Amplify Energy Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS. AMPLIFY ENERGY CORP. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except outstanding shares) ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2021 ​ 2020 ASSETS ​ ​ Current assets: ​ ​ Cash ​ $ 17,344 ​ $ 10,364 Accounts receivable, net ​ 44,748 ​ 30,901 Prepaid expenses and other current assets ​ 10,740 ​ 15,572 Total current assets ​ 72,832 ​ 56,837 Property and equipment, at cost: ​ ​ Oil and natural gas properties, successful efforts method ​ 796,210 ​ 775,167 Support equipment and facilities ​ 144,925 ​ 142,208 Other ​ 9,617 ​ 9,102 Accumulated depreciation, depletion and amortization ​ ( 627,881 ) ​ ( 609,231 ) Property and equipment, net ​ 322,871 ​ 317,246 Long-term derivative instruments ​ — ​ 873 Restricted investments ​ 4,623 ​ 4,623 Operating lease - long term right-of-use asset ​ 3,379 ​ 2,500 Other long-term assets ​ 2,212 ​ 2,680 Total assets ​ $ 405,917 ​ $ 384,759 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND EQUITY ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 9,166 ​ $ 798 Revenues payable ​ 21,095 ​ 22,563 Accrued liabilities (see Note 12) ​ 28,238 ​ 22,677 Short-term derivative instruments ​ 83,599 ​ 10,824 Total current liabilities ​ 142,098 ​ 56,862 Long-term debt (see Note 7) ​ 230,000 ​ 260,516 Asset retirement obligations ​ 101,077 ​ 96,725 Long-term derivative instruments ​ 20,831 ​ 847 Operating lease liability ​ 2,132 ​ 266 Other long-term liabilities ​ 9,930 ​ 3,280 Total liabilities ​ 506,068 ​ 418,496 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, 2021 and December 31, 2020 ​ — ​ — Warrants, 2,173,913 warrants issued and outstanding at September 30, 2021 and December 31, 2020 ​ 4,788 ​ 4,788 Common stock, $ 0.01 par value: 250,000,000 shares authorized; 37,996,974 and 37,663,509 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ​ 380 ​ 378 Additional paid-in capital ​ 425,508 ​ 424,104 Accumulated deficit ​ ( 530,827 ) ​ ( 463,007 ) Total stockholders' deficit ​ ( 100,151 ) ​ ( 33,737 ) Total liabilities and equity ​ $ 405,917 ​ $ 384,759 ​ See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. ​ 8 Table of Contents 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, ​ ​ 2021 2020 ​ 2021 2020 ​ Revenues: ​ ​ ​ ​ ​ ​ Oil and natural gas sales ​ $ 96,841 ​ $ 52,488 ​ $ 249,510 ​ $ 145,163 ​ Other revenues ​ 160 ​ 257 ​ 353 ​ 889 ​ Total revenues ​ 97,001 ​ 52,745 ​ 249,863 ​ 146,052 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ Lease operating expense ​ 34,486 ​ 27,639 ​ 92,045 ​ 91,190 ​ Gathering, processing and transportation ​ 5,047 ​ 5,256 ​ 14,676 ​ 14,998 ​ Taxes other than income ​ 6,024 ​ 3,761 ​ 15,708 ​ 9,942 ​ Depreciation, depletion and amortization ​ 7,000 ​ 7,950 ​ 21,736 ​ 31,129 ​ Impairment expense ​ — ​ — ​ — ​ 455,031 ​ General and administrative expense ​ 6,448 ​ 6,443 ​ 19,399 ​ 21,551 ​ Accretion of asset retirement obligations ​ 1,665 ​ 1,565 ​ 4,918 ​ 4,617 ​ Loss (gain) on commodity derivative instruments ​ 46,653 ​ 14,352 ​ 145,139 ​ ( 74,196 ) ​ Other, net ​ 9 ​ 118 ​ 105 ​ 137 ​ Total costs and expenses ​ 107,332 ​ 67,084 ​ 313,726 ​ 554,399 ​ Operating loss ​ ( 10,331 ) ​ ( 14,339 ) ​ ( 63,863 ) ​ ( 408,347 ) ​ Other (expense) income: ​ ​ ​ ​ ​ Interest expense, net ​ ( 3,078 ) ​ ( 3,362 ) ​ ( 9,327 ) ​ ( 17,218 ) ​ Other expense ​ ​ ( 61 ) ​ ​ 196 ​ ​ ( 141 ) ​ ​ ( 38 ) ​ Gain on extinguishment of debt ​ — ​ — ​ 5,516 ​ — ​ Total other expense ​ ( 3,139 ) ​ ( 3,166 ) ​ ( 3,952 ) ​ ( 17,256 ) ​ Loss before reorganization items, net and income taxes ​ ( 13,470 ) ​ ( 17,505 ) ​ ( 67,815 ) ​ ( 425,603 ) ​ Reorganization items, net ​ — ​ ( 180 ) ​ ( 6 ) ​ ( 532 ) ​ Income tax expense ​ — ​ — ​ — ​ ( 85 ) ​ Net loss ​ $ ( 13,470 ) ​ $ ( 17,685 ) ​ $ ( 67,821 ) ​ $ ( 426,220 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per share: (See Note 9) ​ ​ ​ ​ ​ Basic and diluted earnings (loss) per share ​ $ ( 0.35 ) ​ $ ( 0.47 ) ​ $ ( 1.79 ) ​ $ ( 11.34 ) ​ Weighted average common shares outstanding: ​ ​ ​ ​ ​ Basic and diluted ​ 37,996 ​ 37,626 ​ 37,937 ​ 37,596 ​ ​ See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. ​ 9 Table of Contents AMPLIFY ENERGY CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, ​ 2021 2020 Cash flows from operating activities: ​ ​ Net loss ​ $ ( 67,821 ) ​ $ ( 426,220 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: ​ ​ ​ ​ Depreciation, depletion and amortization ​ 21,736 ​ 31,129 Impairment expense ​ — ​ 455,031 Loss (gain) on derivative instruments ​ 145,142 ​ ( 70,162 ) Cash settlements (paid) received on expired derivative instruments ​ ( 51,512 ) ​ 53,076 Cash settlements received on terminated derivative instruments ​ — ​ 17,977 Bad debt expense ​ 108 ​ 470 Amortization and write-off of deferred financing costs ​ 493 ​ 3,134 Gain on extinguishment of debt ​ ​ ( 5,516 ) ​ ​ — Accretion of asset retirement obligations ​ 4,918 ​ 4,617 Share-based compensation (see Note 10) ​ 1,436 ​ ( 161 ) Settlement of asset retirement obligations ​ ( 162 ) ​ ( 199 ) Changes in operating assets and liabilities: ​ ​ Accounts receivable ​ ( 13,965 ) ​ 5,769 Prepaid expenses and other assets ​ 4,832 ​ 1,080 Payables and accrued liabilities ​ 16,127 ​ ( 11,467 ) Other ​ ( 529 ) ​ ( 476 ) Net cash provided by operating activities ​ 55,287 ​ 63,598 Cash flows from investing activities: ​ ​ Additions to oil and gas properties ​ ( 23,142 ) ​ ( 31,234 ) Additions to other property and equipment ​ ( 515 ) ​ ( 828 ) Other ​ 404 ​ — Net cash used in investing activities ​ ( 23,253 ) ​ ( 32,062 ) Cash flows from financing activities: ​ ​ Advances on revolving credit facility ​ — ​ 25,000 Payments on revolving credit facility ​ ( 25,000 ) ​ ( 45,000 ) Proceeds from the paycheck protection program ​ — ​ 5,516 Deferred financing costs ​ ( 25 ) ​ ( 65 ) Dividends to stockholders ​ — ​ ( 3,786 ) Shares withheld for taxes ​ ( 29 ) ​ ( 40 ) Other ​ — ​ 35 Net cash used in financing activities ​ ( 25,054 ) ​ ( 18,340 ) Net change in cash, cash equivalents and restricted cash ​ 6,980 ​ 13,196 Cash, cash equivalents and restricted cash, beginning of period ​ 10,364 ​ 325 Cash, cash equivalents and restricted cash, end of period ​ $ 17,344 ​ $ 13,521 ​ See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. ​ 10 Table of Contents AMPLIFY ENERGY CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' Equity (Deficit) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ Common ​ ​ ​ ​ Paid-in ​ Accumulated ​ ​ ​ ​ ​ Stock Warrants Capital Deficit Total Balance at December 31, 2020 $ 378 $ 4,788 $ 424,104 $ ( 463,007 ) $ ( 33,737 ) ​ Net loss ​ — ​ — ​ — ​ ( 19,328 ) ​ ( 19,328 ) ​ Share-based compensation expense ​ — ​ — ​ ( 204 ) ​ — ​ ( 204 ) ​ Shares withheld for taxes ​ — ​ — ​ ( 5 ) ​ — ​ ( 5 ) ​ Other ​ 3 ​ — ​ ( 3 ) ​ — ​ — ​ Balance at March 31, 2021 ​ 381 ​ 4,788 ​ 423,892 ​ ( 482,335 ) ​ ( 53,274 ) ​ Net loss ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 35,023 ) ​ ​ ( 35,023 ) ​ Share-based compensation expense ​ ​ — ​ ​ — ​ ​ 934 ​ ​ — ​ ​ 934 ​ Shares withheld for taxes ​ ​ — ​ ​ — ​ ​ ( 12 ) ​ ​ — ​ ​ ( 12 ) ​ Balance at June 30, 2021 ​ 381 ​ 4,788 ​ 424,814 ​ ( 517,358 ) ​ ( 87,375 ) ​ Net loss ​ — ​ — ​ — ​ ( 13,470 ) ​ ( 13,470 ) ​ Share-based compensation expense ​ — ​ — ​ 707 ​ — ​ 707 ​ Shares withheld for taxes ​ — ​ — ​ ( 13 ) ​ — ​ ( 13 ) ​ Balance at September 30, 2021 $ 381 $ 4,788 $ 425,508 $ ( 530,828 ) $ ( 100,151 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' Equity (Deficit) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Accumulated ​ ​ ​ ​ Common ​ ​ ​ ​ Paid-in ​ Earnings ​ ​ ​ ​ Stock Warrants Capital (Deficit) Total Balance at December 31, 2019 $ 209 $ 4,790 $ 424,399 $ 4,809 $ 434,207 Net loss ​ — ​ — ​ — ​ ( 367,199 ) ​ ( 367,199 ) Share-based compensation expense ​ — ​ — ​ ( 1,112 ) ​ — ​ ( 1,112 ) Shares