Amplify Energy Corp.
Amplify Energy Corp (Form: 10-Q, Received: 11/07/2017 16:11:17)

 

 

 

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, 2017

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: 001-35364

 

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 1600, 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       No     

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes       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     (Do not check if a smaller reporting company)

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  

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.   Yes       No

As of November 3, 2017, the registrant had 25,000,000 outstanding shares of common stock, $0.0001 par value outstanding.

 

 

 


AMPLIFY ENERGY CORP.

Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

 

 

 

 

 

 

 

Glossary of Oil and Natural Gas Terms

 

1

 

 

Names of Entities

 

3

 

 

Cautionary Note Regarding Forward-Looking Statements

 

4

 

 

PART I—FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017 (Successor Period) and December 31, 2016 (Predecessor Period)

 

7

 

 

Unaudited Condensed Statements of Consolidated Operations for the Three Months ended September 30, 2017 (Successor Period), for the period from May 5, 2017 through September 30, 2017 (Successor Period), the period from January 1, 2017 through May 4, 2017 (Predecessor Period), and the Three and Nine Months Ended September 30, 2016 (Predecessor Period)

 

8

 

 

Unaudited Condensed Statements of Consolidated Cash Flows for the period from May 5, 2017 through September 30, 2017 (Successor Period), the period from January 1, 2017 through May 4, 2017 (Predecessor Period) and the Nine Months Ended September 30, 2016 (Predecessor Period)

 

10

 

 

Unaudited Condensed Statements of Consolidated Equity for the period from May 5, 2017 through September 30, 2017 (Successor Period) and the period from January 1, 2017 through May 4, 2017 (Predecessor Period)

 

11

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

 

Note 1 – Organization and Basis of Presentation

 

12

 

 

Note 2 – Emergence from Voluntary Reorganization under Chapter 11

 

13

 

 

Note 3 – Fresh Start Accounting

 

14

 

 

Note 4 – Summary of Significant Accounting Policies

 

18

 

 

Note 5 – Acquisitions and Divestitures

 

20

 

 

Note 6 – Fair Value Measurements of Financial Instruments

 

21

 

 

Note 7 – Risk Management and Derivative Instruments

 

22

 

 

Note 8 – Asset Retirement Obligations

 

24

 

 

Note 9 – Debt

 

25

 

 

Note 10 – Equity (Deficit)

 

26

 

 

Note 11 – Earnings per Share/Unit

 

28

 

 

Note 12 – Long-Term Incentive Plans

 

28

 

 

Note 13 – Related Party Transactions

 

31

 

 

Note 14 – Commitments and Contingencies

 

32

 

 

Note 15 – Income Taxes

 

33

 

 

Note 16 – Subsequent Events

 

33

 

 

 

 

 

Item 2.

 

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

 

34

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

46

Item 4.

 

Controls and Procedures

 

47

 

 

PART II—OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

48

Item 1A.

 

Risk Factors

 

48

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

48

Item 3.

 

Defaults Upon Senior Securities

 

48

Item 4.

 

Mine Safety Disclosures

 

48

Item 5.

 

Other Information

 

48

Item 6.

 

Exhibits

 

48

 

 

 

Signatures

 

50

 

 

 

i


G LOSSARY 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.

Bcfe : One billion cubic feet of natural gas equivalent.

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.

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.  

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.

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.

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.

1


Proved Reserves : Those quantities of oil and natural gas, which, by analysis of geoscience and engine ering 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 contrac ts 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, o r 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 undr illed 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 con tacts, 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 dir ect 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, engine ering, 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 prove d 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 evide nce 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 e ntities. 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 re port, 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.

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.

 

 

 

2


N AMES OF ENTITIES

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

“Amplify Energy” and “Successor” refer to Amplify Energy Corp., the successor reporting company of Memorial Production Partners LP, individually and collectively with its subsidiaries, as the context requires;

“Memorial Production Partners,” “MEMP,” and “Predecessor” refer to Memorial Production Partners LP, individually and collectively with its subsidiaries, as the context requires;

“Company,” “we,” “our,” “us” or like terms refer to Memorial Production Partners for the period prior to emergence from bankruptcy and to Amplify Energy for the period after emergence from bankruptcy;

“Predecessor’s general partner” and “MEMP GP” refer to Memorial Production Partners GP LLC, the Predecessor’s general partner and wholly owned subsidiary;

“OLLC” refers to Amplify Energy Operating LLC, formerly known as Memorial Production Operating LLC, our wholly owned subsidiary through which we operate our properties;

