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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 001-35512

Amplify Energy Corp.

(Exact name of registrant as specified in its charter)

Delaware

    

82-1326219

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

500 Dallas Street, Suite 1700, Houston, TX

77002

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (713) 490-8900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  þ    No  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  þ    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer þ  

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).   Yes      No  þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    þ  Yes           No

Securities Registered Pursuant to Section 12(b):

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

AMPY

NYSE

As of November 5, 2021, the registrant had 38,023,229 outstanding shares of common stock, $0.01 par value outstanding.

AMPLIFY ENERGY CORP.

TABLE OF CONTENTS

    

    

Page

Glossary of Oil and Natural Gas Terms

1

Names of Entities

4

Cautionary Note Regarding Forward-Looking Statements

5

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

8

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

8

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

9

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

10

Unaudited Condensed Consolidated Statements of Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020

11

Notes to Unaudited Condensed Consolidated Financial Statements

12

Note 1 – Organization and Basis of Presentation

12

Note 2 – Summary of Significant Accounting Policies

13

Note 3 – Revenue

14

Note 4 – Fair Value Measurements of Financial Instruments

15

Note 5 – Risk Management and Derivative Instruments

17

Note 6 – Asset Retirement Obligations

20

Note 7 – Long-term Debt

20

Note 8 – Equity (Deficit)

21

Note 9 – Earnings per Share

22

Note 10 – Long-Term Incentive Plans

22

Note 11 – Leases

26

Note 12 – Supplemental Disclosures to the Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows

28

Note 13 – Related Party Transactions

28

Note 14 – Commitments and Contingencies

28

Note 15 – Income Taxes

29

Note 16 – Subsequent Events

30

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

Signatures

51

i

GLOSSARY OF OIL AND NATURAL GAS TERMS

Analogous Reservoir: Analogous reservoirs, as used in resource assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, analogous reservoir refers to a reservoir that shares all of the following characteristics with the reservoir of interest: (i) the same geological formation (but not necessarily in pressure communication with the reservoir of interest); (ii) the same environment of deposition; (iii) similar geologic structure; and (iv) the same drive mechanism.

Bbl: One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.

Bbl/d: One Bbl per day.

Bcfe: One billion cubic feet of natural gas equivalent.

Boe: One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.

BOEM: U.S. Bureau of Ocean Energy Management.

Btu: One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit.

CO2: Carbon dioxide.

Development Project: A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.

Dry Hole or Dry Well: A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production would exceed production expenses and taxes.

Economically Producible: The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. For this determination, the value of the products that generate revenue are determined at the terminal point of oil and natural gas producing activities.

Exploitation: A development or other project which may target proven or unproven reserves (such as probable or possible reserves), but which generally has a lower risk than that associated with exploration projects.

Field: An area consisting of a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Gross Acres or Gross Wells: The total acres or wells, as the case may be, in which we have a working interest.

ICE: Inter-Continental Exchange.

MBbl: One thousand Bbls.

MBbls/d: One thousand Bbls per day.

MBoe: One thousand barrels of oil equivalent.

1

MBoe/d: One thousand barrels of oil equivalent per day.

MMBoe: One million barrels of oil equivalent.

Mcf: One thousand cubic feet of natural gas.

Mcf/d: One Mcf per day.

MMBtu: One million Btu.

MMcf: One million cubic feet of natural gas.

MMcfe: One million cubic feet of natural gas equivalent.

MMcfe/d: One MMcfe per day.

Net Production: Production that is owned by us less royalties and production due to others.

NGLs: The combination of ethane, propane, butane and natural gasolines that, when removed from natural gas, become liquid under various levels of higher pressure and lower temperature.

NYMEX: New York Mercantile Exchange.

NYSE: New York Stock Exchange.

Oil: Oil and condensate.

Operator: The individual or company responsible for the exploration and/or production of an oil or natural gas well or lease.

OPIS: Oil Price Information Service.

Plugging and Abandonment: Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another stratum or to the surface. Regulations of all states require plugging of abandoned wells.

Probabilistic Estimate: The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence.

Proved Developed Reserves: Proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods.

2

Proved Reserves: Those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project, within a reasonable time. The area of the reservoir considered as proved includes (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or natural gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons, as seen in a well penetration, unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated natural gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves which can be produced economically through application of improved recovery techniques (including fluid injection) are included in the proved classification when (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir, or an analogous reservoir or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price used is the average price during the twelve-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

Realized Price: The cash market price less all expected quality, transportation and demand adjustments.

