Welcome to Amplify Energy's Fourth Quarter 2023 Investor Conference Call. Amplify's operating and financial results were released yesterday after market close on March 6, 2024, and are available on Amplify's website at www.amplifyenergy.com. During this conference call, all participants will be in a listen-only mode. Today's call is being recorded. A replay of the call will be accessible until March 21, 2024 by dialing (800) 654-1563 and then entering access code 28240256. I would now like to turn the conference over to Jim Frew, Senior Vice President and Chief Financial Officer of Amplify Energy Corp.

Good morning, and welcome to the Amplify Energy conference call to discuss operating and financial results for the fourth quarter of 2023. Before we get started, we would like to remind you that some of our remarks may contain forward-looking statements, which reflect management's current views of future events and are subject to various risks, uncertainties, expectations and assumptions. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove to be correct and undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this earnings call. Please refer to our press release and SEC filings for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. In addition, the unaudited financial information that will be highlighted here is derived from our internal financial books, records and reports. For additional detailed disclosure, we encourage you to read our Form 10-K, which was filed yesterday afternoon. Also, non-GAAP financial measures may be disclosed during this call. Reconciliations of those measures to comparable GAAP measures may be found in our earnings release or on our website at www.amplifyenergy.com. During the call, Martyn Willsher, Amplify's President and Chief Executive Officer will review our fourth quarter performance and provide an update regarding our previously announced strategic initiatives. Next, Dan Furbee, Senior Vice President and Chief Operating Officer, will provide an overview of fourth quarter operational performance. Following that, I will discuss fourth quarter financial results, provide an update on our balance sheet and liquidity and provide additional details on our hedge book. Finally, Martyn will conclude our prepared remarks with comments regarding Amplify's 2024 guidance and provide final thoughts before opening the call up for questions. With that, I will hand it over to Martyn.

Thank you, Jim. Amplify had a strong fourth quarter of 2023, capping up a successful and important year for the company. With respect to the fourth quarter, the company generated $25.2 million of adjusted EBITDA and $14.4 million of free cash flow. Fourth quarter production averaged 20,800 BOE per day, a 1% increase from the prior quarter, while LOE came in 7% lower than the prior quarter on a per BOE basis. For the year, Amplify generated $88 million of adjusted EBITDA and $38 million of free cash flow, which was in line with the company's 2023 guidance despite steep declines in natural gas and NGL prices throughout the year. In 2023, the company also materially improved its balance sheet, reducing net debt by approximately $95 million and establishing a new credit facility in the third quarter. Operationally, the company achieved average net production of 20,500 BOE per day for the year, successfully returned beta to production and formed Magnify Energy Services to provide a variety of auto-build services to Amplify operated wells, reduce operating costs and provide greater operating control. I'm extremely proud of the entire organization for the operational and financial progress we made in 2023, and I expect the company to continue the positive momentum this year. With respect to the strategic initiatives highlighted last quarter, the company engaged an investment bank to pursue the monetization of our oil-producing assets in Bairoil, Wyoming. As a reminder, we're exploring a complete divestiture of the asset as well as considering alternative structures with the goal of maximizing shareholder value. A successful Bairoil monetization will accelerate our ability to reduce debt outstanding and evaluate return of capital options. We will provide an update regarding this process on our next call. At Beta, following an in-depth technical review of the undeveloped potential in the field, we're pursuing a full well development program in 2024 with the first well having been spud earlier this week. At current prices, the development program is forecast to generate attractive IRRs in excess of 100% and payback periods of less than 1 year. The first 2 wells are scheduled to be on production in the second quarter, and we will provide updates to the market when the results are available. In summary, we continue to focus on optimizing cash flow generation while simultaneously pursuing our strategic initiative at Bairoil and Beta. We believe this plan will unlock additional value in Amplify's portfolio and deliver substantial benefits and long-term value to our shareholders. With that, I will hand it over to Dan.

Thank you, Martyn. Total production for the fourth quarter averaged approximately 20,800 BOE per day, consisting of 41% oil, 18% NGL and 41% natural gas. Full year 2023 production averaged 20,500 BOE per day, which was within our full year guidance range. Production guidance of 19,000, 21,000 BOE per day for 2024, represents volumes which are nearly flat year-over-year, with a 12% increased oil volumes for beta development offsetting natural declines of our gas weighted assets. This projection includes approximately 15 days of scheduled shut-in the Beta during the year to complete the electrification of the platforms, which will generate significant cost savings and reduce emissions in the future. The Beta development program is anticipated to bring on additional oil volumes in Q2 and Q4 of 2024, with the full impact of our initial development campaign realized in 2025. Oil production growth will increase revenue realization in 2024 and improve the company's profitability going forward. Additionally, we anticipate that our operating partners in Eagle Ford will continue development in the second half of 2024, with completions adding incremental liquids-weighted volumes in early 2025. Lease operating expenses for the full year 2023 were approximately $140 million or $18.66 per BOE, which was below the midpoint of the 2023 guidance range. As a reminder, we brought the Beta field back to production in late April 2023. When normalizing for a full year of Beta operations, 2023 Beta operating expenses would be approximately $147 million. Our team has been extremely focused on reducing operating costs throughout the asset base, and we continue to realize the positive results from these efforts in the fourth quarter. We expect to continue improving our cost structure throughout 2024 and our guidance to a midpoint of $143 million. Our guidance range for Beta operating expenses does not include…

