Amplify Energy (US:AMPY)2023-08-08 20:24PART I—FINANCIAL INFORMATION Item 1. Financial Statements Net income surged in H1 2023 due to a significant deferred tax benefit and a major litigation settlement Unaudited Condensed Consolidated Balance Sheets The company's financial position improved significantly, turning a stockholders' deficit into positive equity | Financial Metric | June 30, 2023 (In thousands) | December 31, 2022 (In thousands) | | :--- | :--- | :--- | | Total Current Assets | $88,338 | $99,244 | | Total Assets | $715,480 | $459,478 | | Long-Term Debt | $120,000 | $190,000 | | Total Liabilities | $357,336 | $464,043 | | Total Stockholders' Equity (Deficit) | $358,144 | $(4,565) | - The company's equity position shifted from a deficit of $4.6 million at the end of 2022 to a positive equity of $358.1 million as of June 30, 2023, mainly due to a significant increase in assets and a reduction in total liabilities32 Unaudited Condensed Consolidated Statements of Net Income Net income for H1 2023 reached $362.6 million, reversing a prior-year loss, driven by a deferred tax benefit and a litigation settlement despite lower revenues | Metric (In thousands, except EPS) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Total Revenues | $151,841 | $233,210 | | Operating Income (Loss) | $33,195 | $(13,917) | | Litigation Settlement | $84,875 | $0 | | Deferred Income Tax Benefit | $259,422 | $0 | | Net Income (Loss) | $362,575 | $(19,394) | | Basic and Diluted EPS | $8.91 | $(0.51) | - A significant gain on commodity derivative instruments of $19.0 million was recorded in the first six months of 2023, compared to a loss of $112.0 million in the prior year period35 Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow increased substantially in H1 2023, while cash was primarily used for investing activities and significant debt repayment | Cash Flow Activity (In thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $95,221 | $30,396 | | Net cash used in investing activities | $(21,149) | $(16,914) | | Net cash used in financing activities | $(72,207) | $(15,590) | | Net change in cash and cash equivalents | $1,865 | $(2,108) | Notes to Unaudited Condensed Consolidated Financial Statements Key disclosures include revenue declines from lower commodity prices, a credit facility refinancing, a major deferred tax asset release, and details on the pipeline incident settlement Disaggregation of Revenue (Six Months Ended June 30) | Revenue Stream (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Oil | $89,566 | $111,292 | | NGLs | $14,196 | $27,085 | | Natural gas | $29,915 | $68,373 | | Total | $133,677 | $206,750 | - Subsequent to the quarter end, the company amended its credit facility, establishing a new facility with a maturity date of July 31, 2027, and an initial borrowing base of $150.0 million80159 - The company released its deferred tax asset valuation allowance in Q1 2023, resulting in a tax benefit of $279.3 million for the first six months of 2023134201 - The company received a net payment of approximately $85.0 million from a settlement related to the Southern California Pipeline Incident127146148 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses lower revenue due to commodity prices, stable Adjusted EBITDA, and enhanced liquidity from a settlement payment and credit facility refinancing Results of Operations H1 2023 revenues fell due to lower commodity prices despite flat production, while net income was significantly boosted by a litigation settlement and a deferred tax benefit Production and Pricing (Six Months Ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Average Net Production (MBoe/d) | 20.3 | 20.4 | | Average Realized Sales Price (per Boe) | $36.40 | $55.95 | | Oil Price (per Bbl) | $70.99 | $97.84 | | Natural Gas Price (per Mcf) | $2.83 | $6.09 | - The company recorded a litigation settlement of $84.9 million in H1 2023 related to anchor strikes on its pipeline, which was a major contributor to net income185 - A deferred income tax benefit of $259.4 million was recognized in H1 2023 after the company achieved three years of cumulative income, allowing for the release of its valuation allowance187 Adjusted EBITDA Adjusted EBITDA remained stable year-over-year for both the second quarter and first half of 2023, indicating consistent underlying operational performance Adjusted EBITDA Reconciliation (In thousands) | Period | Net Income (Loss) | Adjusted EBITDA | | :--- | :--- | :--- | | Three Months Ended June 30, 2023 | $9,816 | $17,552 | | Three Months Ended June 30, 2022 | $29,220 | $16,278 | | Six Months Ended June 30, 2023 | $362,575 | $43,358 | | Six Months Ended June 30, 2022 | $(19,394) | $41,191 | Liquidity and Capital Resources Liquidity strengthened through improved operating cash flow and a major settlement payment used for debt reduction, further secured by a new credit facility - The company received a net payment of approximately $85.0 million from the pipeline incident settlement, which was used to reduce debt outstanding and enhance liquidity196 - On July 31, 2023, the company entered into a new credit facility with an initial borrowing base of $150.0 million and a maturity in 2027205 Cash Flow Summary (Six Months Ended June 30, In thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $95,221 | $30,396 | | Net cash used in investing activities | $(21,149) | $(16,914) | | Net cash used in financing activities | $(72,207) | $(15,590) | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Amplify Energy Corp. is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk216 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023217 - No material changes in internal control over financial reporting occurred during the quarter218 PART II—OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 16 of the financial statements for details on legal proceedings related to the Southern California Pipeline Incident - For a discussion of legal proceedings, the report refers to Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements220 Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2022 Annual Report and Q1 2023 quarterly report - There have been no material changes to the risk factors disclosed in the company's 2022 Form 10-K and Q1 2023 Form 10-Q221 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased a small number of shares to cover tax withholdings on vested employee stock awards, not as part of a formal buyback plan - Common shares were repurchased to cover required withholding taxes upon the vesting of employee restricted stock and were not part of a publicly announced buyback program223