What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-08 · 125 added, 88 removed, 617 unchanged (26% of the section changed)

3 unchanged sentences

(In thousands, except outstanding shares)

September 30,

Current assets:

21 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 June 30, 2023 and December 31, 2022

no shares issued and outstanding at September 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value:

250,000,000 shares authorized;

38,971,426 and 38,459,731 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

39,062,856 and 38,459,731 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

4 unchanged sentences

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Oil and natural gas sales

10 unchanged sentences

Pipeline incident loss

Pipeline incident settlement

Total costs and expenses

21 unchanged sentences

(In thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

4 unchanged sentences

Cash settlements (paid) received on expired derivative instruments

Cash settlements received (paid) on terminated derivative instruments

Deferred income tax expense (benefit)

37 unchanged sentences

Balance at June 30, 2023

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2023

Stockholders' Equity (Deficit)

9 unchanged sentences

Balance at June 30, 2022

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2022

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

40 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Accordingly, the Company’s contracts do not give rise to contract assets or liabilities.

Accounts receivable attributable to the Company’s revenue contracts with customers was $ 29.7 million at June 30, 2023 and $ 35.1 million at December 31, 2022.

Accounts receivable attributable to the Company’s revenue contracts with customers was $ 31.9 million at September 30, 2023 and $ 35.1 million at December 31, 2022.

Fair Value Measurements of Financial Instruments

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The carrying values of accounts receivables, accounts payables (including accrued liabilities), restricted investments and amounts outstanding under long-term debt agreements with variable rates included in the accompanying Unaudited Condensed Consolidated Balance Sheets approximated fair value at June 30, 2023 and December 31, 2022.

The fair value estimates are based upon observable market data and are classified within Level 2 of the fair value hierarchy.

1 unchanged sentence

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair market values of the derivative financial instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 were based on estimated forward commodity prices.

The fair market values of the derivative financial instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets as of September 30, 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 June 30, 2023 and December 31, 2022 for each of the fair value hierarchy levels:

Fair Value Measurements at June 30, 2023

The following tables present the gross derivative assets and liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 for each of the fair value hierarchy levels:

Fair Value Measurements at September 30, 2023

Quoted Prices in

35 unchanged sentences

The unobservable inputs used to determine fair value include, but are not limited to, estimates of proved reserves, estimates of probable reserves, future commodity prices, the timing of future production and capital expenditures and a discount rate commensurate with the risk reflective of the lives remaining for the respective oil and natural gas properties (some of which are Level 3 inputs within the fair value hierarchy).

● No impairment expense was recorded on proved oil and natural gas properties during the three and six months ended June 30, 2023 and 2022.

● No impairment expense was recorded on proved oil and natural gas properties during the three and nine months ended September 30, 2023 and 2022.

Risk Management and Derivative Instruments

10 unchanged sentences

The terms of the ISDA Agreements provide the Company and each of its counterparties with rights of set-off upon the occurrence of defined acts of default by either the Company or its counterparty to a derivative, whereby the party not in default may set-off all liabilities owed to the defaulting party against all net derivative asset receivables from the defaulting party.

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

See Note 7 for additional information regarding the Company’s Revolving Credit Facility.

Commodity Derivatives

5 unchanged sentences

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

At June 30, 2023, the Company had the following open commodity positions:

At September 30, 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:

19 unchanged sentences

The following table summarizes both:

(i) the gross fair value of derivative instruments by the appropriate balance sheet classification even when the derivative instruments are subject to netting arrangements and qualify for net presentation in the balance sheet and (ii) the net recorded fair value as reflected on the balance sheet at June 30, 2023 and December 31, 2022.

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

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

Balance Sheet Location

18 unchanged sentences

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 Net Income.

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.

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 Six Months Ended

For the Nine Months Ended

Statements of

September 30,

Operations Location

5 unchanged sentences

The Company’s asset retirement obligations primarily relate to the Company’s portion of future plugging and abandonment costs for wells and related facilities.

