What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-06 · 168 added, 285 removed, 457 unchanged (50% 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

7 unchanged sentences

Accrued liabilities (see Note 12)

Short-term derivative instruments

Total current liabilities

1 unchanged sentence

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, 2023 and December 31, 2022

no shares issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.01 par value:

250,000,000 shares authorized;

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

39,612,030 and 39,147,205 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

7 unchanged sentences

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

21 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

Cash settlements received (paid) on terminated derivative instruments

Deferred income tax expense (benefit)

1 unchanged sentence

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

13 unchanged sentences

Balance at March 31, 2024

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at June 30, 2023

Net income (loss)

Share-based compensation expense

Shares withheld for taxes

Balance at September 30, 2023

Stockholders' Equity (Deficit)

4 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

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

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4 unchanged sentences

(“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.

The Company operates in one reportable segment that is engaged in the acquisition, development, exploitation and production of oil and natural gas properties.

The Company’s management evaluates performance based on one reportable business segment as there are not different economic environments within the operation of the Company’s oil and natural gas properties.

The Company’s assets consist primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (“Bairoil”), federal waters offshore Southern California (“Beta”), East Texas/North Louisiana and the Eagle Ford (non-op).

Most of the Company’s oil and natural gas properties are located in large, mature oil and natural gas reservoirs.

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

32 unchanged sentences

For the Three 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 $ 31.9 million at September 30, 2023 and $ 35.1 million at December 31, 2022.

Accounts receivable attributable to the Company’s revenue contracts with customers were $ 31.6 million at March 31, 2024 and $ 31.1 million at December 31, 2023.

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 September 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 September 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 March 31, 2024 and December 31, 2023 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, 2023 and December 31, 2022 for each of the fair value hierarchy levels:

Fair Value Measurements at September 30, 2023

The following tables present the gross derivative assets and liabilities that are measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023 for each of the fair value hierarchy levels:

Fair Value Measurements at March 31, 2024

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 nine months ended September 30, 2023 and 2022.

● No impairment expense was recorded on proved oil and natural gas properties during the three months ended March 31, 2024 and 2023.

Risk Management and Derivative Instruments

4 unchanged sentences

Credit risk is the risk of loss from nonperformance by the counterparty to a contract.

It is the Company’s policy to enter into derivative contracts only with creditworthy counterparties, which generally are financial institutions, deemed by management as competent and competitive market makers.

It is the Company’s policy to enter into derivative contracts only with creditworthy counterparties, which are generally financial institutions, deemed by management as competent and competitive market makers.

Some of the lenders, or certain of their affiliates, under the Company’s current credit agreements are counterparties to its derivative contracts.

3 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.

As a result, had certain counterparties failed completely to perform according to the terms of the existing contracts, the Company would have the right to offset $ 7.6 million against amounts outstanding under our Revolving Credit Facility at March 31, 2024.

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

6 unchanged sentences

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

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

At March 31, 2024, the Company had the following open commodity positions:

Natural Gas Derivative Contracts:

16 unchanged sentences

Weighted-average ceiling price

Three-way collars

Average monthly volume (Bbls)

Weighted-average ceiling price

Weighted-average floor price

Weighted-average sub-floor price

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, 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

21 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

Statements of

September 30,

Operations Location

1 unchanged sentence

Loss (gain) on commodity derivatives

(Gain) loss on interest rate derivatives

Interest expense, net

Asset Retirement Obligations

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, 2023 (in thousands):

The following table presents the changes in the asset retirement obligations for the three months ended March 31, 2024 (in thousands):

Asset retirement obligations at beginning of period

11 unchanged sentences

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

September 30,

(In thousands)

3 unchanged sentences

Amended and Restated Credit Agreement

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.

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 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):

On July 31, 2023, OLLC and Amplify Acquisitionco LLC (“Acquisitionco”), as the direct parent of OLLC and wholly owned subsidiary of the Company, entered into the Amended and Restated Credit Agreement, providing for a senior secured reserve-based revolving credit facility.

The Revolving Credit Facility is guaranteed by the Company and all of its material subsidiaries and secured by substantially all of its assets.

The Revolving Credit Facility matures on July 31, 2027, and is a replacement in full of the prior Revolving Credit Facility by and among OLLC, Acquisitionco, the guarantors party thereto, the lenders party thereto and KeyBank National Association, as the administrative agent (as amended, the “Prior Revolving Credit Facility”).

