On Thursday, Benchmark analysts maintained a Buy rating on Amplify Energy Corp. (NYSE:AMPY) with a price target of $11.00. According to InvestingPro data, the company currently trades at an attractive P/E ratio of 3.8x and Price/Book of 0.57x. Amplify Energy is set to expand its operations through a merger with Juniper Capital's Rockies portfolio.
The deal involves Amplify acquiring assets that produce 7,900 barrels of oil equivalent per day (boepd), primarily in the DJ and PRB basins, for a total consideration of $306 million. This acquisition cost includes 26.7 million shares and the assumption of $133 million in debt, equating to $38,700 per flowing barrel of oil equivalent (boe).
The proven developed producing (PDP) value of these assets is estimated at $330 million, or $17 per boe, a valuation that is seen as favorable compared to the legacy assets of the company. InvestingPro analysis shows the company maintains strong profit margins of 46.65% and achieved revenue growth of 17.42% over the last twelve months.
Despite the potential for growth, the market's initial reaction to the news has been negative, with shares falling due to concerns that the transaction could dilute the value of investments focused on the company's Beta operations.
The analysts also noted that Amplify will take on an additional $140 million in debt, which has raised concerns about the potential postponement of a return-of-capital program. However, Benchmark analysts argue that this view might be premature. They believe that the increased cash flow from the new assets could actually facilitate more aggressive development of the Beta assets.
Further insights into the company's plans for Beta are expected to be provided during the fourth-quarter earnings call, scheduled for March 6, 2025, according to InvestingPro, with the anticipation of an accelerated development program commencing in the second half of 2025. Subscribers to InvestingPro can access the comprehensive Pro Research Report for deeper insights into Amplify Energy's financial health and growth prospects.
In other recent news, Amplify Energy Corp. has announced a merger with Juniper Capital, a deal set to close in the second quarter of 2025. Amplify will issue approximately 26.7 million shares and assume around $133 million in net debt. Upon completion, Amplify shareholders will own 61% of the outstanding equity, with Juniper holding the remaining 39%. The merger is expected to bring significant increases in scale, operating metrics, and corporate efficiency, along with opportunities for organic growth.
Amplify Energy also reported strong financial and operational results for the third quarter of 2024, with an adjusted EBITDA of $25.5 million and a net income increase to $22.7 million. This improvement was largely due to a non-cash unrealized gain on commodity derivatives and successful drilling activities. The company invested $18.2 million in capital expenditures, mainly in Beta facility projects and development drilling, and reported a free cash flow of $3.6 million for the quarter.
Looking ahead, Amplify Energy anticipates capital expenditures for the year to be at or slightly above the $60 million to $65 million guidance range. Furthermore, it is evaluating potential capital return options for 2025, dependent on development activity and debt levels.
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