Amplify Energy (AMPY) - 2024 Q1 - Quarterly Report

Glossary of Oil and Natural Gas Terms Names of Entities The report defines key entities: Amplify Energy (the company and its subsidiaries), Legacy Amplify (Amplify Energy Holdings LLC), and OLLC (Amplify Energy Operating LLC, a wholly-owned subsidiary)[22] Cautionary Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, many beyond the company's control, including business strategies, cash flows, the impact of the Beta Pipeline Incident, ability to replace reserves, commodity prices, production volumes, and general economic/political conditions[24][25][26] Key risk factors that could cause actual results to differ materially include borrowing base redetermination, access to funds, debt obligations, volatility in commodity prices, reserve estimation uncertainty, capital requirements, and the ongoing impact of the Beta Pipeline Incident[28] PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Amplify Energy Corp.'s unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, including balance sheets, statements of operations, cash flows, and equity, along with detailed notes explaining accounting policies, financial instruments, debt, equity, and significant events like the Beta Pipeline Incident Unaudited Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets provide a snapshot of the company's financial position as of March 31, 2024, compared to December 31, 2023, detailing assets, liabilities, and equity Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:----------------------------|:------------------------------|:---------------------------------| | Total Assets | $712,204 | $737,674 | | Total Liabilities | $331,189 | $346,638 | | Total Stockholders' Equity | $381,015 | $391,036 | | Cash and Cash Equivalents | $2,989 | $20,746 | | Total Current Assets | $62,324 | $98,183 | | Total Current Liabilities | $79,308 | $96,431 | - The company experienced a decrease in total assets, total liabilities, and total stockholders' equity from December 31, 2023, to March 31, 2024. Cash and cash equivalents significantly decreased from $20.7 million to $3.0 million[33] Unaudited Condensed Consolidated Statements of Operations This statement outlines the company's revenues, costs, and expenses, leading to net income or loss for the three months ended March 31, 2024, compared to the same period in 2023 Unaudited Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:----------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Total Revenues | $76,299 | $79,870 | | Total Costs and Expenses | $85,381 | $53,265 | | Operating Income (Loss) | $(9,082) | $26,605 | | Net Income (Loss) | $(9,396) | $352,759 | | Basic and Diluted Earnings (Loss) per Share | $(0.24) | $8.69 | - The company reported a net loss of $9.4 million for Q1 2024, a significant decline from a net income of $352.8 million in Q1 2023, primarily due to a $16.6 million loss on commodity derivative instruments (vs. $15.2 million gain in 2023) and the absence of an $84.9 million litigation settlement gain recorded in Q1 2023[36] Unaudited Condensed Consolidated Statements of Cash Flows This statement details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023 Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:----------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Net Cash Provided by Operating Activities | $7,712 | $90,313 | | Net Cash Used in Investing Activities | $(23,724) | $(10,417) | | Net Cash Used in Financing Activities | $(1,745) | $(67,141) | | Net Change in Cash and Cash Equivalents | $(17,757) | $12,755 | | Cash and Cash Equivalents, End of Period | $2,989 | $12,755 | - Net cash provided by operating activities decreased significantly from $90.3 million in Q1 2023 to $7.7 million in Q1 2024, largely due to the absence of the $84.9 million litigation settlement received in 2023. Investing activities saw a substantial increase in cash used, primarily for additions to oil and gas properties[39] Unaudited Condensed Consolidated Statements of Equity (Deficit) This statement presents the changes in the company's equity (deficit) for the three months ended March 31, 2024, and 2023, including net income/loss, share-based compensation, and shares withheld for taxes Unaudited Condensed Consolidated Statements of Equity (Deficit) (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:-------------------------------------|:------------------------------|:---------------------------------| | Total Stockholders' Equity (Deficit) | $381,015 | $391,036 | | Accumulated Deficit | $(53,848) | $(44,452) | | Common Stock (shares outstanding) | 39,612,030 | 39,147,205 | - The accumulated deficit increased from $(44.5) million at December 31, 2023, to $(53.8) million at March 31, 2024, reflecting the net loss incurred during the quarter. Common shares outstanding increased due to restricted stock units