GlobeNewswire Inc | Nov 5, 2020 07:00AM EST

November 05, 2020

HOUSTON, Nov. 05, 2020 (GLOBE NEWSWIRE) -- Amplify Energy Corp. (NYSE: AMPY) (Amplify or the Company) announced today its operating and financial results for the third quarter of 2020.

Key Highlights

-- During the third quarter of 2020 the Company: Grew oil production volumes by 5% to 10.8 MBbls/d from 10.4 MBbls/d in the second quarter Achieved daily production of 27.7 MBoe/d, which was in line with 27.7 MBoe/d in the second quarter of 2020, despite reduced maintenance capital expenseGenerated net cash provided by operating activities of $20.6 millionReduced LOE to $27.6 million, from $27.8 million during the second quarter of 2020, by continued realization and execution of long-term cost reduction initiativesContinued the downward trend of cash G&A expense, attaining the previously forecasted annualized run rate of approximately $22 million, a $2.5 million annualized reduction from the first quarter of 2020Implemented Beta field royalty relief effective July 1, 2020, which is expected to generate approximately $7 million per year of incremental revenue (assuming a $40/Bbl WTI price)Delivered Adjusted EBITDA of $24.8 million, an increase of $3.5 million from the previous quarterRealized $16.0 million of Free Cash Flow, an increase of approximately $5 million from the second quarter of 2020 -- Net Debt to Last Twelve Months (LTM) EBITDA of 2.8x as of September 30, 2020 -- Approximately 75% of fourth quarter 2020 crude oil production hedged at attractive pricing Robust crude oil hedge position in 2021 with a mix of swaps and collars allowing for upside participation -- Current mark-to-market hedge book value of $13 million as of October 30, 2020 -- As of October 30, 2020, net debt was $243 million, inclusive of $17 million of cash on hand

Martyn Willsher, Interim Chief Executive Officer and Chief Financial Officer of Amplify commented, I am very pleased with our third quarter operational and financial results. Despite the continued impact of the ongoing COVID-19 pandemic and depressed commodity prices, we generated significant free cash flow from the continued realization and execution of our liquidity enhancing initiatives and disciplined commodity hedging program, demonstrating the sustainable value of our long-lived, low-decline assets.

Mr. Willsher continued, During the remainder of 2020, we will remain focused on operational excellence and capitalizing on all opportunities that enhance shareholder value. We have initiated the fall borrowing base redetermination process and anticipate a result that supports our liquidity position and provides a solid foundation for significant free cash flow generation.

This year has been challenging for the industry and our Company, but I remain very confident about Amplifys future. I am extremely proud of our exceptional employees and grateful for the dedication and resourcefulness they have exhibited during this uncertain and tumultuous time, Mr. Willsher concluded.

Key Financial Results

During the third quarter of 2020, Amplify generated $24.8 million in Adjusted EBITDA, an increase of $3.5 million from $21.3 million in the second quarter of 2020. This increase exceeded internal expectations and was primarily attributable to higher than expected production, the continued realization of our previously announced cost reduction initiatives and commodity price improvement during the quarter.

Free cash flow, defined as Adjusted EBITDA less cash interest and capital spending, was $16 million in the third quarter of 2020, an increase of approximate $5 million from $11 million in the prior quarter. This result was primarily attributed to increased revenue and a decrease in capital spending in the quarter.

Selected Operating and Financial Results for the Second and Third Quarters of 2020:

Third Quarter Second Quarter$ in millions 2020 2020Average daily production (MBoe/d) 27.7 27.7Total revenues $52.7 $35.2Total assets $421.7 $453.7Net income (loss) $17.7 $41.3Adjusted EBITDA (a non-GAAP financial measure) $24.8 $21.3Net debt ^(1) $257.0 $272.3Net cash provided by operating activities $20.6 $29.9Total capital $5.0 $6.8

(1)As of September 30, 2020 and June 30, 2020, respectively

Revolving Credit Facility and Liquidity Update

Amplify is currently working with its lenders on its fall 2020 borrowing base redetermination and expects the process to be finalized before the end of November.

As of October 30, 2020, Amplify had total net debt of $243 million, with $260 million outstanding under its revolving credit facility and $17 million of cash on hand.

Production and Operations Update

During the third quarter of 2020, average daily production was approximately 27.7 Mboe/d, mirroring that of the second quarter of 2020. While a portion of this result was attributed to receiving royalty relief at Beta, all asset areas met or exceeded internal expectations despite intermittent third-party and weather interruptions. This consistent level of production, achieved with limited capital spending, demonstrates the sustainability of Amplifys long-lived, low-decline assets and stands as a testament to the hard work put forth by our employees to identify and capitalize on high-return projects.

