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Amplify Energy Stock Up 12% This Year: Will Trend Hold?
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Amplfy Energy's (AMPY - Free Report) stock price has given double-digit returns since the beginning of 2024. Shares have gained 12.3% this year, outrperforming the sector and the subindustry. The company is also faring better than its peers like W&T Offshore (WTI - Free Report) and Ring Energy (REI - Free Report) .
AMPY, WTI and REI Stock Performance Comparison
Image Source: Zacks Investment Research
Robust Beta Well Performance
The energy explorer’s A50 Beta well has significantly exceeded expectations, both in terms of production output and costs. Completed for $4.2 million — well below the original budget of $5-$6 million — the well came online in early June 2024. Its production performance is impressive, with a payback period projected to be just over four months. This strong result supports Amplify’s outlook and acted as a key driver of stock performance, overcoming declining oil prices on the back of slower economic growth in China.
Non-Operated Investments to Boost Future Cash Flow
Amplify’s strategic decision to participate in high-return non-operated wells in East Texas and the Eagle Ford is poised to enhance cash flow in early 2025. With 14 new development wells and additional recompletions in the Eagle Ford, alongside the expansion into the Haynesville Shale, the company is set to increase its production volumes.
Strategic Asset Sale Potential
Amplify Energy's imminent plan for the potential sale or partial monetization of its Bairoil assets could significantly de-risk its balance sheet and unlock shareholder value. While a deal hasn't been finalized, getting rid of Bairoil could provide a liquidity boost without significantly impacting the company’s credit facility borrowing base.
The encouraging outlook for the short term has pushed the AMPY stock higher.
AMPY Stock Marred by Its Weak Earnings History
Even though the Beta field success and clever strategic decisions caused a share bump, there are, however, concerns. Amplify Energy has surpassed earnings estimates just once in the last four quarters, missing the other three. Back in August, the company reported second-quarter earnings of 17 cents per share, a -45.2% surprise over the 31 cents per share consensus estimate. AMPY has delivered a trailing four-quarter average earnings surprise of -27.5%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
AMPY Stock’s Vulnerability to Oil Price Volatility
AMPY faces significant risk from fluctuating oil prices, which directly impact its cash flow and profitability. With crude recently dipping below $70, earnings are at risk if prices remain suppressed. Additionally, China’s ongoing economic struggles could further weaken global oil demand, putting downward pressure on prices. Sustained volatility, combined with potential OPEC+ production increases, threatens to strain Amplify Energy's revenues and margins in the coming quarters, creating a challenging outlook for the company.
Is Amplify Energy Stock Cheap?
From a stock valuation perspective, while Amplify Energy might appear attractive relative to the industry, it is still trading above its 5-year median. Going by EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), the company is trading at a multiple of 4.72, higher than its 5-year median of 4.66. We don’t think that this premium is justified given the oil price volatility and the company’s exposure to the commodity.
Takeaway: Amplify Stock is a Hold
While caution is needed, given its volatility and rapid price swings, a long-term vision could reward AMPY investors. The company appears to be treading in the middle of the road, and investors could be better off if they trade carefully. Consequently, this might not be the ideal time to invest in the upstream operator. However, those who already own this Zacks Rank #3 (Hold) stock may stay invested.
Image: Bigstock
Amplify Energy Stock Up 12% This Year: Will Trend Hold?
Amplfy Energy's (AMPY - Free Report) stock price has given double-digit returns since the beginning of 2024. Shares have gained 12.3% this year, outrperforming the sector and the subindustry. The company is also faring better than its peers like W&T Offshore (WTI - Free Report) and Ring Energy (REI - Free Report) .
AMPY, WTI and REI Stock Performance Comparison
Image Source: Zacks Investment Research
Robust Beta Well Performance
The energy explorer’s A50 Beta well has significantly exceeded expectations, both in terms of production output and costs. Completed for $4.2 million — well below the original budget of $5-$6 million — the well came online in early June 2024. Its production performance is impressive, with a payback period projected to be just over four months. This strong result supports Amplify’s outlook and acted as a key driver of stock performance, overcoming declining oil prices on the back of slower economic growth in China.
Non-Operated Investments to Boost Future Cash Flow
Amplify’s strategic decision to participate in high-return non-operated wells in East Texas and the Eagle Ford is poised to enhance cash flow in early 2025. With 14 new development wells and additional recompletions in the Eagle Ford, alongside the expansion into the Haynesville Shale, the company is set to increase its production volumes.
Strategic Asset Sale Potential
Amplify Energy's imminent plan for the potential sale or partial monetization of its Bairoil assets could significantly de-risk its balance sheet and unlock shareholder value. While a deal hasn't been finalized, getting rid of Bairoil could provide a liquidity boost without significantly impacting the company’s credit facility borrowing base.
The encouraging outlook for the short term has pushed the AMPY stock higher.
AMPY Stock Marred by Its Weak Earnings History
Even though the Beta field success and clever strategic decisions caused a share bump, there are, however, concerns. Amplify Energy has surpassed earnings estimates just once in the last four quarters, missing the other three. Back in August, the company reported second-quarter earnings of 17 cents per share, a -45.2% surprise over the 31 cents per share consensus estimate. AMPY has delivered a trailing four-quarter average earnings surprise of -27.5%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
AMPY Stock’s Vulnerability to Oil Price Volatility
AMPY faces significant risk from fluctuating oil prices, which directly impact its cash flow and profitability. With crude recently dipping below $70, earnings are at risk if prices remain suppressed. Additionally, China’s ongoing economic struggles could further weaken global oil demand, putting downward pressure on prices. Sustained volatility, combined with potential OPEC+ production increases, threatens to strain Amplify Energy's revenues and margins in the coming quarters, creating a challenging outlook for the company.
Is Amplify Energy Stock Cheap?
From a stock valuation perspective, while Amplify Energy might appear attractive relative to the industry, it is still trading above its 5-year median. Going by EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), the company is trading at a multiple of 4.72, higher than its 5-year median of 4.66. We don’t think that this premium is justified given the oil price volatility and the company’s exposure to the commodity.
Takeaway: Amplify Stock is a Hold
While caution is needed, given its volatility and rapid price swings, a long-term vision could reward AMPY investors. The company appears to be treading in the middle of the road, and investors could be better off if they trade carefully. Consequently, this might not be the ideal time to invest in the upstream operator. However, those who already own this Zacks Rank #3 (Hold) stock may stay invested.
AMPY currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.