withheld for taxes ​ — ​ — ​ ( 14 ) ​ — ​ ( 14 ) Dividends ​ — ​ — ​ — ​ ( 3,786 ) ​ ( 3,786 ) Balance at March 31, 2020 ​ 209 ​ 4,790 ​ 423,273 ​ ( 366,176 ) ​ 62,096 Net loss ​ ​ — ​ — ​ — ​ ( 41,336 ) ​ ( 41,336 ) Share-based compensation expense ​ ​ — ​ — ​ 480 ​ — ​ 480 Expiration of warrants ​ ​ — ​ ​ ( 2 ) ​ ​ 2 ​ ​ — ​ ​ — Shares withheld for taxes ​ ​ — ​ — ​ ( 20 ) ​ — ​ ( 20 ) Other ​ ​ — ​ ​ — ​ ​ 35 ​ ​ — ​ ​ 35 Balance at June 30, 2020 ​ 209 ​ 4,788 ​ 423,770 ​ ( 407,512 ) ​ 21,255 Net loss ​ — ​ — ​ — ​ ( 17,685 ) ​ ( 17,685 ) Share-based compensation expense ​ — ​ — ​ 471 ​ — ​ 471 Shares withheld for taxes ​ ​ — ​ ​ — ​ ​ ( 5 ) ​ ​ — ​ ​ ( 5 ) Balance at September 30, 2020 $ 209 $ 4,788 $ 424,236 $ ( 425,197 ) $ 4,036 ​ 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,” or the “Company”), is a publicly traded Delaware corporation, in which our common stock is listed on the NYSE under the symbol “AMPY.” We operate in one reportable segment engaged in the acquisition, development, exploitation and production of oil and natural gas properties. Our management evaluates performance based on one reportable business segment as the economic environments are not different within the operation of our oil and natural gas properties. Our assets consist primarily of producing oil and natural gas properties and are located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas / North Louisiana and the Eagle Ford. Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs. 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 Our Unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and guidelines of the SEC. The results reported in these Unaudited Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for fair presentation. Although we believe the disclosures in these financial statements are adequate, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC. Material intercompany transactions and balances have been eliminated in preparation of our consolidated financial statements. 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; depreciation, depletion and amortization of proved oil and natural gas properties; future cash flows from oil and natural gas properties; impairment of long-lived assets; fair value of derivatives; fair value of equity compensation; fair values of assets acquired and liabilities assumed in business combinations and asset retirement obligations. 12 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Market Conditions and COVID-19 In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic. The nature of COVID-19 led to worldwide shutdowns, reductions in commercial and interpersonal activity and changes in consumer behavior. In attempting to control the spread of COVID-19, governments around the world imposed laws and regulations such as shelter-in-place orders, quarantines, executive orders and similar restrictions. As a result, the global economy had been marked by significant slowdown and uncertainty, which in turn led to a precipitous decline in commodity prices in response to decreased demand, further exacerbated by global energy storage shortages and by the price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) beginning in the first quarter of 2020. As of the first quarter of 2021, commodity prices have recovered to pre-pandemic levels, due in part to the accessibility of vaccines, reopening of economies after the lockdown, and optimism about the economic recovery. The continued spread of COVID-19, including vaccine resistant strains, or repeated deterioration in oil and natural gas prices could result in additional adverse impacts on the Company’s results of operations, cash flows and financial position, including further asset impairments. COVID-19 Relief Funding Paycheck Protection Program . On June 22, 2021, KeyBank National Association (“KeyBank”) notified the Company that the loan under the Paycheck Protection Program (the “PPP Loan”) had been approved for full and complete forgiveness by the Small Business Association. For the nine months ended September 30, 2021, the Company reported a gain on extinguishment of debt for $ 5.5 million for the PPP Loan forgiveness in the Unaudited Condensed Consolidated Statements of Operations. See Note 7 for additional information. Employee Retention Credit. The Consolidated Appropriations Act extended and expanded the availability of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) employee retention credit through September 30, 2021. Subsequently, the American Rescue Plan Act of 2021 (the “ARP Act”), enacted on March 11, 2021, extended and expanded the availability of the employee retention credit through December 31, 2021, however, certain provisions applied only after December 31, 2020. This new legislation expanded the group of qualifying businesses to include businesses with fewer than 500 employees and those who previously qualified for the PPP Loan. The employee retention credit is calculated to be equal to 70 % of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $ 10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70 % credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $ 7,000 per employee per qualifying calendar quarter of 2021. The Company has determined that the qualifications for the credit were met in the first and second quarters of 2021. The Company recognized a $ 2.8 million employee retention credit during the nine months ended September 30, 2021, which included an approximate $ 0.8 million credit to general and administrative expense and an approximate $ 2.0 million credit to lease operating expense in the Unaudited Condensed Consolidated Statements of Operations. ​ Note 2. Summary of Significant Accounting Policies There have been no changes to the Company’s significant accounting policies and estimates as described in the Company’s annual financial statements included in our 2020 Form 10-K. New Accounting Pronouncements Reference Rate Reform. In March 2020, the Financial Accounting Standard Board (the “FASB”) issued an accounting standard update which provides optional expedients and expectations for applying GAAP to contracts, hedging relationships and other transactions to ease financial reporting burdens to the expected market transition from the London Interbank Offered Rate (“LIBOR”) or another reference rate to alternative reference rates. The amendments in this accounting standards update became effective on March 12, 2020, and an entity may elect to apply the amendments prospectively through December 31, 2022. The Company notes no material impact with applying this guidance. 13 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Income Taxes – Simplifying the Accounting for Income Taxes . In December 2019, the FASB issued an accounting standard update which simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This accounting standards update removed the following exceptions: (i) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (ii) exception to the requirements to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (iii) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (iv) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in the accounting standards update also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The guidance became effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company adopted the guidance effective January 1, 2021, with all of the anticipated and applicable effects to be required on a prospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements. Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows. ​ Note 3. Revenue Revenue from Contracts with Customers 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. Oil and natural gas revenues are recorded using the sales method. Under this method, revenues are recognized based on actual volumes of oil and natural gas sold to purchasers, regardless of whether the sales are proportionate to our ownership in the property. An asset or a liability is recognized to the extent there is an imbalance in excess of the proportionate share of the remaining recoverable reserves on the underlying properties. No significant imbalances existed at September 30, 2021. Disaggregation of Revenue We have identified three material revenue streams in our business: oil, natural gas and NGLs. The following table presents our revenues disaggregated by revenue stream. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 2021 2020 ​ ​ (in thousands) ​ Revenues ​ ​ ​ ​ ​ ​ Oil ​ $ 63,172 ​ $ 36,868 ​ $ 169,377 ​ $ 101,682 ​ NGLs ​ ​ 11,839 ​ ​ 5,537 ​ ​ 28,386 ​ ​ 14,002 ​ Natural gas ​ ​ 21,830 ​ ​ 10,083 ​ ​ 51,747 ​ ​ 29,479 ​ Oil and natural gas sales ​ $ 96,841 ​ $ 52,488 ​ $ 249,510 ​ $ 145,163 ​ ​ 14 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Contract Balances Under our sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to our revenue contracts with customers was $ 40.4 million at September 30, 2021 and $ 25.6 million at December 31, 2020. ​ 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. 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, 2021 and December 31, 2020. 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, 2021 and December 31, 2020 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, 2021 and December 31, 2020 for each of the fair value hierarchy levels: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at September 30, 2021 Using ​ ​ ​ ​ ​ ​ 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 ​ $ — ​ $ 5,913 ​ $ — ​ $ 5,913 Interest rate derivatives ​ — ​ — ​ — ​ — Total assets ​ $ — ​ $ 5,913 ​ $ — ​ $ 5,913 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ Commodity derivatives ​ $ — ​ $ 109,013 ​ $ — ​ $ 109,013 Interest rate derivatives ​ — ​ 1,330 ​ — ​ 1,330 Total liabilities ​ $ — ​ $ 110,343 ​ $ — ​ $ 110,343 ​ 15 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2020 Using ​ ​ ​ ​ ​ ​ 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 ​ $ — ​ $ 15,449 ​ $ — ​ $ 15,449 Interest rate derivatives ​ — ​ — ​ — ​ — Total assets ​ $ — ​ $ 15,449 ​ $ — ​ $ 15,449 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ Commodity derivatives ​ $ — ​ $ 23,495 ​ $ — ​ $ 23,495 Interest rate derivatives ​ — ​ 2,752 ​ — ​ 2,752 Total liabilities ​ $ — ​ $ 26,247 ​ $ — ​ $ 26,247 ​ See Note 5 for additional information regarding our derivative instruments. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are reported at fair value on a nonrecurring basis as reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets. The following methods and assumptions are used to estimate the fair values: ● The fair value of asset retirement obligations (“AROs”) is based on discounted cash flow projections using numerous estimates, assumptions and judgments regarding factors such as the existence of a legal obligation for an ARO; amounts and timing of settlements; the credit-adjusted risk-free rate; and inflation rates. The initial fair value estimates are based on unobservable market data and are classified within Level 3 of the fair value hierarchy. See Note 6 for a summary of changes in AROs. ● Proved oil and natural gas properties are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying value of such properties. The Company uses an income approach based on the discounted cash flow method, whereby the present value of expected future net cash flows is discounted by applying an appropriate discount rate, for purposes of placing a fair value on the assets. The future cash flows are based on management’s estimates for the future. The unobservable inputs used to determine fair value include, but are not limited to, estimates of proved reserves, estimates of probable reserves, future commodity prices, the timing of future production and capital expenditures and a discount rate commensurate with the risk reflective of the lives remaining for the respective oil and natural gas properties (some of which are Level 3 inputs within the fair value hierarchy). ● No impairment expense recorded on proved oil and natural gas properties during the three and nine months ended September 30, 2021. ● For the nine months ended September 30, 2020, we recognized $ 405.7 million of impairment expense on our proved oil and natural gas properties. These impairments related to certain properties located in East Texas, the Rockies and offshore Southern California. The estimated future cash flows expected from these properties were compared to their carrying values and determined to be unrecoverable primarily as a result of declining commodity prices. The impairments were due to a decline in the value of estimated proved reserves based on declining commodity prices in 2020. ● Unproved oil and natural gas properties are reviewed for impairment based on time or geological factors. Information such as drilling results, reservoir performance, seismic interpretation or future plans to develop acreage is also considered. 16 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ● No impairment expense recorded on unproved oil and natural gas properties during the three and nine months ended September 30, 2021. ● We recognized $ 49.3 million of impairment expense on unproved properties for the nine months ended September 30, 2020, which was related to expiring leases and the evaluation of qualitative and quantitative factors related to the decline in commodity prices in 2020. ​ Note 5. Risk Management and Derivative Instruments Derivative instruments are utilized to manage exposure to commodity price fluctuations and achieve a more predictable cash flow in connection with natural gas and oil sales from production and borrowing related activities. These instruments limit exposure to declines in prices, but also limit the benefits that would be realized if prices increase. Certain inherent business risks are associated with commodity derivative contracts, including market risk and credit risk. Market risk is the risk that the price of natural gas or oil will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from nonperformance by the counterparty to a contract. It is our policy to enter into derivative contracts only with creditworthy counterparties, which generally are financial institutions, deemed by management as competent and competitive market makers. Some of the lenders, or certain of their affiliates, under our current credit agreements are counterparties to our derivative contracts. While collateral is generally not required to be posted by counterparties, credit risk associated with derivative instruments is minimized by limiting exposure to any single counterparty and entering into derivative instruments only with creditworthy counterparties that are generally large financial institutions. Additionally, master netting agreements are used to mitigate risk of loss due to default with counterparties on derivative instruments. We have also entered into International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) with each of our counterparties. The terms of the ISDA Agreements provide us and each of our counterparties with rights of set-off upon the occurrence of defined acts of default by either us or our counterparty to a derivative, whereby the party not in default may set-off all liabilities owed to the defaulting party against all net derivative asset receivables from the defaulting party. See Note 7 for additional information regarding our Revolving Credit Facility. Commodity Derivatives We may use a combination of commodity derivatives (e.g., floating-for-fixed swaps, put options, costless collars and three-way collars) to manage exposure to commodity price volatility. We recognize all derivative instruments at fair value. We enter into natural gas derivative contracts that are indexed to NYMEX-Henry Hub. We also enter into oil derivative contracts indexed to NYMEX-WTI. Our NGL derivative contracts are primarily indexed to OPIS Mont Belvieu. In April 2020, the Company monetized a portion of its 2021 crude oil hedges for total cash proceeds of approximately $ 18.0 million. 