Amplify Energy: A Safely Hedged Play on Oil’s Comeback

Amplify Energy (AMPY) is a rare gem in today’s volatile energy market: a company that has delivered an epic EPS surprise, leveraged its flagship Beta field to outperform production expectations, and hedged its way through commodity turbulence—all while trading at a valuation so low it defies logic. For investors seeking asymmetric upside in energy, AMPY combines the safety of a fortress-like hedge book with the growth profile of a high-margin asset base. Here’s why this stock should be at the top of your watchlist.

The EPS Surprise: A Catalyst Ignored by the Market

Amplify’s Q1 2025 earnings delivered a 1,700% surprise, with EPS of $3.80 versus a consensus of $0.21. This beat wasn’t a fluke. While the company reported a net loss of $5.9 million (an improvement from Q4’s $7.4 million loss), its adjusted EBITDA of $19.4 million and negative free cash flow of just $7.2 million highlight a business in transition—not distress.

Crucially, the stock price rose 7% on the news, yet AMPY still trades at a P/E of 10.03 and a P/B of 0.31—levels that suggest the market has written off its ability to capitalize on its crown jewel: the Beta field.

Beta Field: A Gold Mine at $60 Oil

The Beta field is Amplify’s crown jewel, and its performance in Q1 underscores why this asset is undervalued:
- The C54 well, completed in April, achieved an initial production (IP20) of 800 barrels per day (BOPD)—the highest in the field’s history.
- Beta production has risen 35% since early 2024, with four new wells offsetting base decline.
- D-Sand completions at Beta now have breakeven prices below $35/bbl, delivering >90% IRR at $60/bbl—a price point oil has already breached multiple times this year.

Even more compelling: only 25 of Beta’s 100+ potential locations are classified as proved reserves. The rest remain “undiscovered upside,” meaning the field’s true value is not fully reflected on Amplify’s books.

Hedging: A Bulletproof Vest in a Volatile Market

While most energy companies flinch at $60/bbl oil, Amplify has $62.55/bbl swaps for 2026 and $61.93/bbl for 2027, covering 75-80% of 2025 PDP crude production. For natural gas, swaps at $4.12/MMBtu for 2026 and collars with floors of $3.57/MMBtu for 2027 lock in cash flows even if prices fall further.

This hedging isn’t just risk management—it’s a cash flow engine. At current oil prices, Amplify’s hedges ensure it can generate free cash flow even if oil dips to $50/bbl, while competitors scramble to cut costs.

Cost Discipline: The Margin Expansion Play

Amplify’s Q1 lease operating expenses (LOE) of $23.28/BOE are already among the lowest in its peer group. Management has pledged to cut LOE further in 2025H2 through:
- Operational improvements at its Fair Oil division.
- Utility rate renegotiations.
- Reduced “workover” spending as newer wells offset declines.

With $10–20 million in free cash flow expected this year and plans to slash leverage to 0.5–1.0x net debt/EBITDA, Amplify is primed to reinvest in growth or buy back shares once oil prices stabilize.

Why the Valuation is a Buy Signal

At a P/B of 0.31, AMPY’s market cap is 70% below its book value—a stark contrast to peers like Apache (APA) or Pioneer (PVX), which trade at P/B multiples of 1.0–1.5. This discount ignores:
1. Beta’s undeveloped PUDs (worth $144 million at year-end 2024, with upside).
2. The $50 million in deferred capital spending (a “dry powder” to redeploy if oil prices rebound).
3. The $9.2 million already generated from non-core Haynesville acreage sales, with more to come.

Risks? Yes. But the Reward Outweighs Them

• Oil prices below $60/bbl: Possible, but Amplify’s hedges and cost cuts buffer against this.
• Production delays: Three Beta projects were deferred, but the remaining $55–70 million capital budget prioritizes high-ROI D-Sand wells.
• Debt levels: While leverage is high, the company’s $20 million liquidity cushion and hedging give it time to deleverage.

Conclusion: A High-Conviction Buy at These Levels

Amplify Energy is a two-sided bet:
- Short-term: Its hedges and cost discipline ensure survival even in a downturn.
- Long-term: Beta’s undeveloped potential and margin expansion could trigger a valuation re-rating.

With shares trading at $3.14 (vs. a 52-week high of $8.15), AMPY offers 260% upside to its 2024 high if oil prices stabilize or Beta’s PUDs are unlocked. For investors who believe in a recovery in energy prices—or simply in the power of asymmetric value—this is a buy now, hold forever opportunity.

Action to Take: Buy AMPY at current levels and set a target of $7–$9 within 12 months. The risk/reward is too compelling to ignore.