Houston-based oil and natural gas company, Amplify Energy (AMPY), saw a 44% share price drop a few days ago as one of its oil rigs suffered from a large spill off the coast of California last weekend.
The spill marks the worst ones seen in over 30 years and a major upset for Amplify Energy. After avoiding a bankruptcy in 2017, the company seemed to back on its feet but the oil spill originates from a large revenue source. The Beta oil field, where the spill occurred, was responsible for 14% of the company’s Q4 2020 average production levels. As a result, the company had committed to higher capital expenditures on upgrading the Beta field, while revising its 2021 free-cash-flow projections upwards to $45-55m. At a time when oil prices are on the rise, the spill puts the company’s expansion plans on hold.
why it matters
The rise of ESG risks means spills like this calls for stricter regulatory action for fossil fuel stocks. Last week, Exxon Mobil’s (XOM) proposal in California to reopen three oil platforms was denied, with Amplify’s latest spill not doing the oil sector any more favors.