What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-15 · 256 added, 321 removed, 422 unchanged (58% of the section changed)

3 unchanged sentences

(In thousands, except outstanding shares)

September 30,

Current assets:

Accounts receivable, net

Cash and cash equivalents

Accounts receivable, net (see Note 12)

Short-term derivative instruments

Prepaid expenses and other current assets

5 unchanged sentences

Property and equipment, net

Long-term derivative instruments

Restricted investments

18 unchanged sentences

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

no shares issued and outstanding at March 31, 2022 and December 31, 2021

Warrants, 2,173,913 warrants issued and outstanding at March 31, 2022 and December 31, 2021

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

38,260,182 and 38,024,142 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Oil and natural gas sales

6 unchanged sentences

Depreciation, depletion and amortization

Impairment expense

General and administrative expense

Accretion of asset retirement obligations

Loss (gain) on commodity derivative instruments

Loss on commodity derivative instruments

Pipeline incident loss

Total costs and expenses

3 unchanged sentences

Other expense

Gain on extinguishment of debt

Total other expense

3 unchanged sentences

Loss per share:

Basic and diluted earnings (loss) per share

Basic and diluted loss per share

Weighted average common shares outstanding:

4 unchanged sentences

(In thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

Cash flows from operating activities:

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion and amortization

Impairment expense

Loss (gain) on derivative instruments

Cash settlements (paid) received on expired derivative instruments

Cash settlements received on terminated derivative instruments

Loss on derivative instruments

Cash settlements paid on expired derivative instruments

Bad debt expense

Amortization and write-off of deferred financing costs

Gain on extinguishment of debt

Accretion of asset retirement obligations

9 unchanged sentences

Additions to other property and equipment

Additions to restricted investments

Net cash used in investing activities

Cash flows from financing activities:

Advances on revolving credit facility

Payments on revolving credit facility

Proceeds from the paycheck protection program

Deferred financing costs

Dividends to stockholders

Shares withheld for taxes

Net cash used in financing activities

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7 unchanged sentences

Balance at March 31, 2022

Share-based compensation expense

Shares withheld for taxes

Balance at June 30, 2021

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2021

Stockholders' Equity (Deficit)

3 unchanged sentences

Balance at March 31, 2021

Share-based compensation expense

Expiration of warrants

Shares withheld for taxes

Balance at June 30, 2020

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2020

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

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.

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

The Company operates in one reportable segment engaged in the acquisition, development, exploitation and production of oil and natural gas properties.

The Company’s management evaluates performance based on one reportable business segment as the economic environments are not different within the operation of its oil and natural gas properties.

The Company’s 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 the Company’s 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 Company’s 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.

In the Company’s opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for fair presentation.

Although the Company believes 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 the Company’s consolidated financial statements.

Use of Estimates

8 unchanged sentences

fair values of assets acquired and liabilities assumed in business combinations and asset retirement obligations.

Market Conditions and COVID-19

Since the start of the COVID-19 pandemic, governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, among other actions, which caused a significant decrease in activity in the global economy and the demand for oil and to a lesser extent natural gas and NGLs.

As vaccines have become widely available, social distancing guidelines, travel restrictions and stay-at-home orders have eased, activity in the global economy has increased and demand for oil, natural gas and NGLs and related commodity pricing, has improved.

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.

Additionally, oil, natural gas and NGLs prices increased in the first quarter of 2022 when compared to the same period of 2021 and, as a result, we experienced a significant increase in revenues.

As we continue to monitor the impact of the actions of the Organization of the Petroleum Exporting Countries and other large producing nations, the Russia-Ukraine conflict, global inventories of oil and gas and the uncertainty associated with recovering oil demand, future monetary policy and governmental policies aimed at transitioning towards lower carbon energy, we expect prices for some or all of the commodities we produce to remain volatile.

Other factors such as the duration of the COVID-19 pandemic and the speed and effectiveness of vaccine distributions or other medical advances to combat the virus may impact the recovery of world economic growth and the demand for oil, natural gas and NGLs.