17 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At September 30, 2021, we had the following open commodity positions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ ​ 2021 ​ 2022 2023 Natural Gas Derivative Contracts: ​ ​ ​ ​ Fixed price swap contracts: ​ ​ ​ ​ Average monthly volume (MMBtu) ​ 970,000 ​ ​ 695,000 ​ — Weighted-average fixed price ​ $ 2.49 ​ $ 2.56 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collar contracts: ​ ​ ​ ​ ​ ​ Two-way collars ​ ​ ​ ​ ​ ​ Average monthly volume (MMBtu) ​ 830,000 ​ 775,000 ​ 270,000 Weighted-average floor price ​ $ 2.06 ​ $ 2.56 ​ $ 2.50 Weighted-average ceiling price ​ $ 3.28 ​ $ 3.44 ​ $ 3.28 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Natural Gas Basis Swaps: ​ ​ ​ ​ ​ ​ PEPL basis swaps: ​ ​ ​ ​ ​ ​ Average monthly volume (MMBtu) ​ 500,000 ​ — ​ — Weighted-average spread ​ $ ( 0.40 ) ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Crude Oil Derivative Contracts: ​ ​ ​ ​ ​ ​ Fixed price swap contracts: ​ ​ ​ ​ ​ ​ Average monthly volume (Bbls) ​ 172,500 ​ 99,000 ​ 55,000 Weighted-average fixed price ​ $ 49.37 ​ $ 55.68 ​ $ 57.30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collar contracts: ​ ​ ​ Two-way collars ​ ​ ​ ​ ​ ​ ​ ​ ​ Average monthly volume (Bbls) ​ ​ — ​ ​ 22,500 ​ ​ — Weighted-average floor price ​ $ — ​ $ 58.33 ​ $ — Weighted-average ceiling price ​ $ — ​ $ 67.42 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three-way collars ​ ​ ​ ​ ​ ​ Average monthly volume (Bbls) ​ 72,500 ​ 89,000 ​ 30,000 Weighted-average ceiling price ​ $ 50.36 ​ $ 55.55 ​ $ 67.15 Weighted-average floor price ​ $ 40.00 ​ $ 42.92 ​ $ 55.00 Weighted-average sub-floor price ​ $ 30.00 ​ $ 32.58 ​ $ 40.00 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NGL Derivative Contracts: ​ ​ ​ ​ ​ ​ Fixed price swap contracts: ​ ​ ​ ​ ​ ​ Average monthly volume (Bbls) ​ 20,300 ​ — ​ — Weighted-average fixed price ​ $ 23.74 ​ $ — ​ $ — ​ 18 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Interest Rate Swaps Periodically, we enter into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates such as those in our Credit Agreement to fixed interest rates. At September 30, 2021, we had the following interest rate swap open positions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ 2021 2022 ​ Average Monthly Notional (in thousands) ​ $ 125,000 ​ $ 75,000 ​ Weighted-average fixed rate ​ 1.612 % 1.281 % Floating rate ​ 1 Month LIBOR ​ 1 Month LIBOR ​ ​ Balance Sheet Presentation The following table summarizes both: (i) the gross fair value of derivative instruments by the appropriate balance sheet classification even when the derivative instruments are subject to netting arrangements and qualify for net presentation in the balance sheet and (ii) the net recorded fair value as reflected on the balance sheet at September 30, 2021 and December 31, 2020. There was no cash collateral received or pledged associated with our derivative instruments since most of the counterparties, or certain of their affiliates, to our derivative contracts are lenders under our Revolving Credit Facility. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liability ​ ​ Liability ​ ​ ​ ​ Asset Derivatives ​ Derivatives ​ Asset Derivatives ​ Derivatives ​ ​ ​ ​ September 30, ​ September 30, ​ December 31, ​ December 31, Type Balance Sheet Location 2021 2021 2020 2020 ​ ​ ​ ​ (In thousands) Commodity contracts Short-term derivative instruments ​ $ 1,952 ​ $ 84,412 ​ $ 6,088 ​ $ 15,007 Interest rate swaps Short-term derivative instruments ​ — ​ 1,139 ​ — ​ 1,905 Gross fair value ​ ​ 1,952 ​ 85,551 ​ 6,088 ​ 16,912 Netting arrangements ​ ​ ( 1,952 ) ​ ( 1,952 ) ​ ( 6,088 ) ​ ( 6,088 ) Net recorded fair value Short-term derivative instruments ​ $ — ​ $ 83,599 ​ $ — ​ $ 10,824 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commodity contracts Long-term derivative instruments ​ $ 3,961 ​ $ 24,601 ​ $ 9,361 ​ $ 8,488 Interest rate swaps Long-term derivative instruments ​ — ​ 191 ​ — ​ 847 Gross fair value ​ ​ 3,961 ​ 24,792 ​ 9,361 ​ 9,335 Netting arrangements ​ ​ ( 3,961 ) ​ ( 3,961 ) ​ ( 8,488 ) ​ ( 8,488 ) Net recorded fair value Long-term derivative instruments ​ $ — ​ $ 20,831 ​ $ 873 ​ $ 847 ​ Loss (Gain) on Derivative Instruments We do not designate derivative instruments as hedging instruments for accounting and financial reporting purposes. Accordingly, all gains and losses, including changes in the derivative instruments’ fair values, have been recorded in the accompanying Unaudited Condensed Consolidated Statements of Operations. The following table details the gains and losses related to derivative instruments for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ ​ Statements of September 30, September 30, ​ ​ Operations Location ​ 2021 2020 ​ 2021 2020 ​ Commodity derivative contracts Loss (gain) on commodity derivatives ​ $ 46,653 ​ $ 14,352 ​ $ 145,139 ​ $ ( 74,196 ) ​ Loss (gain) on interest rate derivatives Interest expense, net ​ 47 ​ ( 20 ) ​ 3 ​ 4,034 ​ ​ ​ 19 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 6. Asset Retirement Obligations The Company’s asset retirement obligations primarily relate to the Company’s portion of future plugging and abandonment costs for wells and related facilities. The following table presents the changes in the asset retirement obligations for the nine months ended September 30, 2021 (in thousands): ​ ​ ​ ​ ​ Asset retirement obligations at beginning of period ​ $ 97,149 Liabilities added from acquisition or drilling ​ 29 Liabilities settled ​ ( 162 ) Liabilities removed upon sale of wells ​ ( 113 ) Accretion expense ​ 4,918 Revision of estimates ​ 3 Asset retirement obligation at end of period ​ 101,824 Less: Current portion ​ ( 747 ) Asset retirement obligations - long-term portion ​ $ 101,077 ​ ​ Note 7. Long-Term Debt The following table presents our consolidated debt obligations at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2021 ​ 2020 ​ ​ (In thousands) Revolving Credit Facility (1) ​ $ 230,000 ​ $ 255,000 Paycheck Protection Program loan (2) ​ — ​ 5,516 Total long-term debt ​ $ 230,000 ​ $ 260,516 (1) The carrying amount of our Revolving Credit Facility approximates fair value because the interest rates are variable and reflective of market rates. (2) See below for additional information regarding the receipt and forgiveness of the paycheck protection program loan . Revolving Credit Facility Amplify Energy Operating LLC, our wholly owned subsidiary (“OLLC”), is a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $ 245.0 million as of September 30, 2021, which is guaranteed by us and all of our current subsidiaries. The Revolving Credit Facility matures on November 2, 2023 . Our borrowing base under our Revolving Credit Facility is subject to redetermination on at least a semi-annual basis primarily based on a reserve engineering report. On June 16, 2021, the Company completed its scheduled semi-annual borrowing base redetermination process, pursuant to which the borrowing base under the Revolving Credit Facility was decreased from $ 260.0 million to $ 245.0 million. In addition to the redetermination, the administrative agent under the Revolving Credit Facility agreement was changed from Bank of Montreal to KeyBank. As of September 30, 2021, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with our Revolving Credit Facility. On November 10, 2021, the Company completed its scheduled semi-annual borrowing base redetermination process, pursuant to which the borrowing base under the Revolving Credit Facility was reaffirmed at $ 245.0 million; provided that, beginning on February 28, 2022, the borrowing base will be reduced by $ 5.0 million per month on the last calendar day of each month until the next regularly scheduled redetermination, which is expected to occur in April 2022. 