The aggregate principal amount of loans outstanding under the Revolving Credit Facility as of March 31, 2024, was $ 115.0 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 Revolving Credit Facility borrowing base will be subject to redetermination on at least a semi-annual basis, primarily based on a reserve engineering report.

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

● A maturity date of July 31, 2027;

1 unchanged sentence

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;

● The unused commitments under the Revolving 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;

1 unchanged sentence

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 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.

● 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 Revolving Credit Facility (the “First Period”) and (ii) 50 % for the 12-month period immediately following the First Period.

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 .

As noted above, the Company is required to maintain a minimum current ratio of 1.00 to 1.00 , which is measured on the last day of each quarter.

On March 31, 2024, the Company’s current ratio was 0.98 to 1.00 .

On May 2, 2024, the Company received a letter agreement from its lenders waiving any default or event of default as a result of such noncompliance related to the minimum current ratio requirement for the quarter ended March 31, 2024.

As a result, the Company was in compliance with all financial covenants as of March 31, 2024.

Subsequent event.

On May 2, 2024, OLLC completed its spring 2024 borrowing base redetermination, which reaffirmed the borrowing base of $ 150.0 million with elected commitments of $ 135.0 million.

The next redetermination is expected in the fourth quarter of 2024.

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, 2023, the Company had no letters of credit outstanding.

At March 31, 2024, 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 $ 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.

Unamortized deferred financing costs associated with the Company’s Revolving Credit Facility were $ 4.1 million at March 31, 2024.

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, 2023:

The following is a summary of the changes in the Company’s common stock issued for the three months ended March 31, 2024:

Balance, December 31, 2023

2 unchanged sentences

Shares withheld for taxes (1)

Balance, September 30, 2023

Balance, March 31, 2024

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

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Earnings per Share

Earnings (Loss) per Share

The following sets forth the calculation of earnings (loss) per share, or EPS, for the periods indicated (in thousands, except per share amounts):

For the Three 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 granted under the Legacy Amplify MIP.

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

In May 2021, the shareholders approved a new Equity Incentive Plan (“EIP”) which replaced the Legacy Amplify Management Incentive Plan (the “Legacy Amplify MIP”).

As such, no further awards have been granted under the Legacy Amplify MIP.

In April 2024, the board of directors of the Company (the “Board”) approved and adopted the Amplify Energy Corp.

2024 Equity Incentive Plan (the “2024 Plan”), subject to stockholder approval at the Company’s Annual Meeting of Stockholders to be held on May 15, 2024.

EIP awards are, and, under the Legacy Amplify MIP, were, granted in the form of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, stock awards and other incentive awards.

To the extent that an award under the EIP or Legacy Amplify MIP is expired, forfeited or canceled for any reason without having been exercised in full, the unexercised award would then be available again for future grants under the EIP.

The EIP is administered by the Board.

Restricted Stock Units

Restricted Stock Units with Service Vesting Condition

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

Restricted stock units with service vesting conditions (“TSUs”) are accounted for as either equity-classified awards or liability-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 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.

Compensation costs for equity-classified awards are recorded as general and administrative expense.

The fair value of liability-classified awards is determined on a quarterly basis beginning at the grant date until final vesting.

Changes in the fair value of liability-classified awards are recorded to general administrative expense and are remeasured at fair value each reporting period.

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:

The Company granted contingent cash-settlement awards in the form of TSUs (the “Contingent TSUs”) under the EIP in February 2024 that will be settled in shares of stock, subject to stockholder approval of the 2024 Plan.

In the event the Company’s stockholders do not approve the 2024 Plan, the Contingent TSUs will be settled in cash pursuant to the terms of the applicable award agreement.

The Contingent TSUs are accounted for as liability-classified awards and vest in substantially equal installments over a three-year period.

The unrecognized cost associated with the TSUs was $ 7.8 million at March 31, 2024.

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

Of the unrecognized share-based compensation expense for TSUs, $ 4.1 million relates to liability-classified awards and will be subsequently remeasured at each reporting period.

The Company recognized $ 0.3 million in liability-classified share-based compensation expense at March 31, 2024 for the Contingent TSUs.

The following table summarizes information regarding the TSUs activity for the period presented:

Average Grant-

1 unchanged sentence

TSUs outstanding at December 31, 2023

TSUs outstanding at September 30, 2023

TSUs outstanding at March 31, 2024 (3)

(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, 2023 was $ 5.6 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 three months ended March 31, 2024 was $ 4.3 million based on a grant-date market price of $ 6.09 per share.

