Welcome to Amplify Energy's investor conference call. Amplify's press release was issued this morning regarding updated market news, with a presentation 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 telephonic replay will be available for 14 days following the call by dialing 800-654-1563 and then providing the access code 10174354. I would now like to turn the conference call 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 our recently announced transaction to combine with Juniper Capital's upstream Rocky Mountain portfolio of companies. 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 assurance 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 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 latest Form 10-Q. Also, non-GAAP financial measures may be disclosed during this call. Additional information about our use of non-GAAP measures may be found in our press release or on our website at www.amplifyenergy.com. During the call, Martyn Willsher, Amplify's President and Chief Executive Officer, will provide an overview of the transaction before opening the call up for questions. With that, I will hand it over to Martyn.
Great. Thank you, Jim. First of all, I'd just like to thank all of our shareholders and stakeholders that have joined us for the call today. I really appreciate you all joining on this really important day for Amplify. I'd like to start by, before we get into the presentation and as we go through this, I'll try to reference where we are in the presentation. I really want to just give a little bit of background. For more than 18 months, Amplify has been looking at different ways to create shareholder value, looking at various options, including selling all the assets versus merging into a larger company versus trying to find a transaction similar to this where we can upgrade the development potential and kind of the asset profile of the company.
For various reasons that we'll obviously get more into as we get into the background, we've obviously come to this transaction. But I do want to mention that one of the tricks of reviewing all of these is that both management and I believe our shareholders have a very high opinion of the future potential of the Beta asset. From a transaction perspective, that's made it trickier from getting full value for that in any kind of divestiture and/or scenario where you kind of sell out the assets of the company to another company. So with that in mind, I want to kind of review the rest of the deck with that as kind of part of the understanding of this transaction. Moving on, I want to kind of go to slide four for just a second.
I think one of the key attributes of this is that we are actually not just adding assets. We're adding a partner. Juniper Capital has a tremendous history in the oil and gas space. If you look up their history with Ranger Oil and what they were able to do, consolidating assets in the Eagle Ford, creating a tremendous amount of value for their shareholders, having two of their most senior members, Eddie Geiser and Josh Schmidt, join the board is a really valuable add to this transaction. We're certainly excited to have their experience in the boardroom as we move forward. Moving there, I'm just going to spend a little time on slide five before we go further. So I really want to start talking about the attributes of the deal itself. First of all, from a free cash flow perspective, this is a highly accretive deal.
This is a good time to kind of segue into kind of not all EBITDA's created equal, so to speak. These assets are in highly desirable areas with a lot of running room. The PRB and the DJ are two growth areas in this country. This is an area where there's a lot of running room, and we have a lot of inventory to be able to grow this asset both organically, and it creates a great platform for future growth. So in terms of just the overall scale of this transaction and then how it relates to free cash flow, this asset will generate a lot of free cash flow, not just next year, but for many years to come as we're able to continue to develop the assets. Moving on, I want to talk about the efficiencies of this as well.
From an operating cost perspective, this is a small reduction from kind of our op costs across the rest of the company. But relative to the rest of the company, this has got a much higher oil weighting. So your revenue per BOE is much higher. What that relates to is much higher margins and higher net backs. This is why your free cash flow per barrel produced is much higher for these assets than it is for the rest of the company. In addition, when you look at G&A, this company on a standalone basis runs about $27 million a year of cash G&A. These portfolio companies that we'll be consolidating run around $7-$8 million, which we believe we'll be able to scale back significantly due to having a lot of the back office, having a Rockies operating team already.
And so we'll be able to make key incremental hires to improve that team, especially on the technical and land side. But we don't need to staff up significantly, so that creates a lot of G&A synergies for the company. In addition, I want to talk a little bit from an EBITDA perspective. Amplify is a cash taxpayer at this time. Because of this transaction, these assets that Juniper will be bringing over actually come in at a stepped-up tax basis. What that actually means for the pro forma company is not only do we basically not have a tax liability on the EBITDA related to these assets, it actually improves the tax burden for the entire company. So there's a substantial amount of tax synergies related to this transaction as well.
