See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
General
Amplify Energy Corp. (“Amplify Energy,” or the “Company”), is a publicly traded Delaware corporation, in which our common stock is listed on the NYSE under the symbol “AMPY.”
We operate in one reportable segment engaged in the acquisition, development, exploitation and production of oil and natural gas properties. Our management evaluates performance based on one reportable business segment as the economic environments are not different within the operation of our oil and natural gas properties. Our assets consist primarily of producing oil and natural gas properties and are located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas / North Louisiana and the Eagle Ford. Most of our 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.
Basis of Presentation
Our Unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and guidelines of the SEC. The results reported in these Unaudited Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for fair presentation. Although we believe the disclosures in these financial statements are adequate, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC.
Material intercompany transactions and balances have been eliminated in preparation of our consolidated financial statements.
Use of Estimates
The preparation of the accompanying Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include, but are not limited to, oil and natural gas reserves; depreciation, depletion and amortization of proved oil and natural gas properties; future cash flows from oil and natural gas properties; impairment of long-lived assets; fair value of derivatives; fair value of equity compensation; fair values of assets acquired and liabilities assumed in business combinations and asset retirement obligations.
Market Conditions and COVID-19
In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic. The nature of COVID-19 led to worldwide shutdowns, reductions in commercial and interpersonal activity and changes in consumer behavior. In attempting to control the spread of COVID-19, governments around the world imposed laws and regulations such as shelter-in-place orders, quarantines, executive orders and similar restrictions. As a result, the global economy has been marked by significant slowdown and uncertainty, which in turn has led to a precipitous decline in commodity prices in response to decreased demand, further exacerbated by global energy storage shortages and by the price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) beginning in the first quarter of 2020. As of the first quarter of 2021, commodity prices have recovered to pre-pandemic levels, due in part to the accessibility of vaccines, reopening of economies after the lockdown, and optimism about the economic recovery. The continued spread of COVID-19, including vaccine resistant strains, or repeated deterioration in oil and natural gas prices could result in additional adverse impacts on the Company's results of operations, cash flows and financial position, including further asset impairments.
COVID-19 Relief Funding
Paycheck Protection Program.
12
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On June 22, 2021, KeyBank National Association (“KeyBank”) notified the Company that the loan under the Paycheck Protection Program (the “PPP Loan”) had been approved for full and complete forgiveness by the Small Business Association. For the three and six months ended June 30, 2021, the Company reported a gain on extinguishment of debt for $5.5 million for the PPP Loan forgiveness in the Unaudited Condensed Consolidated Statements of Operations. See Note 7 for additional information.
Employee Retention Credit. The Consolidated Appropriations Act extended and expanded the availability of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) employee retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021 (the “ARP Act”), enacted on March 11, 2021, extended and expanded the availability of the employee retention credit through December 31, 2021, however, certain provisions applied only after December 31, 2020. This new legislation expanded the group of qualifying businesses to include businesses with fewer than 500 employees and those who previously qualified for the PPP Loan. The employee retention credit is calculated to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. The Company has determined that the qualifications for the credit were met in the first and second quarters of 2021. The Company recognized a $2.8 million employee retention credit during the three and six months ended June 30, 2021, which included an approximate $0.8 million credit to general and administrative expense and an approximate $2.0 million to lease operating expense in the Unaudited Condensed Consolidated Statements of Operations.
Note 2. Summary of Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies and estimates as described in the Company’s annual financial statements included in our 2020 Form 10-K.
New Accounting Pronouncements
Reference Rate Reform. In March 2020, the Financial Accounting Standard Board (the “FASB”) issued an accounting standard update which provides optional expedients and expectations for applying GAAP to contracts, hedging relationships and other transactions to ease financial reporting burdens to the expected market transition from the London Interbank Offered Rate (“LIBOR”) or another reference rate to alternative reference rates. The amendments in this accounting standards update became effective on March 12, 2020, and an entity may elect to apply the amendments prospectively through December 31, 2022. The Company notes no material impact with applying this guidance.
Income Taxes – Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued an accounting standard update which simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This accounting standards update removed the following exceptions: (i) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (ii) exception to the requirements to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (iii) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (iv) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in the accounting standards update also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The guidance became effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company adopted the guidance effective January 1, 2021, with all of the anticipated and applicable effects to be required on a prospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.
Note 3. Revenue
Revenue from Contracts with Customers
The Company has determined that its contracts for the sale of crude oil, unprocessed natural gas, residue gas and NGLs contain monthly performance obligations to deliver product at locations specified in the contract. Control is transferred at the delivery location, at which point the performance obligation has been satisfied and revenue is recognized. Fees included in the contract that are incurred prior to control transfer are classified as gathering, processing and transportation, and fees incurred after control transfers are included as a reduction to the transaction price. The transaction price at which revenue is recognized consists entirely of variable consideration based on quoted market prices less various fees and the quantity of volumes delivered.