Reliable Technology: Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

Reserves: Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

Reservoir: A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reserves.

Resources: Resources are quantities of oil and natural gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable and another portion may be considered unrecoverable. Resources include both discovered and undiscovered accumulations.

SEC: The U.S. Securities and Exchange Commission

Working Interest: An interest in an oil and natural gas lease that gives the owner of the interest the right to drill for and produce oil and natural gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations.

Workover: Operations on a producing well to restore or increase production.

WTI: West Texas Intermediate.

3

NAMES OF ENTITIES

As used in this Form 10-Q, unless we indicate otherwise:

“Amplify Energy,” “Company,” “we,” “our,” “us” or like terms refers to Amplify Energy Corp. individually and collectively with its subsidiaries, as the context requires;
“Legacy Amplify” refers to Amplify Energy Holdings LLC (f/k/a Amplify Energy Corp.), the successor reporting company of Memorial Production Partners LP; and
“OLLC” refers to Amplify Energy Operating LLC, our wholly owned subsidiary through which we operate our properties.

4

CAUTIONARY NOTE REGARDING FORWARD–LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

business strategies;
response to the oil incident that occurred off the coast of Southern California resulting from our pipeline operations at the Beta Field (the “Incident”);
acquisition and disposition strategy;
cash flows and liquidity;
financial strategy;
ability to replace the reserves we produce through drilling;
drilling locations;
oil and natural gas reserves;
technology;
realized oil, natural gas and NGL prices;
production volumes;
lease operating expense;
gathering, processing and transportation;
general and administrative expense;
future operating results;
ability to procure drilling and production equipment;
ability to procure oil field labor;
planned capital expenditures and the availability of capital resources to fund capital expenditures;
ability to access capital markets;
marketing of oil, natural gas and NGLs;
acts of God, fires, earthquakes, storms, floods, other adverse weather conditions, war, acts of terrorism, military operations or national emergency;
the occurrence or threat of epidemic or pandemic diseases, such as the ongoing novel coronavirus (“COVID-19”) pandemic, or any government response to such occurrence or threat;

5

expectations regarding general economic conditions;
competition in the oil and natural gas industry;
effectiveness of risk management activities;
environmental liabilities;
counterparty credit risk;
expectations regarding governmental regulation and taxation;
expectations regarding developments in oil-producing and natural-gas producing countries; and
plans, objectives, expectations and intentions.

All statements, other than statements of historical fact included in this report, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “outlook,” “continue,” the negative of such terms or other comparable terminology. These statements address activities, events or developments that we expect or anticipate will or may occur in the future, including things such as projections of results of operations, plans for growth, goals, future capital expenditures, competitive strengths, references to future intentions and other such references. These forward-looking statements involve risks and uncertainties. Important factors that could cause our actual results or financial condition to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following risks and uncertainties:

risks related to the Incident and our response to the Incident;
risks related to a redetermination of the borrowing base under our senior secured reserve-based revolving credit facility;
our ability to access funds on acceptable terms, if at all, because of the terms and conditions governing our indebtedness, including financial covenants;
our ability to satisfy debt obligations;
volatility in the prices for oil, natural gas and NGLs, including further or sustained declines in commodity prices;
the potential for additional impairments due to continuing or future declines in oil, natural gas and NGL prices;
the uncertainty inherent in estimating quantities of oil, natural gas and NGLs reserves;
our substantial future capital requirements, which may be subject to limited availability of financing;
the uncertainty inherent in the development and production of oil and natural gas;
our need to make accretive acquisitions or substantial capital expenditures to maintain our declining asset base;
the existence of unanticipated liabilities or problems relating to acquired or divested businesses or properties;
potential acquisitions, including our ability to make acquisitions on favorable terms or to integrate acquired properties;
the consequences of changes we have made, or may make from time to time in the future, to our capital expenditure budget, including the impact of those changes on our production levels, reserves, results of operations and liquidity;

6

potential shortages of, or increased costs for, drilling and production equipment and supply materials for production, such as CO2;
potential difficulties in the marketing of oil and natural gas;
changes to the financial condition of counterparties;
uncertainties surrounding the success of our secondary and tertiary recovery efforts;
competition in the oil and natural gas industry;
our results of evaluation and implementation of strategic alternatives;
general political and economic conditions, globally and in the jurisdictions in which we operate;
the impact of climate change and natural disasters, such as earthquakes, tidal waves, mudslides, fires and floods;
the impact of local, state and federal governmental regulations;
the risk that our hedging strategy may be ineffective or may reduce our income;
the cost and availability of insurance as well as operating risks that may not be covered by an effective indemnity or insurance;
actions of third-party co-owners of interests in properties in which we also own an interest; and
other risks and uncertainties described in “Item 1A. Risk Factors.”

