10-Q 1 ampy-20230930x10q.htm 10-Q Q3 2023
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 001-35512

Amplify Energy Corp.

(Exact name of registrant as specified in its charter)

Delaware

    

82-1326219

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

500 Dallas Street, Suite 1700, Houston, TX

77002

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (713) 490-8900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  þ    No  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  þ    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer þ

Non-accelerated filer   

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).   Yes      No  þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    þ  Yes           No

Securities Registered Pursuant to Section 12(b):

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

AMPY

NYSE

As of October 31, 2023, the registrant had 39,096,700 outstanding shares of common stock, $0.01 par value outstanding.

AMPLIFY ENERGY CORP.

TABLE OF CONTENTS

    

    

Page

Glossary of Oil and Natural Gas Terms

1

Names of Entities

4

Cautionary Note Regarding Forward-Looking Statements

5

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

8

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

8

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

9

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

10

Unaudited Condensed Consolidated Statements of Equity (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022

11

Notes to Unaudited Condensed Consolidated Financial Statements

12

Note 1 – Organization and Basis of Presentation

12

Note 2 – Summary of Significant Accounting Policies

12

Note 3 – Revenue

13

Note 4 – Fair Value Measurements of Financial Instruments

13

Note 5 – Risk Management and Derivative Instruments

15

Note 6 – Asset Retirement Obligations

17

Note 7 – Long-Term Debt

18

Note 8 – Equity

19

Note 9 – Earnings per Share

20

Note 10 – Long-Term Incentive Plans

20

Note 11 – Leases

22

Note 12 – Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows

24

Note 13 – Related Party Transactions

25

Note 14 – Commitments and Contingencies

25

Note 15 – Income Taxes

27

Note 16 – Southern California Pipeline Incident

28

Note 17 – Subsequent Event

31

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

45

Item 6.

Exhibits

47

Signatures

48

i

GLOSSARY OF OIL AND NATURAL GAS TERMS

Analogous Reservoir: Analogous reservoirs, as used in resource assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, analogous reservoir refers to a reservoir that shares all of the following characteristics with the reservoir of interest: (i) the same geological formation (but not necessarily in pressure communication with the reservoir of interest); (ii) the same environment of deposition; (iii) similar geologic structure; and (iv) the same drive mechanism.

Bbl: One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.

Bbl/d: One Bbl per day.

Bcfe: One billion cubic feet of natural gas equivalent.

Boe: One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.

BOEM: U.S. Bureau of Ocean Energy Management.

Btu: One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit.

CO2: Carbon dioxide.

Development Project: A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.

Dry Hole or Dry Well: A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production would exceed production expenses and taxes.

Economically Producible: The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. For this determination, the value of the products that generate revenue are determined at the terminal point of oil and natural gas producing activities.

Exploitation: A development or other project which may target proven or unproven reserves (such as probable or possible reserves), but which generally has a lower risk than that associated with exploration projects.

Field: An area consisting of a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Gross Acres or Gross Wells: The total acres or wells, as the case may be, in which we have a working interest.

ICE: Inter-Continental Exchange.

MBbl: One thousand Bbls.

MBbls/d: One thousand Bbls per day.

MBoe: One thousand barrels of oil equivalent.

1

MBoe/d: One thousand barrels of oil equivalent per day.

MMBoe: One million barrels of oil equivalent.

Mcf: One thousand cubic feet of natural gas.

Mcf/d: One Mcf per day.

MMBtu: One million Btu.

MMcf: One million cubic feet of natural gas.

MMcfe: One million cubic feet of natural gas equivalent.

MMcfe/d: One MMcfe per day.

Net Production: Production that is owned by us less royalties and production due to others.

NGLs: The combination of ethane, propane, butane and natural gasolines that, when removed from natural gas, become liquid under various levels of higher pressure and lower temperature.

NYMEX: New York Mercantile Exchange.

NYSE: New York Stock Exchange.

Oil: Oil and condensate.

Operator: The individual or company responsible for the exploration and/or production of an oil or natural gas well or lease.

