Amplify Energy Corp

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes in “Item 1. Financial Statements” contained herein and in “Item 1A. Risk Factors” of our Annual Report on the Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in the front of this report.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes in “Item 1. Financial Statements” contained herein and in “Item 1A. Risk Factors” of our 2023 Form 10-K. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in the front of this report.

Previous wording

The results of operations for the three months ended March 31, 2024 and 2023 have been derived from our unaudited condensed consolidated financial statements. The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties during 2023.

Current wording

The results of operations for the three and six months ended June 30, 2024 and 2023 have been derived from our unaudited condensed consolidated financial statements. The comparability of the results of operations among the periods presented below is impacted by the Incident and suspension of operations at our Beta properties during 2023.

Previous wording

We reported a net loss of $9.4 million compared to net income of $352.8 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

We reported a net income of $7.1 million compared to net income of $9.8 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Gathering, processing and transportation expenses were $4.8 million and $5.6 million for the three months ended March 31, 2024 and 2023, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.59 and $3.21 for the three months ended March 31, 2024 and 2023, respectively. The change in gathering processing and transportation expense was primarily due to lower gas volumes and the expiration of minimum volume commitments for our Oklahoma properties.

Current wording

Gathering, processing and transportation expenses were $4.9 million and $5.1 million for the three months ended June 30, 2024 and 2023, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.66 and $2.67 for the three months ended June 30, 2024 and 2023, respectively. The change in gathering processing and transportation expense was primarily due to lower gas volumes and the expiration of minimum volume commitments for our Oklahoma properties.

Previous wording

Taxes other than income were $4.9 million and $5.3 million for the three months ended March 31, 2024 and 2023, respectively. On a per Boe basis, taxes other than income were $2.67 and $3.03 for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily related to a reduction in production taxes due to lower natural gas commodity prices.

Current wording

Taxes other than income were $4.6 million and $5.2 million for the three months ended June 30, 2024 and 2023, respectively. On a per Boe basis, taxes other than income were $2.51 and $2.70 for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily related to a reduction in our ad valorem taxes for 2024 based on lower natural gas prices.

Previous wording

DD&A expenses were $8.2 million and $5.8 million for the three months ended March 31, 2024 and 2023, respectively. The increase in DD&A expense was primarily driven by production at Beta. During the first quarter of 2023, Beta was offline.

Current wording

DD&A expenses were $7.8 million and $7.1 million for the three months ended June 30, 2024 and 2023, respectively. The increase in DD&A expense was primarily driven by operations restarting at Beta.

Previous wording

Pipeline incident loss was $0.7 million and $8.3 million for the three months ended March 31, 2024 and 2023, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Current wording

Pipeline incident loss was $0.5 million and $6.8 million for the three months ended June 30, 2024 and 2023, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Previous wording

Average outstanding borrowings under our Revolving Credit Facility were $115.2 million and $192.4 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Average outstanding borrowings under our Revolving Credit Facility were $121.8 million and $123.8 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Current income tax expenses were $1.4 million and $12.5 million for the three months ended March 31, 2024 and 2023, respectively. See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Current wording

Current income tax benefit (expense)was ($0.6) million and $6.9 million for the three months ended June 30, 2024 and 2023, respectively. See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Previous wording

Deferred income tax benefits were $4.7 million and $259.5 million for the three months ended March 31, 2024 and 2023, respectively. Starting in the first quarter of 2023, we achieved three years of cumulative income which resulted in the release of the valuation allowance. See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Current wording

Deferred income tax benefit (expense)was ($2.1) million and less than ($0.1) million for the three months ended June 30, 2024 and 2023, respectively. Starting in the first quarter of 2023, we achieved three years of cumulative income which resulted in the release of the valuation allowance. See additional information discussed in Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Previous wording

Oil, natural gas and NGL revenues were $75.3 million and $66.3 million for the three months ended March 31, 2024 and 2023, respectively. Average net production volumes were approximately 20.2 MBoe/d and 19.4 MBoe/d for the three months ended March 31, 2024 and 2023, respectively. The change in production volumes was primarily driven by Beta returning to production in April 2023. For the first quarter of 2023 Beta was offline. The average realized sales prices were $40.89 per Boe and $37.99 per Boe for the three months ended March 31, 2024 and 2023, respectively. The increase in oil, natural gas and NGL revenues and average realized sales price was primarily due to Beta returning to production in April 2023.

