Business Overview and History
Amplify Energy Corp. (AMPY) is a Houston-based independent oil and natural gas company that has been steadily expanding its operations and diversifying its asset portfolio through strategic acquisitions. With a focus on enhancing shareholder value, Amplify has consistently demonstrated its ability to navigate the complex and volatile energy landscape, delivering solid financial and operational performance.
Amplify Energy Corp. was formed in 2019 through the merger of Midstates Petroleum Company, Inc. and Memorial Production Partners LP. This transformative merger created a diversified and better capitalized company with a broad asset base across multiple regions. The company's primary assets are located in major oil and gas producing regions across the United States, including Oklahoma, the Rockies (Bairoil), federal waters offshore Southern California (Beta), East Texas/North Louisiana, and the Eagle Ford.
In the years following the merger, Amplify Energy focused on exploiting the long-term value potential of its key asset, the Beta field located offshore California. However, in October 2021, the company faced a significant challenge when a pipeline incident occurred at the Beta field, resulting in an oil spill. Amplify Energy worked closely with regulatory agencies and third-party contractors to respond to the incident, clean up the spill, and restore operations. The company incurred substantial costs related to the incident, with the total estimated cost ranging from $190 million to $210 million, though insurance coverage is expected to offset a portion of the expenses.
Despite this setback, Amplify Energy has demonstrated the ability to effectively manage its assets and operations. The company has maintained positive cash flow, reduced debt levels, and continued to invest capital in high-return projects, such as the development program at Beta. Amplify Energy's diversified portfolio of oil and gas properties, combined with prudent financial management, has enabled it to navigate industry challenges and position the company for future success.
Amplify's asset portfolio is diversified, with the company deriving its production from a mix of oil, natural gas, and natural gas liquids (NGLs). As of December 31, 2024, the company's total estimated proved reserves stood at 93 million barrels of oil equivalent (MMBoe), with 88% classified as proved developed reserves. The company's asset base is further bolstered by its low-cost, long-lived production profile, which has enabled Amplify to generate consistent cash flows.
Asset Portfolio and Production
Amplify Energy's operations are spread across several key regions in the United States:
Oklahoma Region: This area accounted for approximately 29% of Amplify's estimated proved reserves as of December 31, 2024, and 26% of its average daily net production for the fourth quarter of 2024. The Oklahoma properties, primarily located in Alfalfa and Woods counties, contained 27 MMBbls of estimated net proved reserves and generated average net production of 4.7 MBoed during Q4 2024.
Bairoil: The Bairoil complex in Wyoming, which includes the Lost Soldier and Wertz fields, represented about 18% of Amplify's estimated proved reserves and 17% of its average daily net production. These properties contained 16.4 MMBbls of estimated net proved oil and NGLs reserves and generated average net production of 3.2 MBoed in Q4 2024.
Beta: Located in federal waters offshore Southern California, the Beta field accounted for around 20% of Amplify's estimated proved reserves and 18% of its Q4 2024 average daily net production. Amplify owns 100% of the working interests and 75.2% average net revenue interest in the Beta Unit, which contained 19.1 MMBbls of estimated net proved oil reserves and produced an average of 3.3 MBoed in Q4 2024.
East Texas/North Louisiana: This region represented approximately 30% of Amplify's estimated proved reserves and 36% of its Q4 2024 average daily net production. The properties in this area, primarily located in the Joaquin, Carthage, Willow Springs and East Henderson fields, contained 28 MMBoe of estimated net proved reserves and generated average net production of 6.6 MBoed during Q4 2024.
Eagle Ford: The Eagle Ford properties, located primarily in the Eagleville fields, accounted for around 3% of Amplify's estimated proved reserves and 4% of its average daily net production in Q4 2024. These assets contained 2.5 MMBoe of estimated net proved reserves and produced an average of 0.7 MBoed during the fourth quarter.
Financial Performance and Liquidity
Amplify's financial performance has been marked by resilience in the face of volatile market conditions. For the full year 2024, the company reported total revenues of $294.7 million, compared to $307.6 million in the prior year. Oil and natural gas sales revenue was $283 million in 2024, down slightly from $288.3 million in 2023. The company's net income for 2024 was $12.9 million, compared to $392.8 million in 2023. Amplify reported adjusted EBITDA of $103 million for 2024, representing a 17% year-over-year increase.
For the fourth quarter of 2024, Amplify reported revenue of $69 million and a net loss of $7.4 million. The decrease in revenue and net income compared to the prior year quarter was primarily due to lower production volumes and an unrealized loss on commodity derivatives, partially offset by higher realized commodity prices.
The company's liquidity position remains robust, with $18 million of available borrowing capacity under its $145 million revolving credit facility as of the end of 2024. Amplify has also demonstrated its ability to generate positive free cash flow, having done so for 10 consecutive quarters, further strengthening its financial flexibility. For Q4 2024, the company reported free cash flow of $2.9 million.