OPIS: Oil Price Information Service.

Plugging and Abandonment: Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another stratum or to the surface. Regulations of all states require plugging of abandoned wells.

Probabilistic Estimate: The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence.

Proved Developed Reserves: Proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods.

Proved Reserves: Those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project, within a reasonable time. The area of the reservoir considered as proved includes (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or natural gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons, as seen in a well penetration, unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated natural gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves

2

which can be produced economically through application of improved recovery techniques (including fluid injection) are included in the proved classification when (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir, or an analogous reservoir or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price used is the average price during the twelve-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

Realized Price: The cash market price less all expected quality, transportation and demand adjustments.

Reliable Technology: Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

Reserves: Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

Reservoir: A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reserves.

Resources: Resources are quantities of oil and natural gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable and another portion may be considered unrecoverable. Resources include both discovered and undiscovered accumulations.

SEC: The U.S. Securities and Exchange Commission

Working Interest: An interest in an oil and natural gas lease that gives the owner of the interest the right to drill for and produce oil and natural gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations.

Workover: Operations on a producing well to restore or increase production.

WTI: West Texas Intermediate.

3

NAMES OF ENTITIES

As used in this Form 10-Q, unless indicated otherwise:

“Amplify Energy,” “Amplify,” “Company,” “we,” “our,” “us,” or like terms refers to Amplify Energy Corp. individually and collectively with its subsidiaries, as the context requires;
“Legacy Amplify” refers to Amplify Energy Holdings LLC (f/k/a Amplify Energy Corp.), the successor reporting company of Memorial Production Partners LP; and
“OLLC” refers to Amplify Energy Operating LLC, our wholly owned subsidiary through which we operate our properties.

4

CAUTIONARY NOTE REGARDING FORWARD–LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

business strategies;
ongoing impact of the oil incident that occurred off the coast of Southern California resulting from the Company’s pipeline operations (the “Pipeline”) at the Beta Field (the “Incident”);
acquisition and disposition strategy;
cash flows and liquidity;
financial strategy;
ability to replace the reserves we produce through drilling;
drilling locations;
oil and natural gas reserves;
technology;
realized oil, natural gas and NGL prices;
production volumes;
lease operating expense;
gathering, processing and transportation;
general and administrative expense;
future operating results;
ability to procure drilling and production equipment;
ability to procure oil field labor;
planned capital expenditures and the availability of capital resources to fund capital expenditures;
ability to access capital markets;
marketing of oil, natural gas and NGLs;
political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns;
acts of God, fires, earthquakes, storms, floods, other adverse weather conditions, war, acts of terrorism, cyber security breaches, military operations or national emergency;

5

the occurrence or threat of epidemic or pandemic diseases, such as the coronavirus (“COVID-19”) pandemic that began in 2020, or any government response to such occurrence or threat;
expectations regarding general economic conditions, including inflation;
competition in the oil and natural gas industry;
effectiveness of risk management activities;
environmental liabilities;
counterparty credit risk;
expectations regarding governmental regulation and taxation;
expectations regarding developments in oil-producing and natural-gas producing countries; and
plans, objectives, expectations and intentions.

All statements, other than statements of historical fact included in this report, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “outlook,” “continue,” the negative of such terms or other comparable terminology. These statements address activities, events or developments that we expect or anticipate will or may occur in the future, including things such as projections of results of operations, plans for growth, goals, future capital expenditures, competitive strengths, references to future intentions and other such references. These forward-looking statements involve risks and uncertainties. Important factors that could cause our actual results or financial condition to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following risks and uncertainties:

risks related to the Incident and the ongoing impact to the Company;
risks related to a redetermination of the borrowing base under our senior secured reserve-based revolving credit facility (prior to and after the New Credit Facility (as defined below), the “Revolving Credit Facility”);
our ability to access funds on acceptable terms, if at all, because of the terms and conditions governing our indebtedness, including financial covenants;
our ability to satisfy debt obligations;
volatility in the prices for oil, natural gas and NGLs;
the potential for additional impairments due to continuing or future declines in oil, natural gas and NGL prices;
the uncertainty inherent in estimating quantities of oil, natural gas and NGLs reserves;
our substantial future capital requirements, which may be subject to limited availability of financing;
the uncertainty inherent in the development and production of oil and natural gas;
our need to make accretive acquisitions or substantial capital expenditures to maintain our declining asset base;
the existence of unanticipated liabilities or problems relating to acquired or divested businesses or properties;

