What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-03 · 126 added, 78 removed, 236 unchanged (46% of the section changed)

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Recent Developments

Commences Restart Operations at Beta Field

On April 10, 2023, the Company announced it 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.

The Company returned the Beta Field to production and began selling oil on April 24, 2023 (after successfully filling the San Pedro Bay Pipeline and finalizing all required testing).

Certain Officer Departures and Appointments

On March 17, 2023, the board of directors of the Company appointed Daniel Furbee to serve as Senior Vice President and Chief Operating Officer of the Company, effective March 17, 2023.

On April 13, 2023, the board of directors of the Company appointed James Frew to serve as Senior Vice President and Chief Financial Officer of the Company, effective April 17, 2023.

Settlement with the Shipping Companies and Marine Exchange related to the Containerships’ Anchor Strike

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.

Amended and Restated Credit Agreement

On July 31, 2023, OLLC and Acquisitionco amended and restated the Revolving Credit Facility with Keybanc Capital Markets Inc., Cadence Bank, N.A.

and Citizens Bank, N.A.

as joint lead arrangers and KeyBank National Association as the administrative agent (the “New Credit Facility”).

The New Credit Facility is a replacement in full of the Revolving Credit Facility.

The aggregate principal amount of loans outstanding under the New Credit Facility as of July 31, 2023, was $120.0 million.

The initial borrowing base under the facility is $150.0 million with elected commitments of $135.0 million, and, consistent with our prior Revolving Credit Facility, the New Credit Facility borrowing base will be redetermined on a semi-annual basis with the next redetermination expected to occur in the fourth quarter of 2023.

Certain key terms and conditions under the New Credit Facility include (but are not limited to):

● A maturity date of July 31, 2027;

● The loans shall bear interest at a rate per annum equal to (i) adjusted SOFR or (ii) an adjusted base rate, plus an applicable margin based on a utilization ratio of the lesser of the borrowing base and the aggregate commitments.

The applicable margin ranges from 2.00% to 3.00% for adjusted base rate borrowings, and 3.00% to 4.00% for adjusted SOFR borrowings;

● The unused commitments under the New Credit Facility will accrue a commitment fee of 0.50%, payable quarterly in arrears;

● Certain financial covenants, including the maintenance of (i) a net debt leverage ratio not to exceed 3.00 to 1.00, determined as of the last day of each fiscal quarter for the four fiscal-quarter period then ending and (ii) a current ratio of not less than 1.00 to 1.00, determined as of the last day of each fiscal quarter, in each case commencing with the fiscal quarter ending December 31, 2023;

● Certain events of default, including, without limitation:

non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy;

● Initial minimum hedging requirements covering 75% of the reasonably monthly production of hydrocarbons from proved developed producing reserves for the 24-month period following the effective date of the New Credit Facility (the “First Period”) and (ii) 50% for the 12-month period immediately following the First Period.

Business Environment and Operational Focus

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Results of Operations

The results of operations for the three months ended March 31, 2023 and 2022 have been derived from our unaudited condensed consolidated financial statements.

The results of operations for the three and six months ended June 30, 2023 and 2022 have been derived from our unaudited condensed consolidated financial statements.

The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties.

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For the Three Months Ended

For the Six Months Ended

($ In thousands except per unit amounts)

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Depletion, depreciation and amortization

For the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Net income of $352.8 million and a net loss of $48.6 million were recorded for the three months ended March 31, 2023 and 2022, respectively.

Oil, natural gas and NGL revenues were $66.3 million and $93.9 million for the three months ended March 31, 2023 and 2022, respectively.

Average net production volumes were approximately 19.4 MBoe/d and 20.4 MBoe/d for the three months ended March 31, 2023 and 2022, respectively.

The change in production volumes was primarily due to natural declines.

The average realized sales price was $37.99 per Boe and $51.10 per Boe for the three months ended March 31, 2023 and 2022, respectively.

For the Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Net income of $9.8 million and $29.2 million were recorded for the three months ended June 30, 2023 and 2022, respectively.

Oil, natural gas and NGL revenues were $67.4 million and $112.9 million for the three months ended June 30, 2023 and 2022, respectively.

Average net production volumes were approximately 21.2 MBoe/d and 20.4 MBoe/d for the three months ended June 30, 2023 and 2022, respectively.