vesting[42][91] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering organization, accounting policies, revenue recognition, fair value measurements, risk management, debt, equity, earnings per share, long-term incentive plans, leases, supplemental disclosures, related party transactions, commitments, income taxes, and the Beta Pipeline Incident Note 1 – Organization and Basis of Presentation This note describes Amplify Energy Corp. as a publicly traded Delaware corporation operating in one reportable segment focused on oil and natural gas properties, primarily located in Oklahoma, the Rockies, offshore Southern California (Beta), East Texas/North Louisiana, and the Eagle Ford. It also clarifies the basis of presentation for the unaudited condensed consolidated financial statements, which are prepared in accordance with GAAP and involve significant management estimates - Amplify Energy operates as a single reportable segment focused on the acquisition, development, exploitation, and production of oil and natural gas properties across various regions in the continental U.S. and offshore Southern California[46] - The financial statements are prepared under GAAP, include all necessary recurring adjustments, and rely on significant estimates for oil and natural gas reserves, fair value, revenue recognition, and contingencies[47][49] Note 2 – Summary of Significant Accounting Policies This note states that there have been no changes to the company's significant accounting policies from its 2023 Form 10-K and that new accounting pronouncements have not had a material impact - No material changes to significant accounting policies were made from the 2023 Form 10-K[50] - New accounting pronouncements implemented did not have a material impact on financial statements[51] Note 3 – Revenue This note details the company's revenue recognition policy, which follows a five-step process for contracts with customers, and disaggregates revenue by oil, natural gas, and NGL sales - Revenue is recognized when performance obligations are satisfied at the delivery location, with transaction prices based on variable market prices less fees[53][54] Revenue by Stream (in thousands) | Revenue Stream | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:--------------------|:-------------------------------------------------|:-------------------------------------------------| | Oil | $57,422 | $38,816 | | NGLs | $7,525 | $7,785 | | Natural Gas | $10,375 | $19,683 | | Total Oil and Natural Gas Sales | $75,322 | $66,284 | - Oil sales significantly increased from $38.8 million in Q1 2023 to $57.4 million in Q1 2024, while natural gas sales decreased from $19.7 million to $10.4 million[56] Note 4 – Fair Value Measurements of Financial Instruments This note explains the company's approach to fair value measurements for financial instruments, classifying them into a three-tier hierarchy based on observable inputs. All derivative instruments are classified as Level 2 - Fair value is determined as the price to sell an asset or transfer a liability in an orderly transaction, using a three-tier hierarchy. All derivative instruments are classified as Level 2, based on observable market data[58] Fair Value of Commodity Derivatives (in thousands) | Derivative Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:--------------------|:------------------------------|:---------------------------------| | Commodity Derivatives (Assets) | $25,306 | $39,439 | | Commodity Derivatives (Liabilities) | $19,099 | $12,365 | - The fair value of commodity derivative assets decreased from $39.4 million to $25.3 million, while commodity derivative liabilities increased from $12.4 million to $19.1 million between December 31, 2023, and March 31, 2024[61][62] Note 5 – Risk Management and Derivative Instruments This note details the company's use of derivative instruments to manage exposure to commodity price and interest rate fluctuations, outlining the types of contracts, associated market and credit risks, and their balance sheet presentation - The company uses commodity derivatives (swaps, collars) to manage price volatility for natural gas (NYMEX-Henry Hub) and crude oil (NYMEX-WTI), aiming to achieve predictable cash flows[66][68][69] Natural Gas Derivative Contracts (Average Monthly Volume MMBtu) | Year | Fixed Price Swap | Two-way Collars (Floor) | Two-way Collars (Ceiling) | |:-----|:-----------------|:------------------------|:--------------------------| | 2024 | 716,667 | 544,444 ($3.46) | 544,444 ($4.15) | | 2025 | 675,000 | 500,000 ($3.50) | 500,000 ($4.10) | | 2026 | 291,667 | 291,667 ($3.50) | 291,667 ($4.10) | Crude Oil Derivative Contracts (Average Monthly Volume Bbls) | Year | Fixed Price Swap | Two-way Collars (Floor) | Two-way Collars (Ceiling) | |:-----|:-----------------|:------------------------|:--------------------------| | 2024 | 85,889 ($74.04) | 102,000 ($70.00) | 102,000 ($80.20) | | 2025 | 53,000 ($70.68) | 59,500 ($70.00) | 59,500 ($80.20) | | 2026 | 30,917 ($70.68) | — | — | Loss (Gain) on Commodity Derivatives (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:-------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Loss (Gain) on Commodity Derivatives | $16,564 | $(15,159) | Note 6 – Asset Retirement Obligations This note details the changes in the company's asset retirement obligations (AROs), primarily related to future plugging and abandonment costs for wells and facilities Asset Retirement Obligations (in thousands) | Metric | Amount (in thousands) | |:----------------------------------------|:----------------------| | AROs at beginning of period (Dec 31, 2023) | $123,494 | | Accretion expense | $2,061 | | AROs at end of period (March 31, 2024) | $125,555 | | Long-term portion | $124,062 | - Asset retirement obligations increased by $2.1 million due to accretion expense during the three months ended March 31, 2024, reaching $125.6 million[78] Note 7 – Long-Term Debt This note provides information on the company's long-term debt, specifically its senior secured reserve-based revolving credit facility, including its terms, financial covenants, and recent borrowing base redetermination Revolving Credit Facility (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:------------------------|:------------------------------|:---------------------------------| | Revolving Credit Facility | $115,000 | $115,000 | - The company's Revolving Credit Facility had $115.0 million outstanding at March 31, 2024, with a borrowing base of $150.0 million and elected commitments of $135.0 million. The facility matures on July 31, 2027[83][84] - Amplify Energy received a waiver from lenders for non-compliance with the minimum current ratio requirement (0.98 vs. 1.00) for Q1 2024. The borrowing base was reaffirmed at $150.0 million on May 2, 2024[85] Revolving Credit Facility Average Rate | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:-------------------------------------|:----------------------------------|:----------------------------------| | Revolving Credit Facility (Avg. Rate) | 9.37% | 9.73% | Note 8 – Equity This note summarizes the changes in the company's common stock issued for the three months ended March 31, 2024 Common Stock Shares | Metric | Common Stock (shares) | |:-------------------------------------|:----------------------|\ | Balance, December 31, 2023 | 39,147,205 | | Restricted stock units vested | 711,728 | | Shares withheld for taxes | (246,903) | | Balance, March 31, 2024 | 39,612,030 | - Common shares outstanding increased by 464,825 shares during Q1 2024, primarily due to the vesting of restricted stock units, partially offset by shares withheld for taxes[91] Note 9 – Earnings (Loss) per Share This note provides the calculation of basic and diluted earnings (loss) per share for the three months ended March 31, 2024, and 2023 Earnings (Loss) per Share (in thousands, except EPS) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:----------------------------------------|:----------------------------------|:----------------------------------| | Net Income (Loss) | $(9,396) | $352,759 | | Basic and Diluted EPS | $(0.24) | $8.69 | | Weighted Average Common Shares Outstanding | 39,410 | 38,694 | - The company reported a basic and diluted loss per share of $(0.24) for Q1 2024, a significant decrease from $8.69 earnings per share in Q1 2023, reflecting the shift from net income to net loss[94] Note 10 – Long-Term Incentive Plans This note describes the company's equity incentive plans, including restricted stock units (TSUs) and performance stock units (PSUs), their vesting conditions, and the associated compensation expense - The company operates under an Equity Incentive Plan (EIP) and has approved a new 2024 Plan, subject to stockholder approval. Awards include Restricted Stock Units (TSUs) and Performance Stock Units (PSUs), some of which are contingent cash-settlement awards[95][96][98][103] Share-based Compensation Costs (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:----------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Share-based compensation - equity awards | $1,120 | $941 | | Share-based compensation - liability awards | $411 | $0 | | Total Share-based compensation costs | $1,531 | $941 | - Total share-based compensation costs increased to $1.5 million in Q1 2024 from $0.9 million in Q1 2023, primarily due to $0.4 million in liability-classified awards for Contingent TSUs and PSUs[108][99][104] Note 11 – Leases This note details the company's operating leases for office space, warehouse space, equipment, and vehicles, including their financial impact and maturity analysis - The company's leases primarily consist of operating leases for office/warehouse space, equipment, and vehicles, including right-of-way leases for the San Pedro Bay Pipeline. Most are short-term or