What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 155 added, 120 removed, 558 unchanged (33% of the section changed)

34 unchanged sentences

50,000,000 shares authorized;

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

no shares issued and outstanding at June 30, 2022 and December 31, 2021

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

Common stock, $ 0.01 par value:

250,000,000 shares authorized;

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

38,331,368 and 38,024,142 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Oil and natural gas sales

8 unchanged sentences

Accretion of asset retirement obligations

Loss on commodity derivative instruments

Loss (gain) on commodity derivative instruments

Pipeline incident loss

Total costs and expenses

Operating loss

Other (expense) income:

Operating income (loss)

Other income (expense) income:

Interest expense, net

Other expense

Total other expense

Loss before reorganization items, net and income taxes

Gain on extinguishment of debt

Other income (expense)

Total other income (expense)

Income (loss) before reorganization items, net and income taxes

Reorganization items, net

Income tax expense

Loss per share:

Basic and diluted loss per share

Net income (loss)

Allocation of net income (loss) to:

Net income (loss) available to common stockholders

Net income (loss) allocated to participating securities

Net income (loss) available to Amplify Energy Corp.

Earnings (loss) per share:

Basic and diluted earnings (loss) per share

Weighted average common shares outstanding:

4 unchanged sentences

(In thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

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

Net income (loss)

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

Depreciation, depletion and amortization

Loss on derivative instruments

Cash settlements paid on expired derivative instruments

Loss (gain) on derivative instruments

Cash settlements (paid) received 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

12 unchanged sentences

Cash flows from financing activities:

Advances on revolving credit facility

Payments on revolving credit facility

Deferred financing costs

Shares withheld for taxes

9 unchanged sentences

Balance at December 31, 2021

Net income (loss)

Share-based compensation expense

1 unchanged sentence

Balance at March 31, 2022

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Expiration of warrants

Balance at June 30, 2022

Stockholders' Equity (Deficit)

Balance at December 31, 2020

Net income (loss)

Share-based compensation expense

1 unchanged sentence

Balance at March 31, 2021

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at June 30, 2021

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4 unchanged sentences

(“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 is engaged in the acquisition, development, exploitation and production of oil and natural gas properties located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas/North Louisiana and the Eagle Ford.

The Company’s properties consist primarily of operated and non-operated working interests in producing and undeveloped leasehold acreage and working interests in identified producing wells.

Basis of Presentation

The Company’s 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.

The Company’s accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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

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.

Material intercompany transactions and balances have been eliminated.

The results reported in these Unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results that may be expected for the entire year.

Furthermore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.

Accordingly, the accompanying Unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Company’s annual financial statements included in its 2021 Form 10-K.

Use of Estimates

2 unchanged sentences

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.

fair value estimates;

revenue recognition;

and contingencies and insurance accounting.

Market Conditions and COVID-19

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

The Company continues 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.

The Company expects prices for some or all of the commodities 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 its 2021 Form 10-K.

There have been no changes to the Company’s significant accounting policies as described in the Company’s annual financial statements included in its 2021 Form 10-K.

New Accounting Pronouncements

13 unchanged sentences

For the Three Months Ended

For the Six Months Ended

(in thousands)

Oil and natural gas sales

4 unchanged sentences

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.

Accounts receivable attributable to the Company’s revenue contracts with customers was $ 48.5 million at June 30, 2022 and $ 32.4 million at December 31, 2021.

Fair Value Measurements of Financial Instruments

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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 March 31, 2022 and December 31, 2021.

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 March 31, 2022 and December 31, 2021 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 June 30, 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 March 31, 2022 and December 31, 2021 for each of the fair value hierarchy levels:

Fair Value Measurements at March 31, 2022

The following tables present the gross derivative assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021 for each of the fair value hierarchy levels:

Fair Value Measurements at June 30, 2022

Quoted Prices in

35 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 months ended March 31, 2022 and 2021.

● No impairment expense recorded on proved oil and natural gas properties during the three and six months ended June 30, 2022 and 2021.

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.

Derivative instruments are utilized to manage exposure to commodity price and interest rate fluctuations and to achieve a more predictable cash flow in connection with natural gas and oil sales and borrowing related activities.

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

10 unchanged sentences

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.

See Note 7 for additional information regarding the Company’s Revolving Credit Facility (as defined below).

Commodity Derivatives

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

At June 30, 2022, the Company had the following open commodity positions:

Natural Gas Derivative Contracts:

22 unchanged sentences

Interest Rate Swaps

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:

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 Revolving Credit Facility to fixed interest rates.

At June 30, 2022, the Company had the following interest rate swap open positions:

Average Monthly Notional (in thousands)

4 unchanged sentences

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 March 31, 2022 and December 31, 2021.

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.