Production in East Texas exceeded internal forecasts as a result of reduced downtime and efficient workover operations, despite intermittent third-party interruptions. In Oklahoma, the team prudently returned economic wells to production and converted five wells to rod-lift from electrical submersible pumps. These conversions are part of an ongoing program implemented last year, which has facilitated reduced electrical costs and well downtime. At Beta, net production during the third quarter averaged approximately 500 Bbls/d more than the previous quarter, primarily as the result of the royalty rate reduction effective July 1, 2020. This amounts to an approximate $1.7 million increase in revenue for the quarter, in line with the projected annualized increase in revenue of $7 million previously disclosed. Our oil-weighted Bairoil properties maintained stable production from the previous quarter, demonstrating the mature, low-decline nature of the asset. Lastly, third quarter production from our non-operated Eagle Ford assets remained relatively flat when compared with the second quarter of 2020, primarily due to new wells coming online in late May 2020.

Lease operating expenses in the third quarter of 2020 were approximately $27.6 million, a decrease of $0.2 million, from $27.8 million in the second quarter of 2020. This outcome was a strong result considering the second quarter included a significant number of one-time cost reductions, and is a credit to Amplifys operating teams continued efforts to reduce costs without impacting safety or production.

Capital Spending Update

Capital spending during the third quarter of 2020 was approximately $5 million, a decrease of approximately $2 million from $7 million in the second quarter. This was slightly higher than forecasted due to additional costs from non-operated Eagle Ford wells that were drilled earlier in the year.

Amplifys remaining capital budget for the fourth quarter of 2020 is approximately $3 million and is focused principally on maintenance projects, which are essential to equipment integrity and operational efficiency, in addition to high rate of return workover projects.

Hedging Update

As of October 30, 2020, Amplifys mark-to-market value of its commodity and interest rate hedge book remained a net asset position of $13 million.

The following table reflects the hedged volumes under Amplifys commodity derivative contracts and the average fixed or floor prices at which production is hedged for October 2020 through December 2022, as of November 5, 2020.

2020 2021 2022 Natural Gas Swaps: Average Monthly Volume (MMBtu) 1,450,000 925,000 500,000Weighted Average Fixed Price $ 2.26 $ 2.49 $ 2.45($) Natural Gas Collars: Two-way collars Average Monthly Volume (MMBtu) 420,000 925,000 530,000Weighted Average Floor Price $ 2.60 $ 2.10 $ 2.35($)Weighted Average Ceiling Price $ 2.88 $ 3.28 $ 3.09($) Natural Gas Basis Swaps: Average Monthly Volume (MMBtu) 600,000 500,000 Weighted Average Spread ($) $ (0.46 ) $ (0.40 ) Oil Swaps: Average Monthly Volume (Bbls) 199,300 155,000 40,000Weighted Average Fixed Price $ 57.41 $ 45.86 $ 52.39($) Oil Collars: Two-way collars Average Monthly Volume (Bbls) 14,300 Weighted Average Floor Price $ 55.00 ($)Weighted Average Ceiling Price $ 62.10 ($) Three-way collars Average Monthly Volume (Bbls) 30,500 $ 42,500 Weighted Average Ceiling Price $ 65.75 $ 50.61 ($)Weighted Average Floor Price $ 50.00 $ 40.00 ($)Weighted Average Sub-Floor Price $ 40.00 $ 30.00 ($) NGL Swaps: Average Monthly Volume (Bbls) 111,450 22,800 Weighted Average Fixed Price $ 21.99 $ 24.25 ($)

Amplify posted an updated hedge presentation containing additional information on its website, www.amplifyenergy.com, under the Investor Relations section.

Quarterly Report on Form 10-Q

Amplifys financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which Amplify expects to file with the Securities and Exchange Commission on November 5, 2020.

Conference Call

Amplify will host an investor teleconference today at 10:00 a.m. Central Time to discuss these operating and financial results. Interested parties may join the webcast by visiting Amplify's website, www.amplifyenergy.com, and clicking on the webcast link or by dialing (833) 883-4379 at least 15 minutes before the call begins and providing the Conference ID: 7283609. The webcast and a telephonic replay will be available for fourteen days following the call and may be accessed by visiting Amplifys website, www.amplifyenergy.com, or by dialing (855) 859-2056 and providing the Conference ID: 7283609.