Oil and natural gas revenues are recorded using the sales method. Under this method, revenues are recognized based on actual volumes of oil and natural gas sold to purchasers, regardless of whether the sales are proportionate to our ownership in the property. An asset or a liability is recognized to the extent there is an imbalance in excess of the proportionate share of the remaining recoverable reserves on the underlying properties. No significant imbalances existed at June 30, 2021.
13
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Disaggregation of Revenue
We have identified three material revenue streams in our business: oil, natural gas and NGLs. The following table presents our revenues disaggregated by revenue stream.
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
(in thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
$
|
56,510
|
|
|
$
|
22,963
|
|
|
$
|
106,205
|
|
|
$
|
64,814
|
|
NGLs
|
|
8,876
|
|
|
|
3,343
|
|
|
|
16,547
|
|
|
|
8,465
|
|
Natural gas
|
|
14,952
|
|
|
|
8,582
|
|
|
|
29,917
|
|
|
|
19,396
|
|
Oil and natural gas sales
|
$
|
80,338
|
|
|
$
|
34,888
|
|
|
$
|
152,669
|
|
|
$
|
92,675
|
|
Contract Balances
Under our sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to our revenue contracts with customers was $34.9 million at June 30, 2021 and $25.6 million at December 31, 2020.
Note 4. Fair Value Measurements of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. A three-tier hierarchy has been established that classifies fair value amounts recognized or disclosed in the financial statements. The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3). All the derivative instruments reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets were considered Level 2.
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 June 30, 2021 and December 31, 2020. The fair value estimates are based upon observable market data and are classified within Level 2 of the fair value hierarchy. These assets and liabilities are not presented in the following tables.
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 June 30, 2021 and December 31, 2020 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 June 30, 2021 and December 31, 2020 for each of the fair value hierarchy levels:
|
Fair Value Measurements at June 30, 2021 Using
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Market
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Fair Value
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
5,295
|
|
|
$
|
—
|
|
|
$
|
5,295
|
|
Interest rate derivatives
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
$
|
—
|
|
|
$
|
5,295
|
|
|
$
|
—
|
|
|
$
|
5,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
84,336
|
|
|
$
|
—
|
|
|
$
|
84,336
|
|
Interest rate derivatives
|
|
—
|
|
|
|
1,769
|
|
|
|
—
|
|
|
|
1,769
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
86,105
|
|
|
$
|
—
|
|
|
$
|
86,105
|
|
14
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
Fair Value Measurements at December 31, 2020 Using
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Market
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Fair Value
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
15,449
|
|
|
$
|
—
|
|
|
$
|
15,449
|
|
Interest rate derivatives
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
$
|
—
|
|
|
$
|
15,449
|
|
|
$
|
—
|
|
|
$
|
15,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
23,495
|
|
|
$
|
—
|
|
|
$
|
23,495
|
|
Interest rate derivatives
|
|
—
|
|
|
|
2,752
|
|
|
|
—
|
|
|
|
2,752
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
26,247
|
|
|
$
|
—
|
|
|
$
|
26,247
|
|
See Note 5 for additional information regarding our derivative instruments.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are reported at fair value on a nonrecurring basis as reflected on the accompanying Unaudited Condensed Consolidated Balance Sheets. The following methods and assumptions are used to estimate the fair values:
|
•
|
The fair value of asset retirement obligations (“AROs”) is based on discounted cash flow projections using numerous estimates, assumptions and judgments regarding factors such as the existence of a legal obligation for an ARO; amounts and timing of settlements; the credit-adjusted risk-free rate; and inflation rates. The initial fair value estimates are based on unobservable market data and are classified within Level 3 of the fair value hierarchy. See Note 6 for a summary of changes in AROs.
|
|
•
|
Proved oil and natural gas properties are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying value of such properties. The Company uses an income approach based on the discounted cash flow method, whereby the present value of expected future net cash flows is discounted by applying an appropriate discount rate, for purposes of placing a fair value on the assets. The future cash flows are based on management’s estimates for the future. 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 recorded on proved oil and natural gas properties during the three and six months ended June 30, 2021.
|
|
•
|
For the six months ended June 30, 2020, we recognized $405.7 million of impairment expense on our proved oil and natural gas properties. These impairments related to certain properties located in East Texas, the Rockies and offshore Southern California. The estimated future cash flows expected from these properties were compared to their carrying values and determined to be unrecoverable primarily as a result of declining commodity prices. The impairments were due to a decline in the value of estimated proved reserves based on declining commodity prices in 2020.
|
|
•
|
Unproved oil and natural gas properties are reviewed for impairment based on time or geological factors. Information such as drilling results, reservoir performance, seismic interpretation or future plans to develop acreage is also considered.
|
|
•
|
No impairment expense recorded on unproved oil and natural gas properties during the three and six months ended June 30, 2021.
|
|
•
|
We recognized $49.3 million of impairment expense on unproved properties for the six months ended June 30, 2020, which was related to expiring leases and the evaluation of qualitative and quantitative factors related to the decline in commodity prices in 2020.
|
Note 5. Risk Management and Derivative Instruments
Derivative instruments are utilized to manage exposure to commodity price fluctuations and achieve a more predictable cash flow in connection with natural gas and oil sales from production and borrowing related activities. These instruments limit exposure to declines in prices, but also limit the benefits that would be realized if prices increase.