Thank you, Dan. I would now like to discuss full year 2023 and fourth quarter financial performance, balance sheet and liquidity and hedging. With respect to fourth quarter financial performance, the company reported net income of approximately $43.6 million compared to a $13.4 million net loss in the prior quarter. The increase was primarily attributable to non-cash unrealized gains on commodity derivatives during the period. For 2023, Amplify generated $88 million of adjusted EBITDA. Despite falling gas prices, the company's adjusted EBITDA was near the midpoint of its guidance range. As Martyn previously mentioned, fourth quarter adjusted EBITDA was $25.2 million, up $5.7 million from the prior quarter. The quarter-over-quarter increase in adjusted EBITDA was primarily due to lower lease operating expenses and slightly higher oil production. Of note, with Beta coming back online in April, fourth quarter oil production increased to 41% of total production, up from 31% in the first quarter of 2023. With respect to lease operating costs for the full year 2023, Amplify's average LOE was $18.66 per BOE. This was slightly below the midpoint of 2023 guidance. In the fourth quarter, Lease operating expenses averaged $18.14 per BOE, down 7% compared to the prior quarter. As Dan mentioned, we think there are several opportunities to continue reducing LOE and the company is actively pursuing those initiatives. For full year 2023, gathering, processing and transportation costs averaged $2.78 per BOE, which was below the low end of the guidance range. Fourth quarter GPT costs were $2.66 per BOE. We expect these lower costs will continue into 2024. Cash G&A in 2023 was $26.4 million were $3.53 per BOE, which was below the midpoint of guidance. In the fourth quarter of 2023, cash G&A was $6.2 million or $3.25 per BOE which was down $0.3 million from…

Thank you, Jim. On to guidance. Yesterday, we provided operational and financial guidance for 2024, with the current assumption that we retain Bairoil for the full year, if our monetization process is successful, we will update guidance as appropriate later in the year. As Dan previously mentioned, Amplify's 2024 capital budget is forecasted to be between $50 million and $60 million. On the development side, we expect to drill 4 operated wells of Beta and participated in 0.5 to 1 net non-operated wells in Eagle Ford. We also anticipate completing the electrification and emissions project at Beta, while funding facility and high-return workover projects throughout our entire portfolio. Due to the timing of the Beta development and facilities projects, we expect to invest 85% to 95% of our capital budget in the first 3 quarters of 2024. As a result of these investments, we anticipate that the fourth quarter 2024, the company will see a substantial increase in oil production and a lower cost structure of Beta, which will significantly increase our cash flow and the long-term value of the beta asset. Our average daily production forecast for the year ranges between 19,000 and 21,000 BOE per day with a commodity mix of approximately 42% oil, 16% NGLs and 42% natural gas. Due to the development program at Beta, we anticipate oil production as a percent of total production will increase throughout the year. For guidance purposes, we have assumed a WTI price of $75 per barrel and a Henry Hub natural gas price of $2.50 per MMBtu for 2024. Based on these assumptions, we anticipate generating adjusted EBITDA of $90 million to $110 million and approximately $20 million to $40 million of free cash flow this year. Additional guidance details are provided in our earnings release and can be found in the latest investor presentation currently available on our website. As we look ahead to the remainder of 2024, we are excited by the potential of our Beta development program and the impact of our successful monetization of our Bairoil asset. We believe these two critical initiatives, combined with our relentless focus on managing our cost structure will provide a catalyst for market outperformance, while also enhancing our flexibility as we consider our strategic path forward and evaluate potential capital return options. With that operator, we are now open for questions.

[Operator Instructions] Our first question comes from Jeff Grampp with Alliance Global Partners.

Was curious, starting first with Beta. So you guys have drilled in the first well there now, results coming in Q2. Do you have kind of a best guess for when those wells start flowing? Just to get a sense of kind of the contribution in Q2 and maybe into Q3. And I know IP rates aren't everything, but any kind of internal estimate or expectations you could share to kind of benchmark maybe what makes a good well there early on?