(3) As of March 31, 2024, 709,402 of the unvested TSUs were accounted for as liability awards in “accrued liabilities” in the Unaudited Condensed Consolidated Balance sheet.

Restricted Stock Units with Market and Service Vesting Conditions

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

Restricted stock units with market and service vesting conditions (“PSUs”) are accounted for as either equity-classified or liability-classified awards.

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

2 unchanged sentences

The Company accounts for forfeitures as they occur.

Compensation costs are recorded as general and administrative expense.

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.

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.

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.

Vesting of PSUs can range from zero to 200 % of the target awards 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.

The 2022 and 2023 PSU awards are accounted for as equity-classified awards and 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 Company granted contingent cash-settlement awards in the form of PSUs (the “Contingent PSUs”) in February 2024 that will be settled in shares of stock, subject to stockholder approval of the 2024 Plan.

In the event the Company’s stockholders do not approve the 2024 Plan, the Contingent PSUs will be settled in cash pursuant to the terms of the applicable award agreement.

The Contingent PSUs are accounted for as liability-classified awards and 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 Contingent PSUs is January 1, 2024 through December 31, 2026.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Compensation costs related to the awards are recorded as general and administrative expense.

The unrecognized cost associated with these awards was $ 4.3 million at March 31, 2024.

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

Of the unrecognized share-based compensation expense, $ 2.3 million relates to liability-classified awards and will be subsequently remeasured at each reporting period.

The Company recognized $ 0.2 million in liability-classified share-based compensation expense at March 31, 2024 for the Contingent PSUs.

The below table reflects the ranges for the assumptions used in the Monte Carlo model for the Contingent PSU awards:

February 2024

2 unchanged sentences

Risk-free interest rate

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

The following table summarizes information regarding the PSUs activity for the period presented:

Average Grant-

Date Fair Value

PSUs and PRSUs outstanding at December 31, 2022

PSUs and PRSUs outstanding at September 30, 2023

PSUs outstanding at December 31, 2023

PSUs outstanding at March 31, 2024 (3)

(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, 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 PSUs issued for the three months ended March 31, 2024 was $ 2.6 million based on a calculated fair value price ranging from $ 2.63 to $ 9.18 per share.

(3) As of March 31, 2024, 269,897 of the unvested PSUs were accounted for as liability awards in “accrued liabilities” in the Unaudited Condensed Consolidated Balance sheet.

Compensation Expense

1 unchanged sentence

For the Three Months Ended

For the Nine Months Ended

September 30,

Equity classified awards

PSUs and PRSUs

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.

In addition, the Company has offshore Southern California pipeline right-of-way use agreements.

Share-based compensation costs

Share-based compensation - equity awards

Share-based compensation - liability awards

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has leases for office space, warehouse space and equipment in its corporate office and operating regions as well as vehicles, compressors and surface rentals related to its business operations.

In addition, the Company has right-of-way leases to operate the San Pedro Bay Pipeline.

Most of the Company’s leases, other than its corporate office lease, have an initial term and may be extended on a month-to-month basis after expiration of the initial term.

2 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, 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the quarter ended March 31, 2024, 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.

To determine the present value of the lease payments, the Company uses its incremental borrowing rate based on the information available at the inception date.

To determine the present value of the lease payments, the Company uses an incremental borrowing rate based on the information available at the inception date.

To determine the incremental borrowing rate, the Company applies a portfolio approach based on the applicable lease terms and the current economic environment.

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

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.

For the three months ended March 31, 2024 and 2023, the Company recognized approximately $ 0.5 million and $ 0.5 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 Nine Months Ended

September 30,

For the Three Months Ended

(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)

4 unchanged sentences

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):

3 unchanged sentences

Present value of lease liabilities

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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):

2 unchanged sentences

Weighted average discount rate:

Office leases

Office and warehouse space

Office equipment

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows

1 unchanged sentence

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

September 30,

Accrued liability - pipeline incident

Accrued lease operating expense

Accrued current income taxes

Accrued liability - pipeline incident

Accrued liability - current portion of pipeline incident settlement

5 unchanged sentences

Asset retirement obligations

Accrued current income tax payable

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

6 unchanged sentences

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 taxes

Noncash investing and financing activities:

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

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, 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 months ended March 31, 2024 and 2023.