6

potential acquisitions, including our ability to make acquisitions on favorable terms or to integrate acquired properties;
the consequences of changes we have made, or may make from time to time in the future, to our capital expenditure budget, including the impact of those changes on our production levels, reserves, results of operations and liquidity;
potential shortages of, or increased costs for, drilling and production equipment and supply materials for production, such as CO2;
potential difficulties in the marketing of oil and natural gas;
changes to the financial condition of counterparties;
uncertainties surrounding the success of our secondary and tertiary recovery efforts;
competition in the oil and natural gas industry;
our results of evaluation and implementation of strategic alternatives;
general political and economic conditions, globally and in the jurisdictions in which we operate, including escalating tensions between Russia and Ukraine and the potential destabilizing effect such conflict may pose for the European continent or the global oil and natural gas markets;
the impact of climate change and natural disasters, such as earthquakes, tidal waves, mudslides, fires and floods;
the impact of local, state and federal governmental regulations, including those related to climate change and hydraulic fracturing;
the risk that our hedging strategy may be ineffective or may reduce our income;
the cost and availability of insurance as well as operating risks that may not be covered by an effective indemnity or insurance;
actions of third-party co-owners of interests in properties in which we also own an interest; and
other risks and uncertainties described in “Item 1A. Risk Factors.”

The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or that the events or circumstances described in any forward-looking statement will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described in “Part I—Item 1A. Risk Factors” of Amplify’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 9, 2023 (“2022 Form 10-K”). All forward-looking statements speak only as of the date of this report. The Company does not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to the Company or persons acting on its behalf.

7

PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except outstanding shares)

    

September 30, 

    

December 31, 

    

2023

2022

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

6,387

$

Accounts receivable, net (see Note 12)

 

47,864

 

80,455

Prepaid expenses and other current assets

 

24,003

 

18,789

Total current assets

 

78,254

 

99,244

Property and equipment, at cost:

 

  

 

  

Oil and natural gas properties, successful efforts method

 

866,051

 

840,310

Support equipment and facilities

 

149,227

 

147,496

Other

 

10,149

 

9,648

Accumulated depreciation, depletion and amortization

 

(678,531)

 

(658,162)

Property and equipment, net

 

346,896

 

339,292

Restricted investments

 

17,725

 

11,326

Operating lease - long term right-of-use asset

 

6,025

 

7,376

Deferred tax asset

264,130

Other long-term assets

 

4,075

 

2,240

Total assets

$

717,105

$

459,478

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

18,708

$

38,414

Revenues payable

 

21,199

 

22,105

Accrued liabilities (see Note 12)

 

55,354

 

58,449

Short-term derivative instruments

 

12,996

 

20,884

Total current liabilities

 

108,257

 

139,852

Long-term debt (see Note 7)

 

120,000

 

190,000

Asset retirement obligations

 

119,856

 

114,614

Long-term derivative instruments

 

7,834

 

Operating lease liability

 

5,414

 

6,567

Other long-term liabilities

 

9,707

 

13,010

Total liabilities

 

371,068

 

464,043

Commitments and contingencies (see Note 14)

 

  

 

  

Stockholders' equity (deficit):

 

  

 

  

Preferred stock, $0.01 par value: 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

Common stock, $0.01 par value: 250,000,000 shares authorized; 39,062,856 and 38,459,731 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

392

 

386

Additional paid-in capital

 

433,675

 

432,251

Accumulated deficit

 

(88,030)

 

(437,202)

Total stockholders' equity (deficit)

 

346,037

 

(4,565)

