Amplify Energy Corp. Q2 FY2023 earnings call

• Amplify continued strong start in 2023; Beta restarted in late April with production exceeding projections and lower costs. • Second quarter production in Eagle Ford higher due to wells brought online at end of first quarter. • Second quarter adjusted EBITDA was $17.6 million, free cash flow $6.1 million. • Successfully closed new four-year revolving credit facility providing liquidity. • Total production up 9% from previous quarter; expect flat to slightly increasing production in remainder of year. • Operating costs $34.9 million in second quarter, 7% lower per BOE than prior quarter; intend to further reduce costs. • Capital investment for the quarter was approximately $7.9 million, focusing on Beta and Bairoil facility projects.

Total production for the quarter averaged approximately 21,200 barrels of oil equivalent per day, consisting of approximately 38% oil, 17% NGLs, and 45% natural gas. Second quarter adjusted EBITDA was $17.6 million, and net income was approximately $9.8 million. Revenue contribution by segment: oil ~38%, NGLs ~17%, natural gas ~45%.

• Reaffirming 2023 adjusted EBITDA guidance of $80 million to $100 million. • Reaffirming full-year free cash flow guidance of $30 million to $50 million. • Increasing forecasted 2023 through 2025 free cash flow to approximately $200 million at current strip pricing.

Q: Good morning. And congratulations on a good quarter and congrats on your new credit facility. A little more detail on Beta, if we could. If you have it, what was production before the pipeline incident compared to where it's currently?

A: Sure. Obviously, prior to the incident, we were approximately around 4,000 barrels a day gross. We are approaching that now as we kind of got into the third quarter, we're more than a few hundred barrels a day away from reaching that target. So, we expect to get there either maybe later in the third quarter or early in the fourth quarter with our current rate of workovers, and so we've made a lot of progress over the last couple of months. Obviously, this quarter, you didn't see any production at all in pretty much in April and you're ramping up through May and June. But obviously, in the third quarter, you'll see a much more full quarter of close to at least production from the Beta asset, which will more than offset the loss of LOPI that we incurred during this quarter and reduce our revenue a little bit.

Q: Martyn, before the incident in California, Amplify has some redevelopment plans for Beta. Can you talk about where you sit with those today now that the deals come back online?

A: Yes. Thank you. Great question, Jeff. So, when we went off-line, obviously, we were in the middle of kind of the first couple. We're actually finishing up the second well in that program We have permits, we had pipe, we had a lot of the materials already ready to go to continue that program. We are currently evaluating bringing that program back maybe as early as the beginning of next year, that will be discussed with our Board. So, we're going to look at the economics all over again. We're going to look at the risks and the upside and really evaluate that from the bottom up before we make any decisions. But that is certainly something that is currently under discussion, and I expect to be able to kind of give you an update on that by the next quarterly call.

Q: Martyn, you threw in one of your last remarks that the strategic direction being considered over the coming months, does that include possible reduction of the dividend?

A: Yes, John. So obviously, one of the things that we had to look carefully at when we did the financing was how it fit with the future strategy. There are certainly options out there to create a lot more liquidity in the near term. But currently, we're not looking at acquisitions as kind of a primary focus. So more likely to look at some portfolio optimization opportunities and look at free cash flow as a means to reserve some kind of return of capital program to shareholders. That's all to be determined going forward. And that's part of the kind of the strategic decisions that I mentioned that we would be discussing with the Board going forward. As I mentioned, there's -- there are some requirements under the revolving credit facility that we need to obtain before we can resume returning capital to shareholders. But basically, that's part of the conversation that will be -- we have moving forward, and I fully expect to be able to update our shareholders by next quarter on our plans going forward.

Q: Martyn, where is the focus on the workovers regionally?

A: Primarily, Oklahoma has got a continuing workover program. So as East Texas, it's not quite to the same level of Oklahoma. And then primary obviously, is in California, where we still have some wells offline that we are planning to bring back online in the next couple of months. And like said, that should get us back to full production rates that I mentioned earlier. We also have a workover program in Bairoil. It's kind of our -- we don't do a whole lot of drilling, but we do kind of maintain an active workover program because we consider those as the most accretive near-term methods of kind of production up and hitting higher rates of return.