24 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Statements of

1 unchanged sentence

Commodity derivative contracts

Loss on commodity derivatives

Gain on interest rate derivatives

Loss (gain) on commodity derivatives

(Gain) loss on interest rate derivatives

Interest expense, net

1 unchanged sentence

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 three months ended March 31, 2022 (in thousands):

The following table presents the changes in the asset retirement obligations for the six months ended June 30, 2022 (in thousands):

Asset retirement obligations at beginning of period

16 unchanged sentences

Revolving Credit Facility

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.

OLLC, the Company’s wholly owned subsidiary, is a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $ 225.0 million as of June 30, 2022, which is guaranteed by the Company and all of its current subsidiaries.

The Revolving Credit Facility matures on November 2, 2023 .

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.

As of June 30, 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.

On June 20, 2022, OLLC entered into the Borrowing Base Redetermination Agreement and Sixth Amendment to Credit Agreement, among OLLC, Amplify Acquisitionco LLC, a Delaware limited liability company, the guarantors party thereto, the lenders party thereto and KeyBank National Association, as administrative agent (the “Sixth Amendment”).

The Sixth Amendment amends the Revolving Credit Facility to, among other things:

● terminate the automatic monthly reductions of the borrowing base;

● reaffirm the borrowing base under the Revolving Credit Facility at $ 225.0 million;

● modify the affirmative hedging covenant.

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.

The Company completed the regularly scheduled redetermination in June 2022.

Weighted-Average Interest Rates

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

Revolving Credit Facility

Letters of Credit

At March 31, 2022, the Company had no letters of credit outstanding.

Unamortized Deferred Financing Costs

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

At June 30, 2022, the Company had no letters of credit outstanding.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unamortized Deferred Financing Costs

Unamortized deferred financing costs associated with the Company’s Revolving Credit Facility was $ 0.7 million at June 30, 2022.

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 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide loans to qualifying businesses.

On April 24, 2020, the Company received a $ 5.5 million from the Paycheck Protection Program (the “PPP Loan”).

The PPP Loan was established as part of the Coronavirus Aid, Relief, and Economic Security 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 three and six months ended June 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 the Company’s common stock issued for the three months ended March 31, 2022:

The following is a summary of the changes in the Company’s common stock issued for the six months ended June 30, 2022:

Balance, December 31, 2021

2 unchanged sentences

Shares withheld for taxes (1)

Balance, March 31, 2022

Balance, June 30, 2022

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

6 unchanged sentences

For the Three Months Ended

Net income allocated to participating restricted stockholders

For the Six Months Ended

Net income (loss)

Net income allocated to participating securities

Basic and diluted earnings available to common stockholders

3 unchanged sentences

Common shares outstanding — diluted

Net loss per share:

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

As of June 30, 2022, an aggregate of 1,553,416 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 $ 4.9 million at March 31, 2022.

The unrecognized cost associated with the TSUs was $ 4.2 million at June 30, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.3 years.

5 unchanged sentences

TSUs outstanding at December 31, 2021

TSUs outstanding at March 31, 2022

TSUs outstanding at June 30, 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 three months ended March 31, 2022 was $ 3.0 million based on a grant date market price at $ 3.64 per share.

(2) The aggregate grant-date fair value of TSUs issued for the six months ended June 30, 2022 was $ 3.1 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 March 31, 2022.

The unrecognized cost related to the PSUs was less than $ 0.1 million at June 30, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 0.9 years.

8 unchanged sentences

PSUs outstanding at December 31, 2021

PSUs & outstanding at March 31, 2022

PSUs & outstanding at June 30, 2022

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

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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 $ 1.3 million at March 31, 2022.

The unrecognized cost associated with the PRSUs was $ 1.2 million at June 30, 2022.

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

10 unchanged sentences

PRSUs outstanding at December 31, 2021

PRSUs outstanding at March 31, 2022

PRSUs outstanding at June 30, 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 three months ended March 31, 2022 was $ 1.2 million based on a calculated fair value price at $ 6.20 per share.

(2) The aggregate grant-date fair value of PRSUs issued for the six months ended June 30, 2022 was $ 1.2 million based on a calculated fair value price at $ 6.20 per share.

2017 Non-Employee Directors Compensation Plan

7 unchanged sentences

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 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.

Average Grant-

Date Fair Value

Board RSUs outstanding at December 31, 2021

Board RSUs outstanding at June 30, 2022

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

Compensation Expense

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

Equity classified awards

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.

4 unchanged sentences

Additionally, the Company elected the short-term practical expedient to exclude leases with a term of twelve months or less.

For the quarter ended June 30, 2022, all of the Company’s leases qualified as operating leases and it did not have any existing or new leases qualifying as financing leases or variable leases.

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

2 unchanged sentences

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.

