What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-03 · 155 added, 94 removed, 619 unchanged (29% of the section changed)

3 unchanged sentences

(In thousands, except outstanding shares)

September 30,

Current assets:

29 unchanged sentences

50,000,000 shares authorized;

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

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

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

1 unchanged sentence

250,000,000 shares authorized;

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

38,440,803 and 38,024,142 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Oil and natural gas sales

10 unchanged sentences

Pipeline incident loss

Pipeline incident settlement

Total costs and expenses

Operating income (loss)

Other income (expense) income:

Other income (expense):

Interest expense, net

18 unchanged sentences

(In thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

4 unchanged sentences

Cash settlements (paid) received on expired derivative instruments

Bad debt expense

Amortization and write-off of deferred financing costs

Gain on extinguishment of debt

2 unchanged sentences

Settlement of asset retirement obligations

Amortization and write-off of deferred financing costs

Bad debt expense

Changes in operating assets and liabilities:

32 unchanged sentences

Balance at June 30, 2022

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2022

Stockholders' Equity (Deficit)

8 unchanged sentences

Balance at June 30, 2021

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2021

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

23 unchanged sentences

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.

Additionally, oil, natural gas and NGLs prices increased during 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, inflation and 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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The COVID-19 pandemic and the Russia-Ukraine conflict continue to evolve, and the extent to which these events may impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

Summary of Significant Accounting Policies

15 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

5 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 $ 48.5 million at June 30, 2022 and $ 32.4 million at December 31, 2021.

Accounts receivable attributable to the Company’s revenue contracts with customers was $ 45.8 million at September 30, 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 June 30, 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 June 30, 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 September 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 June 30, 2022 and December 31, 2021 for each of the fair value hierarchy levels:

Fair Value Measurements at June 30, 2022

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

Fair Value Measurements at September 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 and six months ended June 30, 2022 and 2021.

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

Risk Management and Derivative Instruments

21 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Natural Gas Derivative Contracts:

23 unchanged sentences

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:

At September 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 June 30, 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.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

Balance Sheet Location

21 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Statements of

September 30,

Operations Location

5 unchanged sentences

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 six months ended June 30, 2022 (in thousands):

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

Asset retirement obligations at beginning of period

11 unchanged sentences

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

September 30,

(In thousands)

3 unchanged sentences

Revolving Credit Facility

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.

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 September 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 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”).

3 unchanged sentences

● 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 completed the regularly scheduled redetermination in June 2022.

As of September 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.

Weighted-Average Interest Rates

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revolving Credit Facility

Letters of Credit

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

At September 30, 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 $ 0.6 million at September 30, 2022.

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

6 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.

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 the Company’s common stock issued for the six months ended June 30, 2022:

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

Balance, December 31, 2021

2 unchanged sentences

Shares withheld for taxes (1)

Balance, June 30, 2022

Balance, September 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

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

10 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 June 30, 2022, an aggregate of 1,553,416 shares were available for future grants under the EIP.

As of September 30, 2022, an aggregate of 1,533,291 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 $ 4.2 million at June 30, 2022.

The unrecognized cost associated with the TSUs was $ 4.3 million at September 30, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 1.9 years.

5 unchanged sentences

TSUs outstanding at December 31, 2021

TSUs outstanding at June 30, 2022

TSUs outstanding at September 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 six months ended June 30, 2022 was $ 3.1 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 nine months ended September 30, 2022 was $ 3.9 million based on a grant date market price ranging from $ 3.64 to $ 6.99 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 June 30, 2022.

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

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 0.7 years.

8 unchanged sentences

PSUs outstanding at December 31, 2021

PSUs & outstanding at June 30, 2022

PSUs & outstanding at September 30, 2022

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

10 unchanged sentences

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 $ 1.2 million at June 30, 2022.

The unrecognized cost associated with the PRSUs was $ 1.0 million at September 30, 2022.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.2 years.

10 unchanged sentences

PRSUs outstanding at December 31, 2021

PRSUs outstanding at June 30, 2022

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

2017 Non-Employee Directors Compensation Plan

10 unchanged sentences

Board RSUs outstanding at December 31, 2021

Board RSUs outstanding at June 30, 2022

Board RSUs outstanding at September 30, 2022

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

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Equity classified awards

6 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.