Current wording

Oil, natural gas and NGL revenues were $147.7 million and $133.7 million for the six months ended June 30, 2024 and 2023, respectively. Average net production volumes were approximately 20.2 MBoe/d and 20.3 MBoe/d for the six months ended June 30, 2024 and 2023, respectively. The average realized sales prices were $40.07 per Boe and $36.40 per Boe for the six months ended June 30, 2024 and 2023, respectively. The change in realized sales prices is primarily due to higher commodity prices, Beta returning to production after being offline for the first quarter of 2023 and the release of revenue suspense of $4.0 million.

Previous wording

Other revenues were $1.0 million and $13.6 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in other revenues was primarily related to our receipt of LOPI insurance proceeds of $13.5 million for the three months ended March 31, 2023. We have not received LOPI insurance proceeds since payments under the LOPI policy terminated on March 31, 2023.

Current wording

Other revenues were $8.1 million and $18.2 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, other revenues consisted of iodine sales, Magnify rental income, and interest income earned on our sinking fund escrow accounts. Additionally, for the six months ended June 30, 2024, we recorded a revenue suspense release of $4.8 million. For the six months ended June 30, 2023, other revenues were primarily related to our receipt of LOPI insurance proceeds of $17.9 million. We have not received LOPI insurance proceeds since payments under the LOPI policy terminated on March 31, 2023.

Previous wording

Lease operating expenses were $38.3 million and $33.0 million for the three months ended March 31, 2024 and 2023, respectively. On a per Boe basis, lease operating expenses were $20.78 and $18.89 for the three months ended March 31, 2024 and 2023, respectively. The change in lease operating expense was primarily related to operating costs associated with Beta returning to production. During the first quarter of 2023, Beta was offline.

Current wording

Lease operating expenses were $74.6 million and $67.9 million for the six months ended June 30, 2024 and 2023, respectively. On a per Boe basis, lease operating expenses were $20.24 and $18.48 for the six months ended June 30, 2024 and 2023, respectively. The change in lease operating expense was primarily related to operating costs associated with Beta returning to production after being offline for the first quarter of 2023.

Previous wording

General and administrative expenses were $9.8 million and $8.5 million for the three months ended March 31, 2024 and 2023, respectively. The change in general and administrative expenses was primarily related to (i) an increase of $0.6 million in stock compensation expense, (ii) an increase of $0.3 million in severance payments, (iii) and an increase of $0.4 million in office lease expense related to the early termination of our Oklahoma office lease.

Current wording

General and administrative expenses were $18.2 million and $16.3 million for the six months ended June 30, 2024 and 2023, respectively. The change in general and administrative expenses was primarily related to (i) an increase of $1.0 million in stock compensation expense, (ii) an increase of $0.2 million in severance payments, (iii) and an increase of $0.6 million in office lease expense related to the early termination of our Oklahoma office lease.

Previous wording

Net loss on commodity derivative instruments of $16.6 million were recognized for the three months ended March 31, 2024, consisting of $20.8 million decrease in the fair value of open positions, partially offset by $4.3 million of cash settlements received on expired positions. Net gain on commodity derivative instruments of $15.2 million was recognized for the three months ended March 31, 2023, consisting of a $17.9 million increase in the fair value of open positions, partially offset by $2.7 million of cash settlements paid on expired positions.

Current wording

Net loss on commodity derivative instruments of $17.8 million were recognized for the six months ended June 30, 2024, consisting of $25.8 million decrease in the fair value of open positions, partially offset by $8.0 million of cash settlements received on expired positions. Net gain on commodity derivative instruments of $19.0 million was recognized for the six months ended June 30, 2023, consisting of a $20.1 million increase in the fair value of open positions, partially offset by $1.2 million of cash settlements paid on expired positions.