The following table presents the changes in the asset retirement obligations for the six months ended June 30, 2023 (in thousands):

The following table presents the changes in the asset retirement obligations for the nine months ended September 30, 2023 (in thousands):

Asset retirement obligations at beginning of period

11 unchanged sentences

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

September 30,

(In thousands)

2 unchanged sentences

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

Revolving Credit Facility

OLLC, the Company’s wholly owned subsidiary, was a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $ 180.0 million as of June 30, 2023, which was guaranteed by the Company and all of its current subsidiaries.

The Revolving Credit Facility would have matured on May 31, 2024 .

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

As of June 30, 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.

Amended and Restated Credit Agreement

Subsequent Events .

On July 31, 2023, OLLC and Amplify Acquisitionco LLC (“Acquisitionco”), as the direct parent of OLLC and wholly owned subsidiary of the Company, amended and restated the Revolving Credit Facility with Keybanc Capital Markets Inc., Cadence Bank, N.A.

1 unchanged sentence

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 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.

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

The aggregate principal amount of loans outstanding under the New Credit Facility as of September 30, 2023, was $ 120.0 million.

The 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.

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

4 unchanged sentences

● 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;

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

● Certain events of default, including, without limitation:

1 unchanged sentence

● Initial minimum hedging requirements covering 75 % of the reasonably projected 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.

As of September 30, 2023, the Company was in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with its New Credit Facility.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 19, 2023, the Company completed the fall 2023 borrowing base redetermination, which reaffirmed the borrowing base of $ 150.0 million with elected commitments of $ 135.0 million.

The next redetermination is expected to occur in the second quarter of 2024.

Revolving Credit Facility

Prior to the New Credit Facility, OLLC had a reserve-based Revolving Credit Facility with a borrowing base of $ 180.0 million when such Revolving Credit Facility was replaced with the New Credit Facility.

The Revolving Credit Facility was guaranteed by the Company and all of its current subsidiaries and would have matured on May 31, 2024 .

Weighted-Average Interest Rates

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revolving Credit Facility

Letters of Credit

At June 30, 2023, the Company had no letters of credit outstanding.

At September 30, 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 $ 0.8 million at June 30, 2023.

For the six months ended June 30, 2023, the Company wrote-off $ 0.3 million of deferred financing costs in connection with the decrease in the Company’s borrowing base.

Unamortized deferred financing costs associated with the Company’s Revolving Credit Facility was $ 4.5 million at September 30, 2023.

For the nine months ended September 30, 2023, the Company wrote off $ 1.0 million of deferred financing costs in connection with the refinancing of the Revolving Credit Facility.

The Company’s authorized capital stock includes 250,000,000 shares of common stock, $ 0.01 par value per share.

The following is a summary of the changes in the Company’s common stock issued for the six months ended June 30, 2023:

The following is a summary of the changes in the Company’s common stock issued for the nine months ended September 30, 2023:

Balance, December 31, 2022

2 unchanged sentences

Shares withheld for taxes (1)

Balance, June 30, 2023

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

Balance, September 30, 2023

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

AMPLIFY ENERGY CORP.

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

7 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”) was replaced by the EIP and no further awards will be allowed to be granted under the Legacy Amplify MIP.

As of June 30, 2023, an aggregate of 932,675 shares were available for future grants under the EIP.

As of September 30, 2023, an aggregate of 831,546 shares were available for future grants under the EIP.

Restricted Stock Units

3 unchanged sentences

Compensation costs are recorded as general and administrative expense.

The unrecognized cost associated with the TSUs was $ 6.0 million at June 30, 2023.

The unrecognized cost associated with the TSUs was $ 5.7 million at September 30, 2023.

The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.1 years.

5 unchanged sentences

TSUs outstanding at December 31, 2022

TSUs outstanding at June 30, 2023

TSUs outstanding at September 30, 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 six months ended June 30, 2023 was $ 4.8 million based on a grant-date market price ranging from $ 6.52 to $ 8.91 per share.