month-to-month, with the corporate office lease being a significant exception[111] Lease Financial Impact (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:-------------------------------------|:------------------------------|:---------------------------------| | Right-of-use asset | $5,407 | $5,756 | | Total Lease Liability | $6,444 | $6,827 | | Operating cash flows from operating leases (Q1) | $349 | $288 | Maturity Analysis of Minimum Lease Payment Obligations (in thousands) | Year | Office and warehouse leases | Leased vehicles and office equipment | Total | |:--------------------|:----------------------------|:-------------------------------------|:------| | 2024 (remaining) | $1,066 | $568 | $1,634| | 2025 | $1,421 | $573 | $1,994| | 2026 | $1,200 | $87 | $1,287| | 2027 | $832 | $4 | $836 | | 2028 and thereafter | $1,790 | — | $1,790| | Total Lease Payments| $6,309 | $1,232 | $7,541| Note 12 – Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows This note provides additional details on accrued liabilities, accounts receivable, and supplemental cash flow information, offering a more granular view of specific balance sheet and cash flow components Accrued Liabilities (in thousands) | Accrued Liability Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:------------------------------------|:------------------------------|:---------------------------------| | Accrued lease operating expense | $11,440 | $14,239 | | Accrued liability - pipeline incident | $2,670 | $9,331 | | Accrued capital expenditures | $6,500 | $8,019 | | Total Accrued Liabilities | $36,776 | $50,871 | Accounts Receivable (in thousands) | Accounts Receivable Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:--------------------------------------|:------------------------------|:---------------------------------| | Oil and natural gas receivables | $31,570 | $31,131 | | Insurance receivable - pipeline incident | $1,437 | $3,571 | | Total Accounts Receivable, net | $36,540 | $39,096 | - Cash paid for interest, net of capitalized amounts, was $3.9 million in Q1 2024, down from $4.5 million in Q1 2023. Noncash investing and financing activities included a $1.5 million decrease in capital expenditures in payables and accrued liabilities for Q1 2024[126] Note 13 – Related Party Transactions This note confirms that there were no material related party transactions for the three months ended March 31, 2024, and 2023 - No material related party transactions occurred during the three months ended March 31, 2024, or 2023[127] Note 14 – Commitments and Contingencies This note outlines the company's various commitments and contingencies, including litigation, environmental remediation, the Beta Pipeline Incident, and funding obligations for decommissioning liabilities - The company is involved in litigation and legal proceedings, including environmental matters, and accrues for remediation costs based on best estimates, with no environmental reserves recorded as of March 31, 2024[128][129] - Amplify Energy has obligations to fund a sinking fund for decommissioning the San Pedro Bay Pipeline ($4.5 million balance as of March 31, 2024) and escrow accounts for federal decommissioning liabilities, with an updated funding commitment of $155.6 million[130][131][133] Updated Funding Commitment for Escrow Agreements (in thousands) | Funding Commitment | Total | Remaining 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | |:---------------------------|:---------|:---------------|:-------|:-------|:-------|:-------|:-----------| | Federal escrow fund payments | $145,550 | $6,000 | $8,000 | $8,000 | $8,000 | $8,000 | $107,550 | | State escrow fund payments | $10,079 | $775 | $1,034 | $1,034 | $1,034 | $1,034 | $5,168 | | Total sinking fund payments | $155,629 | $6,775 | $9,034 | $9,034 | $9,034 | $9,034 | $112,718 | Note 15 – Income Taxes This note provides details on the company's current and deferred income tax expense/benefit and effective tax rates for the three months ended March 31, 2024, and 2023 Income Tax Expense (Benefit) and Effective Tax Rate (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:-------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Current Income Tax Expense | $1,395 | $12,527 | | Deferred Income Tax Benefit | $4,703 | $259,470 | | Effective Tax Rate | 26.0% | (233.4)% | - The deferred income tax benefit significantly decreased from $259.5 million in Q1 2023 to $4.7 million in Q1 2024. The Q1 2023 benefit was primarily due to the release of a $284.9 million valuation allowance on deferred tax assets[134][135] Note 16 – Beta Pipeline Incident This note provides an update on the Beta Pipeline Incident, including the oil spill, regulatory approvals for restart, criminal and civil resolutions, ongoing investigations, and estimated total costs - The Beta Pipeline Incident, an oil spill in October 2021, resulted in a 13-inch pipeline split and