Previous wording

Interest expense, net was $3.5 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively. The change in interest expense was primarily driven by lower outstanding borrowings, slightly lower interest rates and amortization of deferred issuance costs. In addition, in the first quarter of 2023, the Company wrote off $0.2 million in deferred issuance costs.

Current wording

Interest expense, net was $7.2 million and $9.4 million for the six months ended June 30, 2024 and 2023, respectively. The change in interest expense was primarily driven by lower outstanding borrowings and amortization and write-off of deferred issuance costs.

Previous wording

Litigation settlementwas $84.9 million for the three months ended March 31, 2023, related to the settlement with the shipping companies and the containerships whose anchors struck the Company’s pipeline. See additional information discussed in Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report. No litigation settlement was recorded for the three months ended March 31, 2024.

Current wording

Litigation settlementwas $84.9 million for the six months ended June 30, 2023, related to the settlement with the shipping companies and the containerships whose anchors struck the Company’s pipeline. See additional information discussed in Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report. No litigation settlement was recorded for the six months ended June 30, 2024.

Previous wording

Capital Expenditures. Total capital expenditures were approximately $19.1 million for the three months ended March 31, 2024, which were primarily related to the development program at Beta, capital workovers and facilities upgrade projects at Beta and in Oklahoma and non-operated drilling and completion activities in the Eagle Ford.

Current wording

Capital Expenditures. Total capital expenditures were approximately $37.1 million for the six months ended June 30, 2024, which were primarily related to the development program at Beta, capital workovers and facilities upgrade projects at Beta and in Oklahoma and non-operated drilling and completion activities in the Eagle Ford.

Previous wording

As of March 31, 2024, we had a working capital deficit (excluding commodity derivatives) of $21.4 million primarily due to accrued liabilities of $36.8 million, revenues payable of $20.8 million, and accounts payable of $21.7 million partially offset by accounts receivable of $36.5 million, prepaid expenses of $18.4 million and cash on hand of $3.0 million.

Current wording

As of June 30, 2024, we had a working capital deficit (excluding commodity derivatives) of $13.3 million primarily due to accrued liabilities of $35.8 million, revenues payable of $12.6 million, and accounts payable of $25.1 million partially offset by accounts receivable of $36.3 million, prepaid expenses of $23.4 million and cash on hand of $0.5 million.

Previous wording

Revolving Credit Facility. On July 31, 2023, OLLC and Acquisitionco entered into the Revolving Credit Facility. The Revolving Credit Facility is a replacement in full of 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.

Current wording

Revolving Credit Facility. On July 31, 2023, OLLC and Acquisitionco entered into the Revolving Credit Facility. The Revolving Credit Facility is a replacement in full of the Prior Revolving Credit Facility. The aggregate principal amount of loans outstanding under the Revolving Credit Facility as of June 30, 2024, was $118.0 million.

Previous wording

As of March 31, 2024, we had approximately $20.0 million of available borrowings under our Revolving Credit Facility.

Current wording

As of June 30, 2024, we had approximately $17.0 million of available borrowings under our Revolving Credit Facility. As of June 30, 2024, we were in compliance with all the financial (current ratio and total leverage ratio) and non-financial covenants associated with the Revolving Credit Facility.

Previous wording

Sinking Fund Payments**.** We have a funding requirement to fund a trust account to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for the Beta production facilities. As of March 31, 2024, our future commitment under this agreement was $6.8 million for the remainder of 2024 and $9.0 million per year until the escrow account is fully funded. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Current wording

Sinking Fund Payments**.** We have a funding requirement to fund two trust accounts to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for the Beta production facilities. As of June 30, 2024, our future commitments under these agreements were $4.5 million for the remainder of 2024 and $9.0 million per year until the escrow accounts are fully funded. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Previous wording

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated. The cash flows for the three months ended March 31, 2024 and 2023 have been derived from our Unaudited Condensed Consolidated Financial Statements. For information regarding the individual components of our cash flow amounts, see our Unaudited Condensed Consolidated Statements of Cash Flows included under “Item 1. Financial Statements” of this quarterly report.

