10-Q: Amplify Energy Corp. Reports First Quarter 2024 Results, Reaffirms Borrowing Base

Amplify Energy Corp. announced its financial results for the first quarter of 2024, reporting a net loss but reaffirming its borrowing base.

Summary

• Amplify Energy Corp. reported a net loss of $9.4 million for the first quarter of 2024, compared to a net income of $352.8 million in the same period last year.
• The company's oil, natural gas, and NGL revenues totaled $75.3 million, up from $66.3 million in the first quarter of 2023.
• Average net production volumes increased to 20.2 thousand barrels of oil equivalent per day (MBoe/d) from 19.4 MBoe/d year-over-year, primarily due to the return of the Beta field to production.
• The average realized sales price was $40.89 per barrel of oil equivalent (Boe), compared to $37.99 per Boe in the first quarter of 2023.
• Lease operating expenses rose to $38.3 million, or $20.78 per Boe, from $33.0 million, or $18.89 per Boe, year-over-year, mainly due to the Beta field's return to production.
• The company experienced a net loss on commodity derivative instruments of $16.6 million, compared to a net gain of $15.2 million in the prior year.
• Amplify's borrowing base was reaffirmed at $150 million with elected commitments of $135 million following the spring 2024 redetermination.

Sentiment

Score: 4

Explanation: The document presents mixed results with a net loss and increased expenses, but also increased revenues and production. The reaffirmation of the borrowing base and the waiver for the current ratio are positive, but the overall tone is cautious due to the net loss and ongoing risks.

Positives

• Oil, natural gas, and NGL revenues increased year-over-year.
• Average net production volumes increased due to the return of the Beta field to production.
• The average realized sales price per Boe increased year-over-year.
• The company's borrowing base was reaffirmed at $150 million.
• A waiver was received from lenders for non-compliance with the minimum current ratio requirement.

Negatives

• The company reported a net loss of $9.4 million for the quarter.
• Lease operating expenses increased year-over-year.
• The company experienced a net loss on commodity derivative instruments.
• The company's current ratio was below the required minimum of 1.00 to 1.00 on March 31, 2024.

Risks

• The company's financial performance is subject to volatility in oil and natural gas prices.
• The company's operations are subject to risks associated with the oil and gas industry, including environmental liabilities and regulatory changes.
• The company's ability to meet its debt obligations depends on its ability to generate cash flow.
• The company is subject to ongoing investigations related to the Beta pipeline incident, which could have a material impact on its business.
• The company's hedging strategy may be ineffective or may reduce its income.
• The company's current ratio was below the required minimum, although a waiver was received.

Future Outlook

The company expects its cash flows from operations and availability under its Revolving Credit Facility to provide the financial flexibility necessary to meet its cash requirements and pursue its planned 2024 development activities. The company also retains the flexibility to utilize borrowings under its Revolving Credit Facility and/or to access the debt and equity capital markets.

Management Comments

• Management evaluates performance based on one reportable business segment.
• Management believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure the company's ability to meet debt service requirements.
• Management intends to enter into commodity derivative contracts to manage exposure to commodity price volatility.

Industry Context

The company operates in the oil and natural gas industry, which is subject to volatility in commodity prices and is influenced by global events, including actions by OPEC, the Russia-Ukraine conflict, and conflicts in the Middle East. The company is also monitoring governmental policies aimed at transitioning towards lower carbon energy.

Comparison to Industry Standards

• The company's production volumes are comparable to other small to mid-sized independent oil and gas producers.
• The company's lease operating expenses are within the range of industry averages, but are higher than some peers due to the nature of its assets and the return of the Beta field to production.
• The company's hedging strategy is a common practice in the industry to mitigate price volatility, but the effectiveness of the strategy can vary.
• The company's financial performance is impacted by commodity prices, similar to other companies in the sector. Companies such as California Resources Corporation (CRC) and Berry Corporation (BRY) are also exposed to similar risks and market conditions.

Legal Proceedings

• The company is subject to ongoing investigations related to the Beta pipeline incident by certain federal and state agencies.
• The company may be subject to new investigations and proceedings in the future, the results of which may have a material impact on the company's business and results of operations.

Stakeholder Impact

• Shareholders are impacted by the net loss and the volatility in the company's financial performance.
• Employees are impacted by the company's financial performance and any potential changes in operations.
• Customers are impacted by the company's ability to produce and deliver oil and natural gas.
• Suppliers are impacted by the company's ability to pay for goods and services.
• Creditors are impacted by the company's ability to meet its debt obligations.

Next Steps

• The company expects the next borrowing base redetermination in the fourth quarter of 2024.
• The company will continue to monitor the impact of the Beta pipeline incident and comply with all regulatory requirements and investigations.
• The company will continue to evaluate the availability of public debt and equity for funding potential future growth projects and acquisition activity.

Key Dates

Keywords

oil and gas, production, financial results, commodity prices, derivatives, borrowing base, Amplify Energy, Beta field, operating expenses, net loss