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.

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 its 2021 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.

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.

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.

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.

2 unchanged sentences

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:

The Company has identified three material revenue streams in its business:

oil, natural gas and NGLs.

The following table presents our revenues disaggregated by revenue stream.

The following table presents the Company’s revenues disaggregated by revenue stream.

For the Three Months Ended

For the Nine Months Ended

September 30,

(in thousands)

Oil and natural gas sales

2 unchanged sentences

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.

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 $ 39.9 million at March 31, 2022 and $ 32.4 million at December 31, 2021.

Fair Value Measurements of Financial Instruments

4 unchanged sentences

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.

1 unchanged sentence

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.

The fair market values of the derivative financial instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 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

The following tables present the gross derivative assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 for each of the fair value hierarchy levels:

Fair Value Measurements at March 31, 2022

Quoted Prices in

10 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements at December 31, 2020 Using

Fair Value Measurements at December 31, 2021

Quoted Prices in

8 unchanged sentences

Total liabilities

See Note 5 for additional information regarding our derivative instruments.

See Note 5 for additional information regarding the Company’s derivative instruments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

11 unchanged sentences

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.

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.

● No impairment expense recorded on proved oil and natural gas properties during the three months ended March 31, 2022 and 2021.

Risk Management and Derivative Instruments

1 unchanged sentence

These instruments limit exposure to declines in prices but also limit the benefits that would be realized if prices increase.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Certain inherent business risks are associated with commodity derivative contracts, including market risk and credit risk.

1 unchanged sentence

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.

It is the Company’s 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 the Company’s current credit agreements are counterparties to its 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.

The Company has also entered into International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) with each of its counterparties.

The terms of the ISDA Agreements provide the Company and each of its counterparties with rights of set-off upon the occurrence of defined acts of default by either the Company or its 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 the Company’s 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.

The Company 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.

The Company recognizes all derivative instruments at fair value.

The Company enters into natural gas derivative contracts that are indexed to NYMEX-Henry Hub.

The Company also enters into oil derivative contracts indexed to NYMEX-WTI.

The Company’s NGL derivative contracts are primarily indexed to OPIS Mont Belvieu.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At September 30, 2021, we had the following open commodity positions:

At March 31, 2022, the Company had the following open commodity positions:

Natural Gas Derivative Contracts:

7 unchanged sentences

Weighted-average ceiling price

Natural Gas Basis Swaps:

PEPL basis swaps:

Average monthly volume (MMBtu)

Weighted-average spread

Crude Oil Derivative Contracts:

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Weighted-average sub-floor price

NGL Derivative Contracts:

Fixed price swap contracts:

Average monthly volume (Bbls)

Weighted-average fixed price

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:

Periodically, the Company enters into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates such as those in its Credit Agreement to fixed interest rates.

At March 31, 2022, the Company had the following interest rate swap open positions:

Average Monthly Notional (in thousands)

2 unchanged sentences

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.

Asset Derivatives

September 30,

There was no cash collateral received or pledged associated with the Company’s derivative instruments since most of its counterparties, or certain of its affiliates, to its derivative contracts are lenders under its Revolving Credit Facility.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet Location

17 unchanged sentences

Loss (Gain) on Derivative Instruments

We do not designate derivative instruments as hedging instruments for accounting and financial reporting purposes.

The Company does 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.

1 unchanged sentence

For the Three Months Ended

For the Nine Months Ended

Statements of

September 30,

Operations Location

Commodity derivative contracts

Loss (gain) on commodity derivatives

Loss (gain) on interest rate derivatives

Loss on commodity derivatives

Gain on interest rate derivatives

Interest expense, net

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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):

The following table presents the changes in the asset retirement obligations for the three months ended March 31, 2022 (in thousands):

Asset retirement obligations at beginning of period

7 unchanged sentences

Asset retirement obligations - long-term portion

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

The following table presents our consolidated debt obligations at the dates indicated:

September 30,

The following table presents the Company’s consolidated debt obligations at the dates indicated:

(In thousands)

Revolving Credit Facility (1)

Paycheck Protection Program loan (2)

Total long-term debt

(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 .

