Amplify Energy and Midstates Petroleum to merge in all-stock deal

US-based oil and natural gas firm Amplify Energy and exploration and production (E&P) company Midstates Petroleum have entered a definitive merger agreement under which Amplify will merge with a Midstates subsidiary in an all-stock transaction.

The directors of both boards have unanimously approved the agreement.

Under the terms of the agreement, Amplify shareholders will receive 0.933 shares of newly issued Midstates common stock for each share of Amplify common stock.

At the time of closure of the merger in Q3 2019, stockholders of both companies will each own 50% of the outstanding shares of the combined company.

To be based in Houston, the combined company will be led by Amplify president and CEO Ken Mariani. Members currently on the Amplify Energy and Midstates boards will be included in the new board of directors.

The pro forma total enterprise value is worth more than $720m and market capitalisation exceeding $430m as of 3 May.

The pro forma production in the fourth quarter of 2018 was 40 million barrels of oil equivalent (MBoe/d) and an annualised adjusted EBITDA of $241m.

The transaction is expected to result in a strong balance sheet and liquidity that will allow for acceleration of capital return programmes.

Low-decline assets are expected to generate 2019E levered free cash flow of at least $65m.

Mariani said: “Amplify and Midstates are both well positioned to generate significant free cash flow from proved developed producing assets, and we believe that stockholders of both companies will benefit from the reduced costs and enhanced scale achieved by this transaction.

“The combined company’s strong balance sheet, liquidity and free cash flow create additional capacity to return capital to stockholders and support improved market performance.”

UBS Investment Bank is acting as financial adviser for Amplify and Kirkland & Ellis as legal adviser. Houlihan Lokey Capital is acting as financial adviser to Midstates and Latham & Watkins as legal adviser.

Midstates president and chief executive David Sambrooks said: “This merger-of-equals with Amplify is exactly the type of value-maximising transaction we hunted for when we announced our strategic review process earlier this year.

“The stock-for-stock combination provides for substantial value enhancing synergies and the potential to accelerate additional capital returns moving forward, creating significant value for shareholders of both Midstates and Amplify.”