an update on our balance sheet and liquidity, and provide additional details on our hedge book. Finally, Martyn will provide final thoughts before opening the call up for questions. With that, I will hand it over to Martyn.
Speaker Change: Thank you, Jim. Amplify has a strong first quarter 2025, generating 19.4 million dollars of adjusted EBITDA, 25.5 million dollars of operating cash flow, and producing 17,900 BOE per day.
Speaker Change: At Beta, we continue to build off the success of the 2024 development program, which was anchored by the strong results from the A50 and the C59 desand completions, which continue to perform above our pre-drill type curves, with IRRs in excess of 90% at $60 oil prices.
Speaker Change: Following up from those successes, we recently completed the C-54 well in the D-Sand, which through its first 20 days of production has been the strongest well in the program with an IP20 of approximately 800 barrels of oil per day.
Speaker Change: With the recent completions of the C-48 and C-54, the field now has four new development wells on line, which after offsetting the acid's base decline, have increased beta production by approximately 35% since early 2024.
Speaker Change: Due to the success of the beta development program, at year-end 2024, Amplify had 25 PUD locations on our year-end reserves, 21 of which were in the D-Sand.
Speaker Change: Based on the type curve utilized in those reserves, these publications have a PV10 value of approximately $144 million at a $65 flat WTI price oil.
Speaker Change: However, all of our DSAN completions to date have significantly outperformed the type curve, which indicates material upside to this valuation estimate as we continue to generate consistently outstanding results from our DSAN completions.
Speaker Change: In East Texas, the company monetized portions of its Haynesville acreage position to bring forward cash flow.
Speaker Change: As previously announced, in January 2025, Amplify sold 90% of its interest in certain units with Hainesville rights in Harrison County, Texas, for $6.3 million in net proceeds.
Speaker Change: In May 2025, Amplify completed a separate transaction to monetize 90% of its interest in additional units with Hainesville Rides in Panoa and Shelby Counties, generating an additional $1.5 million in proceeds.
Speaker Change: In aggregate, Amplify has now completed three Haynesville acreage transactions since November 2024, generating $9.2 million net in total proceeds, while also retaining a 10% working interest in more than 30 gross non-operated development opportunities to realize additional upside value in future periods.
Turning to guidance.
Speaker Change: In light of the recent material reduction in oil prices, we conducted a comprehensive review of our remaining uncommitted 2025 capital budget and have elected to temporarily defer three development projects at Theta, resulting in capital savings of approximately $50 million.
Speaker Change: While our beta development projects have outstanding economics at current oil prices, we have flexibility on the timing of these projects, and they're committed to maintaining strong free cash flow and a healthy balance sheet for our investors.
Speaker Change: We are also conducting a thorough review of additional cost savings opportunities, targeting reductions in additional capital projects, operating costs, and overhead.
Speaker Change: In summary, with the additional strong results of the C-54 well, we continue to be very optimistic about the long-term potential of our beta development program.
Speaker Change: While we are temporarily deferring some beta projects due to commodity price uncertainty,
Our long-term development strategy remains intact.
Speaker Change: and we will prioritize adding back beta wells as market conditions improve.
Speaker Change: In the meantime, we intend to continue focusing on reducing costs across the organization
Speaker Change: maintaining strong free cash flow, and evaluating portfolio optimization opportunities, which could enable us to accelerate beta development. With that, I will hand it over to Dan.
Dan Furbee: Thank you, Martyn. During the first quarter of 2025, average daily production was approximately 17.9 MVOE per day, a decrease of 0.6 MVOE per day from the prior quarter, with a production commodity mix of 46% oil, 16% NGL, and 38% natural gas.
Dan Furbee: The decrease in production from the prior quarter was driven by natural gas and gel volumes, affected by a gas imbalance adjustment in East Texas, and adverse weather in Oklahoma causing widespread power outages.
Dan Furbee: These negative impacts in production occurred early in the quarter and were factored into our previously announced annual production guidance.
Total production is expected to increase in the subsequent quarters.
Dan Furbee: as the gas imbalance in East Texas was resolved in the first quarter.
Dan Furbee: Volumes from the non-operated development projects in East Texas and Eagleburg are scheduled to come online in the second quarter, and beta production continues to grow after the repair of USP failures occurring in the fourth quarter of 2024 and the benefit of the recently completed C-54 well.
Dan Furbee: Month-to-date, our current average production rates at beta are approximately 5,500 gross or 4,140 net barrel of oil per day. This is after the effect of the C-54 well.
Dan Furbee: Our current production rate at beta represents an approximate 20% increase from our first quarter volume.
