What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2022-11-01 · 185 added, 286 removed, 488 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except outstanding shares)

September 30,

Current assets:

1 unchanged sentence

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

Operating lease - long term right-of-use asset

Deferred tax asset

Other long-term assets

8 unchanged sentences

Asset retirement obligations

Long-term derivative instruments

Operating lease liability

5 unchanged sentences

50,000,000 shares authorized;

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

no shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.01 par value:

250,000,000 shares authorized;

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

38,969,742 and 38,459,731 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders' deficit

Total stockholders' equity (deficit)

Total liabilities and equity

1 unchanged sentence

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(In thousands, except per share amounts)

For the Three 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

2 unchanged sentences

Interest expense, net

Gain on extinguishment of debt

Litigation settlement (See Note 14)

Other income (expense)

Total other income (expense)

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

Reorganization items, net

Income tax expense

Income (loss) before income taxes

Income tax (expense) benefit - current

Income tax (expense) benefit - deferred

Net income (loss)

11 unchanged sentences

(In thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Cash settlements (paid) received on expired derivative instruments

Gain on extinguishment of debt

Deferred income tax expense (benefit)

Accretion of asset retirement obligations

Share-based compensation (see Note 10)

Settlement of asset retirement obligations

Amortization and write-off of deferred financing costs

13 unchanged sentences

Payments on revolving credit facility

Deferred financing costs

Shares withheld for taxes

7 unchanged sentences

(In thousands)

Stockholders' Equity (Deficit)

Stockholders' Equity

Balance at December 31, 2022

3 unchanged sentences

Balance at March 31, 2023

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Expiration of warrants

Balance at June 30, 2022

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2022

Stockholders' Equity (Deficit)

4 unchanged sentences

Balance at March 31, 2022

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at June 30, 2021

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2021

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

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

Amplify Energy Corp.

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

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

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

14 unchanged sentences

and contingencies and insurance accounting.

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.

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

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

3 unchanged sentences

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue from Contracts with Customers

10 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

($ in thousands)

Oil and natural gas sales

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

1 unchanged sentence

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 $ 45.8 million at September 30, 2022 and $ 32.4 million at December 31, 2021.

Accounts receivable attributable to the Company’s revenue contracts with customers was $ 24.2 million at March 31, 2023 and $ 35.1 million at December 31, 2022.

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, 2022 and December 31, 2021.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 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 March 31, 2023 and December 31, 2022 were based on estimated forward commodity prices.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement in its entirety.

The significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

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

Fair Value Measurements at September 30, 2022

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

Fair Value Measurements at March 31, 2023

Quoted Prices in

8 unchanged sentences

Total liabilities

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements at December 31, 2022

10 unchanged sentences

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 2022 and 2021.

● No impairment expense recorded on proved oil and natural gas properties during the three months ended March 31, 2023 and 2022.

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.

11 unchanged sentences

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, 2022, the Company had the following open commodity positions:

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.

At March 31, 2023, the Company had the following open commodity positions:

Natural Gas Derivative Contracts:

Fixed price swap contracts:

Average monthly volume (MMBtu)

Weighted-average fixed price

Collar contracts:

8 unchanged sentences

Collar contracts:

Two-way collars

Average monthly volume (Bbls)

Weighted-average floor price

Weighted-average ceiling price

Three-way collars

3 unchanged sentences

Weighted-average sub-floor price

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 Revolving Credit Facility to fixed interest rates.

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

Average Monthly Notional (in thousands)

Weighted-average fixed rate

Floating rate

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, 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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

Balance Sheet Location

16 unchanged sentences

Long-term derivative instruments

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Loss (Gain) on Derivative Instruments

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.

Accordingly, all gains and losses, including changes in the derivative instruments’ fair values, have been recorded in the accompanying Unaudited Condensed Consolidated Statements of Net Income.

The following table details the gains and losses related to derivative instruments for the periods indicated (in thousands):

For the Three Months Ended

For the Nine Months Ended

Statements of

September 30,

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 nine months ended September 30, 2022 (in thousands):

The following table presents the changes in the asset retirement obligations for the three months ended March 31, 2023 (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 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 September 30, 2022, which is guaranteed by the Company and all of its current subsidiaries.