(1) The carrying amount of the Company’s Revolving Credit Facility approximates fair value because the interest rates are variable and reflective of market rates.

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.

Amplify Energy Operating LLC, the Company’s wholly owned subsidiary (“OLLC”), is a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $ 235.0 million as of March 31, 2022, which is guaranteed by the Company and all of its 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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s borrowing base under its Revolving Credit Facility is subject to redetermination on at least a semi-annual basis, primarily based on a reserve engineering report.

As of March 31, 2022, the Company was in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with its Revolving Credit Facility.

The Fall 2021 semi-annual borrowing base redetermination in November 2021, resulted in (1) the reaffirmation of the $ 245.0 million borrowing base and (2) subsequent reductions to the borrowing base of $ 5.0 million per month beginning February 28, 2022 and continuing until the completion of the next regularly scheduled redetermination.

The Company expects to complete the next regularly scheduled redetermination during the second quarter 2022.

As of April 30, 2022, the Company’s borrowing base was $ 230.0 million, which reflects the previously agreed-upon borrowing base reductions of $ 5.0 million in February, March and April 2022.

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:

The following table presents the weighted-average interest rates paid, excluding commitment fees, on the Company’s consolidated variable-rate debt obligations for the periods presented:

For the Three Months Ended

For the Nine Months Ended

September 30,

Revolving Credit Facility

Letters of Credit

At September 30, 2021, we had no letters of credit outstanding.

At March 31, 2022, the Company 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.

Unamortized deferred financing costs associated with the Company’s Revolving Credit Facility was $ 0.8 million at March 31, 2022.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 established as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide loans to qualifying businesses.

The PPP Loan was not part of the Revolving Credit Facility as described above.

3 unchanged sentences

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.

Equity (Deficit)

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:

The following is a summary of the changes in the Company’s common stock issued for the three months ended March 31, 2022:

Balance, December 31, 2021

Issuance of common stock

Restricted stock units vested

Bonus stock awards (1)

Shares withheld for taxes (1)

Balance, September 30, 2021

(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.

Balance, March 31, 2022

(1) Represents the net settlement on vesting of restricted stock necessary to satisfy the minimum statutory tax withholding requirements.

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.

The warrants expired on May 4, 2022.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Earnings per Share

1 unchanged sentence

For the Three Months Ended

For the Nine Months Ended

September 30,

Net income allocated to participating restricted stockholders

4 unchanged sentences

Common shares outstanding — diluted

Net earnings (loss) per share:

Net loss per share:

Antidilutive warrants (1)

2 unchanged sentences

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2022, an aggregate of 1,564,669 shares were available for future grants under the EIP.

Restricted Stock Units

3 unchanged sentences

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:

The unrecognized cost associated with the TSUs was $ 4.9 million at March 31, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.4 years.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information regarding the TSUs granted under the EIP for the period presented:

Average Grant-

1 unchanged sentence

TSUs outstanding at December 31, 2021

TSUs outstanding at September 30, 2021

TSUs outstanding at March 31, 2022

(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.

(2) The aggregate grant-date fair value of TSUs issued for the three months ended March 31, 2022 was $ 3.0 million based on a grant date market price at $ 3.64 per share.

Restricted Stock Units with Market and Service Vesting Conditions

4 unchanged sentences

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 unrecognized cost related to the PSUs was less than $ 0.1 million at March 31, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 1.0 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.

3 unchanged sentences

A Monte Carlo simulation was used in order to determine the fair value of these awards at the grant date.

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:

The following table summarizes information regarding the PSUs granted under the EIP for the period presented:

Average Grant-

1 unchanged sentence

PSUs outstanding at December 31, 2021

PSUs outstanding at September 30, 2021

PSUs & outstanding at March 31, 2022

(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units with Market Vesting Conditions

4 unchanged sentences

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.