release of approximately 588 barrels of oil. Operations restarted in April 2023 after receiving required regulatory approvals[136][137] - The company resolved criminal matters with federal and state authorities, paying fines of approximately $7.1 million (federal) and $4.9 million (state). A $50.0 million civil class action settlement was approved in April 2023, funded by insurance[138][141] - Amplify received a $96.5 million settlement from vessels that struck the pipeline. Estimated total costs for the incident range from $190.0 million to $210.0 million, with insurance covering a material portion[141][143][145] Pipeline Incident Related Financials (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:-------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Pipeline Incident Loss | $707 | $8,279 | | Litigation Settlement | $0 | $84,875 | | Insurance Receivable - pipeline incident | $1,437 | $3,571 | Note 17 – Subsequent Event This note refers to the borrowing base redetermination as a subsequent event - On May 2, 2024, the company's borrowing base was reaffirmed at $150.0 million with elected commitments of $135.0 million[85][147] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, discussing key performance metrics, industry trends, recent developments, and a detailed comparison of financial results for the three months ended March 31, 2024, versus 2023. It also includes a reconciliation of Adjusted EBITDA Overview The overview reiterates that Amplify Energy operates as a single segment focused on oil and natural gas properties, primarily in Oklahoma, the Rockies, offshore Southern California (Beta), East Texas/North Louisiana, and the Eagle Ford - Amplify Energy operates in one reportable segment, focusing on the acquisition, development, exploitation, and production of oil and natural gas properties in key regions[150] Industry Trends This section highlights the company's monitoring of various industry trends, including OPEC actions, geopolitical conflicts, global inventories, inflation, and governmental policies on lower carbon energy, all of which contribute to commodity price volatility - The company monitors global factors like OPEC actions, geopolitical conflicts (Russia-Ukraine, Middle East), oil and natural gas inventories, inflation, and energy transition policies, expecting continued commodity price volatility[151] Recent Developments This section notes the recent reaffirmation of the borrowing base under the company's revolving credit facility - On May 2, 2024, the spring borrowing base redetermination reaffirmed the Revolving Credit Facility's borrowing base at $150.0 million with elected commitments of $135.0 million[152] Business Environment and Operational Focus This section outlines the key financial and operational metrics used by management to assess the performance of its oil and natural gas operations - Key performance metrics include production volumes, realized prices, cash settlements on commodity derivatives, lease operating expense, gathering/processing/transportation costs, general and administrative expense, and Adjusted EBITDA[153] Sources of Revenues This section describes the company's revenue sources from oil, natural gas, and NGL sales, and its strategy to mitigate price volatility through derivative contracts - Revenues are primarily from the sale of natural gas, oil, and NGLs, all derived from the continental United States. The company uses derivative contracts to reduce the impact of volatile commodity prices[154] Critical Accounting Policies and Estimates This section refers to the company's 2023 Form 10-K for a detailed discussion of critical accounting policies and estimates, emphasizing the subjective nature and potential impact of these estimates - Significant estimates, including oil and natural gas reserves, fair value, revenue recognition, and contingencies, are subjective and require professional judgment, with potential for significant impact on financial results[155][156] Results of Operations This section provides a summary table of key operational results for the three months ended March 31, 2024, and 2023, noting the impact of the Beta Incident on comparability Key Operational Results (in thousands, except per Boe) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:----------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Oil and natural gas sales | $75,322 | $66,284 | | Other revenues | $977 | $13,586 | | Lease operating expense | $38,284 | $32,960 | | Loss (gain) on commodity derivative instruments | $16,564 | $(15,159) | | Net income (loss) | $(9,396) | $352,759 | | Total (MBoe) production volumes | 1,842 | 1,745 | | Average net production (MBoe/d) | 20.2 | 19.4 | | Average realized sales price (per Boe) | $40.89 | $37.99 | - The comparability of results is impacted by the Beta Incident and the suspension of operations at Beta properties during 2023[159] For