The Revolving Credit Facility matures on November 2, 2023 .

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 $ 195.0 million as of March 31, 2023, which is guaranteed by the Company and all of its current subsidiaries.

The Revolving Credit Facility matures on May 31, 2024 .

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.

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.

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 9, 2022, OLLC entered into the Borrowing Base Redetermination Agreement and Seventh Amendment to Credit Agreement, among Amplify Acquisitionco LLC, a Delaware limited liability company (“Acquistionco”), the guarantors party thereto, the lenders party thereto and KeyBank National Association, as administrative agent (the “Seventh Amendment”).

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

● extend the maturity date from November 2, 2023 to May 31, 2024;

● reduce the borrowing base under the Revolving Credit Facility to $ 215.0 million;

provided that, beginning on December 31, 2022, the borrowing base will be reduced by $ 5.0 million per month on the last calendar day of each month.

The borrowing base, as reduced on each date pursuant to the foregoing sentence, shall remain in effect until otherwise redetermined or adjusted in accordance with the provisions of the Credit Agreement;

● adjust the minimum hedging requirements;

● reduce the maximum consolidated net leverage ratio (as defined in the Revolving Credit Facility) requirement from 4.00 to 1.00 to 3.00 to 1.00;

● transition from London Inter-Bank Offered Rate to Secured Overnight Financing Rate based interest rates;

● remove the Borrower’s ability to pay dividends through the maturity date.

As of March 31, 2023, 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 Nine Months Ended

September 30,

Revolving Credit Facility

Letters of Credit

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

At March 31, 2023, 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.

Unamortized deferred financing costs associated with the Company’s Revolving Credit Facility was $ 1.1 million at March 31, 2023.

For the three months ended March 31, 2023, the Company wrote-off $ 0.2 million of deferred financing costs in connection with the decrease in the Company’s borrowing base.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Paycheck Protection Program

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.

The loan and accrued interest were potentially forgivable provided that the borrower uses the loan proceeds for eligible purposes.

The term of the Company’s PPP Loan was two years with an annual interest rate of 1 % and no payments of principal or interest due during the six-month period beginning on the date of the PPP Loan.

The Company applied for forgiveness of the amount due on the PPP Loan based on spending the loan proceeds on eligible expenses as defined by the statute.

On June 22, 2021, KeyBank notified the Company that the PPP Loan had been approved for full and complete forgiveness by the Small Business Association.

For the nine months ended September 30, 2021, the Company reported a gain on extinguishment of debt of $ 5.5 million for the PPP Loan forgiveness in the Unaudited Condensed Consolidated Statements of Operations.

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 nine months ended September 30, 2022:

The following is a summary of the changes in the Company’s common stock issued for the three months ended March 31, 2023:

Balance, December 31, 2022

2 unchanged sentences

Shares withheld for taxes (1)

Balance, September 30, 2022

Balance, March 31, 2023

(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

Earnings per Share

1 unchanged sentence

For the Three Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

9 unchanged sentences

Long-Term Incentive Plans

In May 2021, the shareholders approved a new Equity Incentive Plan (“EIP”) in which the Legacy Amplify Management Incentive Plan (the “Legacy Amplify MIP”) and the Legacy Amplify 2017 Non-Employee Directors Compensation Plan (the “Legacy Amplify Non-Employee Directors Compensation Plan”) were replaced by the EIP and no further awards will be allowed to be granted under the Legacy Amplify MIP or the Legacy Amplify Non-Employee Directors Compensation Plan.

As of September 30, 2022, an aggregate of 1,533,291 shares were available for future grants under the EIP.

In May 2021, the shareholders approved a new Equity Incentive Plan (“EIP”) in which the Legacy Amplify Management Incentive Plan (the “Legacy Amplify MIP”) was replaced by the EIP and no further awards will be allowed to be granted under the Legacy Amplify MIP.