15
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Certain inherent business risks are associated with commodity derivative contracts, including market risk and credit risk. Market risk is the risk that the price of natural gas or oil will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from nonperformance by the counterparty to a contract. It is our policy to enter into derivative contracts only with creditworthy counterparties, which generally are financial institutions, deemed by management as competent and competitive market makers. Some of the lenders, or certain of their affiliates, under our current credit agreements are counterparties to our derivative contracts. While collateral is generally not required to be posted by counterparties, credit risk associated with derivative instruments is minimized by limiting exposure to any single counterparty and entering into derivative instruments only with creditworthy counterparties that are generally large financial institutions. Additionally, master netting agreements are used to mitigate risk of loss due to default with counterparties on derivative instruments. We have also entered into International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) with each of our counterparties. The terms of the ISDA Agreements provide us and each of our counterparties with rights of set-off upon the occurrence of defined acts of default by either us or our 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. See Note 7 for additional information regarding our Revolving Credit Facility.
Commodity Derivatives
We may use a combination of commodity derivatives (e.g., floating-for-fixed swaps, put options, costless collars and three-way collars) to manage exposure to commodity price volatility. We recognize all derivative instruments at fair value.
We enter into natural gas derivative contracts that are indexed to NYMEX-Henry Hub. We also enter into oil derivative contracts indexed to NYMEX-WTI. Our NGL derivative contracts are primarily indexed to OPIS Mont Belvieu.
In April 2020, the Company monetized a portion of its 2021 crude oil hedges for total cash proceeds of approximately $18.0 million.
At June 30, 2021, we had the following open commodity positions:
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
Natural Gas Derivative Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swap contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (MMBtu)
|
|
970,000
|
|
|
|
695,000
|
|
|
|
—
|
|
Weighted-average fixed price
|
$
|
2.49
|
|
|
$
|
2.56
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Two-way collars
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (MMBtu)
|
|
830,000
|
|
|
|
595,000
|
|
|
|
140,000
|
|
Weighted-average floor price
|
$
|
2.06
|
|
|
$
|
2.37
|
|
|
$
|
2.40
|
|
Weighted-average ceiling price
|
$
|
3.28
|
|
|
$
|
3.09
|
|
|
$
|
2.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Basis Swaps:
|
|
|
|
|
|
|
|
|
|
|
|
PEPL basis swaps:
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (MMBtu)
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
Weighted-average spread
|
$
|
(0.40
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil Derivative Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swap contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (Bbls)
|
|
172,500
|
|
|
|
99,000
|
|
|
|
55,000
|
|
Weighted-average fixed price
|
$
|
49.37
|
|
|
$
|
55.68
|
|
|
$
|
57.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Two-way collars
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (Bbls)
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
Weighted-average floor price
|
$
|
—
|
|
|
$
|
55.00
|
|
|
$
|
—
|
|
Weighted-average ceiling price
|
$
|
—
|
|
|
$
|
60.25
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-way collars
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (Bbls)
|
|
72,500
|
|
|
|
89,000
|
|
|
|
30,000
|
|
Weighted-average ceiling price
|
$
|
50.36
|
|
|
$
|
55.55
|
|
|
$
|
67.15
|
|
Weighted-average floor price
|
$
|
40.00
|
|
|
$
|
42.92
|
|
|
$
|
55.00
|
|
Weighted-average sub-floor price
|
$
|
30.00
|
|
|
$
|
32.58
|
|
|
$
|
40.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL Derivative Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swap contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly volume (Bbls)
|
|
20,300
|
|
|
|
—
|
|
|
|
—
|
|
Weighted-average fixed price
|
$
|
23.74
|
|
|
$
|
—
|
|
|
$
|
—
|
|
16
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Interest Rate Swaps
Periodically, we enter into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates such as those in our Credit Agreement to fixed interest rates. At June 30, 2021, we had the following interest rate swap open positions:
|
Remaining
|
|
|
|
|
|
|
2021
|
|
|
2022
|
|
Average Monthly Notional (in thousands)
|
$
|
125,000
|
|
|
$
|
75,000
|
|
Weighted-average fixed rate
|
|
1.612
|
%
|
|
|
1.281
|
%
|
Floating rate
|
1 Month LIBOR
|
|
|
1 Month LIBOR
|
|
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 June 30, 2021 and December 31, 2020. There was no cash collateral received or pledged associated with our derivative instruments since most of the counterparties, or certain of their affiliates, to our derivative contracts are lenders under our Revolving Credit Facility.