Total liabilities and equity

$

717,105

$

459,478

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

    

For the Three Months Ended

For the Nine Months Ended

    

September 30, 

September 30, 

    

2023

    

2022

2023

    

2022

Revenues:

 

  

 

  

  

 

  

Oil and natural gas sales

$

76,403

$

112,812

$

210,080

$

319,562

Other revenues

 

367

 

13,487

 

18,531

 

39,947

Total revenues

 

76,770

 

126,299

 

228,611

 

359,509

Costs and expenses:

 

  

 

  

 

  

 

  

Lease operating expense

 

37,083

 

32,048

 

104,946

 

98,253

Gathering, processing and transportation

 

4,984

 

7,483

 

15,735

 

22,774

Taxes other than income

 

4,942

 

9,152

 

15,440

 

25,328

Depreciation, depletion and amortization

 

7,489

 

6,296

 

20,369

 

17,795

General and administrative expense

 

8,255

 

6,965

 

24,547

 

23,364

Accretion of asset retirement obligations

 

2,005

 

1,773

 

5,922

 

5,242

Loss (gain) on commodity derivative instruments

 

23,328

 

(3,300)

 

4,371

 

108,675

Pipeline incident loss

559

2,606

15,682

8,278

Pipeline incident settlement

12,000

12,000

Other, net

 

449

 

93

 

728

 

534

Total costs and expenses

 

89,094

 

75,116

 

207,740

 

322,243

Operating income (loss)

 

(12,324)

 

51,183

 

20,871

 

37,266

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense, net

 

(4,470)

 

(3,974)

 

(13,908)

 

(9,499)

Litigation settlement (See Note 14)

84,875

Other income (expense)

124

25

319

73

Total other income (expense)

 

(4,346)

 

(3,949)

 

71,286

 

(9,426)

Income (loss) before income taxes

 

(16,670)

 

47,234

 

92,157

 

27,840

Income tax (expense) benefit - current

 

(1,441)

 

 

(7,115)

 

Income tax (expense) benefit - deferred

 

4,708

 

 

264,130

 

Net income (loss)

$

(13,403)

$

47,234

$

349,172

$

27,840

Allocation of net income (loss) to:

Net income (loss) available to common stockholders

$

(13,403)

$

44,962

$

333,401

$

26,530

Net income (loss) allocated to participating securities

 

 

2,272

 

15,771

 

1,310

Net income (loss) available to Amplify Energy Corp.

$

(13,403)

$

47,234

$

349,172

$

27,840

Earnings (loss) per share: (See Note 9)

 

  

 

  

 

  

 

  

Basic and diluted earnings (loss) per share

$

(0.34)

$

1.17

$

8.57

$

0.69

Weighted average common shares outstanding:

 

  

 

  

 

  

 

  

Basic and diluted

 

39,063

 

38,441

 

38,911

 

38,318

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

9

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

    

For the Nine Months Ended

    

September 30, 

    

2023

    

2022

Cash flows from operating activities:

 

  

 

  

Net income (loss)

$

349,172

$

27,840

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

Depreciation, depletion and amortization

 

20,369

 

17,795

Loss (gain) on derivative instruments

 

4,371

 

107,746

Cash settlements (paid) received on expired derivative instruments

 

(5,082)

 

(120,445)

Cash settlements received (paid) on terminated derivative instruments

658

Deferred income tax expense (benefit)

(264,130)

Accretion of asset retirement obligations

 

5,922

 

5,242

Share-based compensation (see Note 10)

 

3,608

 

2,224

Settlement of asset retirement obligations

 

(993)

 

(552)

Amortization and write-off of deferred financing costs

 

1,679

 

469

Bad debt expense

 

98

 

1

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

32,493

 

4,737

Prepaid expenses and other assets

 

(3,844)

 

(1,579)

Payables and accrued liabilities

 

(28,459)

 

3,526

Other

 

(2,634)

 

2,326

Net cash provided by operating activities

 

113,228

 

49,330

Cash flows from investing activities:

 

  

 

  