Current wording

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated. The cash flows for the six months ended June 30, 2024 and 2023 have been derived from our Unaudited Condensed Consolidated Financial Statements. For information regarding the individual components of our cash flow amounts, see our Unaudited Condensed Consolidated Statements of Cash Flows included under “Item 1. Financial Statements” of this quarterly report.

Previous wording

Operating Activities. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities was $7.7 million and $90.3 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2023, we received $84.9 million in connection with the settlement between the Company and the vessels that struck and damaged the pipeline and their respective owners and operators.

Current wording

Operating Activities. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities was $23.1 million and $95.2 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2023, we received $84.9 million in connection with the settlement between the Company and the vessels that struck and damaged the pipeline and their respective owners and operators.

Previous wording

Production volumes were approximately 20.2 MBoe/d and 19.4 MBoe/d for the three months ended March 31, 2024 and 2023, respectively. The change in production volumes was primarily driven by Beta returning to production in April 2023. For the first quarter of 2023 Beta was offline. The average realized sales price was $40.89 per Boe and $37.99 per Boe for the three months ended March 31, 2024 and 2023, respectively. The change in average realized sales price was primarily due to higher oil commodity prices and Beta coming back online.

Current wording

Production volumes were approximately 20.2 MBoe/d and 20.3 MBoe/d for the six months ended June 30, 2024 and 2023, respectively. The average realized sales price was $40.07 per Boe and $36.40 per Boe for the six months ended June 30, 2024 and 2023, respectively. The change in average realized sales price was primarily due to higher commodity prices and Beta returning to production after being offline for the first quarter of 2023. The six months ended June 30, 2024 included a revenue suspense release of $8.4 million.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 included $4.3 million of cash received on expired commodity derivative instruments compared to $2.7 million of cash paid on expired commodity derivatives for the three months ended March 31, 2023. For the three months ended March 31, 2024, we had net losses on commodity derivative instruments of $16.6 million compared to a net gain of $15.2 million for the three months ended March 31, 2023.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 included $8.0 million of cash received on expired commodity derivative instruments compared to $1.2 million of cash paid on expired commodity derivatives for the six months ended June 30, 2023. For the six months ended June 30, 2024, we had net losses on commodity derivative instruments of $17.8 million compared to a net gain of $19.0 million for the six months ended June 30, 2023.

Previous wording

Investing Activities. Net cash used in investing activities for the three months ended March 31, 2024 was $23.7 million, of which $19.1 million was used for additions to oil and natural gas properties. In addition, we had a decrease of $1.5 million in our capital expenditures payable account. Net cash provided by investing activities for the three months ended March 31, 2023 was $10.4 million, of which $8.2 million was used for additions to oil and natural gas properties.

Current wording

Investing Activities. Net cash used in investing activities for the six months ended June 30, 2024 was $44.6 million, of which $37.1 million was used for additions to oil and natural gas properties and $1.0 million for additions to other property and equipment. In addition, we had a decrease of $1.6 million in our capital expenditures payable account. Net cash used in investing activities for the six months ended June 30, 2023 was $21.1 million, of which $16.8 million was used for additions to oil and natural gas properties and $0.2 million for additions to other property and equipment.

Previous wording

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our Beta properties. Additions to restricted investments were $2.5 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our Beta properties. Additions to restricted investments were $5.0 million and $4.2 million during the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Financing Activities**.** We had repayments of $25.0 million, offset by $25.0 million in borrowings for the three months ended March 31, 2024 related to our Revolving Credit Facility compared to net repayments of $65.0 million for the three months ended March 31, 2023.

Current wording

Financing Activities**.** We had net borrowings of $3.0 million for the six months ended June 30, 2024 related to our Revolving Credit Facility compared to net repayments of $70.0 million for the six months ended June 30, 2023. Shares withheld for taxes was $1.8 million and $2.1 million for the six months ended June 30, 2024 and 2023, respectively.