Commitments and Contingencies

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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, 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

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.

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

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

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

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.

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

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

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

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.

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

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

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

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

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

The Company was party to a gas purchase, gathering and processing contract in Oklahoma, which included certain minimum NGL commitments.

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 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

Environmental costs for remediation are accrued based on estimates of known remediation requirements.

Such accruals are based on management’s best estimate of the ultimate cost to remediate a site and are adjusted as further information and circumstances develop.

Those estimates may change substantially depending on information about the nature and extent of contamination, appropriate remediation technologies and regulatory approvals.

Expenditures to mitigate or prevent future environmental contamination are capitalized.

Ongoing environmental compliance costs are charged to expense as incurred.

In accruing for environmental remediation liabilities, costs of future expenditures for environmental remediation are not discounted to their present value, unless the amount and timing of the expenditures are fixed or reliably determinable.

At March 31, 2024 and December 31, 2023, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet.

Beta Pipeline Incident

Please refer to “Note 16.

Beta Pipeline Incident” for details.

Sinking Fund Trust Agreement

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.

Beta Operating Company, LLC (“Beta LLC”), a wholly owned subsidiary, assumed an obligation with a third party to make payments into a sinking fund in connection with the Company’s 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.

Interest earned in the account stays in the account.

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

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

As of March 31, 2024, the account balance included in restricted investments was approximately $ 4.5 million.

Supplemental Bond for Decommissioning Liabilities Trust Agreement

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

Beta LLC has a decommissioning obligation with BOEM in connection with 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 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.

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 its deferred tax assets, the Company considers whether it is more likely than not that some portion of or all its deferred tax assets will not be realized.

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

As of each reporting date, management considers new evidence, both positive and negative, 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 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 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 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 nine months ended September 30, 2022, was primarily due to our recorded valuation allowances.

In March 2024, the Company amended one of the escrow funding agreements to decrease the amount funded from $ 14.8 million per year to $ 8.0 million per year.

There were no changes made to the second escrow agreement.

The obligation for these agreements ceases when the total aggregate value of the escrow accounts reaches $ 172.6 million.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Southern California Pipeline Incident

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.

The below table outlines the updated funding commitment for these agreements at March 31, 2024 (in thousands):

Payment Due by Period

Funding commitment

Remaining 2024

Federal escrow fund payments

State escrow fund payments

Total sinking fund payments

As of March 31, 2024, the Company has funded $ 17.6 million into the escrow accounts which is reflected in “Restricted investments” on the Unaudited Condensed Consolidated Balance Sheet.

The Company’s current income tax expense was $ 1.4 million and $ 12.5 million for the three months ended March 31, 2024 and 2023, respectively.

The Company’s deferred income tax benefit was $ 4.7 million and $ 259.5 million for the three months ended March 31, 2024 and 2023, respectively.

The effective tax rates for the three months ended March 31, 2024 and 2023 were 26.0 % and ( 233.4 %), 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, 2024 was the weighted state accrual rate.

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, 2023 was the release of the valuation allowances.

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 its deferred tax assets, the Company considers whether it is more likely than not that all of its deferred tax assets will be realized.

On December 31, 2023, the Company release all of its valuation allowance of $ 284.9 million, which increased net deferred tax assets as of such date .

Beta Pipeline Incident

On October 2, 2021, contractors operating under the direction of Beta LLC observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California.

Beta LLC platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan.

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

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

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.

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 was below the previously reported maximum estimate of 3,134 barrels.

On October 16, 2021, the U.S.

Coast Guard announced that it had identified the Mediterranean Shipping Company (DANIT) as a “vessel of interest” and its owner Dordellas Finance Corporation and operator Mediterranean Shipping Company, S.A.

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

On November 19, 2021, the U.S.

Coast Guard announced that it had identified the COSCO (Beijing) as another vessel involved in the Anchor Dragging Incident and named its owner Capetanissa Maritime Corporation of Liberia and its operator V.Ships Greece Ltd.

as parties in interest.

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

At the height of the Incident response, the Company deployed over 1,800 personnel working under the guidance and at the direction of the Unified Command to aid in cleanup operations.

As of October 14, 2021, all beaches that had been closed following the Incident have reopened.

On February 2, 2022, the Unified Command announced that response and monitoring efforts have officially concluded for the Incident, and Unified Command would stand down as of such date.

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 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.

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.