The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or that the events or circumstances described in any forward-looking statement will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described in “Part I—Item 1A. Risk Factors” of Amplify’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2021 (“2020 Form 10-K”). All forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

7

PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except outstanding shares)

    

September 30, 

    

December 31, 

    

2021

2020

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash

$

17,344

$

10,364

Accounts receivable, net

 

44,748

 

30,901

Prepaid expenses and other current assets

 

10,740

 

15,572

Total current assets

 

72,832

 

56,837

Property and equipment, at cost:

 

  

 

  

Oil and natural gas properties, successful efforts method

 

796,210

 

775,167

Support equipment and facilities

 

144,925

 

142,208

Other

 

9,617

 

9,102

Accumulated depreciation, depletion and amortization

 

(627,881)

 

(609,231)

Property and equipment, net

 

322,871

 

317,246

Long-term derivative instruments

 

 

873

Restricted investments

 

4,623

 

4,623

Operating lease - long term right-of-use asset

 

3,379

 

2,500

Other long-term assets

 

2,212

 

2,680

Total assets

$

405,917

$

384,759

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

9,166

$

798

Revenues payable

 

21,095

 

22,563

Accrued liabilities (see Note 12)

 

28,238

 

22,677

Short-term derivative instruments

 

83,599

 

10,824

Total current liabilities

 

142,098

 

56,862

Long-term debt (see Note 7)

 

230,000

 

260,516

Asset retirement obligations

 

101,077

 

96,725

Long-term derivative instruments

 

20,831

 

847

Operating lease liability

 

2,132

 

266

Other long-term liabilities

 

9,930

 

3,280

Total liabilities

 

506,068

 

418,496

Commitments and contingencies (see Note 14)

 

  

 

  

Stockholders' equity (deficit):

 

  

 

  

Preferred stock, $0.01 par value: 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020

 

 

Warrants, 2,173,913 warrants issued and outstanding at September 30, 2021 and December 31, 2020

 

4,788

 

4,788

Common stock, $0.01 par value: 250,000,000 shares authorized; 37,996,974 and 37,663,509 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 

380

 

378

Additional paid-in capital

 

425,508

 

424,104

Accumulated deficit

 

(530,827)

 

(463,007)

Total stockholders' deficit

 

(100,151)

 

(33,737)

Total liabilities and equity

$

405,917

$

384,759

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

    

For the Three Months Ended

For the Nine Months Ended

    

September 30, 

September 30, 

    

2021

    

2020

2021

    

2020

Revenues:

 

  

 

  

  

 

  

Oil and natural gas sales

$

96,841

$

52,488

$

249,510

$

145,163

Other revenues

 

160

 

257

 

353

 

889

Total revenues

 

97,001

 

52,745

 

249,863

 

146,052

Costs and expenses:

 

  

 

  

 

  

 

  

Lease operating expense

 

34,486

 

27,639

 

92,045

 

91,190

Gathering, processing and transportation

 

5,047

 

5,256

 

14,676

 

14,998

Taxes other than income

 

6,024

 

3,761

 

15,708

 

9,942

Depreciation, depletion and amortization

 

7,000

 

7,950

 

21,736

 

31,129

Impairment expense

 

 

 

 

455,031

General and administrative expense

 

6,448

 

6,443

 

19,399

 

21,551

Accretion of asset retirement obligations

 

1,665

 

1,565

 

4,918

 

4,617

Loss (gain) on commodity derivative instruments

 

46,653

 

14,352

 

145,139

 

(74,196)

Other, net

 

9

 

118

 

105

 

137

Total costs and expenses

 

107,332

 

67,084

 

313,726

 

554,399

Operating loss

 

(10,331)

 

(14,339)

 

(63,863)

 

(408,347)

Other (expense) income:

 

  

 

  

 

  

 

  

Interest expense, net

 

(3,078)

 

(3,362)

 

(9,327)

 

(17,218)

Other expense

(61)

196

(141)

(38)

Gain on extinguishment of debt

 

 

 

5,516

 

Total other expense

 

(3,139)

 

(3,166)

 

(3,952)

 

(17,256)

Loss before reorganization items, net and income taxes

 

(13,470)

 

(17,505)

 

(67,815)

 

(425,603)

Reorganization items, net

 

 

(180)

 

(6)

 

(532)

Income tax expense

 

 

 

 

(85)

