It must be a good idea if it compelled me to use Substack, right?
In re: both questions re: call options, I don't trade options for various reasons, the biggest one being I don't love being boxed in from a timing perspective. On AMPY, separately, implied vol is so high that you have to see massive upside in the stock before you start to make money, and I'm not sure that there is a ton of liquidity in anything long-dated.
Great write-up and podcast. Are you surprised that the stock didn't react positively to the Q3 earnings?
Three questions going forward for you:
- How much in EBITDA do you think Beta would have done in FY21 that would be eligible for lost income insurance?
- What happens with the Beta ARO liability if CA somehow never allows the asset to operate again? Does it accelerate the balance sheet liability if they are forced to plug the holes today (or when the lawsuits finally end) instead of a decade or two in the future?
- Do you think mgmt. will sell assets? If so, which do you think are mostly likely and at what price?
You nailed it
Starting in March 2020 trading volume in AMPY rose abruptly and was sustained through March of 2021 but then just as abruptly fell (though still above pre-March 2020 level). Very clearly sustaining significantly lower volume. This is best seen on weekly chart. Do you have any ideas what this was about and if there is anything to read into it?
Very nice write-up btw, and also on ARCH. I'm a tourist in energy -- something to avoid I thought b/c of secular decline and ESG headwinds but you make compelling case.
Such a great write-up of such a great idea.
hi twebs - great article! I just registered on substack just so I can comment/ask questions on this :-)
Key questions I have is on valuation:
- you often cite their PV10, however (as far as I know - and please correct me if I'm missing sth): PV10's vs fair market value can show *significant* discounts, e.g. because of how much production actually comes from proved reserves on a year-by-year basis can vary greatly, because of tax rates, etc. (I think AMPY itself was trading at about ~60% discount to their then PV10 before the spill?)
-> do you have any insights on this, or other reasoning for how you're using their PV10? In the podcast you mention, that at current level (which back then was far below current prices) it really doesn't matter because it's so cheap - but the stock being approaching 10 / share I think this question has become more pressing. (strip reported by AMPY as of 4/18/22 was 18.45 PD / share, if we simply take off 60% here we arrive at ~11.. I know: "Hold on!" you say, "Prices have increased even more since then!!" - true, but this question still has to be faced in some way at some time)
- ...and therefore more generally: What do you see as ballpark-estimate for when you would sell again/when fair value has been realized?
At $110 WTI, what valuation do you get for $AMPY and looks like little to no liability
Any updated thoughts on this thesis. Appreciate any feedback.
Hi Tim, many thanks for the post. It's really well written. I would also be interested in the call options (although I am not an expert I have to admit). Do you have a view on that if any? Best regards Philip
Tim, great interview w/ Andrew. It was my exposure to AMPY. It seems like the options might be a great way to play this (instead of the stock). It seems like if things play out in the "middle range" of what you mentioned on AMPY (in terms of liabilities, the company is able to keep its revolving LOC), then the options could be worth a lot. There are April '22 calls, giving you 6-7 months to see what happens. Plenty of time to have this spill issue resolved.
Am I missing something in how I view it?