The change in production volumes was primarily due to the restart of operations at Beta and was partially offset by natural declines.

The average realized sales price was $34.97 per Boe and $60.74 per Boe for the three months ended June 30, 2023 and 2022, respectively.

The decrease in average realized sales price was primarily due to the decrease in commodity prices.

Other revenues were $13.6 million and $17.6 million for the three months ended March 31, 2023 and 2022, respectively.

The change in other revenues was primarily related to the recognition of loss of production income (“LOPI”) insurance proceeds of $13.5 million for the three months ended March 31.

2023 compared to $17.5 million of LOPI proceeds for the three months ended March 31, 2022.

The decrease in LOPI proceeds reflects the timing recognition of one additional month of LOPI during the three months ended March 31, 2022.

Lease operating expense was $33.0 million and $32.9 million for the three months ended March 31, 2023 and 2022, respectively.

On a per Boe basis, lease operating expense was $18.89 and $17.92 for the three months ended March 31, 2023 and 2022, respectively.

The change in lease operating expense on a per Boe basis was due to lower production.

Gathering, processing and transportation expense was $5.6 million and $8.0 million for the three months ended March 31, 2023 and 2022, respectively.

Other revenues were $4.6 million and $8.9 million for the three months ended June 30, 2023 and 2022, respectively.

The change in other revenues was primarily related to one month of loss of production income (“LOPI”) insurance proceeds of $4.5 million for the three months ended June 30, 2023 compared to two months of LOPI proceeds of $8.8 million for the three months ended June 30, 2022.

Lease operating expense was $34.9 million and $33.3 million for the three months ended June 30, 2023 and 2022, respectively.

On a per Boe basis, lease operating expense was $18.10 and $17.91 for the three months ended June 30, 2023 and 2022, respectively.

The change in lease operating expense on a per Boe basis was due to higher costs associated with the restart of operations at Beta.

Gathering, processing and transportation expense was $5.1 million and $7.3 million for the three months ended June 30, 2023 and 2022, respectively.

The decrease in gathering, processing and transportation expense was primarily related to the expiration of the minimum volume commitment (“MVC”) fee for the East Texas/North Louisiana property in November 2022.

On a per Boe basis, gathering, processing and transportation expense was $3.21 and $4.36 for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended June 30, 2022, we started marketing our own natural gas in Oklahoma, which resulted in us now recognizing certain revenue deductions as gathering, processing and transportation expenses.

On a per Boe basis, gathering, processing and transportation expense was $2.67 and $3.92 for the three months ended June 30, 2023 and 2022, respectively.

The change on a per BOE basis is primarily related to decrease in production and a decrease in MVC fees.

Taxes other than income were $5.2 million and $8.6 million for the three months ended June 30, 2023 and 2022, respectively.

The decrease was due to a reduction in production taxes as a result of lower commodity prices and lower production.

On a per Boe basis, taxes other than income were $2.70 and $4.64 for the three months ended June 30, 2023 and 2022, respectively.

DD&A expense was $7.1 million and $5.9 million for the three months ended June 30, 2023 and 2022, respectively.

The change in DD&A expense was primarily due to an increase in production of 70 MBoe, which equates to an increase of approximately $0.2 million in the change of production and an increase of $1.0 million in our depletion rate.

General and administrative expense was $7.8 million and $8.6 million for the three months ended June 30, 2023 and 2022, respectively.

The change in general and administrative expense was primarily related to (i) a decrease of $0.8 million in legal expense, and (ii) a decrease of $0.6 million in professional services partially offset by (i) an increase of $0.5 million in stock compensation expense and (ii) an increase of $0.1 million in salaries and other payroll benefits.

Net gain on commodity derivative instruments of $3.8 million were recognized for the three months ended June 30, 2023, consisting of a $1.5 million of cash settlements received on expired positions and an increase of $2.3 million in the fair value of open positions.

Net loss on commodity derivative instruments of $18.6 million was recognized for the three months ended June 30, 2022, consisting of a $30.0 million increase in the fair value of open positions offset by $48.6 million of cash settlements paid on expired positions.

Pipeline incident loss was $6.8 million and $5.1 million for the three months ended June 30, 2023 and 2022, respectively.