As of March 31, 2023, an aggregate of 1,153,461 shares were available for future grants under the EIP.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

3 unchanged sentences

Compensation costs are recorded as general and administrative expense.

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

The unrecognized cost associated with the TSUs was $ 6.4 million at March 31, 2023.

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

2 unchanged sentences

TSUs outstanding at December 31, 2022

TSUs outstanding at September 30, 2022

TSUs outstanding at March 31, 2023

(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, 2022 was $ 3.9 million based on a grant date market price ranging from $ 3.64 to $ 6.99 per share.

(2) The aggregate grant-date fair value of TSUs issued for the three months ended March 31, 2023 was $ 4.1 million based on a grant date market price of $ 8.91 per share.

Restricted Stock Units with Market and Service Vesting Conditions

The restricted stock units with market and service vesting conditions (“PSUs”) are accounted for as equity-classified awards.

The restricted stock units with market and service vesting conditions (“PSUs” or “PRSUs”) are accounted for as equity-classified awards.

The grant-date fair value is recognized as compensation cost on a graded-vesting basis.

As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards.

The fair value of the awards is estimated on their grant dates using a Monte Carlo simulation .

The Company recognizes compensation cost over the requisite service or performance period.

The Company accounts for forfeitures as they occur.

Compensation costs are recorded as general and administrative expense.

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

The unrecognized cost associated with these awards was $ 1.9 million at March 31, 2023.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.6 years.

The PSUs will vest based on the satisfaction of service and market vesting conditions, with market vesting based on the Company’s achievement of certain share price targets.

The PSUs are subject to service-based vesting such that 50 % of the PSUs service vest on the applicable market vesting date and an additional 25 % of the PSUs service vest on each of the first and second anniversaries of the applicable market vesting date.

In the event of a qualifying termination, subject to certain conditions, (i) all PSUs that have satisfied the market vesting conditions will fully service vest, upon such termination, and (ii) if the termination occurs between the second and third anniversaries of the grant date, then PSUs that have not market vested as of the termination will market vest to the extent that the share targets (in each case, reduced by $ 0.25 ) are achieved as of such termination.

Subject to the foregoing, any unvested PSUs will be forfeited upon termination of employment.

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

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

Average Grant-

Date Fair Value

PSUs outstanding at December 31, 2021

PSUs & outstanding at September 30, 2022

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

2020 PSU Awards

The 2020 PSU awards vested based on the satisfaction of service and market vesting conditions, and the market vesting was based on the Company’s achievement of certain share price targets.

The PSUs were subject to service-based vesting such that 50 % of the PSUs service vested on the applicable market vesting date and an additional 25 % of the PSUs service vested on each of the first and second anniversaries of the applicable market vesting date.

2021 PRSU Awards

The 2021 PRSU awards were issued collectively in separate tranches with individual performances periods beginning on January 1, 2021.

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 performance period of January 1, 2021 through December 31, 2021;

25 % able to vest during the period January 1, 2021 through December 31, 2022 and 50 % able to vest during the period of January 1, 2021 through December 31, 2023.

Vesting of PRSUs can range from zero to 200 % of the target units granted based on the Company’s relative total shareholder return as compared to the total shareholder return of the Company’s performance peer group over the applicable performance period.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units with Market Vesting Conditions

The restricted stock units with performance-based vesting conditions (“PRSUs”) are accounted for as equity-classified awards.

The grant-date fair value is recognized as compensation cost on a graded-vesting basis.

As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards.

The Company accounts for forfeitures as they occur.

Compensation costs are recorded as general and administrative expense.

The 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.

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 $ 1.0 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.

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:

2022 and 2023 PRSU Awards

The 2022 and 2023 PRSU awards were issued with a three-year vesting period beginning on the grant date and ending on the third anniversary of the grant date.

The three-year performance period for the 2022 awards is January 1, 2022 through December 31, 2024.

The three-year performance period for the 2023 awards is January 1, 2023 through December 31, 2025.