(2) The aggregate grant-date fair value of TSUs issued for the nine months ended September 30, 2023 was $ 5.6 million based on a grant-date market price ranging from $ 6.52 to $ 8.91 per share.

Restricted Stock Units with Market and Service Vesting Conditions

5 unchanged sentences

Compensation costs are recorded as general and administrative expense.

The unrecognized cost associated with these awards was $ 2.9 million at June 30, 2023.

The unrecognized cost associated with these awards was $ 2.6 million at September 30, 2023.

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

23 unchanged sentences

PSUs and PRSUs outstanding at December 31, 2022

PSUs and PRSUs outstanding at June 30, 2023

PSUs and PRSUs outstanding at September 30, 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 six months ended June 30, 2023 was $ 3.4 million based on a calculated fair value price ranging from $ 1.27 to $ 15.04 per share.

(2) The aggregate grant-date fair value of PRSUs issued for the nine months ended September 30, 2023 was $ 3.4 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 Net Income for the periods presented (in thousands):

The following table summarizes the amount of recognized compensation expense associated with the EIP, which are reflected in the accompanying Unaudited Condensed Consolidated Statements of Operations for the periods presented (in thousands):

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Equity classified awards

6 unchanged sentences

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

For the quarter ended June 30, 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.

For the quarter ended September 30, 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.

AMPLIFY ENERGY CORP.

4 unchanged sentences

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

For the six months ended June 30, 2023 and 2022, the Company recognized approximately $ 1.1 million and $ 0.7 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Net Income.

For the nine months ended September 30, 2023 and 2022, the Company recognized approximately $ 1.6 million and $ 1.1 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Operations.

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

For the Six Months Ended

For the Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

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

September 30,

(In thousands)

12 unchanged sentences

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

September 30,

Weighted average remaining lease term (years):

7 unchanged sentences

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

September 30,

Accrued liability - pipeline incident

8 unchanged sentences

Asset retirement obligations

Accrued interest payable

Accrued liabilities

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

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

September 30,

Oil and natural gas receivables

4 unchanged sentences

Total accounts receivable, net

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Cash Flows

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

For the Six Months Ended

For the Nine Months Ended

September 30,

Supplemental cash flows:

5 unchanged sentences

Related Party Agreements

There have been no transactions between the Company and any related person in which the related person had a direct or indirect material interest for the three and six months ended June 30, 2023 and 2022.

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, 2023 and 2022.

Commitments and Contingencies

2 unchanged sentences

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

At June 30, 2023 and December 31, 2022, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet.

At September 30, 2023 and December 31, 2022, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Southern California Pipeline Incident

6 unchanged sentences

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 June 30, 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.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2023, the Company recorded $ 2.0 million in “Accrued liability – pipeline incident” and $ 1.1 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 June 30, 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 agreed to pay the Company $ 96.5 million in a settlement.

13 unchanged sentences

To the extent the Company did not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGLs, it was required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee.

The commitment fee expense for the six months ended June 30, 2023 and 2022 was approximately $ 0.3 million and $ 1.1 million, respectively.

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

The commitment fee expense for the nine months ended September 30, 2023 and 2022 was approximately $ 0.3 million and $ 1.5 million, respectively.

The minimum volume commitment for the Oklahoma properties ended on June 30, 2023.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sinking Fund Trust Agreement

3 unchanged sentences

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

As of June 30, 2023, the account balance included in restricted investments was approximately $ 4.4 million.

As of September 30, 2023, the account balance included in restricted investments was approximately $ 4.4 million.

Supplemental Bond for Decommissioning Liabilities Trust Agreement

1 unchanged sentence

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2023, the Company has funded $ 11.2 million into the escrow accounts which is reflected in “Restricted investments” on the Unaudited Condensed Consolidated Balance Sheet.

As of September 30, 2023, the Company has funded $ 13.0 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.

4 unchanged sentences

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

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

The three months ended March 31, 2023 marked the first time that the Company had 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, the Company released substantially all of its valuation allowance previously recorded.