For the quarter ended September 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 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.

For the nine months ended September 30, 2022 and 2021, the Company recognized approximately $ 1.1 million and $ 2.0 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Operations.

AMPLIFY ENERGY CORP.

1 unchanged sentence

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

For the Six Months Ended

For the Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

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

September 30,

(In thousands)

11 unchanged sentences

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

September 30,

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

9 unchanged sentences

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

September 30,

Oil and natural gas receivables

6 unchanged sentences

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

For the Six Months Ended

For the Nine Months Ended

September 30,

Supplemental cash flows:

8 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 and six months ended June 30, 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 nine months ended September 30, 2022 and 2021.

Commitments and Contingencies

Litigation and Environmental

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.

As of September 30, 2022, the Company had $ 8.0 million contingent liabilities recorded in its Unaudited Condensed Consolidated Financial Statements associated with any litigation, pending or threatened.

See additional information regarding the Incident below.

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

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

Southern California Pipeline Incident

5 unchanged sentences

The OPA 90 claims process remains ongoing.

On August 25, 2022, the Company reached an agreement in principle with plaintiffs in the class action to resolve all civil claims against it and its subsidiaries.

The settlement of $ 50.0 million, which also includes certain injunctive relief, will be funded under the Company’s insurance policies, and the final agreement will be subject to court approval.

On October 17, 2022, counsel to the putative class filed a motion for preliminary approval of the final settlement agreement;

that motion is noticed for a hearing with the Court on November 16, 2022.

On August 26, 2022, the Company reached an agreement with the United States government, which the court has approved, to resolve all federal criminal matters involving the Company and its subsidiaries stemming from Incident.

As part of the resolution with the United States, the Company agreed to plead guilty to one count of misdemeanor negligent discharge of oil in violation of the Clean Water Act.

The Company will pay a fine of approximately $ 7.1 million in installments over a period of three years , serve a term of four years ’ probation and reimburse governmental agencies approximately $ 5.8 million for their response to this event.

The Company also has agreed to implement certain compliance measures including installation of a new leak detection system and increased Remote Operated Vehicle inspections of the pipeline.

On September 8, 2022, the Company reached an agreement with the state of California to resolve all related state criminal matters.

As part of the resolution with the state of California, which also has court approval, the Company agreed to enter a plea of No Contest to six misdemeanor charges.

The Company will pay a fine in the amount of $ 4.9 million to be distributed among the state of California, including the State’s Fish and Game Preservation Fund, and Orange County.

The Company also will serve a one-year term of probation and has agreed to certain compliance enhancements to its operations.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future litigation may be necessary, among other things, to defend the Company by determining the scope, enforceability, and validity of claims.

4 unchanged sentences

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

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 commitment fee expense for the three and nine months ended September 30, 2022 was approximately $ 0.4 million and $ 1.5 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 and six months ended June 30, 2022, was approximately $ 0.6 million and $ 1.1 million, respectively.

The commitment fee expense for the three and nine months ended September 30, 2022, was approximately $ 0.6 million and $ 1.7 million, respectively.

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sinking Fund Trust Agreement

3 unchanged sentences

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

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

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

Supplemental Bond for Decommissioning Liabilities Trust Agreement

1 unchanged sentence

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.

As of September 30, 2022, the account balance included in restricted investments was $ 5.7 million.

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

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

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

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

In August 2022, the U.S.

Inflation Reduction Act (“IRA”) was enacted into law.

The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax, expanded tax credits for clean energy incentives, and a 1% excise tax on corporate stock repurchase in tax years beginning after December 31, 2022.

The IRA did not have a material impact on the Company’s current year tax provision.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Southern California Pipeline Incident

13 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.

8 unchanged sentences

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.

On September 30, 2022, the U.S.

Army Corps of Engineers issued the NWP 12 permit.

As of November 1, 2022, the permanent repairs are ongoing.

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

As a result of the uncertainties related to the 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.

1 unchanged sentence

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.

As previously disclosed, state authorities were conducting parallel criminal investigations.

As noted above, the Company has reached court approved agreements to resolve all criminal matters stemming from the incident.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

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 have conducted or 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.

2 unchanged sentences

§ 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.