Net loss

$

(13,470)

$

(17,685)

$

(67,821)

$

(426,220)

Loss per share: (See Note 9)

 

  

 

  

 

  

 

  

Basic and diluted earnings (loss) per share

$

(0.35)

$

(0.47)

$

(1.79)

$

(11.34)

Weighted average common shares outstanding:

 

  

 

  

 

  

 

  

Basic and diluted

 

37,996

 

37,626

 

37,937

 

37,596

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

9

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

    

For the Nine Months Ended

    

September 30, 

    

2021

    

2020

Cash flows from operating activities:

 

  

 

  

Net loss

$

(67,821)

$

(426,220)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

Depreciation, depletion and amortization

 

21,736

 

31,129

Impairment expense

 

 

455,031

Loss (gain) on derivative instruments

 

145,142

 

(70,162)

Cash settlements (paid) received on expired derivative instruments

 

(51,512)

 

53,076

Cash settlements received on terminated derivative instruments

 

 

17,977

Bad debt expense

 

108

 

470

Amortization and write-off of deferred financing costs

 

493

 

3,134

Gain on extinguishment of debt

(5,516)

Accretion of asset retirement obligations

 

4,918

 

4,617

Share-based compensation (see Note 10)

 

1,436

 

(161)

Settlement of asset retirement obligations

 

(162)

 

(199)

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

(13,965)

 

5,769

Prepaid expenses and other assets

 

4,832

 

1,080

Payables and accrued liabilities

 

16,127

 

(11,467)

Other

 

(529)

 

(476)

Net cash provided by operating activities

 

55,287

 

63,598

Cash flows from investing activities:

 

  

 

  

Additions to oil and gas properties

 

(23,142)

 

(31,234)

Additions to other property and equipment

 

(515)

 

(828)

Other

 

404

 

Net cash used in investing activities

 

(23,253)

 

(32,062)

Cash flows from financing activities:

 

  

 

  

Advances on revolving credit facility

 

 

25,000

Payments on revolving credit facility

 

(25,000)

 

(45,000)

Proceeds from the paycheck protection program

 

 

5,516

Deferred financing costs

 

(25)

 

(65)

Dividends to stockholders

 

 

(3,786)

Shares withheld for taxes

 

(29)

 

(40)

Other

 

 

35

Net cash used in financing activities

 

(25,054)

 

(18,340)

Net change in cash, cash equivalents and restricted cash

 

6,980

 

13,196

Cash, cash equivalents and restricted cash, beginning of period

 

10,364

 

325

Cash, cash equivalents and restricted cash, end of period

$

17,344

$

13,521

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

10

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In thousands)

Stockholders' Equity (Deficit)

Additional

Common

Paid-in

Accumulated

    

Stock

    

Warrants

    

Capital

    

Deficit

    

Total

 

Balance at December 31, 2020

 

$

378

 

$

4,788

 

$

424,104

 

$

(463,007)

 

$

(33,737)

Net loss

 

 

 

 

(19,328)

 

(19,328)

Share-based compensation expense

 

 

 

(204)

 

 

(204)

Shares withheld for taxes

 

 

 

(5)

 

 

(5)

Other

 

3

 

 

(3)

 

 

Balance at March 31, 2021

 

381

 

4,788

 

423,892

 

(482,335)

 

(53,274)

Net loss

(35,023)

(35,023)

Share-based compensation expense

934

934

Shares withheld for taxes

(12)

(12)

Balance at June 30, 2021

 

381

 

4,788

 

424,814

 

(517,358)

 

(87,375)

Net loss

 

 

 

 

(13,470)

 

(13,470)

Share-based compensation expense

 

 

 

707

 

 

707

Shares withheld for taxes

 

 

 

(13)

 

 

(13)

Balance at September 30, 2021

 

$

381

 

$

4,788

 

$

425,508

 

$

(530,828)

 

$

(100,151)

Stockholders' Equity (Deficit)

Additional

Accumulated

Common

Paid-in

Earnings

    

Stock

    

Warrants

    

Capital

    

(Deficit)

    

Total

Balance at December 31, 2019

 

$

209

 

$

4,790

 

$

424,399

 

$

4,809

 

$

434,207

Net loss

 

 

 

 

(367,199)

 

(367,199)

Share-based compensation expense

 

 

 

(1,112)

 

 

(1,112)

Shares withheld for taxes

 

 

 

(14)

 

 

(14)

Dividends

 

 

 

 

(3,786)

 

(3,786)

Balance at March 31, 2020

 

209

 

4,790

 

423,273

 