|
|
|
|
Asset Derivatives
|
|
|
Liability
Derivatives
|
|
|
Asset Derivatives
|
|
|
Liability
Derivatives
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
Type
|
|
Balance Sheet Location
|
|
2021
|
|
|
2021
|
|
|
2020
|
|
|
2020
|
|
|
|
|
|
(In thousands)
|
|
Commodity contracts
|
|
Short-term derivative instruments
|
|
$
|
1,172
|
|
|
$
|
62,901
|
|
|
$
|
6,088
|
|
|
$
|
15,007
|
|
Interest rate swaps
|
|
Short-term derivative instruments
|
|
|
—
|
|
|
|
1,342
|
|
|
|
—
|
|
|
|
1,905
|
|
Gross fair value
|
|
|
|
|
1,172
|
|
|
|
64,243
|
|
|
|
6,088
|
|
|
|
16,912
|
|
Netting arrangements
|
|
|
|
|
(1,172
|
)
|
|
|
(1,172
|
)
|
|
|
(6,088
|
)
|
|
|
(6,088
|
)
|
Net recorded fair value
|
|
Short-term derivative instruments
|
|
$
|
—
|
|
|
$
|
63,071
|
|
|
$
|
—
|
|
|
$
|
10,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Long-term derivative instruments
|
|
$
|
4,124
|
|
|
$
|
21,436
|
|
|
$
|
9,361
|
|
|
$
|
8,488
|
|
Interest rate swaps
|
|
Long-term derivative instruments
|
|
|
—
|
|
|
|
427
|
|
|
|
—
|
|
|
|
847
|
|
Gross fair value
|
|
|
|
|
4,124
|
|
|
|
21,863
|
|
|
|
9,361
|
|
|
|
9,335
|
|
Netting arrangements
|
|
|
|
|
(4,124
|
)
|
|
|
(4,124
|
)
|
|
|
(8,488
|
)
|
|
|
(8,488
|
)
|
Net recorded fair value
|
|
Long-term derivative instruments
|
|
$
|
—
|
|
|
$
|
17,739
|
|
|
$
|
873
|
|
|
$
|
847
|
|
(Gains) Losses on Derivatives
We do not designate derivative instruments as hedging instruments for accounting and financial reporting purposes. Accordingly, all gains and losses, including changes in the derivative instruments’ fair values, have been recorded in the accompanying Unaudited Condensed Consolidated Statements of Operations. The following table details the gains and losses related to derivative instruments for the periods indicated (in thousands):
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
Statements of
|
|
June 30,
|
|
|
June 30,
|
|
|
|
Operations Location
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Commodity derivative contracts
|
|
(Gain) loss on commodity derivatives
|
|
$
|
63,898
|
|
|
$
|
19,165
|
|
|
$
|
98,486
|
|
|
$
|
(88,548
|
)
|
(Gain) loss on interest rate derivatives
|
|
Interest expense, net
|
|
|
18
|
|
|
|
438
|
|
|
|
(44
|
)
|
|
|
4,054
|
|
17
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6. 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 six months ended June 30, 2021 (in thousands):
Asset retirement obligations at beginning of period
|
$
|
97,149
|
|
Liabilities added from acquisition or drilling
|
|
29
|
|
Liabilities settled
|
|
(162
|
)
|
Liabilities removed upon sale of wells
|
|
(113
|
)
|
Accretion expense
|
|
3,253
|
|
Revision of estimates
|
|
3
|
|
Asset retirement obligation at end of period
|
|
100,159
|
|
Less: Current portion
|
|
(747
|
)
|
Asset retirement obligations - long-term portion
|
$
|
99,412
|
|
Note 7. Long-Term Debt
The following table presents our consolidated debt obligations at the dates indicated:
|
June 30,
|
|
|
December 31,
|
|
|
2021
|
|
|
2020
|
|
|
(In thousands)
|
|
Revolving Credit Facility (1)
|
$
|
235,000
|
|
|
$
|
255,000
|
|
Paycheck Protection Program loan (2)
|
|
—
|
|
|
|
5,516
|
|
Total long-term debt
|
$
|
235,000
|
|
|
$
|
260,516
|
|
|
(1)
|
The carrying amount of our Revolving Credit Facility approximates fair value because the interest rates are variable and reflective of market rates.
|
|
(2)
|
See below for additional information regarding the receipt and forgiveness of the paycheck protection program loan.
|
Revolving Credit Facility
Amplify Energy Operating LLC, our wholly owned subsidiary (“OLLC”), is a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $245.0 million as of June 30, 2021, which is guaranteed by us and all of our current subsidiaries. The Revolving Credit Facility matures on November 2, 2023. Our borrowing base under our Revolving Credit Facility is subject to redetermination on at least a semi-annual basis primarily based on a reserve engineering report.