Getting into the development side of it on the organic value creations, as mentioned, this has got roughly 300,000 acres, so we're almost doubling the size of the company from an acreage position. A lot of that is in the Powder River Basin, which is an area where there's likely to be a lot of future growth and consolidation. We have a lot of term remaining on that acreage, so we don't have to go out there and start developing this with multiple rigs all at once. We're going to have the time to really study this and learn from the large operators working around us, benefit from what they're doing on the service side, benefit from what they're doing on the drilling side, and really ramp up over time. We don't need to go out there, like I said, and drill a bunch of wells all at once.
We'll talk more about oil weighting in a minute, but obviously, that's a significant part of this as well is that it substantially increases our relative oil position. On slide six, using some of the themes that I just mentioned, one of the questions I've received from investors today has been kind of relative PV value for these assets versus our other assets, and it's a fair question, but it comes back to two aspects of this that I mentioned earlier. One is the multiples paid for assets and the relative discount rates for assets are based on multiple things, including perceptions of risk, upside potential, desirability of the areas, organic growth potential, etc. This area kind of checks all of those boxes. This is an area, like I said, that's going to be kind of set for future growth. These are relatively lower-risk production areas.
You're in Wyoming, which from a regulatory perspective is a reasonably easy place to operate, and so from all of those perspectives, this is kind of an area which you would expect to trade at a higher multiple and a lower PV-10 value. Obviously, some of our assets are in areas where we don't have a lot of growth. Maybe there's a higher perception of risk, and so just from that perspective, there is a difference between some of our assets and the assets we're acquiring. Secondly, it comes back to that G&A point that I made earlier. If you're burdening our existing assets with $27 million a year plus of G&A, that's obviously a much higher burden than what we expect will be a very minimal G&A increase for these new assets, and then third, you add in the tax synergies of these assets versus our existing structure.
You can see kind of. You can easily bridge down to kind of how the relative value splits on the NAV adjustments. Okay. Moving over to slide seven, this kind of puts into perspective just how much the scale increases from this one transaction. We've already talked about acreage moving, almost doubling in size. Just from our reserves, and then if you look, I think it tells a story that our proved developed reserves go up 62%, even though our reserves from just a molecule perspective only go up 20%. This is because this is much higher value production. This gets back to what I said earlier about higher revenue per BOE, relatively lower OPEX per BOE. It's just much higher margin production than what we have in the rest of the portfolio.
This also makes it easier with commodity prices moving around relative to the rest of our portfolio. If commodity prices were to go down on an unhedged basis, this production is actually much more resilient to that than the rest of our portfolio where we have higher relative fixed costs. So from that perspective, this is, like I said, a great addition to our overall portfolio of assets. Once again, if you look at the net production, we're almost adding 41%, which is fairly similar, obviously, to the splits of the company. On slide eight, we really wanted to demonstrate kind of that this is an area, obviously, where there's a lot of activity. We have acreage kind of in that area between kind of Converse and Campbell counties. Moving west is an area where there's an increasing amount of development.
And like I said, we have enough time, especially in this Powder River Basin area, that we can wait until some of the activity gets closer to us. I equate this in a lot of ways to what we're doing here and what we've done in East Texas, where we've had an opportunity to see the Haynesville move closer and closer to us and learn from kind of the operators out there. The difference here is that we have a lot of acreage ourselves where we can operate and develop this asset. Unfortunately, in East Texas, we don't have a lot of the deep rights in the Haynesville, and we don't have enough acreage to really develop it ourselves. But we do in this area.
And like I said, we're going to benefit from learning from these large operators that are bringing in more rigs and creating better economies with their drilling times and their service availability for future development. In the DJ Basin, you can see that most of the activity and most of our acreage is in Wyoming. That area is probably the area that will kind of focus on development more near term. There's a little bit more acreage there that is on a more limited time crunch from a development perspective. Probably during the interim time period between signing and close, there's at least two wells that are likely to be drilled kind of between signing and close and with probably the completions of those wells scheduled for sometime in the second quarter.
After we move on from here, obviously, if you look at slide nine, that's a slide that's familiar to a lot of our investors. But I do want to focus on this. And the reason is that this doesn't impact our desire or our ability to grow and develop the Beta Field. In fact, it's actually hugely beneficial to that. We have now the combined resources of both companies from a free cash flow perspective. And so from a development, we are, especially kind of in the near term, as we are slowly ramping up development potentially in the Rockies, we have a lot more capital to work with at a much larger scale with a much more efficient organization in order to look at the Beta development and potentially ramp that up more so than we could as a standalone company.