Additions to oil and gas properties

 

(23,065)

 

(26,193)

Additions to other property and equipment

 

(501)

 

(7)

Additions to restricted investments

 

(6,399)

 

(5,353)

Net cash used in investing activities

 

(29,965)

 

(31,553)

Cash flows from financing activities:

 

  

 

  

Advances on Revolving Credit Facility

 

125,000

 

5,000

Payments on Revolving Credit Facility

 

(195,000)

 

(30,000)

Deferred financing costs

 

(4,698)

 

(86)

Shares withheld for taxes

 

(2,178)

 

(546)

Net cash used in financing activities

 

(76,876)

 

(25,632)

Net change in cash and cash equivalents

 

6,387

 

(7,855)

Cash and cash equivalents, beginning of period

 

 

18,799

Cash and cash equivalents, end of period

$

6,387

$

10,944

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

10

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In thousands)

Stockholders' Equity

Additional

Accumulated

Common

Paid-in

Earnings

    

Stock

    

Capital

    

(Deficit)

    

Total

Balance at December 31, 2022

 

$

386

$

432,251

$

(437,202)

$

(4,565)

Net income (loss)

 

 

 

352,759

 

352,759

Share-based compensation expense

 

 

941

 

 

941

Shares withheld for taxes

 

 

(2,141)

 

 

(2,141)

Other

 

5

 

(5)

 

 

Balance at March 31, 2023

391

431,046

(84,443)

346,994

Net income (loss)

9,816

9,816

Share-based compensation expense

1,340

1,340

Shares withheld for taxes

(6)

(6)

Balance at June 30, 2023

$

391

$

432,380

$

(74,627)

$

358,144

Net income (loss)

 

 

 

(13,403)

 

(13,403)

Share-based compensation expense

 

 

1,327

 

 

1,327

Shares withheld for taxes

 

 

(31)

 

 

(31)

Other

1

(1)

Balance at September 30, 2023

 

$

392

 

$

433,675

 

$

(88,030)

 

$

346,037

Stockholders' Equity (Deficit)

Additional

Accumulated

Common

Paid-in

Earnings

    

Stock

    

Warrants (1)

    

Capital

    

(Deficit)

    

Total

Balance at December 31, 2021

 

$

382

 

$

4,788

 

$

425,066

 

$

(495,077)

 

$

(64,841)

Net income (loss)

 

 

 

 

(48,614)

 

(48,614)

Share-based compensation expense

 

 

 

518

 

 

518

Shares withheld for taxes

 

 

 

(66)

 

 

(66)

Other

 

2

 

 

(2)

 

 

Balance at March 31, 2022

 

384

 

4,788

 

425,516

 

(543,691)

 

(113,003)

Net income (loss)

 

 

 

29,220

 

29,220

Share-based compensation expense

 

 

856

 

 

856

Shares withheld for taxes

 

 

(464)

 

 

(464)

Expiration of warrants

(4,788)

4,788

Other

1

(1)

Balance at June 30, 2022

$

385

$

$

430,695

$

(514,471)

$

(83,391)

Net income (loss)

 

 

 

 

47,234

 

47,234

Share-based compensation expense

 

 

 

850

 

 

850

Shares withheld for taxes

(16)

(16)

Other

1

(1)

Balance at September 30, 2022

 

$

386

 

$

 

$

431,528

 

$

(467,237)

 

$

(35,323)

(1) The warrants expired on May 4, 2022.

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

11

Table of Contents

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

General

Amplify Energy Corp. (“Amplify Energy,” “Amplify,” “it” or the “Company”) is a publicly traded Delaware corporation whose common stock is listed on the NYSE under the symbol “AMPY.”

The Company is engaged in the acquisition, development, exploitation and production of oil and natural gas properties located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas/North Louisiana and the Eagle Ford. The Company’s properties consist primarily of operated and non-operated working interests in producing and undeveloped leasehold acreage and working interests in identified producing wells.

Basis of Presentation

The Company’s accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the Company’s opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for fair presentation. Material intercompany transactions and balances have been eliminated.