On June 16, 2021, the Company completed its scheduled semi-annual borrowing base redetermination process, pursuant to which the borrowing base under the Revolving Credit Facility was decreased from $260.0 million to $245.0 million. In addition to the redetermination, the administrative agent under the Revolving Credit Facility agreement was changed from Bank of Montreal to KeyBank.
As of June 30, 2021, we were in compliance with all the financial (current ratio and total leverage ratio) and other covenants associated with our Revolving Credit Facility.
Weighted-Average Interest Rates
The following table presents the weighted-average interest rates paid, excluding commitment fees, on our consolidated variable-rate debt obligations for the periods presented:
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revolving Credit Facility
|
3.65%
|
|
|
3.12%
|
|
|
3.66%
|
|
|
3.55%
|
|
Letters of Credit
At June 30, 2021, we had no letters of credit outstanding.
Unamortized Deferred Financing Costs
Unamortized deferred financing costs associated with our Revolving Credit Facility was $1.2 million at June 30, 2021.
18
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Paycheck Protection Program
On April 24, 2020, the Company received a $5.5 million PPP Loan. The PPP Loan was established as part of the CARES Act to provide loans to qualifying businesses. The PPP Loan was not part of the Revolving Credit Facility as described above. The loan and accrued interest were potentially forgivable provided that the borrower uses the loan proceeds for eligible purposes. The term of the Company’s PPP Loan was two years with an annual interest rate of 1% and no payments of principal or interest due during the six-month period beginning on the date of the PPP Loan. The Company applied for forgiveness of the amount due on the PPP Loan based on spending the loan proceeds on eligible expenses as defined by the statute. On June 22, 2021, KeyBank notified the Company that the PPP Loan had been approved for full and complete forgiveness by the Small Business Association. For the three and six months ended June 30, 2021, the company reported a gain on extinguishment of debt of $5.5 million for the PPP Loan forgiveness in the Unaudited Condensed Consolidated Statements of Operations.
Note 8. Equity (Deficit)
Common Stock
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 our common stock issued for the six months ended June 30, 2021:
|
Common Stock
|
|
Balance, December 31, 2020
|
|
37,663,509
|
|
Restricted stock units vested
|
|
29,621
|
|
Bonus stock awards (1)
|
|
455,973
|
|
Shares withheld for taxes (2)
|
|
(161,958
|
)
|
Balance, June 30, 2021
|
|
37,987,145
|
|
|
(1)
|
Reflects shares granted to certain executive officers and employees pursuant to our annual incentive bonus program. Shares were granted on February 12, 2021 at a grant price of $2.48 per share.
|
|
(2)
|
Represents the net settlement on vesting of restricted stock necessary to satisfy the minimum statutory tax withholding requirements.
|
Warrants
On May 4, 2017, Legacy Amplify entered into a warrant agreement with American Stock Transfer & Trust Company, LLC, as warrant agent, pursuant to which Legacy Amplify issued warrants to purchase up to 2,173,913 shares of Legacy Amplify’s common stock, exercisable for a five-year period commencing on May 4, 2017 at an exercise price of $42.60 per share.
Cash Dividend Payment
On March 3, 2020, our board of directors approved a dividend of $0.10 per share of outstanding common stock or $3.8 million in aggregate, which was paid on March 30, 2020, to stockholders of record at the close of business on March 16, 2020. The board of directors subsequently suspended quarterly dividends. Future dividends, if any, are subject to debt covenants under our Revolving Credit Facility and discretionary approval by the board of directors.
19
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Earnings 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 Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
|
2020
|
|
Net loss
|
$
|
(35,023
|
)
|
|
$
|
(41,336
|
)
|
|
$
|
(54,351
|
)
|
|
|
$
|
(408,535
|
)
|
Less: Net income allocated to participating restricted stockholders
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
Basic and diluted earnings available to common stockholders
|
$
|
(35,023
|
)
|
|
$
|
(41,336
|
)
|
|
$
|
(54,351
|
)
|
|
|
$
|
(408,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares/units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding — basic
|
|
37,983
|
|
|
|
37,595
|
|
|
|
37,907
|
|
|
|
|
37,582
|
|
Dilutive effect of potential common shares
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
Common shares outstanding — diluted
|
|
37,983
|
|
|
|
37,595
|
|
|
|
37,907
|
|
|
|
|
37,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.92
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(1.43
|
)
|
|
|
$
|
(10.87
|
)
|
Diluted
|
$
|
(0.92
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(1.43
|
)
|
|
|
$
|
(10.87
|
)
|
Antidilutive warrants (1)
|
|
2,174
|
|
|
|
2,174
|
|
|
|
2,174
|
|
|
|
|
2,174
|
|
(1)
|
Amount represents warrants to purchase common stock that are excluded from the diluted net earnings per share calculations because of their antidilutive effect.
|
Note 10. 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”) and the Legacy Amplify 2017 Non-Employee Directors Compensation Plan (the “Legacy Amplify Non-Employee Directors Compensation Plan”) replaced by the EIP and no further awards will be allowed to be granted under the Legacy Amplify MIP or the Legacy Amplify Non-Employee Directors Compensation Plan. As of June 30, 2021, an aggregate of 2,802,856 shares were available for future grants under the EIP.
