Amplify Energy (AMPY) - 2023 Q3 - Quarterly Report

Front Matter Cover Page The report is a Form 10-Q for the quarter ended September 30, 2023, for Amplify Energy Corp - Filing: Form 10-Q for the quarterly period ended September 30, 2023[2] - Company: Amplify Energy Corp. (NYSE: AMPY)[2][3] - Outstanding Shares: 39,096,700 shares of common stock as of October 31, 2023[3] Glossary of Oil and Natural Gas Terms This section defines key technical terms and abbreviations used in the oil and natural gas industry - Boe (Barrel of Oil Equivalent) is converted from natural gas at a ratio of six Mcf to one Bbl of oil[6] - Proved Reserves are quantities of oil and gas estimated with reasonable certainty to be economically producible[11] Cautionary Note Regarding Forward–Looking Statements The report contains forward-looking statements and warns of risks that could cause actual results to differ - The report includes forward-looking statements regarding business strategies, financial performance, and operational plans[19] - Key risks include the Southern California pipeline incident's impact, commodity price volatility, and debt obligations[20][22] - Forward-looking statements are based on management's current expectations and are subject to risks beyond the company's control[23] PART I—FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended September 30, 2023 Unaudited Condensed Consolidated Balance Sheets Total assets increased to $717.1 million, driven by a deferred tax asset, turning stockholders' equity positive Condensed Consolidated Balance Sheet Data (in thousands) | | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $78,254 | $99,244 | | Property and Equipment, net | $346,896 | $339,292 | | Deferred Tax Asset | $264,130 | $— | | Total Assets | $717,105 | $459,478 | | Total Current Liabilities | $108,257 | $139,852 | | Long-Term Debt | $120,000 | $190,000 | | Total Liabilities | $371,068 | $464,043 | | Total Stockholders' Equity (Deficit) | $346,037 | $(4,565) | Unaudited Condensed Consolidated Statements of Operations The company reported a Q3 2023 net loss of $13.4 million, a decline from Q3 2022 due to lower sales and derivative losses Statements of Operations Highlights (in thousands, except per share data) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $76,770 | $126,299 | $228,611 | $359,509 | | Operating Income (Loss) | $(12,324) | $51,183 | $20,871 | $37,266 | | Litigation Settlement | $— | $— | $84,875 | $— | | Income Tax Benefit (Expense) | $3,267 | $— | $257,015 | $— | | Net Income (Loss) | $(13,403) | $47,234 | $349,172 | $27,840 | | Basic & Diluted EPS | $(0.34) | $1.17 | $8.57 | $0.69 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations for the nine-month period increased to $113.2 million, driven by non-cash items Condensed Statements of Cash Flows (in thousands) | | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $113,228 | $49,330 | | Net cash used in investing activities | $(29,965) | $(31,553) | | Net cash used in financing activities | $(76,876) | $(25,632) | | Net change in cash and cash equivalents | $6,387 | $(7,855) | | Cash and cash equivalents, end of period | $6,387 | $10,944 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, the pipeline incident settlement, and the release of a tax valuation allowance Disaggregated Revenue (Nine Months Ended Sep 30, in thousands) | Revenue Stream | 2023 | 2022 | | :--- | :--- | :--- | | Oil | $146,780 | $165,686 | | NGLs | $21,973 | $38,789 | | Natural gas | $41,327 | $115,087 | | Total | $210,080 | $319,562 | - The company entered a new credit facility with a $150.0 million borrowing base, with $120.0 million outstanding as of September 30, 2023[73] - Settlements for the Southern California Pipeline Incident included a $96.5 million payment received and agreements to pay fines of approximately $12.0 million[121][122][123] - A $278.8 million tax benefit was recorded for the nine-month period following the release of the deferred tax asset valuation allowance[130] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the Q3 2023 net loss to lower prices, while nine-month income was boosted by a settlement and tax benefit - Revenue declines in Q3 and the first nine months of 2023 were primarily driven by lower commodity prices[165][173] - Nine-month net income of $349.2 million was significantly impacted by an $84.9 million litigation settlement and a $264.1 million deferred tax benefit[179][181] - Primary liquidity sources are cash from operations and a revolving credit facility with $15.0 million available, enhanced by an $85.0 million settlement payment[190][191][200] Adjusted EBITDA Reconciliation (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(13,403) | $47,234 | $349,172 | $27,840 | | Adjusted EBITDA | $19,483 | $30,750 | $62,841 | $71,941 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide information under this item - As a smaller reporting company, Amplify Energy Corp. is not required to provide quantitative and qualitative disclosures about market risk[211] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023 - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[212] - No material changes to the internal control over financial reporting occurred during the most recent quarter[213] PART II—OTHER INFORMATION Legal Proceedings This section refers to Note 16 for details on legal proceedings, mainly related to the Southern California Pipeline Incident - For details on legal proceedings related to the Southern California Pipeline Incident, the report refers to Note 16 of the financial statements[215] Risk Factors There have been no material changes to risk factors previously disclosed in the 2022 Form 10-K and Q1 2023 Form 10-Q - There have been no material changes to the risk factors disclosed in the 2022 Form 10-K and the Q1 2023 Form 10-Q[216] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 4,319 shares in Q3 2023 to cover tax withholdings on vested employee stock units Share Repurchase Activity (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1 - July 31, 2023 | 4,319 | $6.77 | | August 1 - Aug 31, 2023 | — | $— | | Sep 1 - Sep 30, 2023 | — | $— | Other Information New employment agreements for six key executives with updated compensation and severance terms became effective November 1, 2023 - New employment agreements were executed for six executives, effective November 1, 2023, replacing all prior agreements[220] Executive Compensation Under New Agreements | Executive | Title | Annual Base Salary | Target Annual Bonus (% of Salary) | | :--- | :--- | :--- | :--- | | Martyn Willsher | President & CEO | $520,000 | 100% | | James Frew | SVP & CFO | $364,000 | 70% | | Daniel Furbee | SVP & COO | $364,000 | 70% | | Eric Willis | SVP, General Counsel | $364,000 | 70% | | Tony Lopez | SVP Engineering | $322,400 | 70% | | Eric Dulany | VP & CAO | $255,000 | 50% | - The agreements provide for severance payments upon termination without 'cause' or for 'good reason', with enhanced benefits following a 'Change of Control'[225][226]