On April 22, 2022, the Company responded to the Show Cause Notice.

On September 9, 2022, the EPA informed the Company’s counsel that the EPA has administratively closed the case at this time, and as such, the Company is no longer under a Show Cause Notice.

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.

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.

2 unchanged sentences

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.

The Company filed a third-party complaint on February 28, 2022, an amended complaint on June 21, 2022, and second amended complaint on October 5, 2022.

The Company has 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.

Ltd., Mediterranean Shipping Company S.r.l., and MSC Shipmanagement Limited.

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.

On October 3, 2022, the Court denied several of the motions to dismiss filed by certain shipping defendants;

other motions to dismiss remain pending.

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.

Discovery is ongoing, and the Court has set a trial for April 24, 2023 in that proceeding.

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.

As noted above, on August 25, 2022, the Company reached an agreement in principle with plaintiffs in the class action to resolve all civil claims against it and its subsidiaries.

The settlement of $ 50.0 million, which also includes certain injunctive relief, will be funded under the Company’s insurance policies, and the final agreement will be subject to court approval.

On October 17, 2022, counsel to the putative class filed a motion for preliminary approval of the final settlement agreement;

that motion is noticed for a hearing with the Court on November 16, 2022.

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

3 unchanged sentences

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 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.

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 26, 2022, the Company reached an agreement with the United States government, subject to court review and approval, to resolve all federal criminal matters involving the Company and its subsidiaries stemming from Incident.

As part of the resolution with the United States, the Company agreed to plead guilty to one count of misdemeanor negligent discharge of oil in violation of the Clean Water Act.

The Court approved the plea.

On September 8, 2022, as part of the resolution with the state of California, the Company agreed to enter a plea of No Contest to six misdemeanor charges.

The Company will pay a fine in the amount of $ 4.9 million to be distributed among the state of California, including the State’s Fish and Game Preservation Fund, and Orange County.

The Company will serve a one-year term of probation and has agreed to certain compliance enhancements to its operations.

Based on presently enacted laws and regulations and currently available facts, the Company estimates that the total costs it has incurred or will incur with respect to the Incident to be approximately $ 120.0 million to $ 140.0 million, which includes (i) actual and projected response and remediation under the direction of the Unified Command, (ii) estimated fines and penalties of $ 12.0 million resulting from the resolution of the federal and state of California matters discussed above, and (iii) certain legal fees.

The range of total costs is based on the Company’s assumptions regarding (i) settlement of costs associated with certain vendors for response and remediation expenses, (ii) resolution of certain third-party claims, excluding claims with respect to losses, which are not probable or reasonably estimable, and (iii) future claims and lawsuits.

While the Company believes it has accurately reflected all probable and reasonably estimable costs incurred in the Company’s Unaudited Consolidated Statements of Operations, these estimates are subject to uncertainties associated with the underlying assumptions.

For example, settlements with vendors for response and remediation expenses may be significantly higher or lower than the Company has currently estimated.

Accordingly, as the Company’s assumptions and estimates may change in future periods based on future events, the Company can provide no assurance that total costs will not materially change in future periods.

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, 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.

On September 30, 2022, and December 31, 2021, the Company’s insurance receivables were $ 30.6 million and $ 49.1 million, respectively.

Excluding the costs associated with the resolution of the federal and state matters discussed above, for the nine months ended September 30, 2022, the Company incurred response and remediation expenses and legal fees of $ 28.3 million.

Of these costs, the Company has received, or expects that it is probable that it will receive, $ 20.0 million in insurance recoveries.

The remaining amount of $ 8.3 million, which primarily relates to certain legal costs that are not expected to be recovered under an insurance policy, are classified as “Pipeline Incident Loss” on the Company’s Unaudited Condensed Consolidated Statements of Operations.

For the nine months ended September 30, 2022, the Company received $ 38.5 million in insurance recoveries.

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.

For the nine months ended September 30, 2022, the Company recorded $ 12.0 million related to the resolution of the federal and state matters discussed above, which amount is classified as “Pipeline Incident Settlement” on the Company’s Unaudited Condensed Consolidated Statement of Operations.

Additionally, during the nine months ended September 30, 2022, the Company recognized $ 39.6 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.

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