Amplify's balance sheet remains healthy, with a debt-to-equity ratio of 0.31 and a current ratio of 1.05 as of December 31, 2024. The company's net debt to last 12 months adjusted EBITDA ratio stood at 1.2x at the end of 2024.
Strategic Acquisitions and Diversification
Amplify has been proactive in pursuing strategic acquisitions to expand its operational footprint and enhance its asset base. In January 2025, the company announced a transformative merger agreement with certain portfolio companies of Juniper Capital, a private equity firm, to acquire substantial oil-weighted producing assets and significant leasehold interests in the Denver-Julesburg (DJ) and Powder River Basins.
The Juniper transaction, which is expected to close in the second quarter of 2025, will increase Amplify's scale and operating margins, while also providing the company with significant synergies and tax benefits. The acquired assets are estimated to have year-end 2024 proved developed reserves of 18 million barrels of oil equivalent (MMBoe) with a PV-10 value of $335 million, and total proved reserves of 50 MMBoe with a combined PV-10 value of $614 million. This transaction is expected to be significantly accretive to Amplify's free cash flow in 2025 and over a five-year time horizon.
In addition to the Juniper acquisition, Amplify has also recently completed two separate transactions in East Texas, allowing the company to realize value from its Haynesville acreage. These deals, which generated $7.6 million in net proceeds, demonstrate Amplify's ability to efficiently manage its asset portfolio and unlock value for shareholders.
Operational Highlights and Development Plans
Amplify's operational performance has been strong, particularly at its flagship Beta property located in federal waters offshore Southern California. In 2024, the company completed two wells at Beta, the A50 and C59, which have exceeded pre-drill type curve expectations and generated internal rates of return in excess of 100%.
Building on this success, Amplify plans to complete six additional wells at Beta in 2025, including the C48 well, which was the first horizontal completion in the C-Sand formation. The company also has 23 additional PUD locations at Beta with a PV-10 value of approximately $180 million, based on a $70 per barrel flat oil price assumption.
Outside of Beta, Amplify has allocated capital to participate in attractive non-operated drilling opportunities in its East Texas and Eagle Ford positions, where it expects to see 16 gross (1.1 net) new wells completed in the first half of 2025. The company has also earmarked funds for various capital workovers, facility upgrades, and investments in its Magnify Energy Services business, which generated $3.7 million of adjusted EBITDA in 2024 on a capital investment of only $1.7 million.
For 2025, Amplify has provided guidance on several key operational and financial metrics:
- Production is expected to range from 19,000 to 21,000 BOE/d, with the midpoint representing a 7% increase in oil production compared to 2024. - Lease operating expenses are projected to be approximately $143 million at the midpoint, which is flat compared to 2024. - Magnify Energy Services is expected to generate approximately $5 million of EBITDA in 2025, up from $3 million in 2024. - Capital expenditure guidance is set at $70 million to $80 million, with the majority to be invested in the Beta development program. This includes $30 million allocated to the Beta development program and completing 6 wells in 2025. The remaining capital is expected to be invested in non-operated drilling in the Eagle Ford and East Texas, as well as various capital workovers and facility projects across Amplify's assets.
Risks and Challenges
As with any energy company, Amplify is exposed to the inherent risks associated with oil and gas exploration and production, including volatile commodity prices, regulatory changes, and operational challenges. The oil and gas industry has experienced significant volatility in commodity prices over the past few years, which has impacted Amplify's financial performance. The industry is also facing increased regulatory scrutiny and pressure to transition towards lower-carbon energy sources, which could impact Amplify's long-term outlook.
The company's offshore operations at Beta also carry additional risks related to environmental and safety regulations, as well as the potential for disruptions due to weather or other natural events. The 2021 oil spill incident at Beta highlights these risks and the potential for significant financial and operational impacts.
Additionally, the successful integration of the Juniper assets will be crucial for Amplify to realize the anticipated synergies and benefits of the transaction. Any delays or complications in the integration process could negatively impact the company's financial and operational performance.
Outlook and Conclusion
Amplify Energy is well-positioned for growth and value creation in the years ahead. The company's strategic acquisitions, such as the transformative Juniper transaction, have significantly expanded its asset base and production profile, while also providing opportunities for operational and financial synergies.
With a focus on disciplined capital allocation, Amplify continues to invest in high-return development projects, such as its expansive drilling program at Beta, which is expected to drive production growth and enhance cash flow generation. The company's strong liquidity position and consistent free cash flow generation further support its ability to navigate the industry's challenges and capitalize on future opportunities.
Overall, Amplify Energy's diversified asset portfolio, proven operational capabilities, and strategic vision make it a compelling investment opportunity in the dynamic energy sector. As the company continues to execute on its growth strategy and integrate new assets, it remains well-positioned to deliver value to shareholders in the coming years.