20 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Weighted-Average Interest Rates The following table presents the weighted-average interest rates paid, excluding commitment fees, on our consolidated variable-rate debt obligations for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 ​ Revolving Credit Facility ​ 3.64 % 3.72 % 3.65 % 3.61 % ​ ​ Letters of Credit At September 30, 2021, we had no letters of credit outstanding. Unamortized Deferred Financing Costs Unamortized deferred financing costs associated with our Revolving Credit Facility was $ 1.1 million at September 30, 2021. Paycheck Protection Program On April 24, 2020, the Company received a $ 5.5 million PPP Loan. The PPP Loan was established as part of the CARES Act to provide loans to qualifying businesses. The PPP Loan was not part of the Revolving Credit Facility as described above. The loan and accrued interest were potentially forgivable provided that the borrower uses the loan proceeds for eligible purposes. The term of the Company’s PPP Loan was two years with an annual interest rate of 1 % and no payments of principal or interest due during the six-month period beginning on the date of the PPP Loan. The Company applied for forgiveness of the amount due on the PPP Loan based on spending the loan proceeds on eligible expenses as defined by the statute. On June 22, 2021, KeyBank notified the Company that the PPP Loan had been approved for full and complete forgiveness by the Small Business Association. For the nine months ended September 30, 2021, the company reported a gain on extinguishment of debt of $ 5.5 million for the PPP Loan forgiveness in the Unaudited Condensed Consolidated Statements of Operations. ​ Note 8. Equity (Deficit) Common Stock The Company’s authorized capital stock includes 250,000,000 shares of common stock, $ 0.01 par value per share. The following is a summary of the changes in our common stock issued for the nine months ended September 30, 2021: ​ ​ ​ ​ ​ Common Stock Balance, December 31, 2020 37,663,509 Restricted stock units vested 42,534 Bonus stock awards (1) ​ 455,973 Shares withheld for taxes (2) ​ ( 165,042 ) Balance, September 30, 2021 37,996,974 (1) Reflects shares granted to certain executive officers and employees pursuant to our annual incentive bonus program. Shares were granted on February 12, 2021 at a grant price of $ 2.48 per share. (2) Represents the net settlement on vesting of restricted stock necessary to satisfy the minimum statutory tax withholding requirements. 21 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Warrants On May 4, 2017, Legacy Amplify entered into a warrant agreement with American Stock Transfer & Trust Company, LLC, as warrant agent, pursuant to which Legacy Amplify issued warrants to purchase up to 2,173,913 shares of Legacy Amplify’s common stock, exercisable for a five-year period commencing on May 4, 2017 at an exercise price of $ 42.60 per share. Cash Dividend Payment On March 3, 2020 , our board of directors approved a dividend of $ 0.10 per share of outstanding common stock or $ 3.8 million in aggregate, which was paid on March 30, 2020, to stockholders of record at the close of business on March 16, 2020 . The board of directors subsequently suspended quarterly dividends. Future dividends, if any, are subject to debt covenants under our Revolving Credit Facility and discretionary approval by the board of directors. ​ Note 9. Earnings per Share The following sets forth the calculation of earnings (loss) per share, or EPS, for the periods indicated (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 ​ Net loss ​ $ ( 13,470 ) ​ $ ( 17,685 ) ​ $ ( 67,821 ) ​ $ ( 426,220 ) ​ Less: Net income allocated to participating restricted stockholders ​ — ​ — ​ — ​ — ​ Basic and diluted earnings available to common stockholders ​ $ ( 13,470 ) ​ $ ( 17,685 ) ​ $ ( 67,821 ) ​ $ ( 426,220 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common shares: ​ ​ ​ ​ ​ Common shares outstanding — basic ​ 37,996 ​ 37,626 ​ 37,937 ​ 37,596 ​ Dilutive effect of potential common shares ​ — ​ — ​ — ​ — ​ Common shares outstanding — diluted ​ 37,996 ​ 37,626 ​ 37,937 ​ 37,596 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net earnings (loss) per share: ​ ​ ​ ​ ​ Basic ​ $ ( 0.35 ) ​ $ ( 0.47 ) ​ $ ( 1.79 ) ​ $ ( 11.34 ) ​ Diluted ​ $ ( 0.35 ) ​ $ ( 0.47 ) ​ $ ( 1.79 ) ​ $ ( 11.34 ) ​ Antidilutive warrants (1) ​ 2,174 ​ 2,174 ​ 2,174 ​ 2,174 ​ (1) Amount represents warrants to purchase common stock that are excluded from the diluted net earnings per share calculations because of their antidilutive effect . ​ Note 10. Long-Term Incentive Plans In May 2021, the shareholders approved a new Equity Incentive Plan (“EIP”) in which the Legacy Amplify Management Incentive Plan (the “Legacy Amplify MIP”) and the Legacy Amplify 2017 Non-Employee Directors Compensation Plan (the “Legacy Amplify Non-Employee Directors Compensation Plan”) were replaced by the EIP and no further awards will be allowed to be granted under the Legacy Amplify MIP or the Legacy Amplify Non-Employee Directors Compensation Plan. As of September 30, 2021, an aggregate of 2,674,808 shares were available for future grants under the EIP. 22 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Restricted Stock Units Restricted Stock Units with Service Vesting Condition The restricted stock units with service vesting conditions (“TSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur. Compensation costs are recorded as general and administrative expense. The unrecognized cost associated with the TSUs was $ 3.0 million at September 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.2 years. The following table summarizes information regarding the TSUs granted under the Legacy Amplify MIP for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ ​ Number of ​ Date Fair Value ​ ​ Units ​ per Unit (1) TSUs outstanding at December 31, 2020 115,797 ​ $ 4.47 Granted (2) 1,065,481 ​ $ 3.63 Forfeited ( 13,822 ) ​ $ 4.33 Vested ( 36,969 ) ​ $ 4.37 TSUs outstanding at September 30, 2021 1,130,487 ​ $ 3.68 (1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued. (2) The aggregate grant-date fair value of TSUs issued for the nine months ended September 30, 2021 was $ 3.9 million based on a grant date market price ranging from $ 3.52 to $ 4.12 per share. Restricted Stock Units with Market and Service Vesting Conditions The restricted stock units with market and service vesting conditions (“PSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a graded-vesting basis. As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. The Company accounts for forfeitures as they occur. Compensation costs are recorded as general and administrative expense. The unrecognized cost related to the PSUs was less than $ 0.1 million at September 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 1.3 years. The PSUs will vest based on the satisfaction of service and market vesting conditions with market vesting based on the Company’s achievement of certain share price targets. The PSUs are subject to service-based vesting such that 50 % of the PSUs service vest on the applicable market vesting date and an additional 25 % of the PSUs service vest on each of the first and second anniversaries of the applicable market vesting date. In the event of a qualifying termination, subject to certain conditions, (i) all PSUs that have satisfied the market vesting conditions will fully service vest, upon such termination, and (ii) if the termination occurs between the second and third anniversaries of the grant date, then PSUs that have