The results reported in these Unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results that may be expected for the entire year. Furthermore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. Accordingly, the accompanying Unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Company’s annual financial statements included in its 2022 Form 10-K.

Use of Estimates

The preparation of the accompanying Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates include, but are not limited to, oil and natural gas reserves; fair value estimates; revenue recognition; and contingencies and insurance accounting.

Note 2. Summary of Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies as described in the Company’s annual financial statements included in its 2022 Form 10-K.

New Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

12

Table of Contents

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Revenue

Revenue from Contracts with Customers

Revenue is recognized when the following five steps are completed: (1) identify the contract with the customer, (2) identify the performance obligation (promise) in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, (5) recognize revenue when the reporting organization satisfies a performance obligation.

The Company has determined that its contracts for the sale of crude oil, unprocessed natural gas, residue gas and NGLs contain monthly performance obligations to deliver product at locations specified in the contract. Control is transferred at the delivery location, at which point the performance obligation has been satisfied and revenue is recognized. Fees included in the contract that are incurred prior to control transfer are classified as gathering, processing and transportation, and fees incurred after control transfers are included as a reduction to the transaction price. The transaction price at which revenue is recognized consists entirely of variable consideration based on quoted market prices less various fees and the quantity of volumes delivered.

Disaggregation of Revenue

The Company has identified three material revenue streams in its business: oil, natural gas and NGLs. The following table presents the Company’s revenues disaggregated by revenue stream.

    

For the Three Months Ended

For the Nine Months Ended

    

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

    

(In thousands)

Revenues

 

  

 

  

  

 

  

Oil

$

57,214

$

54,394

$

146,780

$

165,686

NGLs

7,777

11,704

21,973

38,789

Natural gas

11,412

46,714

41,327

115,087

Oil and natural gas sales

$

76,403

$

112,812

$

210,080

$

319,562

Contract Balances

Under the Company’s sales contracts, the Company invoices customers once its performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to the Company’s revenue contracts with customers was $31.9 million at September 30, 2023 and $35.1 million at December 31, 2022.

Note 4. Fair Value Measurements of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. A three-tier hierarchy has been established that classifies fair value amounts recognized or disclosed in the financial statements. The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3). All the derivative instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets were considered Level 2.

13

Table of Contents

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The carrying values of accounts receivables, accounts payables (including accrued liabilities), restricted investments and amounts outstanding under long-term debt agreements with variable rates included in the accompanying Unaudited Condensed Consolidated Balance Sheets approximated fair value at September 30, 2023 and December 31, 2022. The fair value estimates are based upon observable market data and are classified within Level 2 of the fair value hierarchy. These assets and liabilities are not presented in the following tables.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair market values of the derivative financial instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 were based on estimated forward commodity prices. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement in its entirety. The significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following tables present the gross derivative assets and liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 for each of the fair value hierarchy levels:

    

Fair Value Measurements at September 30, 2023

Significant

Quoted Prices in

Significant Other

Unobservable

Active Market

Observable Inputs

 Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Fair Value

(In thousands)

Assets:

 

  

 

  

 

  

 

  

Commodity derivatives

$

$

21,729

$

$

21,729

Interest rate derivatives

 

 

 

 

Total assets

$

$

21,729

$

$

21,729

Liabilities:

 

  

 

  

 

  

 

  

Commodity derivatives

$

$

42,559

$

$

42,559

Interest rate derivatives

 

 

 

 

Total liabilities

$

$

42,559

$

$

42,559

    

Fair Value Measurements at December 31, 2022 

Significant

Quoted Prices in

Significant Other

Unobservable 

Active Market

Observable Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Fair Value

(In thousands)

Assets:

  

  

  

  

Commodity derivatives

$

$

6,257

$

$

6,257

Interest rate derivatives

 

 

 

 

Total assets

$

$

6,257

$

$

6,257

Liabilities:

 

  

 

  

 

  

 

  

Commodity derivatives

$

$

27,141

$

$

27,141

Interest rate derivatives