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. 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 $2.7 million at June 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 1.7 years.
The following table summarizes information regarding the TSUs granted under the Legacy Amplify MIP for the period presented:
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average Grant
|
|
|
Number of
|
|
|
-Date Fair Value
|
|
|
Units
|
|
|
per Unit (1)
|
|
TSUs outstanding at December 31, 2020
|
|
115,797
|
|
|
$
|
4.47
|
|
Granted (2)
|
|
872,588
|
|
|
$
|
3.52
|
|
Forfeited
|
|
(1,244
|
)
|
|
$
|
5.12
|
|
Vested
|
|
(24,056
|
)
|
|
$
|
3.91
|
|
TSUs outstanding at June 30, 2021
|
|
963,085
|
|
|
$
|
3.62
|
|
|
(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 six months ended June 30, 2021 was $3.1 million based on a grant date market price of $3.52 per share.
|
Restricted Stock Units with Market and Service Vesting Conditions
The restricted stock units with market and service vesting conditions (“PSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a graded-vesting basis. As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. The Company accounts for forfeitures as they occur. Compensation costs are recorded as general and administrative expense. The unrecognized cost related to the PSUs was less than $0.1 million at June 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 1.4 years.
20
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The PSUs will vest based on the satisfaction of service and market vesting conditions with market vesting based on the Company’s achievement of certain share price targets. The PSUs are subject to service-based vesting such that 50% of the PSUs service vest on the applicable market vesting date and an additional 25% of the PSUs service vest on each of the first and second anniversaries of the applicable market vesting date.
In the event of a qualifying termination, subject to certain conditions, (i) all PSUs that have satisfied the market vesting conditions will fully service vest, upon such termination, and (ii) if the termination occurs between the second and third anniversaries of the grant date, then PSUs that have not market vested as of the termination will market vest to the extent that the share targets (in each case, reduced by $0.25) are achieved as of such termination. Subject to the foregoing, any unvested PSUs will be forfeited upon termination of employment.
A Monte Carlo simulation was used in order to determine the fair value of these awards at the grant date.
The following table summarizes information regarding the PSUs granted under the Legacy Amplify MIP for the period presented:
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average Grant
|
|
|
Number of
|
|
|
-Date Fair Value
|
|
|
Units
|
|
|
per Unit (1)
|
|
PSUs outstanding at December 31, 2020
|
|
214,554
|
|
|
$
|
2.36
|
|
Granted
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
|
(3,732
|
)
|
|
$
|
2.11
|
|
Vested
|
|
—
|
|
|
$
|
—
|
|
PSUs outstanding at June 30, 2021
|
|
210,822
|
|
|
$
|
2.36
|
|
|
(1)
|
Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.
|
Restricted Stock Units with Market Vesting Conditions
The restricted stock units with performance-based vesting conditions (“PRSUs”) are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a graded-vesting basis. As such, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. The Company accounts for forfeitures as they occur. Compensation costs are recorded as general and administrative expense.
The PRSUs are issued collectively in separate tranches with individual performances periods beginning in January 2021, 2022, and 2023 respectively. 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 period January 1, 2021 through December 31, 2021; 25% able to vest during the period January 1, 2022 through December 31, 2022 and 50% able to vest during the period of January 1, 2023 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 performance period. The fair value of each PRSU award was estimated on their grant dates using a Monte Carlo simulation. The unrecognized cost associated with the PRSUs was $0.3 million at June 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.1 years.
The ranges for the assumptions used in the Monte Carlo model for the PRSUs granted during 2021 are presented as follows:
|
2021
|
|
Expected volatility
|
|
119.6
|
%
|
Dividend yield
|
|
0.00
|
%
|
Risk-free interest rate
|
|
0.31
|
%
|
21
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information regarding the PRSUs granted under the Legacy Amplify MIP for the period presented:
|
Number of Units
|
|
|
Weighted-Average Grant-Date Fair Value per Unit (1)
|
|
PRSUs outstanding at December 31, 2020
|
|
—
|
|
|
$
|
—
|
|
Granted (2)
|
|
196,377
|
|
|
$
|
1.94
|
|
Forfeited
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
—
|
|
|
$
|
—
|
|
PRSUs outstanding at June 30, 2021
|
|
196,377
|
|
|
$
|
1.94
|
|
|
(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 six months ended June 30, 2021 was $0.4 million based on a grant-date market price ranging from $1.24 to $2.63 per share.
|
2017 Non-Employee Directors Compensation Plan
In June 2017, Legacy Amplify implemented the Legacy Amplify Non-Employee Directors Compensation Plan to attract and retain the services of experienced non-employee directors of Legacy Amplify or its subsidiaries. In connection with the closing of the merger, on August 6, 2019, the Company assumed the Legacy Amplify Non-Employee Directors Compensation Plan. As noted above, the Legacy Amplify Non-Employee Directors Compensation Plan was replaced by the EIP in May 2021.