Dan Furbee: Due to the reduction of our capital program in 2025 as described by Martyn earlier, our annual production guidance range has been adjusted slightly for 2025 and is now 19,000 to 20,500 DOE per day.
Dan Furbee: For the first quarter, lease operating expenses were approximately $37.4 million, a $2.3 million increase from the prior quarter and in line with internal projections.
Dan Furbee: Lease operating expenses are expected to decrease in the second half of 2025 after the effect of cost savings projects being completed in barrel oil and fewer expense workovers scheduled later in the year.
Dan Furbee: These operating expenses for the first quarter also do not reflect $900,000 of income generated by Magnify Energy Services.
Dan Furbee: We expect to continue improving our cost structure throughout 2025 and are guiding week operating expenses to a midpoint of $143 million.
Dan Furbee: This is approximately flat when compared to 2024, despite expected increase in total production and the cost pressures we are seeing from the electric utility rates at Fair Oil, which represent a large portion of our total oil release.
Dan Furbee: Given the recent decrease in oil prices, the operations team is exploring additional cost-saving opportunities across our asset base.
Dan Furbee: The company's total capital investment for the first quarter was $23.1 million. Approximately 55% of its capital was invested at Beta in our development drilling program, recompletion, and facility projects.
Dan Furbee: The remaining capital was invested in non-operated drilling in the Eagleburg, East Texas, as well as various capital workovers and facility projects across our assets.
Dan Furbee: Our 2025 Capital Program is now expected to be between $55 and $70 million. The Adjusted 2025 Operations Development Plan is designed to continue unlocking the underlying value of a company's assets while adjusting for lower commodity prices to maintain strong free cash flow for the year.
Dan Furbee: The main driver of the reduced capital is due to the deferral of development activity of data.
Dan Furbee: Even though the DSAN completions at Beta have break-even oil prices below $35 per barrel, Beta development is where we have the most flexibility with the remaining capital allocated to invest in 2025.
Dan Furbee: Amplify intends to now complete three wells in 2025 at Theta, with the option to add back wells this year should commodity prices improve.
Dan Furbee: The C-48 well, the first of now three wells to be completed in 2025, was completed in mid-February and is now in line.
Dan Furbee: As discussed last quarter, the C-48 was originally designed as a de-sand completion, but due to adverse drilling conditions encountered, we decided to complete the shallower sea sand.
Dan Furbee: The current production of the C-48 CSAM completion is approximately 100 barrels of oil per day.
Dan Furbee: Even though early results this well are underperforming our initial expectations from when we decide to pivot to a CSAN completion,
Dan Furbee: We believe the future production of this well will be higher once additional water injection is directed to the sea sand formation in this area of the field, as the well logs and production indicate a high oil saturation reservoir.
Dan Furbee: However, we are seeing lower oil gravities in the sea sand and lower reservoir pressures, which are negatively affecting overall deliverability, but can be improved with additional water injection support in the future.
Dan Furbee: The total capital cost of the C-48 well was approximately $8.5 million, which is higher than our expected development cost due to the complications encountered while drilling. We still expect future development costs to be between $5 to $6 million per well.
Dan Furbee: As a reminder, the D-stand is our primary target and is where we are planning the majority of our near to midterm future completions.
Dan Furbee: After the D-Sand, the S-Sand is considered our secondary target with excellent geophysical characteristics and significant remaining inventory.
Dan Furbee: The CSAND is our tertiary target of data. However, we may find parts of the field where we decide to test the CSAND as part of our development program before the complete development of the primary and secondary targets.
Dan Furbee: After the completion of the C-48, the beta drilling team made additional enhancements to our drilling procedures, including the implementation of managed pressure drilling to help improve our ability to manage drilling hazards like the issues experienced in the C-48.
Dan Furbee: The changes were implemented in the drilling of the C-54 well with excellent results. We completed the C-54 well in mid-April, and early results are outstanding, with approximately 800 barrels of oil per day average production over the first 20 days since first oil.
Dan Furbee: This further demonstrates the excellent results of the desand completion as we now have 3 desand wells producing, all of which are projected to have greater than 90% IRRs at $60 oil prices.
Dan Furbee: In East Texas, we are participating in the completion of four non-operated development wells, which we expect to be online in the late second quarter.
Dan Furbee: The completion of this four-well pad is expected to provide strong additional gas production in the second half of 2025. In the equal part, we are participating in 14 gross 0.7 net new development wells and 2 gross 0.4 net recompletion projects.
Dan Furbee: These non-operated wells, with highly agreed-up returns, have been completed and are scheduled to come online this month.