“Finance Corp.” refers to Memorial Production Finance Corporation, our Predecessor’s wholly owned subsidiary, whose activities were limited to co-issuing our debt securities and engaging in other activities incidental thereto, which was dissolved following the effective date of the Plan (as defined in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements under Part I, “Item 1. Financial Statements”);

“Memorial Resource” refers collectively to Memorial Resource Development Corp., the former owner of the Predecessor’s general partner, and its subsidiaries;

“Funds” refers collectively to Natural Gas Partners VIII, L.P., Natural Gas Partners IX, L.P. and NGP IX Offshore Holdings, L.P., which collectively controlled MRD Holdco LLC;

“MRD Holdco” refers to MRD Holdco LLC, which together with a group, controlled Memorial Resource; and

“NGP” refers to Natural Gas Partners.

 

 

 

3


 

C AUTIONARY 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, 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;

 

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;

 

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.

4


 

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,” “contin ue,” 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 fin ancial condition to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following risks and uncertainties:

 

our results of evaluation and implementation of strategic alternatives;

 

our inability to maintain relationships with suppliers, customers, employees and other third parties as a result of our Chapter 11 filing, or otherwise;

 

our indebtedness and our ability to satisfy our debt obligations and a potential inability to effect deleveraging transactions or otherwise reduce those risks;

 

risks related to a redetermination of the borrowing base under our Exit Credit Facility;

 

our ability to access funds on acceptable terms, if at all, because of the terms and conditions governing our indebtedness;

 

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;

 

potential shortages of, or increased costs for, drilling and production equipment and supply materials for production, such as CO 2 ;

 

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;

 

general political and economic conditions, globally and in the jurisdictions in which we operate;

 

the impact of legislation and governmental regulations, including those related to climate change, and hydraulic fracturing;

 

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; and

 

actions of third-party co-owners of interests in properties in which we also own an interest.

5


 

The forward-looking statements cont ained 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 re aders 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-lo oking 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 our Annual Report on Form 10-K for the year ended December 31 , 2016 filed with the SEC on March 10, 2017 (“2016 Form 10-K”), “Part II—Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed with the SEC on August 9, 2017 (“Second Quarter Form 10-Q”), “Part II—Item 1A. Ri sk Factors” appearing within this report and elsewhere in this report. 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 event s or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

 

6


 

P ART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except outstanding shares/units)

 

 

Successor

 

 

 

Predecessor

 

 

September 30,

 

 

 

December 31,

 

 

2017

 

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

14,859

 

 

 

$

15,373

 

Accounts receivable

 

32,378

 

 

 

 

34,584

 

Short-term derivative instruments

 

41,376

 

 

 

 

69,464

 

Prepaid expenses and other current assets

 

6,383

 

 

 

 

13,163

 

Total current assets

 

94,996

 

 

 

 

132,584

 

Property and equipment, at cost:

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method

 

591,735

 

 

 

 

3,115,012

 

Support equipment and facilities

 

100,063

 

 

 

 

199,093

 

Other

 

6,055

 

 

 

 

15,344

 

Accumulated depreciation, depletion and impairment

 

(21,818

)

 

 

 

(1,749,747

)

Property and equipment, net

 

676,035

 

 

 

 

1,579,702

 

Long-term derivative instruments

 

10,419

 

 

 

 

102,630

 

Restricted investments

 

156,752

 

 

 

 

156,234

 

Deferred tax asset

 

3,631

 

 

 

 

 

Other long-term assets

 

9,518

 

 

 

 

2,104

 

Total assets

$

951,351

 

 

 

$

1,973,254

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

$

11,303

 

 

 

$

4,353

 

Revenues payable

 

23,403

 

 

 

 

21,285

 

Accrued liabilities (see Note 4)

 

32,293

 

 

 

 

65,235

 

Current portion of long-term debt (see Note 9)

 

 

 

 

 

1,622,904

 

Total current liabilities

 

66,999

 

 

 

 

1,713,777

 

Long-term debt (see Note 9)

 

403,000

 

 

 

 

 

Asset retirement obligations

 

97,876

 

 

 

 

154,913

 

Long-term derivative instruments

 

244

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

2,280

 

Other long-term liabilities

 

 

 

 

 

2,795

 

Total liabilities

 

568,119

 

 

 

 

1,873,765

 

Commitments and contingencies (see Note 14)

 

 

 

 

 

 

 

 

Stockholders'/ partners' equity:

 

 

 

 

 

 

 

 