The 2022 PRSUs were issued with a three year vesting period beginning on the grant date and ending on the third anniversary of the grant date.

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 unrecognized cost associated with the PRSUs was $ 1.3 million at March 31, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.7 years.

The 2021 PRSUs awards were issued collectively in separate tranches with individual performances periods beginning in January 2021, 2022, and 2023 respectively.

For each of the 2021 PRSUs awards the performance period, 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.

The ranges for the assumptions used in the Monte Carlo model for the PRSUs granted during 2022 are presented as follows:

2 unchanged sentences

Risk-free interest rate

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:

The following table summarizes information regarding the PRSUs granted under the EIP for the period presented:

Average Grant-

1 unchanged sentence

PRSUs outstanding at December 31, 2021

PRSUs outstanding at September 30, 2021

PRSUs outstanding at March 31, 2022

(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.

(2) The aggregate grant-date fair value of PRSUs issued for the three months ended March 31, 2022 was $ 1.2 million based on a calculated fair value price at $ 6.20 per share.

2017 Non-Employee Directors Compensation Plan

2 unchanged sentences

As noted above, the Legacy Amplify Non-Employee Directors Compensation Plan was replaced by the EIP in May 2021.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The restricted stock units with a service vesting condition (“Board RSUs”) are accounted for as equity-classified awards.

1 unchanged sentence

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:

Average Grant-

Date Fair Value

Board RSUs outstanding at December 31, 2020

Board RSUs outstanding at September 30, 2021

(1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unrecognized cost associated with restricted stock unit awards was less than $ 0.1 million at March 31, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 0.1 years.

The remaining Board RSUs outstanding was 3,333 at March 31, 2022 with a weighted average grant date fair value per unit of $ 5.12 .

No awards granted, forfeited or vested during the three months ended March 31, 2022.

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):

The following table summarizes the amount of recognized compensation expense associated with the EIP, 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,

Equity classified awards

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.

PSUs and PRSUs

For the quarter ended March 31, 2022, the Company’s leases qualify as operating leases and it did not have any existing or new leases qualifying as financing leases or variable leases.

The Company has leases for office space and equipment in its corporate office and operating regions as well as warehouse space, vehicles, compressors and surface rentals related to its business operations.

In addition, the Company has offshore Southern California pipeline right-of-way use agreements.

Most of the Company’s leases, other than its 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 the Company’s leases can be terminated with 30-day prior written notice.

The majority of its month-to-month leases are not included as a lease liability in its 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,

The Company’s corporate office lease does not provide an implicit rate.

To determine the present value of the lease payments, the Company uses its incremental borrowing rate based on the information available at the inception date.

To determine the incremental borrowing rate, the Company applies a portfolio approach based on the applicable lease terms and the current economic environment.

The Company uses a reasonable market interest rate for its office equipment and vehicle leases.

For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.4 million and $ 0.6 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 is included in the table below:

For the Three Months Ended

(In thousands)

4 unchanged sentences

The following table presents the Company’s right-of-use assets and lease liabilities for the period presented:

September 30,

(In thousands)

10 unchanged sentences

Present value of lease liabilities

The weighted average remaining lease terms and discount rate for all of our operating leases for the period presented:

September 30,

The weighted average remaining lease terms and discount rate for all of the Company’s operating leases for the period presented:

Weighted average remaining lease term (years):

9 unchanged sentences

Current accrued liabilities consisted of the following at the dates indicated (in thousands):

September 30,

Accrued liability - pipeline incident

Accrued lease operating expense

Accrued capital expenditures

Accrued commitment fee and other expense

Accrued production and ad valorem tax

Accrued general and administrative expense

Operating lease liability

Accrued production and ad valorem tax

Accrued commitment fee and other expense

Accrued capital expenditures

Asset retirement obligations

Accrued current income taxes

Operating lease liability

Accrued liabilities

Accounts Receivable

Accounts receivable consisted of the following at the dates indicated (in thousands):