So not only does it not impact Beta, it's actually potentially very impactfully able to kind of move this much faster along than we would be on our own. So like I said, this is still an extremely important part of the company's future. We still believe in the Beta story. And like I said, I think this does nothing but actually help our ability to develop this asset. Slide 10, I'll spend just a little time on. We've already talked about Eagle Ford and East Texas in prior discussions, but we are still developing in Eagle Ford. We've got wells coming online probably end of Q1. East Texas, I think we've got four wells likely coming on sometime between the end of Q1 and the end of Q2. There's going to be more activity. We have more options with some of this Haynesville acreage.
I wish we had more of it, but we are certainly creating what value we can from the acreage that we do have, especially as the value of this acreage has increased as the activities come towards us, and so those are other things that we're working on simultaneously, and then obviously on slide 11, we're continuing to utilize our cash flow from our existing areas in the portfolio. Slide 12, this gets back to the efficiencies that I mentioned earlier. We're going from a production mix, which is 43% oil to 55% oil on a pro forma 3Q basis. I expect this percentage to continue to grow, which has benefits for margins across the company. You'll see what looks like a relatively modest decline in company LOE per BOE. Obviously, this is combined for the whole company.
And so the relative LOE per BOE for the acquired assets is lower. But it also means that, like I said, if you look at that, couple that with the unhedged revenue increase, just for the acquired asset impact alone, the net back is basically a $7 value per BOE to the company. Like I said, this is a much higher margin growth area than a lot of what we have in the company. And then once again, G&A on a pro forma basis with the benefits of scale and synergies is substantially reduced. And so that burden on the shareholders from the overhead is substantially reduced. Slide 13, I want to spend a little time talking about this. We've talked a lot about the organic growth potential, but we want to spend a little time about inorganic growth potential as well.
Obviously, one of the things this does is it creates a new core area. We have a lot of acreage, but this is an area where it's kind of set for consolidation. There's obviously some larger operators out there, but there's a lot of smaller operators. There's the ability to potentially buy some pieces of these larger operators. And so this is an area we feel, especially in the Powder River Basin, where we could really consolidate and grow. Obviously, as we do that, we'll look at the rest of our portfolio of assets and look to see which areas where either we are potential to grow or maybe we divest some of those as we move along in order to fund the growth in both organically and inorganically of the Rockies area and/or the development of the Beta area, for example.
This is also a way that we could manage leverage, etc., as we move forward. So managing the portfolio, becoming more efficient, focusing our efforts in potentially a smaller number of areas as we move forward is something that is certainly a possibility and something that we'll be looking at as we move forward. In the near term, obviously, we will benefit from having all these areas in the cash flow from each of them. So before we turn this over for questions from analysts, just want to once again hit on the high points here. From a free cash flow perspective, and I'm looking at free cash flow, and then especially on an after-tax basis, this is very accretive to the cash flow to the company. Even at the splits that we've created, this is very beneficial to each and every one of our shareholders.
The benefits to scale and operational and G&A efficiency are impactful. Like I said, this is a stepping stone to making us an even more efficient operational organization moving forward as we, like I said, are able to look at the overall organization, make sure we have the right people in the right places, and potentially look at ways to optimize the portfolio of assets in the future. From an inventory perspective, obviously, beta has some great inventory, high rates of return, relatively low payback periods, but it's confined to that one area. There's really no way to kind of grow around beta other than what we can do on the two existing platforms. This gives us hundreds of potential locations in an area with a lot of potential growth that we can build around.
We can create an organization that's focused on these areas, not just from an organic perspective, but also the ability to bolt on in those areas. And like I said, that kind of covers the last bullet as well, is really that inorganic growth potential is extremely important as we move forward, like I said, in making us a more efficient organization. With that, I appreciate everyone's time, and we'll open up the line for questions. Thank you.
If you would like to ask a question, please press star and one on your telephone keypad now, and you'll be placed into the queue in the order received. If you would like to remove yourself at any time, press pound and one to be removed from the queue. Once again, to ask a question, press star and one on your phone now.
We'll take our first question from Subash Chandra with Benchmark.
Yeah. Hi, Martyn. Just curious on the nature of the debt that's acquired here. I guess the free cash flow accretion, how do we model that out? What do you think on CapEx, sort of the immediate 12 months? And is that all going towards debt reduction? Is this debt short-term in nature?