About Amplify Energy

Amplify Energy Corp. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. Amplifys operations are focused in Oklahoma, the Rockies, offshore California, East Texas / North Louisiana and South Texas. For more information, visit www.amplifyenergy.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Amplify expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as will, would, should, could, expect, anticipate, plan, project, intend, estimate, believe, target, continue, potential, the negative of such terms or other comparable terminology are intended to identify forward-looking statements. Amplify believes that these statements are based on reasonable assumptions, but such assumptions may prove to be inaccurate. Such statements are also subject to a number of risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Amplify, which may cause Amplifys actual results to differ materially from those implied or expressed by the forward-looking statements. Please read the Companys filings with the Securities and Exchange Commission, including Risk Factors in its Annual Report on Form 10-K, and if applicable, its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and other public filings and press releases for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements. All forward-looking statements speak only as of the date of this press release. All forward-looking statements in this press release are qualified in their entirety by these cautionary statements. Amplify undertakes no obligation and does not intend to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow. The accompanying schedules provide a reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP. Amplifys non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flows provided by operating activities or any other measure of financial performance calculated and presented in accordance with GAAP. Amplifys non-GAAP financial measures may not be comparable to similarly titled measures of other companies because they may not calculate such measures in the same manner as Amplify does.

Adjusted EBITDA. Amplify defines Adjusted EBITDA as net income or loss, plus interest expense; income tax expense; depreciation, depletion and amortization; impairment of goodwill and long-lived assets; accretion of asset retirement obligations; losses on commodity derivative instruments; cash settlements received on expired commodity derivative instruments; losses on sale of assets; unit-based compensation expenses; exploration costs; acquisition and divestiture related expenses; amortization of gain associated with terminated commodity derivatives, bad debt expense; and other non-routine items, less interest income; gain on extinguishment of debt; income tax benefit; gains on commodity derivative instruments; cash settlements paid on expired commodity derivative instruments; gains on sale of assets and other, net; and other non-routine items. Adjusted EBITDA is commonly used as a supplemental financial measure by management and external users of Amplifys financial statements, such as investors, research analysts and rating agencies, to assess: (1) its operating performance as compared to other companies in Amplifys industry without regard to financing methods, capital structures or historical cost basis; (2) the ability of its assets to generate cash sufficient to pay interest and support Amplifys indebtedness; and (3) the viability of projects and the overall rates of return on alternative investment opportunities. Since Adjusted EBITDA excludes some, but not all, items that affect net income or loss and because these measures may vary among other companies, the Adjusted EBITDA data presented in this press release may not be comparable to similarly titled measures of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net cash provided by operating activities.

Free Cash Flow. Amplify defines Free Cash Flow as Adjusted EBITDA, less cash income taxes; cash interest expense; and total capital expenditures. Free cash flow is an important non-GAAP financial measure for Amplifys investors since it serves as an indicator of the Companys success in providing a cash return on investment. The GAAP measure most directly comparable to distributable cash flow is net cash provided by operating activities.

Selected Operating and Financial Data (Tables)

Amplify Energy Corp. Selected Financial Data - Unaudited Statements of Operations Data Three Months Three Months Ended Ended(Amounts in $000s, except per share data) September 30, June 30, 2020 2020 Revenues: Oil and natural gas sales $ 52,488 $ 34,888 Other revenues 257 283 Total revenues 52,745 35,171 Costs and Expenses: Lease operating expense 27,639 27,828 Gathering, processing and transportation 5,256 4,689 Exploration 5 3 Taxes other than income 3,761 2,195 Depreciation, depletion and amortization 7,950 7,623 Impairment expense - - General and administrative expense 6,443 6,755 Accretion of asset retirement obligations 1,565 1,539 Realized (gain) loss on commodity derivatives (14,067 ) (45,272 ) Unrealized (gain) loss on commodity 28,419 64,437 derivatives Other, net 113 - Total costs and expenses 67,084 69,797 Operating Income (loss) (14,339 ) (34,626 ) Other Income (Expense): Interest expense, net (3,362 ) (6,209 ) Other income (expense) 196 (250 ) Total Other Income (Expense) (3,166 ) (6,459 ) Income (loss) before reorganization items, (17,505 ) (41,085 ) net and income taxes Reorganization items, net (180 ) (166 )Income tax benefit (expense) - (85 ) Net income (loss) $ (17,685 ) $ (41,336 ) Earnings per share: Basic and diluted earnings (loss) per $ (0.47 ) $ (1.10 ) share