Dan Furbee: The company is also evaluating additional development opportunities recently offered by our partners in New York, where we have interest.
Dan Furbee: The majority of the remainder of our 2025 capital has not changed from our prior guidance and we will be investing in facility projects, including the previously discussed $8 million pipeline upgrade project at Beda and a full field and plant turnaround facility project at Bear Oil for approximately $5 million.
Dan Furbee: Additionally, we are continuing to invest in small but accretive capital workover programs in Oklahoma, East Texas, and Bear Oil.
With that, I will turn it over to Jim.
Thank you, Dan.
Speaker Change: I would now like to discuss the following items, first quarter financial performance, balance sheet and liquidity, and hedging.
Speaker Change: With respect to first quarter financial performance, the company reported a net loss of approximately $5.9 million compared to a $7.4 million net loss in the prior quarter.
Speaker Change: The change was primarily attributable to a non-cash, unrealized loss on commodity derivatives in the quarter, partially offset by a gain on the sale of our East Texas properties.
Speaker Change: excluding the impact of the non-cash unrealized loss on commodity derivatives, the East Texas divestiture, and other one-time impacts, adjusted net income was 3.8 million dollars for the first quarter.
Speaker Change: First quarter adjusted EBITDA was $19.4 million, a decrease of approximately $2.4 million compared to the prior quarter.
Speaker Change: The decrease was primarily due to higher lease operating expenses and G&A costs that are typically higher in the first quarter, partially offset by stronger gas price realizations.
Speaker Change: In total, first quarter lease operating expenses were approximately $37.4 million, or $23.28 per BOE. As Dan said, our lease operating expenses does not reflect the $0.9 million of income generated by Magnify in the first quarter.
Speaker Change: First quarter production taxes were $4.4 million, down $1 million versus the prior quarter.
Speaker Change: In addition to benefiting from lower production, we realized a one-time benefit of rehearsing an accrual for 2024 waste emission charges.
Speaker Change: First quarter GPT costs were $4.3 million or $2.67 per BOE.
Speaker Change: GPT costs per BOE have remained relatively constant through recent quarters, and we expect that to remain true for the balance of 2025.
Cash G&A expenses were $7.3 million for the first quarter.
Speaker Change: Though GNA is usually higher in the first quarter, Q1 2025 Cas GNA was down 7% vs. Q1 2024.
Speaker Change: We expect CAST-GNA to be within our guidance range for the remainder of 2025.
Speaker Change: With respect to capital, Amplify invested $23.1 million in the first quarter, which was in line with expectations.
Speaker Change: The company's capital allocation was approximately 55% for the beta development drilling, recompletions, and facilities.
Speaker Change: and 30% for non-operated development projects in East Texas and the Eaglesburg. The remaining capital was distributed across the company's other assets.
Speaker Change: Free cash flow, defined as adjusted EBITDA, less CapEx, and cash interest expense, was negative $7.2 million for the first quarter of 2025, but in line with expectations due to planned capital investments in the first quarter.
Speaker Change: As of March 31st, Amplify had $125 million of debt outstanding under its revolving credit facility.
Speaker Change: At the end of the first quarter, the company's liquidity was $20 million, and net debt to last 12 months adjusted even dollars was 1.3 times.
Speaker Change: The company is currently working on its spring semi-annual redetermination of its barring base and expects that process to be completed by the end of May.
Speaker Change: Recently, Amplify added to our hedge position further protecting future cash flows. In the first quarter, Amplify executed crude oil swaps covering the first half of 2026 at a weighted average price of $62.55 per barrel.
Speaker Change: Additionally, we placed crude oil swaps covering the first half of 2027 at a weighted average price of $61.93 per barrel.
Speaker Change: The company also added natural gas flops covering 2026 at a weighted average price of $4.12 per MMBTU, collars for the first quarter of 2026 with a weighted average floor of $4.50 per MMBTU, and a weighted average ceiling of $5.73.
Speaker Change: And, natural gas collars for 2027 with a weighted average floor of $3.57 per MMBTU and a weighted average ceiling of $4.58 per MMBTU.
Speaker Change: As of May 12, our forecasted PDP crude oil production was approximately 75-80% hedged for 2025, 50-60% hedged in 2026, and 10-15% hedged in 2027.
Speaker Change: On the gas side, our forecasted PDP production is hedged 80-90% for 2025 and 2026.
and 50-55% hedged in 2027.
Speaker Change: We will continue monitoring the market and we will look for opportunities to add to our strong hedge positions.
With that, I'll turn the call back to Martyn.