Successor preferred stock, $0.0001 par value: 45,000,000 shares authorized; no shares issued and outstanding at September 30, 2017 and December 31, 2016

 

 

 

 

 

 

Successor warrants, 2,173,913 warrants issued and outstanding at September 30, 2017 and no warrants issued or outstanding at December 31, 2016

 

4,788

 

 

 

 

 

Successor common stock, $0.0001 par value: 300,000,000 shares authorized; 25,000,000 shares issued and outstanding at September 30, 2017 and no shares authorized or issued at December 31, 2016

 

3

 

 

 

 

 

Successor additional paid-in capital

 

386,883

 

 

 

 

 

Successor accumulated earnings (deficit)

 

(8,442

)

 

 

 

 

Predecessor common units, no units issued or outstanding at September 30, 2017 and 83,827,920 units issued and outstanding at December 31, 2016

 

 

 

 

 

99,489

 

Total stockholders'/partners' equity

 

383,232

 

 

 

 

99,489

 

Total liabilities and equity

$

951,351

 

 

 

$

1,973,254

 

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7


 

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

(In thousands, except per shares/unit amounts)

 

 

Successor

 

 

 

Predecessor

 

 

Three Months

 

 

 

Three Months

 

 

Ended

 

 

 

Ended

 

 

September 30,

 

 

 

September 30,

 

 

2017

 

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

Oil and natural gas sales

$

75,534

 

 

 

$

74,222

 

Other revenues

 

55

 

 

 

 

 

Total revenues

 

75,589

 

 

 

 

74,222

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Lease operating expense

 

29,119

 

 

 

 

31,575

 

Gathering, processing, and transportation

 

7,077

 

 

 

 

8,519

 

Exploration

 

4

 

 

 

 

12

 

Taxes other than income

 

4,214

 

 

 

 

3,945

 

Depreciation, depletion, and amortization

 

13,467

 

 

 

 

43,219

 

Impairment of proved oil and natural gas properties

 

 

 

 

 

 

General and administrative expense

 

11,097

 

 

 

 

12,605

 

Accretion of asset retirement obligations

 

1,665

 

 

 

 

2,383

 

(Gain) loss on commodity derivative instruments

 

14,217

 

 

 

 

(21,938

)

(Gain) loss on sale of properties

 

 

 

 

 

60

 

Other, net

 

772

 

 

 

 

178

 

Total costs and expenses

 

81,632

 

 

 

 

80,558

 

Operating income (loss)

 

(6,043

)

 

 

 

(6,336

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense, net

 

(5,808

)

 

 

 

(27,209

)

Other income (expense)

 

 

 

 

 

6

 

Gain on extinguishment of debt

 

 

 

 

 

673

 

Total other income (expense)

 

(5,808

)

 

 

 

(26,530

)

Income (loss) before reorganization items, net and income taxes

 

(11,851

)

 

 

 

(32,866

)

Reorganization items, net

 

(33

)

 

 

 

 

Income tax benefit (expense)

 

4,348

 

 

 

 

 

Net income (loss)

 

(7,536

)

 

 

 

(32,866

)

Net income (loss) attributable to Successor/Predecessor

$

(7,536

)

 

 

$

(32,866

)

 

 

 

 

 

 

 

 

 

Successor/Predecessor interest in net income (loss):

 

 

 

 

 

 

 

 

Net income (loss) attributable to Successor/Predecessor

$

(7,536

)

 

 

$

(32,866

)

Net (income) loss allocated to Predecessor's general partner

 

 

 

 

 

 

Net (income) allocated to participating restricted stockholders

 

 

 

 

 

 

Net income (loss) available to common stockholders/limited partners

$

(7,536

)

 

 

$

(32,866

)

 

 

 

 

 

 

 

 

 

Earnings per share/unit: (See Note 11)

 

 

 

 

 

 

 

 

Basic and diluted earnings per share/unit

$

(0.30

)

 

 

$

(0.39

)

Weighted average common shares/units outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

25,000

 

 

 

 

83,621

 

 

 

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8


 

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

(In thousands, except per shares/unit amounts)

 

 

Successor

 

 

 

Predecessor

 

 

Period from

 

 

 

 

 

 

 

 

 

 

 

May 5, 2017

 

 

 

Period from

 

 

Nine Months

 

 

through

 

 

 

January 1,

 

 

Ended

 

 

September 30,

 

 

 

2017 through

 

 

September 30,

 

 

2017

 

 

 

May 4, 2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas sales

$

117,762

 

 

 

$

108,970

 

 

$

202,625

 

Other revenues

 

222

 

 