Selected Financial Data - Unaudited Operating Statistics Three Months Three Months Ended Ended(Amounts in $000s, except per share data) September 30, June 30, 2020 2020 Oil and natural gas revenue: Oil Sales $ 36,868 $ 22,963 NGL Sales 5,537 3,343 Natural Gas Sales 10,083 8,582 Total oil and natural gas sales - Unhedged $ 52,488 $ 34,888 Production volumes: Oil Sales - MBbls 997 944 NGL Sales - MBbls 430 435 Natural Gas Sales - MMcf 6,706 6,857 Total - MBoe 2,545 2,523 Total - MBoe/d 27.7 27.7 Average sales price (excluding commodity derivatives): Oil - per Bbl $ 36.98 $ 24.30 NGL - per Bbl $ 12.89 $ 7.68 Natural gas - per Mcf $ 1.50 $ 1.25 Total - per Boe $ 20.63 $ 13.83 Average unit costs per Boe: Lease operating expense $ 10.86 $ 11.03 Gathering, processing and transportation $ 2.07 $ 1.86 Taxes other than income $ 1.48 $ 0.87 General and administrative expense $ 2.53 $ 2.68 Depletion, depreciation, and amortization $ 3.12 $ 3.02

Selected Financial Data - Unaudited Balance Sheet Data (Amounts in $000s, except per share data) September 30, June 30, 2020 2020 Total current assets $ 62,502 $ 84,773 Property and equipment, net 345,733 348,788 Total assets 421,694 453,683 Total current liabilities 51,387 66,794 Long-term debt 265,516 265,516 Total liabilities 417,658 432,428 Total equity 4,036 21,255

Selected Financial Data - Unaudited Statements of Cash Flows Data Three Months Three Months Ended Ended(Amounts in $000s, except per share data) September 30, June 30, 2020 2020 Net cash provided by (used in) operating $ 20,609 $ 29,900 activitiesNet cash provided by (used in) investing (5,220 ) (14,122 )activitiesNet cash provided by (used in) financing (15,070 ) (4,470 )activities

Selected Operating and Financial Data (Tables) Reconciliation of Unaudited GAAP Financial Measures to Non-GAAP Financial MeasuresAdjusted EBITDA and Free Cash Flow Three Months Three Months Ended Ended(Amounts in $000s, except per share data) September June 30, 2020 30, 2020 Reconciliation of Adjusted EBITDA to Net Cash Provided from Operating Activities: Net cash provided by operating activities $ 20,609 $ 29,900 Changes in working capital (217 ) 5,766 Interest expense, net 3,362 6,209 Gain (loss) on interest rate swaps 20 (438 ) Cash settlements paid (received) on 462 346 interest rate swaps Cash settlements paid (received) on - (17,977 ) terminated commodity derivatives Amortization and write-off of deferred (135 ) (2,690 ) financing fees Reorganization items, net 180 166 Exploration costs 5 3 Acquisition and divestiture related costs 152 44 Severance payments 25 10 Plugging and abandonment cost 312 - Current income tax expense (benefit) - 85 Oher (15 ) (109 )Adjusted EBITDA: $ 24,760 $ 21,315 Reconciliation of Free Cash Flow to Net Cash Provided from Operating Activities:Adjusted EBITDA: $ 24,760 $ 21,315 Less: Cash interest expense 3,739 3,456 Less: Capital expenditures 4,999 6,791 Free Cash Flow: $ 16,023 $ 11,067

Selected Operating and Financial Data (Tables)Reconciliation of Unaudited GAAP Financial Measures to Non-GAAP Financial MeasuresAdjusted EBITDA and Free Cash Flow Three Months Three Months Ended Ended(Amounts in $000s, except per share data) September 30, June 30, 2020 2020 Reconciliation of Adjusted EBITDA to Net Income (Loss): Net income (loss) $ (17,685 ) $ (41,336 ) Interest expense, net 3,362 6,209 Income tax expense - 85 Depreciation, depletion and amortization 7,950 7,623 Accretion of asset retirement obligations 1,565 1,539 (Gains) losses on commodity derivatives 14,352 19,165 Cash settlements on expired commodity 14,067 27,295 derivatives Acquisition and divestiture related costs 152 44 Reorganization items, net 180 166 Share/unit-based compensation expense 456 371 Exploration costs 5 3 Loss on settlement of AROs 113 - Bad debt expense 218 141 Severance payments 25 10 Adjusted EBITDA: $ 24,760 $ 21,315 Reconciliation of Free Cash Flow to Net Income (Loss): Adjusted EBITDA: $ 24,760 $ 21,315 Less: Cash interest expense 3,739 3,456 Less: Capital expenditures 4,999 6,791 Free Cash Flow: $ 16,023 $ 11,067

Contacts

Martyn Willsher Interim CEO & CFO(832) 219-9047martyn.willsher@amplifyenergy.com

Jason McGlynn VP, Business Development(832) 219-9055jason.mcglynn@amplifyenergy.com