(366,176)

 

62,096

Net loss

 

 

 

(41,336)

 

(41,336)

Share-based compensation expense

 

 

480

 

 

480

Expiration of warrants

(2)

2

Shares withheld for taxes

 

 

(20)

 

 

(20)

Other

35

35

Balance at June 30, 2020

 

209

 

4,788

 

423,770

 

(407,512)

 

21,255

Net loss

 

 

 

 

(17,685)

 

(17,685)

Share-based compensation expense

 

 

 

471

 

 

471

Shares withheld for taxes

(5)

(5)

Balance at September 30, 2020

 

$

209

 

$

4,788

 

$

424,236

 

$

(425,197)

 

$

4,036

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

11

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AMPLIFY ENERGY CORP.

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.

12

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 had been marked by significant slowdown and uncertainty, which in turn 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. 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 nine months ended September 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 September 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 nine months ended September 30, 2021, which included an approximate $0.8 million credit to general and administrative expense and an approximate $2.0 million credit 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.

13

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, 2021.

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 Nine Months Ended

    

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

    

(in thousands)

Revenues

 

  

 

  

  

 

  

Oil

$

63,172

$

36,868

$

169,377

$

101,682

NGLs

11,839

5,537

28,386

14,002

Natural gas

21,830

10,083

51,747

29,479

Oil and natural gas sales

$

96,841

$

52,488

$

249,510

$

145,163

14

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 $40.4 million at September 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 September 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 September 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 September 30, 2021 and December 31, 2020 for each of the fair value hierarchy levels:

    

Fair Value Measurements at September 30, 2021 Using

Significant

Quoted Prices in

Significant Other

Unobservable

Active Market

Observable Inputs

 Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Fair Value

(In thousands)

Assets:

 

  

 

  

 

  

 

  

Commodity derivatives

$

$

5,913

$

$

5,913

Interest rate derivatives

 

 

 

 

Total assets

$

$

5,913

$

$

5,913

Liabilities:

 

  

 

  

 

  

 

  

Commodity derivatives

$

$

109,013

$

$

109,013

Interest rate derivatives

 

 

1,330

 

 

1,330

Total liabilities

$

$

110,343

$

$

110,343

15

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

    

Fair Value Measurements at December 31, 2020 Using

Significant

Quoted Prices in

Significant Other

Unobservable 

Active Market

Observable Inputs

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 nine months ended September 30, 2021.
For the nine months ended September 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.

16

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

No impairment expense recorded on unproved oil and natural gas properties during the three and nine months ended September 30, 2021.
We recognized $49.3 million of impairment expense on unproved properties for the nine months ended September 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.

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.

17

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AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At September 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

 

775,000

 

270,000

Weighted-average floor price

$

2.06

$

2.56

$

2.50

Weighted-average ceiling price

$

3.28

$

3.44

$

3.28

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)

22,500

Weighted-average floor price

$

$

58.33

$

Weighted-average ceiling price

$

$

67.42

$

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

$

$

18

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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 September 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 September 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.

    

    

    

Liability

    

    

Liability

Asset Derivatives

Derivatives

Asset Derivatives

Derivatives

September 30, 

September 30, 

December 31, 

December 31, 

Type

    

Balance Sheet Location

    

2021

    

2021

    

2020

    

2020

(In thousands)

Commodity contracts

 

Short-term derivative instruments

$

1,952

$

84,412

$

6,088

$

15,007

Interest rate swaps

 

Short-term derivative instruments

 

 

1,139

 

 

1,905

Gross fair value

 

 

1,952

 

85,551

 

6,088

 

16,912

Netting arrangements

 

 

(1,952)

 

(1,952)

 

(6,088)

 

(6,088)

Net recorded fair value

 

Short-term derivative instruments

$

$

83,599

$

$

10,824

Commodity contracts

 

Long-term derivative instruments

$

3,961

$

24,601

$

9,361

$

8,488

Interest rate swaps

 

Long-term derivative instruments

 

 

191

 

 

847

Gross fair value

 

 

3,961

 

24,792

 

9,361

 

9,335

Netting arrangements

 

 

(3,961)

 

(3,961)

 

(8,488)

 

(8,488)

Net recorded fair value

 

Long-term derivative instruments

$

$

20,831

$

873

$

847

Loss (Gain) on Derivative Instruments

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 Nine Months Ended

Statements of

    

September 30, 

    

September 30, 

    

Operations Location

2021

    

2020

2021

    

2020

Commodity derivative contracts

 

Loss (gain) on commodity derivatives

$

46,653

$