For the six months ended June 30, 2022 and 2021, the Company recognized approximately $ 0.7 million and $ 1.2 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Operations.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to the Company’s lease liabilities is included in the table below:

For the Three Months Ended

For the Six Months Ended

(In thousands)

1 unchanged sentence

Operating cash flows from operating leases

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:

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Accrued lease operating expense

Accrued general and administrative expense

Accrued capital expenditures

Accrued production and ad valorem tax

Accrued commitment fee and other expense

Accrued capital expenditures

Accrued general and administrative expense

Asset retirement obligations

11 unchanged sentences

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

For the Three Months Ended

For the Six Months Ended

Supplemental cash flows:

1 unchanged sentence

Cash paid for reorganization items, net

Cash paid for taxes

Noncash investing and financing activities:

Increase in capital expenditures in payables and accrued liabilities

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

AMPLIFY ENERGY CORP.

2 unchanged sentences

Related Party Agreements

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.

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 and six months ended June 30, 2022 and 2021.

Commitments and Contingencies

Litigation and Environmental

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.

As of June 30, 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.

At June 30, 2022 and December 31, 2021, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet.

Southern California Pipeline Incident

11 unchanged sentences

The Company is not meeting the minimum volume required under this contractual provision.

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

The commitment fee expense for the three and six months ended June 30, 2022 was approximately $ 0.7 million and $ 1.1 million, respectively.

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 months ended March 31, 2022 and 2021, was approximately $ 0.5 million and $ 0.7 million, respectively.

The commitment fee expense for the three and six months ended June 30, 2022, was approximately $ 0.6 million and $ 1.1 million, respectively.

The minimum volume commitment for East Texas ends on November 30, 2022.

Sinking Fund Trust Agreement

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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 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.

1 unchanged sentence

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.

As of June 30, 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.

The Company supports this obligation with $ 161.3 million of A-rated surety bonds.

As of June 30, 2022, the account balance included in restricted investments was $ 4.3 million.

The Company had no income tax expense for the three and six months ended June 30, 2022 and 2021, respectively.

The Company’s effective tax rate was 0 % for the three and six months ended June 30, 2022 and 2021, respectively.

The effective tax rates for the three and six months ended June 30, 2022 and 2021 are different from the statutory U.S.

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

9 unchanged sentences

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.

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

On November 19, 2021, the U.S.

2 unchanged sentences

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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.

21 unchanged sentences

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.

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.

4 unchanged sentences

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.

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

The Company and two subsidiaries have been named as defendants in a consolidated putative class action in the United States District Court for the Central District of California.

Plaintiffs filed a consolidated class action complaint on January 28, 2022 and an amended complaint on March 21, 2022.

Plaintiffs assert claims against the Company, Beta Operating Company, LLC, San Pedro Bay Pipeline Company, MSC Mediterranean Shipping Company, Dordellas Finance Corp., the MSC Danit (proceeding in rem), Costamare Shipping Co.

S.A., Capetanissa Maritime Corporation of Liberia, V.Ships Greece Ltd., and the COSCO Beijing (proceeding in rem).

The Company filed a third-party complaint on February 28, 2022, and an amended complaint on June 21, 2022.

The Company sued the same shipping defendants and has added claims against the Marine Exchange of Los Angeles-Long Beach Harbor, COSCO Shipping Lines Co.

Ltd., COSCO (Cayman) Mercury Co.

Ltd., and Mediterranean Shipping Company S.r.l.

The Company has moved to dismiss the Plaintiffs’ complaint, and the Marine Exchange of Los Angeles-Long Beach Harbor and certain of the shipping defendants have moved to dismiss the Company’s complaint.

A hearing on the motions to dismiss is scheduled for August 25, 2022.

Further, MSC Mediterranean Shipping Company, Dordellas Finance Corp., and Capetanissa Maritime Corporation of Liberia have filed petitions for limitations of liability under maritime law in the United States District Court for the Central District of California.

The court consolidated the limitation actions into a single limitation action and also coordinated discovery between the consolidated limitation and the consolidated class actions.

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

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

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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.

The Company currently estimates that the total costs it has incurred or will incur with respect to the Incident to be approximately $ 110.0 million to $ 130.0 million, which is primarily 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.

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

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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.

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

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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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2022, the Company incurred total aggregate gross costs of $ 18.7 million.

Of these costs, the Company has received, or expects that it is probable that it will receive, $ 13.0 million in insurance recoveries.

The remaining amount of $ 5.7 million, which primarily relates to certain legal costs, is not expected to be recovered under an insurance policy and is classified as “Pipeline Incident Loss” on the Company’s Unaudited Condensed Consolidated Statements of Operations.

On June 30, 2022, and December 31, 2021, the Company’s insurance receivables were $ 26.5 million and $ 49.1 million, respectively.

For the six months ended June 30, 2022, the Company received $ 35.7 million in insurance recoveries.

Additionally, during the six months ended June 30, 2022, the Company recognized $ 26.2 million related to approved loss of production income (“LOPI”) insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Operations.

Subsequent to June 30, 2022, the Company received approval for approximately $ 6.2 million of LOPI proceeds for the period from July 1, 2022 through August 12, 2022.

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