The restricted stock units with a service vesting condition (“Board RSUs”) are accounted for as equity-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 restricted stock unit awards was less than $0.1 million at June 30, 2021. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 0.8 years.
The following table summarizes information regarding the Board RSUs granted under the Legacy Amplify Non-Employee Directors Compensation Plan for the period presented:
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average Grant
|
|
|
Number of
|
|
|
-Date Fair Value
|
|
|
Units
|
|
|
per Unit (1)
|
|
Board RSUs outstanding at December 31, 2020
|
|
8,898
|
|
|
$
|
5.12
|
|
Granted
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
(5,565
|
)
|
|
$
|
5.12
|
|
Board RSUs outstanding at June 30, 2021
|
|
3,333
|
|
|
$
|
5.12
|
|
|
(1)
|
Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued.
|
Compensation Expense
The following table summarizes the amount of recognized compensation expense associated with the Legacy Amplify MIP and Legacy Amplify Non-Employee Directors Compensation Plan, which are reflected in the accompanying Unaudited Condensed Consolidated Statements of Operations for the periods presented (in thousands):
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Equity classified awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSUs
|
|
582
|
|
|
|
(6
|
)
|
|
|
657
|
|
|
|
125
|
|
PSUs
|
|
16
|
|
|
|
5
|
|
|
|
39
|
|
|
|
10
|
|
Board RSUs
|
|
4
|
|
|
|
2
|
|
|
|
8
|
|
|
|
40
|
|
PRSUs
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
691
|
|
|
$
|
1
|
|
|
$
|
793
|
|
|
$
|
175
|
|
22
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Leases
For the quarter ended June 30, 2021, our leases qualify as operating leases and we did not have any existing or new leases qualifying as financing leases or variable leases. We have leases for office space and equipment in our corporate office and operating regions as well as vehicles, compressors and surface rentals related to our business operations. In addition, we have offshore Southern California pipeline right-of-way use agreements. Most of our leases, other than our corporate office lease, have an initial term and may be extended on a month-to-month basis after expiration of the initial term. Most of our leases can be terminated with 30-day prior written notice. The majority of our month-to-month leases are not included as a lease liability in our balance sheet under ASC 842 because continuation of the lease is not reasonably certain. Additionally, the Company elected the short-term practical expedient to exclude leases with a term of twelve months or less.
Our corporate office lease does not provide an implicit rate. To determine the present value of the lease payments, we use our incremental borrowing rate based on the information available at the inception date. To determine the incremental borrowing rate, we apply a portfolio approach based on the applicable lease terms and the current economic environment. We use a reasonable market interest rate for our office equipment and vehicle leases.
For the six months ended June 30, 2021 and 2020, we recognized approximately $1.2 million and $1.2 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 are included in the table below:
|
For the Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
(In thousands)
|
|
Non-cash amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
$
|
729
|
|
|
$
|
877
|
|
The following table presents the Company’s right-of-use assets and lease liabilities for the period presented:
|
June 30,
|
|
|
December 31,
|
|
|
2021
|
|
|
2020
|
|
|
(In thousands)
|
|
Right-of-use asset
|
$
|
1,771
|
|
|
$
|
2,500
|
|
|
|
|
|
|
|
|
|
Lease liabilities:
|
|
|
|
|
|
|
|
Current lease liability
|
|
1,480
|
|
|
|
2,258
|
|
Long-term lease liability
|
|
301
|
|
|
|
266
|
|
Total lease liability
|
$
|
1,781
|
|
|
$
|
2,524
|
|
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):
|
Office leases
|
|
|
Leased vehicles and office equipment
|
|
|
Total
|
|
Remaining 2021
|
$
|
816
|
|
|
$
|
370
|
|
|
$
|
1,186
|
|
2022
|
|
140
|
|
|
|
290
|
|
|
|
430
|
|
2023
|
|
—
|
|
|
|
195
|
|
|
|
195
|
|
2024 and thereafter
|
|
—
|
|
|
|
14
|
|
|
|
14
|
|
Total lease payments
|
|
956
|
|
|
|
869
|
|
|
|
1,825
|
|
Less: interest
|
|
16
|
|
|
|
28
|
|
|
|
44
|
|
Present value of lease liabilities
|
$
|
940
|
|
|
$
|
841
|
|
|
$
|
1,781
|
|
23
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The weighted average remaining lease terms and discount rate for all of our operating leases for the period presented:
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
Weighted average remaining lease term (years):
|
|
|
|
|
|
