• Adjusted EBITDA: $30.7 million for Q2 2024.

• Free Cash Flow: $9.2 million for Q2 2024.

• Net Income: $7.1 million for Q2 2024.

• Total Production: Approximately 20,300 Boe per day for Q2 2024.

• Lease Operating Expenses: $36.3 million for Q2 2024.

• Capital Investment: $18 million for Q2 2024.

• Net Debt: Approximately $117.5 million as of June 30, 2024.

• Liquidity: $17.5 million at the end of Q2 2024.

• Hedging: 70%-75% of crude oil and 85%-90% of natural gas production hedged for the remainder of 2024.

• Warning! GuruFocus has detected 4 Warning Signs with AMPY.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Amplify Energy Corp (NYSE:AMPY) reported a strong second quarter with $30.7 million of adjusted EBITDA and $9.2 million of free cash flow, both exceeding expectations.

• The company successfully drilled and brought online the A50 Well in early June, with production exceeding the upper end of expectations.

• Amplify Energy Corp (NYSE:AMPY) revised its annual guidance upwards due to stronger-than-expected performance and participation in high-return non-operated development wells.

• The electrification and emission reduction project at Beta is on schedule to be completed in the fourth quarter, expected to lower operating expenses and increase operational redundancy.

• Amplify Energy Corp (NYSE:AMPY) has generated positive free cash flow in 16 of the last 17 quarters, demonstrating strong cash-generating potential.

Negative Points

• Production in East Texas was impacted by significant flooding, leading to production curtailments and access issues for over 100 days.

• The company faces uncertainties related to the potential sale or partial monetization of its barrel assets, with no definitive updates available yet.

• Lease operating expenses, although decreased from the first quarter, remain a significant cost at $36.3 million for the second quarter.

• Gas prices remain low, impacting the economic attractiveness of some development projects, although future price forecasts are more favorable.

• Amplify Energy Corp (NYSE:AMPY) has a net debt of approximately $117.5 million, with a slight increase due to expected changes in working capital and increased investment activity.

Q & A Highlights

Q: Given the strong results from the Beta development program, are there any constraints to accelerating the drilling schedule beyond the planned wells for 2025? A: Martyn Willsher, President and CEO, stated that they are considering acceleration as they continue to receive results. The flexibility exists to adjust the schedule, and they will evaluate this as more data becomes available in the third and fourth quarters.

Q: The A50 well came in under budget. What is the confidence level in maintaining these lower costs for future wells? A: Daniel Furbee, COO, mentioned that while the initial estimate was $5 million to $6 million, the team efficiently completed the A50 well for less. They are optimistic about maintaining lower costs but will confirm after drilling more wells.

Q: Regarding the new non-operated wells in East Texas, is this a one-time participation or a potential long-term strategy? A: Martyn Willsher explained that the participation is both a learning opportunity and a strategic move. The Haynesville acreage is becoming more prospective, and they are evaluating future opportunities while comfortable with current returns despite low gas prices.

Q: With potential proceeds from the Bairoil sale, do you have a preference for capital returns, such as stock buybacks or dividends? A: Martyn Willsher stated that both options are on the table, and the decision will depend on the situation at the time. They have previously done both and will evaluate the best approach for shareholder value.

Q: Can you provide insights on the expected impact of the electrification project on LOE at Beta? A: Daniel Furbee noted that the project will significantly reduce diesel usage and NOx credit costs, leading to a sizable reduction in LOE. They expect to see these benefits fully realized next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.