not market vested as of the termination will market vest to the extent that the share targets (in each case, reduced by $ 0.25 ) are achieved as of such termination. Subject to the foregoing, any unvested PSUs will be forfeited upon termination of employment. A Monte Carlo simulation was used in order to determine the fair value of these awards at the grant date. 23 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information regarding the PSUs granted under the Legacy Amplify MIP for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ ​ Number of ​ Date Fair Value ​ ​ Units ​ per Unit (1) PSUs outstanding at December 31, 2020 214,554 ​ $ 2.36 Granted — ​ $ — Forfeited ( 56,010 ) ​ $ 2.16 Vested — ​ $ — PSUs outstanding at September 30, 2021 158,544 ​ $ 2.43 (1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued. Restricted Stock Units with Market Vesting Conditions The restricted stock units with performance-based vesting conditions (“PRSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a graded-vesting basis. As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. The Company accounts for forfeitures as they occur. Compensation costs are recorded as general and administrative expense. The PRSUs are issued collectively in separate tranches with individual performances periods beginning in January 2021, 2022, and 2023 respectively. For each of the performance periods the awards will vest based on the percentage of the target PRSUs subject to the performance vesting condition with 25 % able to vest during the period January 1, 2021 through December 31, 2021; 25 % able to vest during the period January 1, 2022 through December 31, 2022 and 50 % able to vest during the period of January 1, 2023 through December 31, 2023. Vesting of PRSUs can range from zero to 200 % of the target units granted based on the Company’s relative total shareholder return as compared to the total shareholder return of the Company’s performance peer group over the performance period. The fair value of each PRSU award was estimated on their grant dates using a Monte Carlo simulation. The unrecognized cost associated with the PRSUs was $ 0.2 million at September 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.0 years. The ranges for the assumptions used in the Monte Carlo model for the PRSUs granted during 2021 are presented as follows: ​ ​ ​ ​ ​ ​ ​ 2021 ​ Expected volatility ​ 119.6 % Dividend yield ​ 0.00 % Risk-free interest rate ​ 0.31 % ​ 24 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information regarding the PRSUs granted under the Legacy Amplify MIP for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ ​ Number of ​ Date Fair Value ​ ​ Units ​ per Unit (1) PRSUs outstanding at December 31, 2020 — ​ $ — Granted (2) 196,377 ​ $ 1.94 Forfeited — ​ $ — Vested — ​ $ — PRSUs outstanding at September 30, 2021 196,377 ​ $ 1.94 (1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued. (2) The aggregate grant-date fair value of PRSUs issued for the nine months ended September 30, 2021 was $ 0.4 million based on a grant-date market price ranging from $ 1.24 to $ 2.63 per share. 2017 Non-Employee Directors Compensation Plan In June 2017, Legacy Amplify implemented the Legacy Amplify Non-Employee Directors Compensation Plan to attract and retain the services of experienced non-employee directors of Legacy Amplify or its subsidiaries. In connection with the closing of the merger, on August 6, 2019, the Company assumed the Legacy Amplify Non-Employee Directors Compensation Plan. As noted above, the Legacy Amplify Non-Employee Directors Compensation Plan was replaced by the EIP in May 2021. The restricted stock units with a service vesting condition (“Board RSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur. Compensation costs are recorded as general and administrative expense. The unrecognized cost associated with restricted stock unit awards was less than $ 0.1 million at September 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 0.6 years. The following table summarizes information regarding the Board RSUs granted under the Legacy Amplify Non-Employee Directors Compensation Plan for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ ​ Number of ​ Date Fair Value ​ ​ Units ​ per Unit (1) Board RSUs outstanding at December 31, 2020 8,898 ​ $ 5.12 Granted — ​ $ — Forfeited — ​ $ — Vested ( 5,565 ) ​ $ 5.12 Board RSUs outstanding at September 30, 2021 3,333 ​ $ 5.12 (1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued. 25 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Compensation Expense The following table summarizes the amount of recognized compensation expense associated with the Legacy Amplify MIP and Legacy Amplify Non-Employee Directors Compensation Plan, which are reflected in the accompanying Unaudited Condensed Consolidated Statements of Operations for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 ​ Equity classified awards ​ ​ ​ ​ ​ ​ ​ ​ ​ TSUs ​ ​ 466 ​ ​ 59 ​ ​ 1,123 ​ ​ 184 ​ PSUs ​ ( 55 ) ​ 30 ​ ( 15 ) ​ 69 ​ Board RSUs ​ 4 ​ 4 ​ 12 ​ 15 ​ PRSUs ​ ​ 45 ​ ​ — ​ ​ 134 ​ ​ — ​ ​ ​ $ 460 ​ $ 93 ​ $ 1,254 ​ $ 268 ​ ​ ​ Note 11. Leases For the quarter ended September 30, 2021, our leases qualify as operating leases and we did not have any existing or new leases qualifying as financing leases or variable leases. We have leases for office space and equipment in our corporate office and operating regions as well as warehouse space, vehicles, compressors and surface rentals related to our business operations. In addition, we have offshore Southern California pipeline right-of-way use agreements. Most of our leases, other than our corporate office lease, have an initial term and may be extended on a month-to-month basis after expiration of the initial term. Most of our leases can be terminated with 30-day prior written notice. The majority of our month-to-month leases are not included as a lease liability in our balance sheet under ASC 842 because continuation of the lease is not reasonably certain. Additionally, the Company elected the short-term practical expedient to exclude leases with a term of twelve months or less. Our corporate office lease does not provide an implicit rate. To determine the present value of the lease payments, we use our incremental borrowing rate based on the information available at the inception date. To determine the incremental borrowing rate, we apply a portfolio approach based on the applicable lease terms and the current economic environment. We use a reasonable market interest rate for our office equipment and vehicle leases. For the nine months ended September 30, 2021 and 2020, we recognized approximately $ 2.0 million and $ 1.8 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Operations. Supplemental cash flow information related to the Company’s lease liabilities are included in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ ​ ​ September 30, ​ ​ ​ 2021 ​ 2020 ​ ​ ​ (In thousands) ​ Non-cash amounts included in the measurement of lease liabilities: ​ ​ ​ ​ ​ Operating cash flows from operating leases $ 879 ​ $ 1,351 ​ ​ 26 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company’s right-of-use assets and lease liabilities for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2021 ​ 2020 ​ ​ (In thousands) Right-of-use asset ​ $ 3,379 ​ $ 2,500 ​ ​ ​ ​ ​ ​ ​ Lease liabilities: ​ ​ Current lease liability ​ 1,281 ​ 2,258 Long-term lease liability ​ 2,132 ​ 266 Total lease liability ​ $ 3,413 ​ $ 2,524 ​ The following table reflects the Company’s maturity analysis of the minimum lease payment obligations under non-cancelable operating leases with a remaining term in excess of one year (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Office and ​ Leased vehicles ​ ​ ​ ​ ​ ​ warehouse ​ and office ​ ​ ​ ​ leases equipment Total Remaining 2021 ​ $ 532 ​ $ 166 ​ $ 698 2022 ​ ​ 636 ​ ​ 327 ​ ​ 963 2023 ​ ​ 495 ​ ​ 195 ​ ​ 690 2024 and thereafter ​ 1,280 ​ 14 ​ 1,294 Total lease payments ​ 2,943 ​ 702 ​ 3,645 Less: interest ​ 211 ​ 21 ​ 232 Present value of lease liabilities ​ $ 2,732 ​ $ 681 ​ $ 3,413 ​ The weighted average remaining lease terms and discount rate for all of our operating leases for the period presented: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ ​ 2021 ​ 2020 Weighted average remaining lease term (years): ​ ​ Office and warehouse space 3.15 0.91 ​ Vehicles 0.31 0.41 ​ Office equipment — 0.05 ​ Weighted average discount rate: ​ ​ ​ Office leases 3.05 % 3.41 % Vehicles 0.63 % 0.97 % Office equipment 0.04 % 0.17 % ​ ​ 27 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 12. Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows Accrued Liabilities Current accrued liabilities consisted of the following at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2021 ​ 2020 Accrued lease operating expense ​ $ 10,185 ​ $ 8,978 Accrued capital expenditures ​ ​ 4,350 ​ ​ 173 Accrued commitment fee and other expense ​ 3,917 ​ 4,404 Accrued production and ad valorem tax ​ 3,817 ​ 2,601 Accrued general and administrative expense ​ 3,630 ​ 3,349 Operating lease liability ​ ​ 1,281 ​ ​ 2,258 Asset retirement obligations ​ 747 ​ 424 Accrued current income taxes ​ — ​ 110 Other ​ 311 ​ 380 Accrued liabilities ​ $ 28,238 ​ $ 22,677 ​ Supplemental Cash Flows Supplemental cash flows for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ ​ September 30, ​ ​ 2021 ​ 2020 Supplemental cash flows: ​ ​ ​ ​ Cash paid for interest, net of amounts capitalized ​ $ 6,578 ​ $ 7,921 Cash paid for reorganization items, net 6 ​ 532 Cash paid for taxes — ​ 85 ​ ​ ​ ​ ​ ​ ​ Noncash investing and financing activities: ​ ​ ​ Increase (decrease) in capital expenditures in payables and accrued liabilities 4,177 ​ ( 4,016 ) ​ ​ Note 13. Related Party Transactions Related Party Agreements There have been no transactions between us and any related person in which the related person had a direct or indirect material interest for the three or nine months ended September 30, 2021 and 2020, respectively. ​ Note 14. Commitments and Contingencies Litigation and Environmental As of September 30, 2021, we had no material contingent liabilities recorded in our Unaudited Condensed Consolidated Financial Statements associated with any litigation, pending or threatened. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings. 28 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At September 30, 2021 and December 31, 2020, we had no environmental reserves recorded in our Unaudited Condensed Consolidated Balance Sheet. Southern California Pipeline Incident As of November 5, 2021, the Company and certain of its subsidiaries are named defendants in approximately 13 putative class action suits filed in the United States District Court for the Central District of California and one complaint for damages was filed against the Company and one subsidiary in the Superior Court of the State of California, County of Orange - Civil Division, which were removed to the United States District Court for the Central District of California. All of the actions generally allege that the Company caused a discharge of oil off the Southern California coast in early October 2021 and the plaintiffs seek unspecified monetary damages and certain plaintiffs seek various forms of injunctive relief. The Company understands that certain plaintiffs intend to file one or more amended consolidated complaints, and the matters may be consolidated into a single action. Regarding all 14 matters, the Company denies the allegations and intends to vigorously defend against them. As of November 5, 2021, there have been no responsive pleadings filed, discovery schedules ordered, or trial dates set in any of the 14 matters. We are also participating in a related claims process organized under the Oil Pollution Act of 1990, 33 U.S.C. S 2701 et seq. (“OPA 90”). Under OPA 90, a party alleged to be responsible for a discharge of oil is required to establish a claims process to pay for interim costs and damages as a result of the discharge. The OPA 90 claims process remains at a preliminary stage. Future litigation may be necessary, among other things, to defend ourselves by determining the scope, enforceability, and validity of claims. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Minimum Volume Commitment The Company is party to a gas purchase, gathering and processing contract in Oklahoma, which includes certain minimum NGL commitments. To the extent the Company does not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGLs, it would be required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee. The Company is not meeting the minimum volume required under this contractual provision. The commitment fee expense for the three and nine months ended September 30, 2021, was approximately $ 0.4 million and $ 1.2 million, respectively. The minimum volume commitment for Oklahoma ends on June 30, 2023. The Company is party to a gas purchase, gathering and processing contract in East Texas, which includes certain minimum gas commitments. The Company is not meeting the minimum volume required under this contractual provision. The commitment fee expense for the three and nine months ended September 30, 2021, was approximately $ 0.5 million and $ 1.5 million, respectively. The minimum volume commitment for East Texas ends on November 30, 2022. Supplemental Bond for Decommissioning Liabilities Trust Agreement Beta Operating Company, LLC (“Beta”), a wholly-owned subsidiary of the Company, has an obligation with the BOEM in connection with its 2009 acquisition of the Company’s properties in federal waters offshore Southern California. The Company supports this obligation with $ 161.3 million of A-rated surety bonds and $ 0.3 million of cash as of September 30, 2021. ​ Note 15. Income Taxes The Company had no income tax expense for the three and nine months ended September 30, 2021, respectively. The Company had no income tax expense for the three months ended September 30, 2020 and had less than $ 0.1 million in income tax expense for the nine months ended September 30, 2020. The Company’s effective tax rate was 0 % for the three and nine months ended September 30, 2021, and 0 % for the three and nine months ended September 30, 2020. The effective tax rates for the three and nine months ended September 30, 2021 and 2020 are different from the statutory U.S. federal income tax rate primarily due to our recorded valuation allowances. 29 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In March 2021, the President of the United States signed the ARP Act, to respond to the COVID-19 emergency and address its economic effects. The ARP Act did not have a material impact on the Company’s current year tax provision. ​ Note 16. Subsequent Events Southern California Pipeline Incident On October 2, 2021, contractors operating under the direction of Beta, a subsidiary of Amplify, observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California (the “Incident”). Beta platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan, which was reviewed and approved by the Bureau of Safety and Environmental Enforcement’s Oil Spill Preparedness Division within the United States Department of the Interior, and which included the required notifications of specified regulatory agencies. On October 3, 2021, a Unified Command, consisting of the Company, the U.S. Coast Guard and California Department of Fish and Wildlife’s Office of Spill Prevention and Response, was established to respond to the Incident. The Company is and has been fully committed to working cooperatively within the Unified Command and with all relevant agencies to respond to the Incident and supporting all associated ongoing