Yes. Let me talk about timing and then give Dan the floor and the other part of your question. These usually will take a couple of months to kind of by the time you've drilled them, completed them and started flowing them back. And so we may have some initial results by early May in our next call, but we're anticipating better results by kind of later in May and June and kind of that time frame. So we'll provide what we can by the next earnings call, but I think this is more likely a later in 2Q results and impact on our production base.

Yes, Jeff, this is Dan. Initial production results, we said we're expecting our first year average production to be approximately 350 barrels of oil per day kind of based on the latest wells drilled here. And I'd say the profile of these wells is a much shallower decline than what you would see in the typical shale well being conventional assets. So we're expecting IP rates obviously higher than 350 barrels of oil per day with not an extremely steep decline. It's kind of the characteristics of this reservoir in the results.

Okay. Great. That's really helpful. Thank you. And sticking with beta, so production is kind of above pre-incident levels. I'm curious if you guys have any read or expectation on the sustainability of that? Is that maybe just a short-term boost since it's been offline for a while? Or what you guys are kind of expecting on the PDP base wedge of production there?

Yes. Since we brought Beta back on, we've been able to do some much more extensive cleanouts of the laterals and the wells and the screens in the wells. And we've been able to utilize the coiled tubing unit that was not previously available on our assets. So bringing in that unit, the uplift we've seen seems to be sustainable, and we've seen that uplift now on individual wells for going on 6 months since we started our workover program since we brought the asset back on. So we're confident we're able to continue seeing these results on our workover and hopefully get increasing uplift from these projects.

Okay. Great. And maybe one more for me. On the LOE bridge slide that you guys have, and I appreciate the detail that went into that. On the cost inflation component specifically, I think you guys hit on a couple of items in the reports, but can you just kind of review specifically what you're seeing there on cost inflation? And then, curious, if you guys view that as kind of just a structural change to the cost profile going forward? Is that something Magnify could help with? Are there other things you guys could do to maybe mitigate that, any kind of commentary there with you again would be helpful.

Yes. I think we highlighted two main items, which are an increase in regulated power costs which are basically just -- they got approved at a higher rate, in some cases, almost double digits, and those came kind of late in the year. And so we obviously push those into the forecast. And then our insurance costs really not related to Amplify any way. This isn't just an industry-wide, I think this is all company-wide increase in liability cost. A lot of it's associated with automobile kind of incident costs, it's kind of impacting the entire market for liability claims and costs in the marketplace. I think this is something that a lot of companies will have to absorb. And we're obviously pointing it out specifically, but those are two of the things that kind of impacted us the most. Dan, do you want to go into that in any part of the question there?

Yes. On the other parts of it, Magnify has done a really good job to offset some of these inflationary costs. If you go back to like 2022 with much higher gas prices, in East Texas, we saw a lot of inflation with things specifically around compression costs, and we have a lot of rental compression, bringing a lot of that compression in-house, we've been able to offset a lot of that. And we do expect compressor rates to come down over time as obviously it's going out with natural gas prices, there's just not as much activity in the East Texas region. And then, yes, like Martyn said, most of the cost inflation we are expecting this year are mainly the insurance rates and the regulated power costs, which we are currently looking for ways to reduce our power consumption across all of our assets. We think there's additional upside there to realize this year.

And this is obviously the bridge to 2024. A lot of the things we're doing this year will impact later in '24 and into '25, especially if we finish the electrification and the mission of projects. So we've already gotten some benefit from them, but there will be incremental benefits that will flow through later in the year and into 2025. And so this is kind of where we are now and obviously, but not where we intend to continue to progress from here.

Okay. Understood. Great. I appreciate the time guys. Thank you.

Before we always try to survey our questions from our investors, one that we received that we did feel we wanted to kind of spend a little bit more time on is the timing of the Bairoil process from here. Bairoil a very technical asset. And so what we've started by doing is obviously reaching out to the most interested buyers, which is a pretty long list. And really working with them on the technical aspects of this deal. Keep in mind, we are running this as a parallel process between both in asset, outright asset sale and a monetization for a different kind of securitization or other structure. So that's going to take a little bit longer than your traditional divestiture timing. We anticipate this will lead to some kind of results or decision somewhere between kind of the first quarter and second quarter earnings calls. So probably sometime in that kind of mid-summer time frame, June, July, somewhere in there. So we expect to have more information as of the May call, but likely the kind of completing somewhere in the months in between that call and the August call. With that, I just wanted to say thank you to all of our employees for their outstanding efforts and dedication this year. I'd also like to express my appreciation to all of our stakeholders for their continuing support. Thank you for participating on the call today. And as always, if there are any questions, please don't hesitate to reach out. Thank you, everyone.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.