The indictment alleges that the Company committed a misdemeanor violation of the federal Clean Water Act for negligently discharging oil into the contiguous zone of the United States.

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

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.

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 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.

Reports from the Unified Command’s contracted commercial divers and Remotely Operated Vehicle footage indicated that a 4,000 -foot section of the Company’s pipeline had been displaced and that the pipeline had a 13 -inch split, running parallel to the pipe, releasing approximately 588 barrels of oil.

All operations were suspended and the pipeline was shut-in pending the Company’s receipt of the required regulatory approvals to restart operations, including but not limited to, approval of a written restart plan from the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), Office of Pipeline Safety.

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

Since such date, the pipeline has been operated in accordance with the restart procedures that were reviewed and approved by PHMSA.

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

To date, the U.S.

Coast Guard, the U.S.

Bureau of Ocean Energy Management, the U.S.

Department of Justice, PHMSA, the U.S.

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.

§ 180.800(a)(4).

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

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

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 has responded to that notice with the Company’s positions and is conferring with PHMSA regarding a resolution.

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.

On December 15, 2021, a federal grand jury in the Central District of California returned a federal criminal indictment against the Company, Beta LLC, and San Pedro Bay Pipeline Company in connection with the Incident.

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

The Company reached court-approved agreements to resolve all criminal matters stemming from the 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, and, agreed to 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.

Additionally, as part of the resolution with the state of California, the Company agreed to enter a plea of No Contest to six misdemeanor charges, and, as a result, 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, agreed to serve a one-year term of probation and 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 and may be subject to new investigations and proceedings in the future, the results of which may have a material impact on the Company’s business and results of operations and could put pressure on its liquidity position going forward.

With respect to PHMSA’s investigation, 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 has responded to the notice and is conferring with PHMSA regarding a resolution.

Amplify continues to comply with all regulatory requirements and investigations.

The outcomes of these investigations and the nature of any remedies pursued will depend on the discretion of the relevant authorities and may result in regulatory or other enforcement actions, as well as civil liability.

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.

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

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

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

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.

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.

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.

The Company, Beta 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, asserting claims against the Company, Beta LLC, San Pedro Bay Pipeline Company, among others.

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 agreed to pay the Company $ 96.5 million in a settlement.

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

The overall resolution included subrogation claims by Amplify’s property damage and LOPI insures, with Amplify ultimately receiving a net payment of approximately $ 85.0 million.

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

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

AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Court granted final approval of the settlement on April 24, 2023.

Separately, 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.

This settlement resolved Amplify’s affirmative claims related to the Incident, and as such, Amplify dismissed its legal claims against those parties.

Under the Oil Pollution Act of 1990, 33 U.S.C.

§ 2701 et seq.

(“OPA 90”), the Company’s pipeline was designated by the U.S.

Coast Guard as the source of the oil discharge and therefore the Company is financially responsible for remediation and for certain costs and economic damages as provided for in OPA 90, as well as certain natural resource damages associated with the spill and certain costs determined by federal and state trustees engaged in a joint assessment of such natural resource damages.

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While the Company anticipates insurance will reimburse it for expenses related to the Natural Resource Damage Assessment, any potentially uncovered expenses may be material and could impact the Company’s business and results of operations and could put pressure on its liquidity position going forward.

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 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, 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.

The Company regularly reviews its risk of loss and the cost and availability of insurance and revises its insurance accordingly.

The Company’s insurance does not cover every potential risk associated with its operations and is subject to certain exclusions and deductibles.

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, 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 $ 15.6 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In accordance with customary insurance practice, the Company maintains insurance policies, including loss of production insurance, against many potential losses or liabilities arising from its operations, which, in addition to the settlement amount disclosed, have covered a material portion of aggregate costs associated with the Incident.

However, the Company can provide no assurance that its coverage will continue to 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 March 31, 2024, and December 31, 2023, the Company’s insurance receivables were $ 1.4 million and $ 3.6 million, respectively.

Excluding the costs associated with the resolution of the federal and state matters discussed above, for the three months ended March 31, 2024, the Company incurred response and remediation expenses and legal fees of $ 0.7 million, which primarily relates to certain legal costs that are not expected to be recovered under an insurance policy and are classified as “Pipeline Incident Loss” on the Company’s Unaudited Condensed Consolidated Statements of Operations.

For more information, please see our annual report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 7, 2024.

Subsequent Events

2 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 1. Financial Statements