The below table reflects the ranges for the assumptions used in the Monte Carlo model for the 2023 PRSUs awards:

Expected volatility

1 unchanged sentence

Risk-free interest rate

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

Average Grant-

Date Fair Value

PRSUs outstanding at December 31, 2021

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 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

In June 2017, Legacy Amplify implemented the Legacy Amplify Non-Employee Directors Compensation Plan to attract and retain the services of experienced non-employee directors of Legacy Amplify or its subsidiaries.

In connection with the closing of the merger, on August 6, 2019, the Company assumed the Legacy Amplify Non-Employee Directors Compensation Plan.

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

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.

The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

Compensation costs are recorded as general and administrative expense.

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

Average Grant-

Date Fair Value

Board RSUs outstanding at December 31, 2021

Board RSUs outstanding at September 30, 2022

PSUs and PRSUs outstanding at December 31, 2022

PSUs and PRSUs outstanding at March 31, 2023

(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, 2023 was $ 2.2 million based on a calculated fair value price ranging from $ 1.27 to $ 15.04 per share.

Compensation Expense

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):

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 Net Income for the periods presented (in thousands):

For the Three Months Ended

For the Nine Months Ended

September 30,

Equity classified awards

PSUs and PRSUs

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

For the quarter ended March 31, 2023, 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 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 0.5 million and $ 0.4 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Net Income.

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

For the Nine Months Ended

September 30,

For the Three Months Ended

(In thousands)

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

September 30,

(In thousands)

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Total lease liability

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table reflects the Company’s maturity analysis of the minimum lease payment obligations under non-cancelable operating leases with a remaining term in excess of one year (in thousands):

Leased vehicles

Remaining 2022

2027 and thereafter

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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):

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

September 30,

Accrued liability - pipeline incident

Accrued liability - current portion of pipeline incident settlement

Accrued lease operating expense

Accrued capital expenditures

Accrued production and ad valorem tax

Accrued commitment fee and other expense

Accrued production and ad valorem tax

Accrued general and administrative expense

Asset retirement obligations

Accrued capital expenditures

Operating lease liability

Asset retirement obligations

Accrued current income taxes

Accrued liabilities

1 unchanged sentence

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

September 30,

Oil and natural gas receivables

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

For the Nine Months Ended

September 30,

For the Three Months Ended

Supplemental cash flows:

Cash paid for interest, net of amounts capitalized

Cash paid for reorganization items, net

Cash paid for taxes

Noncash investing and financing activities:

4 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 nine months ended September 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 months ended March 31, 2023 and 2022.

Commitments and Contingencies

Litigation and Environmental

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.

As part of our normal business activities, we may be named as defendants in litigation and legal proceedings, including those arising from regulatory and environmental matters.

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

At March 31, 2023 and December 31, 2022, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet.

Southern California Pipeline Incident

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 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 25, 2022, the Company reached an agreement in principle with plaintiffs in a putative class action pending in the United States District Court for the Central District of California to resolve all civil claims against the Company and its subsidiaries related to the Incident.

The settlement of $ 50.0 million, which also includes certain injunctive relief, will be funded under the Company’s insurance policies.

The Court preliminarily approved the settlement on December 7, 2022 and granted final approval on April 24, 2023.

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.

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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.

As of March 31, 2023, the Company recorded $ 2.0 million in “Accrued liability – pipeline incident” and $ 3.1 million in “Other long-term liabilities” for the remaining payments related to this settlement on its Unaudited Condensed Consolidated Balance Sheet.

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

2 unchanged sentences

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

As of March 31, 2023, the Company recorded $ 2.9 million in “Accrued liability – pipeline incident” for the remaining payments related to this settlement on its Unaudited Condensed Consolidated Balance Sheet.

On March 1, 2023, the Company announced that the vessels that struck and damaged the pipeline and their respective owners and operators have agreed to pay the Company $ 96.5 million in a settlement.

The Marine Exchange of Los Angeles-Long Beach Harbor (the “Marine Exchange”) has agreed to non-monetary terms as well.

The overall resolution includes subrogation claims by Amplify’s property damage and loss of production income insurers, with Amplify ultimately receiving a net payment of approximately $ 85.0 million.

The settlement resolves Amplify’s affirmative claims related to the Incident.