The costs reflect certain expenses that are not expected to be recovered under an insurance policy.

See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report for additional information.

Litigation settlement was not recorded for the three months ended June 30, 2023 and 2022.

Interest expense, net was $3.7 million and $3.1 million for the three months ended June 30, 2023 and 2022, respectively.

The change in interest expense is primarily due to higher interest rates offset by lower debt outstanding during the period.

Average outstanding borrowings under our Revolving Credit Facility were $123.8 million and $219.4 million for the three months ended June 30, 2023 and 2022, respectively.

Current income tax benefit (expense) was $6.9 million for the three months ended June 30, 2023.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No current income tax expense was recorded for the three months ended June 30, 2022.

Deferred income tax benefit (expense) was less than ($0.1) million for the three months ended June 30, 2023.

Starting in the first quarter of 2023, we achieved three years of cumulative income which allowed the release of the valuation allowance.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

No deferred income tax benefit was recorded for the three months ended June 30, 2022.

For the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Net income of $362.6 million and a net loss of $19.4 million were recorded for the six months ended June 30, 2023 and 2022, respectively.

Oil, natural gas and NGL revenues were $133.7 million and $206.8 million for the six months ended June 30, 2023 and 2022, respectively.

Average net production volumes were approximately 20.3 MBoe/d and 20.4 MBoe/d for the six months ended June 30, 2023 and 2022, respectively.

The change in production volumes was primarily due to the restart of operations at Beta and natural declines.

The average realized sales price was $36.40 per Boe and $55.95 per Boe for the six months ended June 30, 2023 and 2022, respectively.

The decrease in average realized sales price was primarily due to the decrease in commodity prices.

Other revenues were $18.2 million and $26.5 million for the six months ended June 30, 2023 and 2022, respectively.

The change in other revenues was primarily related to LOPI insurance proceeds of $17.9 million for the six months ended June 30.

2023 compared to $26.2 million of LOPI proceeds for the six months ended June 30, 2022.

Lease operating expense was $67.9 million and $66.2 million for the six months ended June 30, 2023 and 2022, respectively.

On a per Boe basis, lease operating expense was $18.48 and $17.92 for the six months ended June 30, 2023 and 2022, respectively.

The change in lease operating expense on a per Boe basis was due to higher costs associated with the restart of operations at Beta partially offset with lower production.

Gathering, processing and transportation expense was $10.8 million and $15.3 million for the six months ended June 30, 2023 and 2022, respectively.

The decrease in gathering, processing and transportation expense was primarily related to the expiration of the MVC fee for the East Texas/North Louisiana property in November 2022.

During the six months ended June 30, 2022, we started marketing our own natural gas in Oklahoma, which improved our differentials, but, in 2022, we started to recognize certain revenue deductions as gathering, processing and transportation expenses.

On a per Boe basis, gathering, processing and transportation expense was $2.93 and $4.14 for the six months ended June 30, 2023 and 2022, respectively.

The change on a per BOE basis primarily related to decrease in production and a decrease in MVC fees.

Taxes other than income were $5.3 million and $7.6 million for the three months ended March 31, 2023 and 2022, respectively.

Taxes other than income were $10.5 million and $16.2 million for the six months ended June 30, 2023 and 2022, respectively.

The decrease was due to a reduction in production taxes as a result of lower commodity prices and lower production.

In addition, we received a $0.4 million from a one-time positive severance tax adjustment related to our non-operated Eagle Ford operations.

On a per Boe basis, taxes other than income were $3.03 and $4.11 for the three months ended March 31, 2023 and 2022, respectively.

The change in taxes other than income on a per Boe basis was primarily due to the decrease in commodity prices and lower production.

DD&A expense was $5.8 million and $5.6 million for the three months ended March 31, 2023 and 2022, respectively.

The change in DD&A expense was primarily due to a decrease of approximately $0.3 million in the change of production offset by an increase of $0.5 million related to our depletion rate.

General and administrative expense was $8.5 million and $7.8 million for the three months ended March 31, 2023 and 2022, respectively.

The change in general and administrative expense was primarily related to (i) an increase of $0.5 million in salaries and other payroll benefits, (ii) an increase of $0.3 million in stock compensation expense, (iii) an increase of $0.2 million in professional services, partially offset by a decrease of $0.2 million in legal expense and a decrease of $0.2 million in accounting/audit services.