One of the things that we're going to do as part of this transaction is right now they have debt at the DJ and PRB portfolio companies. We're going to consolidate the debt and refinance it all under Amplify at a kind of a much more consolidated, lower-cost, kind of more streamlined kind of capital structure moving forward.
And so, as part of that, obviously, we'll be able to kind of lower kind of pro forma debt costs, especially for the pro forma portfolio company's debt. Secondly, to your question, that's all going to be kind of part of the capital allocation process that we'll do. Unfortunately, we're in a kind of a little bit of an awkward phase of timing from where we're through fourth quarter, but we don't have fourth quarter numbers out there. We don't have reserves for year-end 2024. We don't have the full budget for 2024. And we certainly don't have a budget yet for the two companies combined. And the time between now and when we close this deal, we could certainly see higher oil prices or lower oil prices, higher gas prices, lower gas prices, etc.
And so part of having this portfolio of assets is that we're obviously going to make capital allocation decisions based on what makes the most sense. Beta is probably going to be at the top of the stack pretty much no matter what you do. But for the rest of the portfolio, I would expect that we'll start. We've got two wells that for sure will be drilled and completed in the first half of this year in the Rockies. In the second half of this year, we'll certainly look at potentially additional DJ wells or PRB wells and look at how those stack up with the opportunities across the portfolio. So I would expect additional activity in the Rockies, but I don't think we're going to be drilling 10, 12 wells a year. I think this is going to be four, five wells probably in the near term.
Then, like I said, we'll grow to kind of drill more as we move forward in time. That'll kick off a lot of cash flow to kind of manage leverage pro forma for the transaction, even within a bigger Beta development program. We'll utilize that excess cash flow to kind of reduce leverage pro forma for the deal and create more opportunities that way for future, especially for future potential capital return programs, which, like I said, will be part of how we set up the financing structure.
Yeah. I think that could you shed more light maybe on the potentially bigger Beta development program? It's probably what the shares are reacting to this morning, but I think you've strongly hinted that this should be accretive to the program. What are you thinking on Beta now? When will we get the well results?
Anything you can say to the second half or the fourth quarter well results? And then my final question is just, is there much PRB production in the Rockies portfolio?
So I'll answer the second part of your question first. Relatively, if you look at the kind of the 7,900 net BOE per day for Q3, I think around 1,000-1,100 BOE per day of that was from the Powder. The rest of that was from the DJ. In regards to Beta, like I said, we're going to have kind of a program kind of set up that's got some flexibility in the second half of the year so that we can discuss this as a pro forma board and make capital allocation decisions.
We're not in a position to be able to talk about fourth quarter yet without the financials, without any of that information out there in public, unfortunately. But we'll talk more about that, obviously, coming up in our earnings call in early March. And then in terms of kind of, like I said, the second half of the year, that'll be up to the pro forma board, but we'll have kind of a lot of additional information when we report fourth quarter on inventory and development and the potential for what we can do moving forward. But yes, I wouldn't view this as in any way dilutive to the ability to drill beta. It's actually completely the opposite.
Thank you.
And our next question will come from Jeff Grampp with Alliance Global Partners. Hi, guys. Morning.
Was curious to maybe dig a bit further along kind of some of Subash's questions with respect to how we should think about these Wyoming assets. A lot of the kind of historical legacy asset base for Amplify has obviously been much more kind of harvesting free cash, not necessarily focused on maintaining production or growing it. This asset seems to have some pretty good growth potential. So should we think about it as a growth asset in the medium and longer term? Would you guys look to maybe just more maintain production and harvest the free cash? Or do you guys really even have a longer-term view or thesis on what kind of asset this really is for the company going forward?
Yeah. I think over the longer term, it's certainly a growth asset.
I think the question comes down to you from a short to whatever you're considering medium-term perspective. Like I said, I don't think we start off with a huge development program there in the very near term, but we grow into it over time, especially in the Powder and some of the opportunities and multiple benches in that area. But we're going to take the time to make sure that we have everything in place before we start that program so we're not rushing into anything. And I'd kind of equate this back to what we did with the Beta program where we really studied that and made sure that we were as ready as we could be and then started the program.