investigations. On October 5, 2021, the Unified Command announced that reports from its contracted commercial divers and Remotely Operated Vehicle footage indicated that a 4,000 -foot section of the Company’s pipeline had been displaced with a maximum lateral movement of approximately 105 feet and that the pipeline had a 13 -inch split, running parallel to the pipe. On October 14, 2021, the U.S. Coast Guard announced that it had a high degree of confidence the size of the release was approximately 588 barrels of oil, which is below the previously reported maximum estimate of 3,134 barrels. On October 16, 2021, the U.S. Coast Guard announced that it had identified the Mediterranean Shipping Company (DANIT) as a “vessel of interest” in connection with an anchor-dragging incident, which occurred in close proximity to the Company’s pipeline, and that additional vessels of interest continue to be investigated. The cause, timing and details regarding the Incident are currently under investigation and any information regarding the Incident is preliminary. Following the Incident, the Company deployed contractors so that at the height of the Incident response there were over 1,800 personnel working under the guidance and at the direction of the Unified Command to aid in cleanup operations. As of October 14, 2021, all beaches that had been closed following the Incident have reopened. On October 15, 2021, the Unified Command announced that reports from trained oil observers and beach cleanup contractors working for the Unified Command showed significant progress in cleanup operations. On October 18, 2021, the Unified Command stated that segments of beach are recommended for no further clean-up activities. While the Unified Command has significantly reduced the number of personnel conducting remediation activities from the height of the effort, remediation efforts remain ongoing at November 15, 2021. The Company is currently subject to a number of ongoing investigations related to the Incident by certain federal and state agencies. The outcomes of these investigations and the nature of any remedies pursued will depend on the discretion of the relevant authorities and may result in regulatory or other enforcement actions, as well as civil and criminal liability. As of November 5, 2021, the Company and certain of its subsidiaries were named defendants in approximately 13 putative class action suits filed in the United States District Court for the Central District of California, and one complaint for damages was filed against the Company and one of its subsidiaries in the Superior Court of the State of California, County of Orange - Civil Division, which was removed to the United States District Court for the Central District of California. All of the actions generally allege that the Company caused a discharge of oil off the Southern California coast in early October 2021. The plaintiffs seek unspecified monetary damages, and certain plaintiffs seek various forms of injunctive relief. The Company understands that certain plaintiffs intend to file one or more amended consolidated complaints, and the matters may be consolidated into a single action. Regarding all 14 matters, the Company denies the allegations and intends to vigorously defend against them. As of November 5, 2021, there have been no responsive pleadings filed, discovery schedules ordered, or trial dates set in any of the 14 matters. 30 Table of Contents AMPLIFY ENERGY CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Under the OPA 90, the Company’s pipeline was designated by the United States Coast Guard as the source of the oil discharge and therefore the Company is financially responsible for remediation and for certain costs and economic damages as provided for in OPA 90, as well as certain natural resource damages associated with the spill and certain costs determined by federal and state trustees engaged in a joint assessment of such natural resource damages. The Company is currently processing covered claims under OPA 90 as expeditiously as possible. The Company may, in the future, seek contribution from any third parties, including any vessels that may have played a role in the causes of the Incident, that are liable or potentially liable under OPA or any other law in connection with the Incident. The Company is unable to estimate total costs for remediation efforts with respect to the Incident because remediation and related activity are still ongoing and because the evaluation and approval of certain incurred third-party and contractor claims related to remediation efforts are in progress. As of November 11, 2021, the Company has paid approximately $ 17.3 million in costs related to remediation efforts regarding the Incident, of which $ 3.8 million has been received as a reimbursement by our insurance carriers and the remaining $ 13.5 million has been approved for reimbursement by our insurance carriers, less the applicable deductible. There is substantial uncertainty surrounding the full impact that the Incident will have on the Company’s financial condition and cash flow generation going forward. The Company has incurred and will continue to incur costs as a result of the Incident, and the Company anticipates that the suspension of production from Beta will lead to a material reduction in revenue from these assets. The Company carries customary industry insurance policies, including loss of production income insurance, which it expects will cover a material portion of the total aggregate costs associated with the Incident, including loss of revenue resulting from suspended operations. However, the Company can provide no assurance that its coverage will adequately protect it against liability from all potential consequences, damages and losses related to the Incident. Given the timing of the Incident, no obligation related to the Incident was recorded for the quarter ended September 30, 2021. Additionally, due to the limited time that has elapsed since the Incident, the ongoing remediation efforts and the progress of current investigations, the Company cannot reasonably estimate the total aggregate costs related to the Incident at this time. In accordance with customary industry practice, the Company maintains insurance against many potential losses or liabilities arising from our operations and at costs that the Company believes to be economic. The Company regularly reviews its risk of loss and the cost and availability of insurance and revises its insurance accordingly. The Company’s insurance does not cover every potential risk associated with our operations. While the Company expects its insurance policies will cover a material portion of the total aggregate costs associated with the Incident, including defense costs and loss of revenue resulting from suspended operations, the Company can provide no assurance that its coverage will adequately protect it against liability from all potential consequences, damages and losses related to the Incident and such view and understanding is preliminary and subject to change. In response to the Incident, all operations have been suspended and the pipeline has been shut-in until the Company receives the required regulatory approvals to begin operations. On October 4, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS) issued a Corrective Action Order (CAO) pursuant to 49 U.S.C. § 60112, which makes clear that no restart of the affected pipeline may occur until PHMSA has approved a written restart plan. The Company is working expeditiously and cooperatively to comply with the requirements of the CAO in order to gain such approvals and any other regulatory approvals that are necessary to restart operations. At present, given that the pipeline to shore is not operational, no operations are underway in the Beta field. ​ ​ 31 Table of Contents