AMPY Q3 2024: Capital Return in 2025 as Haynesville Sale Nears
- Beta Field Development Upside: The Q&A highlights that Amplify has 4 PUDs booked this year with significant potential to add derisked locations into reserves, supporting a robust long-term development program extending into 2025–2029.
- Improving Drilling Economics: Executives emphasized that drilling costs are expected to remain within the $5–$6 million range with opportunities to drive cost efficiency further by avoiding tool failures and optimizing operations, which could enhance overall margins.
- Monetization of East Texas Assets: The discussion pointed to upcoming monetization of the Haynesville acreage, with expected transactions potentially generating several million dollars while retaining non-operated interest—a move that could strengthen cash flow and balance sheet flexibility.
- Drilling risks and cost overruns: The call highlighted that wells such as C-59 have experienced extra drilling days and tool issues, jeopardizing the cost targets and potentially hurting margins.
- Limited near-term reserve additions: With only 4 PUDs booked for the current year and uncertainty over the exact number of derisked locations, the development pipeline may not support substantial near-term production growth.
- Uncertain capital return timing: The ambiguity around the trigger for capital return—in particular, the reliance on lowering bank utilization below a moving target—introduces uncertainty regarding when shareholders might see distributions.
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Capital Return
Q: When will capital be returned?
A: Management anticipates a return of capital in 2025 once bank utilization drops below about $100 million and development pace is balanced, signaling sustainable free cash flow generation. -
Haynesville Monetization
Q: Timing and value of Haynesville monetization?
A: Opportunities on Haynesville acreage are expected to materialize soon – likely by mid‐Q1 – with potential proceeds in the range of several million dollars. -
Well Costs
Q: What drove the second well’s cost increase?
A: Extra drilling days and technical challenges pushed costs to about $5.9 million, yet management remains comfortable with a $5–$6 million range if operations run smoothly. -
PUD Derisking
Q: How many derisked PUD locations exist?
A: Although specific numbers aren’t called out, management noted they only have 4 PUDs booked this year, with expectation of additional derisked locations coming online for a broader development program. -
Permits at Beta
Q: How many permits are at Beta?
A: There are currently between 7 and 10 permits already in place, with more expected to be added as development plans progress. -
Non-Op AFEs
Q: What is the near-term outlook for AFEs?
A: Non-operated proposals are expected to be submitted in the next 6–9 months, although precise activity levels for 2025 remain uncertain. -
Exit Rate
Q: What exit rate is expected at year-end?
A: Management foresees a modest decline from initial production – a pattern supported by historical performance and waterflood injection – yielding a relatively stable exit rate. -
Bottom Hole Pressure
Q: Why was the second well produced with high bottom hole pressure?
A: The pump was set high deliberately to avoid casing issues in unconsolidated sands, a precaution that will be adjusted after initial production to boost flow.
Research analysts covering Amplify Energy.