Net gain on commodity derivative instruments of $15.2 million were recognized for the three months ended March 31, 2023, consisting of a $17.9 million increase in the fair value of open positions offset by $2.7 million of cash settlements paid on expired positions.

Net loss on commodity derivative instruments of $93.4 million was recognized for the three months ended March 31, 2022, consisting of a $62.5 million decrease in the fair value of open positions and $30.9 million of cash settlements paid on expired positions.

The change in commodity derivative instruments is primarily related to the rolling off of out-of-the-money commodity hedges.

Pipeline incident loss was $8.3 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

On a per Boe basis, taxes other than income were $2.86 and $4.38 for the six months ended June 30, 2023 and 2022, respectively.

DD&A expense was $12.9 million and $11.5 million for the six months ended June 30, 2023 and 2022, respectively.

The change in DD&A expense was primarily due to a decrease in production of 23 MBoe, which equates to a decrease of $0.1 million in the change in production offset by an increase of $1.5 million in the change in our depletion rate.

General and administrative expense was $16.3 million and $16.4 million for the six months ended June 30, 2023 and 2022, respectively.

The change in general and administrative expenses was primarily related to (i) an increase of $0.6 million in salaries and other payroll benefits, and (ii) an increase of $0.8 million in stock compensation expense, offset by a (i) a decrease of $0.4 million in professional services, and (ii) a decrease of $1.1 million in legal expense.

Net gain on commodity derivative instruments of $19.0 million were recognized for the six months ended June 30, 2023, consisting of a $20.1 million increase in the fair value of open positions partially offset by $1.2 million of cash settlements paid on expired positions.

Net loss on commodity derivative instruments of $112.0 million was recognized for the six months ended June 30, 2022, consisting of a $32.4 million decrease in the fair value of open positions and $79.5 million of cash settlements paid on expired positions.

Pipeline incident loss was $15.1 million and $5.7 million for the six months ended June 30, 2023 and 2022, respectively.

The costs reflect certain expenses that are not expected to be recovered under an insurance policy.

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Financial Statements” of this quarterly report for additional information.

Litigation settlement was $84.9 million for the three months ended March 31, 2023, related to the settlement with the shipping companies related to the containerships’ anchor strikes of the Company’s pipeline.

Litigation settlement was $84.9 million for the six months ended June 30, 2023, related to the settlement with the shipping companies related to the containerships’ anchor strikes of the Company’s pipeline.

See additional information discussed in Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

Interest expense, net was $5.7 million and $2.4 million for the three months ended March 31, 2023 and 2022, respectively.

Interest expense included $0.5 million and $0.1 million for the amortization and write-off of deferred financing fees for the three months ended March 31, 2023 and 2022, respectively.

In addition, we had an increase of $2.5 million in interest expense due to higher interest rates on our Revolving Credit Facility.

Average outstanding borrowings under our Revolving Credit Facility were $192.4 million and $228.1 million for the three months ended March 31, 2023 and 2022, respectively.

Current income tax expense was $12.5 million for the three months ended March 31, 2023.

This is the estimated current federal and state income tax expense for the year.

No litigation settlement was recorded for the six months ended June 30, 2022.

Interest expense, net was $9.4 million and $5.5 million for the six months ended June 30, 2023 and 2022, respectively.

We had an increase of $2.7 million in interest expense due to higher interest rates offset by lower debt outstanding, an increase of $0.4 million in the amortization and write-off of debt issuance costs, and a change of $0.8 million in the change in interest rate swaps.

Average outstanding borrowings under our Revolving Credit Facility were $157.9 million and $223.7 million for the six months ended June 30, 2023 and 2022, respectively.

Current income tax benefit (expense) was ($5.7) million for the six months ended June 30, 2023.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

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

Deferred income tax benefit was $259.5 million for the three months ended March 31 2023.

This is related to the release of our valuation allowance due to a three-year cumulative book income.

No current income tax expense was recorded for the six months ended June 30, 2022.

Deferred income tax benefit (expense) was $259.4 million for the six months ended June 30, 2023.

Starting in the first quarter of 2023, we achieved three years of cumulative income which allowed the release of the valuation allowance.