the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023 This section provides a detailed comparative analysis of the company's financial performance for the three months ended March 31, 2024, versus the same period in 2023, highlighting changes in revenues, expenses, and net income/loss - Net loss of $9.4 million in Q1 2024 compared to net income of $352.8 million in Q1 2023. This significant change is primarily due to a $16.6 million loss on commodity derivatives (vs. $15.2 million gain in 2023) and the absence of the $84.9 million litigation settlement received in Q1 2023[161][165][166] - Oil, natural gas, and NGL revenues increased to $75.3 million in Q1 2024 from $66.3 million in Q1 2023, driven by Beta returning to production in April 2023 and higher average realized sales prices ($40.89/Boe vs. $37.99/Boe)[161] - Lease operating expenses increased to $38.3 million ($20.78/Boe) in Q1 2024 from $33.0 million ($18.89/Boe) in Q1 2023, mainly due to Beta's return to production. Other revenues decreased significantly due to the termination of LOPI insurance proceeds[162] - General and administrative expenses increased by $1.3 million, driven by higher stock compensation, severance payments, and office lease expenses[164] - Interest expense, net, decreased to $3.5 million in Q1 2024 from $5.7 million in Q1 2023, attributed to lower outstanding borrowings and slightly lower interest rates[167] - Deferred income tax benefit decreased substantially from $259.5 million in Q1 2023 to $4.7 million in Q1 2024, as the 2023 benefit included the release of a valuation allowance[168] Adjusted EBITDA This section defines Adjusted EBITDA as a non-GAAP financial measure used to evaluate operating performance and cash flow, providing a reconciliation to net income (loss) and net cash flows from operating activities - Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance and compare results without regard to financing or capital structure, and to measure ability to meet debt service requirements and fund development[169][170][171][172] Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:----------------------------------------|:----------------------------------|:----------------------------------| | Net income (loss) | $(9,396) | $352,759 | | Interest expense, net | $3,527 | $5,737 | | Income tax expense (benefit) - current | $1,395 | $12,527 | | Income tax expense (benefit) - deferred | $(4,703) | $(259,470) | | DD&A | $8,239 | $5,808 | | Losses (gains) on commodity derivative instruments | $16,564 | $(15,159) | | Pipeline incident loss | $707 | $8,279 | | Litigation settlement | — | $(84,875) | | Share-based compensation expense | $1,531 | $941 | | Adjusted EBITDA | $24,901 | $25,806 | Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:----------------------------------------|:----------------------------------|:----------------------------------| | Net cash provided by operating activities | $7,712 | $90,313 | | Changes in working capital | $11,217 | $(5,740) | | Interest expense, net | $3,527 | $5,737 | | Pipeline incident loss | $707 | $8,279 | | Litigation settlement | — | $(84,875) | | Income tax expense (benefit) - current | $1,395 | $12,527 | | Adjusted EBITDA | $24,901 | $25,806 | Liquidity and Capital Resources This section discusses the company's ability to finance operations, meet obligations, and fund capital expenditures, focusing on cash flows, the Revolving Credit Facility, the impact of the Beta Pipeline Incident, hedging strategy, and working capital - Primary liquidity sources are cash flows from operations and the Revolving Credit Facility. The company expects these to meet 2024 cash requirements and development activities, but future cash flows are subject to commodity prices and production levels[177] - The Beta Pipeline Incident's full financial impact remains uncertain, though insurance policies have covered a material portion of costs. Loss of production income insurance expired on March 31, 2023, but Beta operations restarted in April 2023[178] - The company's hedging strategy aims to cover 50%-75% of estimated production from proved developed producing reserves over a one-to-three-year period to reduce cash flow volatility[180] - Total capital expenditures for Q1 2024 were $19.1 million, primarily for Beta development, capital workovers, facilities upgrades, and non-operated drilling in the Eagle Ford[181] - As of March 31, 2024, the company had a working capital deficit (excluding commodity derivatives) of $21.4 million, primarily due to accrued liabilities and payables, partially offset by receivables and cash[183] Debt Agreement This section provides an update on the Revolving Credit Facility, including the outstanding amount and compliance with financial covenants - The Revolving Credit Facility had $115.0 million outstanding as of March 31, 2024. The company received a waiver for non-compliance with the minimum