Thank you, Jim.
Speaker Change: As we look ahead, we are excited about Amplify's future. Amplify remains committed to exploiting the long-term value potential of the beta field, and we anticipate strong results for oil production from the area in 2025.
Speaker Change: This enthusiasm is warranted by the results from the two wells we brought online in 2024 and the recently completed C-54 well. All of these wells have pre-given prices below $35 per barrel and compare favorably to the economics of the best oil development place in the country.
Speaker Change: The strong cash flow profile of these wells provides substantial benefits to the company and creates the flexibility to consider a range of value-maximizing opportunities for existing assets.
Speaker Change: 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.
Speaker Change: In summary, our diversified portfolio of mature, low-decline assets and robust hedge book protect our cash flow profile during commodity downturns, allowing us the flexibility to scale up or down investments in either oil or gas projects depending on market conditions.
Speaker Change: We remain confident that we still have all the elements in place to make 2025 a successful year for the company and its stakeholders. With that, Operator, we are now open for questions.
Speaker Change: If you would like to ask a question, please press star and 1 on your telephone keypad now, and you'll be placed into the queue in the order received.
Speaker Change: If you would like to remove yourself from the queue at any time, press pound and 1 to remove yourself from the queue. Once again, if you would like to ask a question, please press star and 1 on your phone now. We'll pause for just a minute to allow everyone an opportunity to signal.
Subhash Chandra: And our first question comes from Subhash Chandra from Benchmark. Please go ahead, Subhash.
Subhash Chandra: Yeah, thanks. Good morning. So two questions. First on the bank debt, do you have a goal in mind to exit the year?
to go back to the program.
Subhash Chandra: Hey Subash, it's Jim. Yeah I think obviously our expectation is that we'll generate positive free cash flow this year and our goal is to continue to pay down
pay down the debt. That's been our
Subhash Chandra: consistent hope. As we've talked about long term, our goal is to be half a turn to one turn of leverage.
Subhash Chandra: So there's a lot of ways to get there, but that's the goal.
Subhash Chandra: You know, as it relates to the drilling, I'm sure Martyn will have something to expand on that. Part of it is commodity price, part of it is liquidity, right? So there are a lot of levers we can pull there to create that opportunity.
Subhash Chandra: We think the results have been really good and really supportive and we want to continue to aggressively do that But we want to do it prudently right so as oil prices have come down and we forecast out our cash flow We want to be thoughtful about our development pace But we will look at all kind of levers we can pull to ramp that back up because the results have been so good
Speaker Change: Yeah, I'll just add on point number two that you know the while we're
you know, we're very excited about.
Speaker Change: especially this most recent well with the changes we made operationally I think that that well went as smoothly as we've seen to date and we're very proud of the team and the changes they've made to to really obviously you know execution of that program is key to the long-term success of the company and I think we're we executed better on that well than we have on any other well to date and so really excited about continuing to develop at Beta. To Jim's point obviously we're
Jim Frew: We're going to be managing the balance sheet, but there's other things we can do. Obviously, commodity prices could help if they move up a little bit in the 60s, and liquidity has a significant enough cushion, then we'll certainly add wells back.
Jim Frew: But, you know, we could also look at other portfolio optimization opportunities that could, you know, create some additional liquidity and use that to drive further beta development. That's something that we'll be actively looking at as we move forward. So a few different levers there that we could pull, because obviously we are committed to further beta development as we move forward.
Speaker Change: Yeah, and so to that point on portfolio optimization, you mentioned that in the press release, and you just mentioned it again. Are we talking more Haynesville, or are there other opportunities?
I think we're looking at
Speaker Change: All of the potential opportunities in our portfolio, other than obviously beta that, you know, we're the most excited about developing. You know, anything else that would create liquidity and, you know, we could redeploy the funds into.
http://www.martynwillsher.com
All right. Thanks, Martyn. Thanks, Jim.
Speaker Change: And at this time there are no further questions. I'd like to turn the call back over to Martyn for closing remarks.
Speaker Change: Thank you. I'd just like to express my appreciation to all of our employees for their outstanding efforts and dedication, and really to all of our stakeholders for the continued support. It's obviously been a difficult start to the year with commodity prices, and really just wanted to say thank you to everyone who's continued to support us, and we're actively listening to and talking to our shareholders, and we'll continue to work with all of you moving forward.
Speaker Change: As always, if you have any follow-up questions, please don't hesitate to reach out to us directly. Thank you.
Speaker Change: This does conclude today's Amplify Energy Investor Conference call. Thank you for your participation. You may now disconnect.