See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

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

No deferred income tax benefit was recorded for the six months ended June 30, 2022.

Adjusted EBITDA

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For the Three Months Ended

For the Six Months Ended

(In thousands)

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Bad debt expense

LOPI - timing difference

Adjusted EBITDA

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For the Three Months Ended

For the Six Months Ended

(In thousands)

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Acquisition and divestiture related expenses

LOPI - timing difference

Adjusted EBITDA

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As we pursue reserve and production growth, we plan to monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements.

Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our Revolving Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2023 development activities.

Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our New Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2023 development activities.

However, future cash flows are subject to a number of variables, including the level of our oil and natural gas production and the prices we receive for our oil and natural gas production, and significant additional capital expenditures will be required to more fully develop our properties.

We cannot assure you that operations and other needed capital will be available on acceptable terms, or at all.

For the remainder of 2023, we expect our primary funding sources to be from internally generated cash flow, borrowings under our Revolving Credit Facility, and equity and debt capital markets.

For the remainder of 2023, we expect our primary funding sources to be from internally generated cash flow, borrowings under our New Credit Facility, and equity and debt capital markets.

Impact of the Southern California Pipeline Incident.

We have incurred and will continue to incur certain costs as a result of the Incident.

In addition, although the Company has returned the Beta Field to production and initial production rates have exceeded Company forecasts, the full impact to production from the prolonged shut-in remains uncertain and may have a material adverse impact on our business, results of operations and financial condition.

We carry customary insurance policies, which have covered a material portion of the aggregate costs, including LOPI insurance, to offset loss of revenue resulting from suspended operations in Southern California.

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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 release during the three months ended March 31, 2023 was a tax benefit of $269.5 million.

The three months ended March 31, 2023 marked the first time that we had achieved three years of cumulative income.

Furthermore, management determined that our 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 our assessment, during the quarter ended June 30, 2023, we released substantially all of our valuation allowance previously recorded.

The result of the valuation allowance release during the six months ended June 30, 2023 was a tax benefit of $279.3 million.

Capital Expenditures.

Our total capital expenditures were approximately $9.0 million for the three months ended March 31, 2023, which were primarily related to capital workovers and facilities upgrades located in Oklahoma and California and non-operated drilling and completion activities in the Eagle Ford.

Our total capital expenditures were approximately $16.9 million for the six months ended June 30, 2023, which were primarily related to capital workovers and facilities upgrades located in Oklahoma and California and non-operated drilling and completion activities in the Eagle Ford.

Working Capital.

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We expect that our future working capital requirements will be impacted by these same factors.

As of March 31, 2023, we had a working capital deficit of $17.1 million primarily due to short-term derivatives of $3.1 million, accrued liabilities of $66.6 million, revenues payable of $20.3 million, and accounts payable of $21.7 million, partially offset by accounts receivable of $66.0 million, prepaid expenses of $16.0 million and cash on hand of $12.8 million.

As of June 30, 2023, we had a working capital deficit of $12.7 million primarily due to accrued liabilities of $55.4 million, revenues payable of $21.5 million, accounts payable of $23.4 million and short-term derivatives of $0.7 million, partially offset by accounts receivable of $63.0 million, prepaid expenses of $23.5 million and cash on hand of $1.9 million.

Debt Agreement

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On November 2, 2018, OLLC, as borrower, entered into the Revolving Credit Facility (as amended and supplemented to date).

KeyBank serves as the administrative agent.

Our borrowing base under our Revolving Credit Facility is subject to redetermination on at least a semi-annual basis primarily based on a reserve engineering report.

As of March 31, 2023 we had approximately $70.0 million of available borrowings under our Revolving Credit Facility.

As of March 31, 2023, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with our Revolving Credit Facility.

For additional information regarding our Revolving Credit Facility, see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

KeyBank National Association serves as the administrative agent.

On July 31, 2023, OLLC and Acquisitionco entered into the New Credit Facility.

The New Credit Facility is a replacement in full of the Revolving Credit Facility.

The aggregate principal amount of loans outstanding under the New Credit Facility as of July 31, 2023, was $120.0 million.

The initial borrowing base under the facility is $150.0 million, with elected commitments of $135.0 million, and, consistent with the prior Revolving Credit Facility, the New Credit Facility borrowing base will be redetermined on a semi-annual basis with the next redetermination expected to occur in the fourth quarter of 2023.