Oil and natural gas receivables

Insurance receivable - pipeline incident

Joint interest owners and other

Total accounts receivable

allowance for doubtful accounts

Total accounts receivable, net

Supplemental Cash Flows

Supplemental cash flows for the periods presented (in thousands):

For the Nine Months Ended

September 30,

For the Three Months Ended

Supplemental cash flows:

1 unchanged sentence

Cash paid for reorganization items, net

Cash paid for taxes

Noncash investing and financing activities:

Increase (decrease) in capital expenditures in payables and accrued liabilities

Increase in capital expenditures in payables and accrued liabilities

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

There have been no transactions between the Company and any related person in which the related person had a direct or indirect material interest for the three months ended March 31, 2022 and 2021.

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.

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.

As of March 31, 2022, the Company had no material contingent liabilities recorded in its Unaudited Condensed Consolidated Financial Statements associated with any litigation, pending or threatened.

Although the Company is insured against various risks to the extent it believes it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify it against liabilities arising from future legal proceedings.

At March 31, 2022 and December 31, 2021, the Company had no environmental reserves recorded in its 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.

The Company and certain of its subsidiaries are named defendants in a putative class action pending in the United States District Court for the Central District of California.

The plaintiffs seek unspecified monetary damages and certain forms of injunctive relief.

The Company is also participating in a related claims process organized under the Oil Pollution Act of 1990, 33 U.S.C.

§ 2701 et seq.

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.

The OPA 90 claims process remains ongoing.

Future litigation may be necessary, among other things, to defend the Company 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 the Company because of defense and settlement costs, diversion of management resources, and other factors.

Minimum Volume Commitment

2 unchanged sentences

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 commitment fee expense was approximately $ 0.4 million for each of the three months ended March 31, 2022 and 2021.

The minimum volume commitment for Oklahoma ends on June 30, 2023.

1 unchanged sentence

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 commitment fee expense for the three months ended March 31, 2022 and 2021, was approximately $ 0.5 million and $ 0.7 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.

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.

Sinking Fund Trust Agreement

Beta Operating Company, LLC, a wholly owned subsidiary, assumed an obligation with a third party to make payments into a sinking fund in connection with its 2009 acquisition of the Company properties in federal waters offshore Southern California, the

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.

Subsequent Events

purpose of which is to provide funds adequate to decommission the portion of the San Pedro Bay Pipeline that lies within state waters and the surface facilities.

Under the terms of the agreement, the operator of the properties is obligated to make monthly deposits into the sinking fund account in an amount equal to $ 0.25 per barrel of oil and other liquid hydrocarbon produced from the acquired working interest.

Interest earned in the account stays in the account.

The obligation to fund ceases when the aggregate value of the account reaches $ 4.3 million.

As of March 31, 2022, the account balance included in restricted investments was approximately $ 4.3 million.

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 March 31, 2022.

The Company had no income tax expense for the three months ended March 31, 2022 and 2021, respectively.

The Company’s effective tax rate was 0 % for the three months ended March 31, 2022 and 2021, respectively.

The effective tax rates for the three months ended March 31, 2022 and 2021 are different from the statutory U.S.

federal income tax rate primarily due to the Company’s recorded valuation allowances.

Southern California Pipeline Incident

3 unchanged sentences

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.

2 unchanged sentences

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.

Coast Guard announced that it had identified the Mediterranean Shipping Company (DANIT) as a “vessel of interest” and its owner Dordellas Finance Corporation and operator Mediterranean Shipping Company, S.A.

as parties in interest in connection with an anchor-dragging incident, in January 2021 (the “Anchor Dragging Incident”), which occurred in close proximity to our pipeline, and that additional vessels of interest continued to be investigated.

On November 19, 2021, the U.S.