|
|
Office leases
|
|
0.30
|
|
|
|
1.10
|
|
Vehicles
|
|
0.77
|
|
|
|
0.53
|
|
Office equipment
|
|
0.02
|
|
|
|
0.06
|
|
Weighted average discount rate:
|
|
|
|
|
|
|
|
Office leases
|
|
2.57
|
%
|
|
|
3.49
|
%
|
Vehicles
|
|
1.57
|
%
|
|
|
0.94
|
%
|
Office equipment
|
|
0.14
|
%
|
|
|
0.17
|
%
|
Note 12. Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows
Accrued Liabilities
Current accrued liabilities consisted of the following at the dates indicated (in thousands):
|
June 30,
|
|
|
December 31,
|
|
|
2021
|
|
|
2020
|
|
Accrued lease operating expense
|
$
|
7,725
|
|
|
$
|
8,978
|
|
Accrued capital expenditures
|
|
5,376
|
|
|
|
173
|
|
Accrued commitment fee and other expense
|
|
3,719
|
|
|
|
4,404
|
|
Accrued production and ad valorem tax
|
|
3,612
|
|
|
|
2,601
|
|
Accrued general and administrative expense
|
|
3,051
|
|
|
|
3,349
|
|
Operating lease liability
|
|
1,480
|
|
|
|
2,258
|
|
Asset retirement obligations
|
|
747
|
|
|
|
424
|
|
Accrued current income taxes
|
|
—
|
|
|
|
110
|
|
Other
|
|
350
|
|
|
|
380
|
|
Accrued liabilities
|
$
|
26,060
|
|
|
$
|
22,677
|
|
Supplemental Cash Flows
Supplemental cash flows for the periods presented (in thousands):
|
For the Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
|
2020
|
|
Supplemental cash flows:
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized
|
$
|
4,429
|
|
|
$
|
5,380
|
|
Cash paid for reorganization items, net
|
|
6
|
|
|
|
351
|
|
Cash paid for taxes
|
|
—
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
Increase (decrease) in capital expenditures in payables and accrued liabilities
|
|
5,203
|
|
|
|
(3,618
|
)
|
Note 13. Related Party Transactions
Related Party Agreements
There have been no transactions between us and any related person in which the related person had a direct or indirect material interest for the three or six months ended June 30, 2021 and 2020.
24
AMPLIFY ENERGY CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Commitments and Contingencies
Litigation and Environmental
We are not aware of any litigation, pending or threatened, that we believe will have a material adverse effect on our financial position, results of operations or cash flows; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.
Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings.
At June 30, 2021 and December 31, 2020, we had no environmental reserves recorded on our Unaudited Condensed Consolidated Balance Sheet.
Minimum Volume Commitment
The Company is party to a gas purchase, gathering and processing contract in Oklahoma, which includes certain minimum NGL commitments. To the extent the Company does not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGLs, it would be required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee. The Company is not meeting the minimum volume required under this contractual provision. The commitment fee expense for the three and six months ended June 30, 2021, was approximately $0.5 million and $0.8 million, respectively. The minimum volume commitment for Oklahoma ends on June 30, 2023.
The Company is party to a gas purchase, gathering and processing contract in East Texas, which includes certain minimum gas commitments. The Company is not meeting the minimum volume required under this contractual provision. The commitment fee expense for the three and six months ended June 30, 2021, was approximately $0.5 million and $0.9 million, respectively. The minimum volume commitment for East Texas ends on November 30, 2022.
Supplemental Bond for Decommissioning Liabilities Trust Agreement
Beta Operating Company, LLC, has an obligation with the BOEM in connection with its 2009 acquisition of our properties in federal waters offshore Southern California. The Company supports this obligation with $161.3 million of A-rated surety bonds and $0.3 million of cash as of June 30, 2021.
Note 15. Income Taxes
The Company had no income tax expense for the three and six months ended June 30, 2021, respectively, and less than $0.1 million in income tax expense for the three and six months ended June 30, 2020, respectively. The Company’s effective tax rate was 0.0% for the three and six months ended June 30, 2021, respectively, and 0.2% and 0.0% for the three and six months ended June 30, 2020, respectively. The effective tax rates for the three and six months ended June 30, 2021 and 2020 are different from the statutory U.S. federal income tax rate primarily due to our recorded valuation allowances.
In March 2021, the President of the United States signed the ARP Act, to respond to the COVID-19 emergency and address its economic effects. The ARP Act did not have a material impact on the Company’s current year tax provision.
25