As part of the settlement, Amplify has dismissed its legal claims against those parties.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

For further information regarding the Incident, please see Note 16.

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, 2022 was approximately $ 0.4 million and $ 1.5 million, respectively.

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

The Company is party to a gas purchase, gathering and processing contract in East Texas, which includes certain minimum gas commitments.

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

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

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

The commitment fee expense for the three months ended March 31, 2023 and 2022 was approximately $ 0.1 million and $ 0.4 million, respectively.

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

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.

Beta Operating Company, LLC (“Beta”), 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 September 30, 2022, the account balance included in restricted investments was approximately $ 4.3 million.

As of March 31, 2023, 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.

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.

Beta has a decommissioning obligation with BOEM in connection with its 2009 acquisition of the Company’s properties in federal waters offshore Southern California.

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

In December 2021, the Company entered into two escrow funding agreements with its surety providers to fund interest-bearing escrow accounts on a quarterly basis to reimburse and indemnify the surety providers for any claims arising under the surety bonds related to the decommissioning of our Beta properties.

The obligation ceases when the aggregate value of the escrow accounts reaches $ 172.6 million.

As of March 31, 2023, the Company has funded $ 9.1 million into the escrow accounts which is reflected in “Restricted investments” on the Unaudited Condensed Consolidated Balance Sheet.

Net deferred tax assets relate to net operating loss carryforwards, interest expense carryforwards, tax credits, and other temporary differences expected to produce tax deductions in future periods.

The realization of these assets depends on recognition of sufficient future taxable income in specific federal and state tax jurisdictions in which those temporary differences are deductible.

In assessing the need for a valuation allowance on our deferred tax assets, the Company followed GAAP guidance to consider whether it is more likely than not that some portion of or all our deferred tax assets will not be realized.

On December 31, 2022, our valuation allowance was $ 284.9 million, which offset all net deferred tax assets as of such date.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of each reporting date, management considers new evidence, both positive and negative in accordance with GAAP guidance, that could affect its view of the future realization of deferred tax assets.

The assessment considers all available information including historical and forecasted taxable income and operating history.

The three months ended March 31, 2023 marks the first time that the Company has achieved three years of cumulative book income.

Furthermore, management determined that the Company’s ability to maintain long-term profitability despite near-term changes in commodity prices and capital and operating costs demonstrated that there is sufficient positive evidence to conclude that it is more likely than not that all net deferred tax asset is realizable.

As a result of the Company’s assessment, during the quarter ended March 31, 2023, the Company released substantially all of its valuation allowance previously recorded.

The result of the valuation allowance released during the three months ended March 31, 2023 was a tax benefit of $ 269.5 million.

The Company’s current income tax expense was $ 12.5 million for the three months ended March 31, 2023.

No current income tax expense was recorded for the three months ended March 31, 2022.

The Company’s deferred income tax benefit was $ 259.5 million for the three months ended March 31, 2023.

No deferred income tax benefit was recorded for the three months ended March 31, 2022.

The effective tax rates for the three months ended March 31, 2023 and March 31, 2022 were ( 233.4 %) and 0 %, respectively.

The item that had the most significant impact on the difference between the statutory U.S.

federal income tax rate of 21 % and the effective tax rate for the three months ended March 31, 2023 was the release of the valuation allowance.

The items that had the most significant impact on the difference between the statutory U.S.

federal income tax rate of 21 % and the effective tax rate for the three months ended March 31, 2022, was primarily due to our recorded valuation allowances.

Southern California Pipeline Incident

On October 2, 2021, contractors operating under the direction of Beta, a subsidiary of Amplify, observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California (the “Incident”).

Beta platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan, which was reviewed and approved by the Bureau of Safety and Environmental Enforcement’s Oil Spill Preparedness Division within the United States Department of the Interior, and which included the required notifications of specified regulatory agencies.

On October 2, 2021, contractors operating under the direction of Beta Operating Company, LLC, a subsidiary of the Company, observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California (the “Incident”).