We took a little break towards the end of the fourth quarter, which we already mentioned, and we'll be starting back up on the 2025 program here in late Q1. But really want to take the time, make sure you're learning as you go, taking those lessons and applying them to the next program so that we're making sure that we are utilizing the capital that belongs to the Amplify shareholders in the most efficient way possible. And so, like I said, I think it's a ramped-up development program in the Rockies, probably a little bit more DJ-focused near term with the Powder becoming an increasing part of that as we move forward.
Got it. Okay. That's really helpful.
And with bringing on a fair amount of acreage and kind of a new operating area for you guys, does this at all change or augment what you guys might define as non-core? And obviously, you guys have been very open to monetizing the asset base at the right price, but does bringing on such a significant amount of production and acreage in a new area at all change kind of the interest in maybe reviewing the asset base like you guys have in the past? Or how should we think about what the portfolio might kind of be for the company going forward?
Yeah. I think that's something that we're going to be looking at, right?
We've talked in the past about just from a pure scale perspective. It made it difficult to sell off pieces of certain assets, even if we had less potential in those areas down the road. Just because just from a pure scale perspective, you needed a certain size, especially being public requires a certain amount of overhead to manage an organization, a public company in this, like I said, in the right way, so the good thing about that is you can bolt onto it and you can in a more efficient way as you kind of add assets.
But there may be ways for us to trim some parts of the portfolio as we move forward that will make sense from, like I said, from an efficiency perspective and our personnel and from our time and kind of execution perspective that now having this kind of second kind of development area and kind of growth area allows us a little bit more of an opportunity to do that versus where we've been in the past.
Great. Thanks, Martyn. If I could sneak one more in, is there any way for us on the outside to get some kind of, I don't know, bookend range in terms of the tax benefit that you guys hit on a few times?
I mean, I know it's hard to distill to one particular number, but I guess just trying to get a little bit of a framework to understand how meaningful that could be for you guys. Thanks.
Yeah. I don't know if we'll have to kind of think through if there's a good way to kind of provide that level of information. So I don't have the answer for you on this call, but that's something that we'll think about.
Okay. Thank you. That's the time.
As a reminder, if you'd like to ask a question, you can signal by pressing star one on your telephone keypad now. And our next question will come from Jeff Robertson with Water Tower Research.
Thank you. Good morning.
Martyn, back to the balance sheet, can you talk about or can you give any color on what you think the capacity might be under the consolidated RBL? And then secondly, how will you think about, further Subash's question, debt reduction versus reinvesting it for growth and maybe reserving dry powder for consolidation opportunities?
Yeah, I'm going to take the last part of your question as part of the first part of your question. So I think the financing structure that we put in place will try to give us enough flexibility to have a little bit of dry powder, but also be able to pay down debt if that's the best use for our free cash flow.
In regards to size, I think that's to be determined, and I'm probably not going to bid against myself, so to speak, with the banks in terms of what I think the capacity should be. That's something that we'll work with on the banks' pro forma for this deal. And so I said, whether it's all RBL debt or there's some stub piece of some other form of capital in the very short term to kind of get through the initial period of ramping up is something that we'll look at. But certainly, over time, I expect most of this will be under an RBL.
But like I said, it might make sense to have a little bit more of some permanent capital in order to, given that we're going to be a larger organization with a substantially higher EBITDA level, I think some form of permanent capital just to kind of manage that would make a lot of sense as well.
Secondly, on the margin accretion, especially with respect to LOE, as Beta production grows, that should further reduce the per unit LOE out there and enhance your margins. Is that correct?
Absolutely. Yeah. That's certainly part of it as well.
Given where we were, we can only use kind of third quarter 2024 numbers, but certainly, as we move forward from not just the incremental production, but the work we've done on reducing costs relative to electricity and some of the costs of operating out there with the emissions credits and things like that, as we get through the end of 2024 and into 2025, all of that will start to come help the Beta operating cost from a fixed perspective. And like I said, the increased production will lower it as well.
Thank you.
And once again, if you'd like to ask a question, please press star one at this time. We'll pause for just a moment to allow everyone an opportunity to signal. And it appears we have no further questions at this time. I'll now turn the call back to our presenters for closing remarks.
I'd just like to thank everyone who participated in the call today. As always, we're available for follow-up questions and really appreciate your support. Thanks, everyone. And this does conclude today's Amplify Energy's investor conference call. Thank you for your participation. You may now disconnect.