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

The Company’s current income tax benefit (expense) was $ 6.9 million and ($ 5.7 ) million for the three and six months ended June 30, 2023, respectively.

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

The Company’s deferred income tax benefit (expense) was less than ($ 0.1 ) million and $ 259.4 million for the three and six months ended June 30, 2023, respectively.

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

The effective tax rates for the three and six months ended June 30, 2023 were ( 226.0 %) and ( 233.2 %), respectively.

The effective tax rate was 0 % for the three and six months ended June 30, 2022.

The result of the valuation allowance release for the nine months ended September 30, 2023 was a tax benefit of $ 278.8 million.

The Company’s current income tax (expense) benefit was ($ 1.4 ) million and ($ 7.1 ) million for the three and nine months ended September 30, 2023, respectively.

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

The Company’s deferred income tax benefit (expense) was $ 4.7 million and $ 264.1 million for the three and nine months ended September 30, 2023, respectively.

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

The effective tax rates for the three and nine months ended September 30, 2023 were 19.6 % and ( 278.9 %), respectively.

The effective tax rate was 0 % for the three and nine months ended September 30, 2022.

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 and six months ended June 30, 2023 was the release of the valuation allowance.

federal income tax rate of 21 % and the effective tax rate for the three and nine months ended September 30, 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 and six months ended June 30, 2022, was primarily due to our recorded valuation allowances.

federal income tax rate of 21 % and the effective tax rate for the three and nine months ended September 30, 2022, was primarily due to our recorded valuation allowances.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Southern California Pipeline Incident

3 unchanged sentences

Coast Guard and California Department of Fish and Wildlife’s Office of Spill Prevention and Response, was established to respond to the Incident.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 5, 2021, the Unified Command announced that reports from its contracted commercial divers and Remotely Operated Vehicle footage indicated that a 4,000 -foot section of the Company’s pipeline had been displaced with a maximum lateral movement of approximately 105 feet and that the pipeline had a 13 -inch split, running parallel to the pipe.

24 unchanged sentences

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 paid 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.

43 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.

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 $ 190.0 million to $ 210.0 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.

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 $ 190.0 million to $ 210.0 million, which includes (i) actual and projected response and remediation under the direction of the Unified Command, (ii) 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 Net Income, 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 Operations, these estimates are subject to uncertainties associated with the underlying assumptions.

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

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

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

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, including regulatory 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 operations at Beta.

In accordance with customary insurance practice, the Company maintains insurance policies, including LOPI 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 June 30, 2023, and December 31, 2022, the Company’s insurance receivables were $ 30.4 million and $ 42.0 million, respectively.

Excluding the costs associated with the resolution of the federal and state matters discussed above, for the six months ended June 30, 2023, the Company incurred response and remediation expenses and legal fees of $ 29.5 million.

On September 30, 2023, and December 31, 2022, the Company’s insurance receivables were $ 12.9 million and $ 42.0 million, respectively.

Excluding the costs associated with the resolution of the federal and state matters discussed above, for the nine months ended September 30, 2023, the Company incurred response and remediation expenses and legal fees of $ 26.7 million.

Of these costs, the Company has received, or expects that it is probable that it will receive, $ 11.1 million in insurance recoveries.

The remaining amount of $ 15.1 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 six months ended June 30, 2023, the Company received $ 26.0 million in insurance recoveries.

Additionally, during the six months ended June 30, 2023, the Company recognized $ 17.9 million related to approved LOPI insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Net Income.

The remaining amount of $ 15.6 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 Operations.

For the nine months ended September 30, 2023, the Company received $ 40.1 million in insurance recoveries.

Additionally, during the nine months ended September 30, 2023, the Company recognized $ 17.9 million related to approved LOPI insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Operations.

AMPLIFY ENERGY CORP.

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Subsequent Events

Amended and Restated Credit Agreement

See Note 7 for additional information relating to the Company’s refinancing of its Revolving Credit Facility.

Borrowing Base Redetermination

See Note 7 for additional information relating to the Company’s borrowing base redetermination.

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