Beta platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan, which was reviewed and approved by the Bureau of Safety and Environmental Enforcement’s (the “BSEE”) Oil Spill Preparedness Division within the United States Department of the Interior, and which included the required notifications of specified regulatory agencies.

On October 3, 2021, a Unified Command, consisting of the Company, the U.S.

2 unchanged sentences

On October 14, 2021, the U.S.

Coast Guard announced that it had a high degree of confidence the size of the release was approximately 588 barrels of oil, which is below the previously reported maximum estimate of 3,134 barrels.

Coast Guard announced that it had a high degree of confidence the size of the release was approximately 588 barrels of oil, which was below the previously reported maximum estimate of 3,134 barrels.

On October 16, 2021, the U.S.

9 unchanged sentences

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

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In response to the Incident, all operations were suspended and the pipeline was shut-in pending the Company’s receipt of the required regulatory approvals to restart operations.

On October 4, 2021, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), Office of Pipeline Safety issued a Corrective Action Order 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.

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.

On April 10, 2023, the Company announced that it has received the required approvals from federal regulatory agencies to restart operations at the Beta Field.

The pipeline will be operated in accordance with the restart procedures that were reviewed and approved by PHMSA.

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.

1 unchanged sentence

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 has reached court-approved agreements to resolve all criminal matters stemming from the Incident.

Specifically, on August 26, 2022, 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.

Further, 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.

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 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.

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.

Department of the Interior Bureau of Safety and Environmental Enforcement, the National Transportation Safety Board, 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 EPA asking the Company to provide information as to why it should not be suspended from participating in future federal contracting pursuant to 2 C.F.R.

§ 180.700(a), (c) and 2 C.F.R.

2 unchanged sentences

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.

On April 6, 2023, PHMSA provided the Company notice of PHMSA’s positions regarding “probable violations of the Pipeline Safety Regulations” in connection with the Incident;

the Company will respond to that notice per the applicable regulatory process.

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.

1 unchanged sentence

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 liability.

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.

The Company, Beta Operating Company, LLC, and San Pedro Bay Pipeline Company were 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.

2 unchanged sentences

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.

The Company sued the same shipping defendants as had Plaintiffs and added claims against the Marine Exchange, COSCO Shipping Lines Co.

Ltd., COSCO (Cayman) Mercury Co.

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.

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MSC Mediterranean Shipping Company, Dordellas Finance Corp., and Capetanissa Maritime Corporation of Liberia also 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.

On April 17, 2023, the Court stayed the Limitation Action pending the documentation and approval of certain settlements that are expected to fully resolve the Limitation Action.

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.

The Court preliminarily approved the settlement on December 7, 2022 and granted final approval on April 24, 2023.

On March 1, 2023, the Company announced that the vessels that struck and damaged the pipeline and their respective owners and operators have agreed to pay the Company $ 96.5 million in a settlement.

The Marine Exchange has agreed to non-monetary terms as well.

The overall resolution includes subrogation claims by Amplify’s property damage and loss of production insurers, with Amplify ultimately receiving a net payment of approximately $ 85.0 million.

The settlement resolves Amplify’s affirmative claims related to the Incident.

As part of the settlement, Amplify has dismissed its legal claims against those parties.

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.

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 $ 160.0 million to $ 175.0 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.

While the Company believes it has accurately reflected all probable and reasonably estimable costs incurred in the Company’s Unaudited Consolidated Statements of Net Income, 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.

1 unchanged sentence

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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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.

On March 31, 2023, and December 31, 2022, the Company’s insurance receivables were $ 38.5 million and $ 42.0 million, respectively.

Excluding the costs associated with the resolution of the federal and state matters discussed above, for the three months ended March 31, 2023, the Company incurred response and remediation expenses and legal fees of $ 17.3 million.

Of these costs, the Company has received, or expects that it is probable that it will receive, $ 14.7 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 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.

The remaining amount of $ 2.6 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 Net Income.

For the three months ended March 31, 2023, the Company received $ 18.1 million in insurance recoveries.

Additionally, during the three months ended March 31, 2023, the Company recognized $ 13.5 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 Net Income.

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