Coast Guard announced that it had identified the COSCO (Beijing) as another vessel involved in the Anchor Dragging Incident and named its owner Capetanissa Maritime Corporation of Liberia and its operator V.Ships Greece Ltd.

as parties in interest.

The cause, timing and details regarding the Incident remain under investigation.

At the height of the Incident response, the Company deployed 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.

On February 2, 2022, the Unified Command announced that response and monitoring efforts have officially concluded for the Incident, and Unified Command would stand down as of such date.

Amplify is grateful to its Unified Command partners for their collaboration and professionalism over the course of the response.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Additionally, the California Coastal Commission requested approval from the Office of Coastal Management for the National Oceanic and Atmospheric Association (NOAA) to conduct a Coastal Zone Management Act consistency review of the U.S.

Army Corps of Engineers Nationwide Permit (NWP) 12 application for the proposed permanent repair permit;

on April 7, 2022, NOAA denied that request.

The Company is working expeditiously and cooperatively to comply with the requirements of the relevant agencies in order to gain such approvals and any other regulatory approvals that are necessary to permanently repair the pipeline and restart operations.

As a result of the uncertainties related to the permitting and regulatory approval process, the Company can provide no assurances as to whether and when, if at all, operation will restart at the Beta field.

At present, no operations are underway in the Beta field.

On December 15, 2021, a federal grand jury in the Central District of California returned a federal criminal indictment against Amplify Energy Corp., Beta Operating Company, LLC, and San Pedro Bay Pipeline Company in connection with the Incident.

The indictment alleges that the Company committed a misdemeanor violation of the federal Clean Water Act for negligently discharging oil into the contiguous zone of the United States.

A trial is set for November 1, 2022.

The United States Attorney’s Office for the Central District of California has stated that its investigation of the Incident and related matters is ongoing.

State authorities are conducting parallel criminal investigations as well.

We are continuing to cooperate with these federal and state investigations.

The outcome of these investigations is uncertain, including whether they will result in additional criminal charges.

The Company is currently subject to a number of ongoing investigations related to the Incident by certain federal and state agencies.

To date, the U.S.

Coast Guard, the U.S.

Bureau of Ocean Energy Management, the U.S.

Department of Justice, PHMSA, the U.S.

Department of the Interior Bureau of Safety and Environmental Enforcement, the California Department of Justice, the Orange County District Attorney, the Los Angeles County District Attorney, and the California Department of Fish & Wildlife are conducting investigations or examinations of the Incident.

On April 8, 2022, in light of the allegations raised in the December 15, 2021 federal indictment, the Company received a Show Cause Notice from the U.S.

Environmental Protection Agency (“EPA") asking the Company to provide information as to why it should not be suspended from participating in future Federal contracting and assisting activities pursuant to 2 C.F.R.

§ 180.700(a), (c) and 2 C.F.R.

§ 180.800(a)(4).

On April 22, 2022, the Company responded to the Show Cause Notice and is working cooperatively with the EPA in connection with this matter.

Other federal agencies may or have commenced investigations and proceedings, and may initiate enforcement actions seeking penalties and other relief under the Clean Water Act and other statutes.

Amplify continues to comply with all regulatory requirements and investigations.

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.

The Company and certain of its subsidiaries have been named as defendants in approximately 14 putative class action lawsuits, which have been consolidated into a single consolidated action in the United States District Court for the Central District of California.

In the consolidated action, Plaintiffs filed a consolidated class action complaint on January 28, 2022.

The consolidated complaint asserted claims against the Company and MSC Mediterranean Shipping Company, Dordellas Finance Corp., Costamare Shipping Co.

S.A., and Capetanissa Maritime Corporation of Liberia.

In a third-party complaint filed on February 28, 2022, the Company also asserted claims against those entities, as well as against the Marine Exchange of Los Angeles-Long Beach Harbor, V Ships Greece Ltd, the MSC Danit (proceeding in rem ), and the COSO Beijing (proceeding in rem ).

The Company moved to dismiss the Plaintiffs’ consolidated complaint on February 28, 2022.