current ratio requirement (0.98 to 1.00) for Q1 2024, bringing it into compliance[184] Material Cash Requirements This section outlines the company's significant contractual commitments, including debt, lease obligations, and sinking fund payments for decommissioning liabilities - Material cash requirements include debt obligations (principal and interest), operating lease payments, and sinking fund payments for Beta decommissioning liabilities, with a future commitment of $6.8 million for the remainder of 2024 and $9.0 million annually thereafter[186][187] Cash Flows from Operating, Investing and Financing Activities This section summarizes the company's cash flows from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023, and discusses the key drivers for changes Cash Flows by Activity (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | |:----------------------------------------|:-------------------------------------------------|:-------------------------------------------------| | Net cash provided by operating activities | $7,712 | $90,313 | | Net cash used in investing activities | $(23,724) | $(10,417) | | Net cash used in financing activities | $(1,745) | $(67,141) | - Net cash from operating activities decreased significantly due to the $84.9 million litigation settlement received in Q1 2023. Production volumes increased to 20.2 MBoe/d (from 19.4 MBoe/d) and average realized sales price increased to $40.89/Boe (from $37.99/Boe) in Q1 2024, primarily due to Beta's return to production[190][191] - Investing activities used $23.7 million in Q1 2024, mainly for oil and natural gas property additions ($19.1 million). Financing activities included $25.0 million in borrowings and $25.0 million in repayments on the Revolving Credit Facility[192][193] Off–Balance Sheet Arrangements This section states that the company had no off-balance sheet arrangements as of March 31, 2024 - As of March 31, 2024, Amplify Energy had no off-balance sheet arrangements[193] Recently Issued Accounting Pronouncements This section refers to Note 2 for a discussion of recently issued accounting pronouncements - Refer to Note 2 for details on recently issued accounting pronouncements, which had no material impact[193] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Amplify Energy Corp. is not required to provide quantitative and qualitative disclosures about market risk - Amplify Energy Corp. is exempt from providing quantitative and qualitative disclosures about market risk as it is a smaller reporting company[194] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024 - The company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2024[196] Change in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the most recent quarter - No material changes in internal control over financial reporting occurred during the most recent quarter[197] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 16 for details on legal proceedings related to the Beta Pipeline Incident and notes the inherent uncertainties and potential adverse impacts of litigation - Legal proceedings related to the Beta Pipeline Incident are discussed in Note 16. The outcomes of current or future litigation are uncertain and can adversely impact the company due to defense and settlement costs and diversion of management resources[199] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors disclosed in the company's 2023 Form 10-K - No material changes to the risk factors disclosed in the 2023 Form 10-K have occurred[200] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the company's common share repurchase activity during the three months ended March 31, 2024, primarily for tax withholding on vested restricted stock Common Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price per Share | |:-------------------------------------|:---------------------------------|:------------------------| | January 1, 2024 - January 31, 2024 | 29,412 | $5.96 | | February 1, 2024 - February 29, 2024 | 137,637 | $6.04 | | March 1, 2024 - March 31, 2024 | 60,162 | $6.05 | - The company repurchased 227,211 common shares during Q1 2024, primarily for net settlement on vesting of restricted stock to satisfy tax withholding requirements[202] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[203] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[203] Item 5. Other Information This section states that there is no other information to report - No other information was reported[203] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL-related files - The report includes various exhibits such as the Certificate of Incorporation, Bylaws, CEO and CFO certifications (31.1, 31.2, 32.1), and Inline XBRL documents[204] Signatures - The report is signed by James Frew, Senior Vice President and Chief Financial Officer, and Eric Dulany, Vice President and Chief Accounting Officer, on May 8, 2024[205][206]