Market Overview

Amplify Energy Announces Third Quarter 2019 Results, Fourth Quarter 2019 Dividend, Merger Integration Update and Fourth Quarter 2019 Guidance


HOUSTON, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Amplify Energy Corp. (NYSE:AMPY) ("Amplify" or the "Company") announced today its pro forma(1) and reportable(2) operating and financial results for the third quarter of 2019.

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

"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," said Ken Mariani, President and Chief Executive Officer of Amplify.  "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" 

Mr. Mariani continued, "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."

(1) Pro forma numbers include Amplify and Midstates results as though the companies were combined for the full period 
(2) Reportable numbers include Amplify and Midstates results starting in August 2019 following closing of the merger

Key Pro Forma(1) and Reportable(2) Financial Results

      Reportable Reportable     Pro Forma Pro Forma  
      Third Quarter Second Quarter     Third Quarter Second Quarter  
  $ in millions   2019   2019     2019 2019  
  Average daily production (MBoe/d)   28.8   21.1     32.7 33.1  
  Total revenues   $73.0   $59.5     $80.5 $82.8  
  Total assets   $914.6   $722.7     NA NA  
  Net Income (loss)   $5.2   $18.6     $6.8 $23.4  
  Adjusted EBITDA (a non-GAAP financial measure) $27.9   $19.1     $31.5 $28.1  
  Net debt (3)   $270.6   $156.3     $270.6 $226.3  
  Net debt / LTM Adjusted EBITDA   NM   1.4x     1.7x 1.2x  
  Net cash provided by (used in) operating activities   ($8.5)   $22.5     NA NA  
  Total capital   $21.4   $25.3     $24.1 $36.0  

(3)  As of September 30, 2019 and June 30, 2019, respectively

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 NGL Volumes Sold as Condensate Update
In the third quarter of 2019, Amplify decided to modify the process for stripping out NGLs at its Bairoil field due to weak NGL pricing.  While the Bairoil NGL stream has historically been very heavy (primarily C5), recently the extraction of the lighter liquids has resulted in a less valuable product in the market.  Due to this inefficiency, the Company has decided to strip out less of the lighter liquids from the gas stream and sell the remaining product as condensate instead of NGLs.  This resulted in a reduction in volume of approximately 90 Bbls/d (approximately 10% of Bairoil NGL volumes).  However, the price received for the condensate (WTI less $12 per barrel) is approximately 25-30% higher than would otherwise be received as a barrel of NGLs.

These adjustments are reflected in the Company's third quarter results with oil production above guidance expectations and NGL production below guidance expectations.  The adjustments will also be reflected in oil and NGL differentials, as oil differentials will be wider due to the condensate sales and the removal of Bairoil's heavy NGLs will reduce the Company's NGL price realization relative to WTI.  We will continue to monitor the market for NGLs in the Rockies area, and we retain the flexibility to revert to selling NGLs if the market for those products improves in the future.

Comparison of Third Quarter Pro Forma(1) Guidance vs Actual Pro Forma(1) Results

  3Q 2019 Guidance (2)   3Q 2019
  Low   High   Actuals
Net Average Daily Production          
Oil (MBbls/d) 10.6 - 11.8   12.1
NGL (MBbls/d) 6.0 - 6.6   5.2
Natural Gas (MMcf/d) 85.9 - 95.1   92.8
Total (MBoe/d) 30.9 - 34.3   32.7
Commodity Price Differential / Realizations (Unhedged)          
Oil Differential ($ / Bbl) $1.20 - $1.50   $2.21
NGL Realized Price (% of WTI NYMEX) 28% - 34%   21%
Natural Gas Realized Price (% of Henry Hub) 75% - 85%   72%
Gathering, Processing and Transportation Costs          
Oil ($ / Bbl) $0.40 - $0.60   $0.34
NGL ($ / Bbl) $2.00 - $2.30   $2.28
Natural Gas ($ / Mcf) $0.30 - $0.40   $0.35
Total ($ / Boe) $1.20 - $1.80   $1.49
Average Costs          
Lease Operating ($ / Boe) $11.90 -
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