For additional information regarding our Revolving Credit Facility and New Credit Facility, see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

Financial Statements” of this quarterly report.

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We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for our offshore Southern California production facilities.

As of March 31, 2023, our future commitment under this agreement were $6.0 million for the remaining of 2023, and $15.8 million a year for years 2024 through 2033.

As of June 30, 2023, our future commitment under this agreement were $4.0 million for the remaining of 2023, and $15.8 million a year for years 2024 through 2033.

See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1.

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The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated.

The cash flows for the three months ended March 31, 2023 and 2022 have been derived from our Unaudited Condensed Consolidated Financial Statements.

The cash flows for the six months ended June 30, 2023 and 2022 have been derived from our Unaudited Condensed Consolidated Financial Statements.

For information regarding the individual components of our cash flow amounts, see our Unaudited Condensed Consolidated Statements of Cash Flows included under “Item 1.

Financial Statements” of this quarterly report.

For the Three Months Ended

For the Six Months Ended

(In thousands)

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Key drivers of net operating cash flows are commodity prices, production volumes and operating costs.

Net cash provided by operating activities was $90.3 million and $9.7 million for the three months ended March 31, 2023 and 2022, respectively.

Production volumes were approximately 19.4 MBoe/d and 20.4 MBoe/d for the three months ended March 31, 2023 and 2022, respectively.

The average realized sales price was $37.99 per Boe and $51.10 per Boe for the three months ended March 31, 2023 and 2022, respectively.

Net cash provided by operating activities was $95.2 million and $30.4 million for the six months ended June 30, 2023 and 2022, respectively.

Production volumes were approximately 20.3 MBoe/d and 20.4 MBoe/d for the six months ended June 30, 2023 and 2022, respectively.

The average realized sales price was $36.40 per Boe and $55.95 per Boe for the six months ended June 30, 2023 and 2022, respectively.

The change in average realized sales price was primarily due to the decrease in commodity prices.

Net cash provided by operating activities for the three months ended March 31, 2023 included $2.7 million of cash paid on expired commodity derivative instruments compared to $30.9 million of cash paid on expired commodity derivatives for the three months ended March 31, 2022.

For the three months ended March 31, 2023, we had net gains on commodity derivative instruments of $15.2 million compared to net losses of $93.4 million for the three months ended March 31, 2022.

Net cash provided by operating activities for the six months ended June 30, 2023 included $1.2 million of cash paid on expired commodity derivative instruments compared to $79.5 million of cash paid on expired commodity derivatives for the six months ended June 30, 2022.

For the six months ended June 30, 2023, we had net gains on commodity derivative instruments of $19.0 million compared to net losses of $112.0 million for the six months ended June 30, 2022.

Investing Activities.

Net cash used in investing activities for the three months ended March 31, 2023 was $10.4 million, of which $8.2 million was used for additions to oil and natural gas properties.

Net cash provided by investing activities for the three months ended March 31, 2022 was $7.8 million, of which $5.2 million was used for additions to oil and natural gas properties.

Net cash used in investing activities for the six months ended June 30, 2023 was $21.1 million, of which $16.8 million was used for additions to oil and natural gas properties.

Net cash provided by investing activities for the six months ended June 30, 2022 was $16.9 million, of which $12.9 million was used for additions to oil and natural gas properties.

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our offshore Southern California properties.

Additions to restricted investments were $2.1 million and $2.7 million during the three months ended March 31, 2023 and 2022, respectively.

Additions to restricted investments were $4.2 million and $4.0 million during the six months ended June 30, 2023 and 2022, respectively.

Financing Activities .

We had net repayments of $65.0 million and $5.0 million for the three months ended March 31, 2023 and 2022, respectively, related to our Revolving Credit Facility.

We had net repayments of $70.0 million and $15.0 million for the six months ended June 30, 2023 and 2022, respectively, related to our Revolving Credit Facility.

Off–Balance Sheet Arrangements

As of March 31, 2023, we had no off–balance sheet arrangements.

As of June 30, 2023, we had no off–balance sheet arrangements.

Recently Issued Accounting Pronouncements

4 unchanged sentences

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 2. Management’s Discussion and Analysis