Certain of the shipping-related defendants have moved to dismiss the Company’s complaint against them.

MSC Mediterranean Shipping Company and Dordellas Finance Corp.

have filed a Petition for Limitation of Liability under maritime law in the United States District Court for the Central District of California.

The Court is considering whether to consolidate the Limitation of Liability action with the consolidated class action.

Resolution of the civil litigation may take considerable time, and it is not possible at this time to estimate our potential liability resulting from these actions.

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.

Under the OPA 90, the Company’s pipeline was designated by the U.S.

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.

In addition, the Natural Resource Damage Assessment remains ongoing and therefore the extent, timing and cost related to such assessment are difficult to project.

While the Company anticipates insurance will reimburse it for expenses related to the Natural Resource Damage Assessment, any potentially uncovered expenses may be material and could impact the Company’s business and results of operations and could put pressure on its liquidity position going forward.

The Company currently estimates that the total costs it has incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees, to be approximately $ 100.0 million to $ 120.0 million.

These estimates consider currently available facts and presently enacted laws and regulations.

The Company has made assumptions regarding (i) the probable and estimable amounts expected to be settled with certain vendors for response and remediation expenses and (ii) the resolution of certain third-party claims, excluding claims with respect to losses, which are not probable and reasonably estimable, and (iii) future claims and lawsuits.

The Company’s estimates do not include (i) the nature, extent and cost of future legal services that will be required in connection with all lawsuits, claims and other matters requiring legal or expert advice associated with the Incident, (ii) any lost revenue associated with the suspension of operations at Beta, (iii) any liabilities or costs that are not reasonably estimable at this time or that relate to contingencies where the Company currently regards the likelihood of loss as being only reasonably possible or remote and (iv) the costs associated with the permanent repair of the pipeline and the restart of the Beta operations.

The Company believes it has accrued adequate amounts for all probable and reasonably estimable costs;

however, this estimate is subject to uncertainties associated with the assumptions that it has made.

For example, settlements with vendors for response and remediation expenses could turn out to be significantly higher or lower than the Company has estimated.

Accordingly, as the Company’s assumptions and estimates may change in future periods based on future events and total costs may materially increase;

therefore, the Company can provide no assurance that it will not have to accrue significant additional costs in future periods with respect to the Incident.

In accordance with customary insurance practice, the Company maintains insurance policies, including loss of production income insurance, against many potential losses or liabilities arising from its 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.

The Company’s insurance does not cover every potential risk associated with its operations and is subject to certain exclusions and deductibles.

While the Company expects its insurance policies will cover a material portion of the total aggregate costs associated with the Incident, including but not limited to response and remediation expenses, defense costs and loss of revenue resulting from suspended operations, it 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.

As of March 31, 2022, and inclusive of cost associated with the temporary repair of the pipeline, the Company has incurred total aggregate gross costs of $ 111.2 million, of which the Company has received or expects that it is probable that it will receive $ 109.0 million in insurance recoveries.

The Company’s net charge of $ 0.6 million, which is classified as “Pipeline Incident Loss” in the Company’s Unaudited Condensed Consolidated Statements of Operations, reflects legal costs incurred during the three months ended March 31, 2022, that are not currently expected to be recovered under an insurance policy.

The Company incurred the balance of the difference, or $ 1.6 million, in expense for the year ended December 31, 2021.

Through March 31, 2022, the Company had collected $ 70.4 million out of the approximately $ 109.0 million of costs that the Company expects are probable of recovery from insurance carriers, net of deductibles.

Therefore as of March 31, 2022, the Company had a receivable of approximately $ 38.6 million for the portion of costs that the Company expects is probable of recovery from insurance, net of deductibles and amounts collected during 2022.

Additionally, during the three months ended March 31, 2022, the Company recognized $ 17.5 million related to approved LOPI insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Operations.

As of March 31, 2022, the Company has recorded a receivable of $ 8.9 million related to approved but unpaid LOPI claims.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements