Amplify Energy Simplifies Portfolio, Goes Debt-Free to Fuel Beta and Bairoil Growth

Amplify Energy has simplified its portfolio and eliminated debt by selling its East Texas, Oklahoma and Eagle Ford assets for approximately $250 million, leaving Beta and Bairoil as its core producing assets and providing cash for growth investments. Beta is the primary development opportunity: nine horizontal wells have lifted net production to roughly 4,500 barrels per day, with 26 additional drilling locations identified and lower federal royalties improving project economics. Bairoil’s revised CO2 agreement significantly improves cash flow by shifting the asset from roughly $5 million in annual CO2 costs to an estimated $5 million–$6 million in annual benefits, while increased CO2 supply could enable development of the Sector One area.

Amplify Energy NYSE: AMPY outlined a simplified strategy centered on two remaining producing assets—its offshore Beta field in federal waters off Southern California and the Bairoil CO2 flood in Wyoming—after divesting several noncore positions and eliminating debt, CEO Dan Furbee said during an EnerCom presentation. Furbee said the company sold its East Texas, Oklahoma and Eagle Ford assets for approximately $250 million in net proceeds. The transactions were part of a plan introduced a year earlier to streamline a portfolio that had been spread across multiple U.S. regions with limited scale in any one area.

“We found it prudent to simplify the portfolio,” Furbee said. “By doing that, we sold our East Texas, Oklahoma, and Eagle Ford positions,” using the proceeds to pay down all debt. He said Amplify now has cash on hand to pursue development programs at Beta and Bairoil.

Using an assumed $75 per-barrel WTI oil price, Furbee said Amplify’s proved developed reserves had a PV-10 value of $414 million. He cited an additional $106 million PV-20 value for Beta proved undeveloped reserves, bringing 1P reserve value to approximately $520 million. Furbee also pointed to the company’s hedges, cash balance and restricted cash account associated with Beta’s eventual decommissioning obligations. He said these factors, along with a deduction for corporate general and administrative costs, implied an equity value of about $510 million, or more than $12 per share. He characterized that figure as more than a 200% premium to the company’s recent trading value.

The company announced a share repurchase program several weeks before the presentation. Furbee said the perceived discount between Amplify’s market value and its intrinsic value was a primary reason for establishing the program.

The Beta field consists of three federal lease blocks about 10 miles offshore Southern California. Amplify operates two producing platforms, Eureka and Ellen, as well as the Elly processing platform, which handles oil, water and gas before sales oil is transported by pipeline to Long Beach and connected to the Los Angeles Basin refinery complex. Shell discovered the field in the late 1970s, and it has produced more than 100 million barrels of oil to date, according to Furbee. He estimated original oil in place at roughly 1 billion barrels and said comparable Los Angeles Basin fields have typically achieved recovery factors of 30% to 40%, while Beta has recovered about 10% thus far. Amplify has been pursuing horizontal development using drilling technology that was not available during the field’s earlier development in the 1980s and early 1990s. Furbee said legacy wells were generally drilled at 30- to 40-degree inclinations, while current rigs and rotary steerable, measurement-while-drilling and loggin...