 

 

231

 

 

 

529

 

Total revenues

 

117,984

 

 

 

 

109,201

 

 

 

203,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expense

 

47,961

 

 

 

 

35,568

 

 

 

96,625

 

Gathering, processing, and transportation

 

11,191

 

 

 

 

10,772

 

 

 

26,551

 

Exploration

 

11

 

 

 

 

21

 

 

 

149

 

Taxes other than income

 

6,147

 

 

 

 

5,187

 

 

 

11,438

 

Depreciation, depletion, and amortization

 

21,818

 

 

 

 

37,717

 

 

 

132,061

 

Impairment of proved oil and natural gas properties

 

 

 

 

 

 

 

 

8,342

 

General and administrative expense

 

18,479

 

 

 

 

31,606

 

 

 

41,375

 

Accretion of asset retirement obligations

 

2,692

 

 

 

 

3,407

 

 

 

7,802

 

(Gain) loss on commodity derivative instruments

 

12,302

 

 

 

 

(23,076

)

 

 

50,897

 

(Gain) loss on sale of properties

 

 

 

 

 

 

 

 

(3,575

)

Other, net

 

772

 

 

 

 

36

 

 

 

245

 

Total costs and expenses

 

121,373

 

 

 

 

101,238

 

 

 

371,910

 

Operating income (loss)

 

(3,389

)

 

 

 

7,963

 

 

 

(168,756

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(9,605

)

 

 

 

(10,243

)

 

 

(91,904

)

Other income (expense)

 

(6

)

 

 

 

8

 

 

 

6

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

42,337

 

Total other income (expense)

 

(9,611

)

 

 

 

(10,235

)

 

 

(49,561

)

Income (loss) before reorganization items, net and income taxes

 

(13,000

)

 

 

 

(2,272

)

 

 

(218,317

)

Reorganization items, net

 

(382

)

 

 

 

(88,774

)

 

 

 

Income tax benefit (expense)

 

4,940

 

 

 

 

91

 

 

 

(196

)

Net income (loss)

 

(8,442

)

 

 

 

(90,955

)

 

 

(218,513

)

Net income (loss) attributable to Successor/Predecessor

$

(8,442

)

 

 

$

(90,955

)

 

$

(218,513

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor/Predecessor interest in net income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Successor/Predecessor

$

(8,442

)

 

 

$

(90,955

)

 

$

(218,513

)

Net (income) loss allocated to Predecessor's general partner

 

 

 

 

 

 

 

 

168

 

Net (income) allocated to participating restricted stockholders

 

 

 

 

 

 

 

 

 

Net income (loss) available to common stockholders/limited partners

$

(8,442

)

 

 

$

(90,955

)

 

$

(218,345

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share/unit: (See Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share/unit

$

(0.34

)

 

 

$

(1.09

)

 

$

(2.62

)

Weighted average common shares/units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

25,000

 

 

 

 

83,807

 

 

 

83,189

 

 

 

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

9


 

AMPLIFY ENERGY CORP.

UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(In thousands)

 

 

Successor

 

 

 

Predecessor

 

 

Period from

 

 

 

Period from

 

 

 

 

 

 

May 5, 2017

 

 

 

January 1, 2017

 

 

Nine Months

 

 

through

 

 

 

through

 

 

Ended

 

 

September 30, 2017

 

 

 

May 4, 2017

 

 

September 30, 2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(8,442

)

 

 

$

(90,955

)

 

$

(218,513

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion, and amortization

 

21,818

 

 

 

 

37,717

 

 

 

132,061

 

Impairment of proved oil and natural gas properties

 

 

 

 

 

 

 

 

8,342

 

(Gain) loss on derivative instruments

 

12,302

 

 

 

 

(23,076

)

 

 

54,991

 

Cash settlements (paid) received on expired derivative instruments

 

21,277

 

 

 

 

15,895

 

 

 

183,221

 

Cash settlements (paid) on terminated derivatives

 

 

 

 

 

94,146

 

 

 

39,299

 

Bad debt expense

 

 

 

 

 

 

 

 

1,601

 

Deferred income tax expense (benefit)

 

(5,837

)

 

 

 

(74

)

 

 

129

 

Amortization of deferred financing costs

 

916

 

 

 

 

 

 

 

3,862

 

Accretion of senior notes discount

 

 

 

 

 

 

 

 

1,769

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

(42,337

)

Accretion of asset retirement obligations

 

2,692

 

 

 

 

3,407

 

 

 

7,802

 

Gain on sale of properties

 

 

 

 

 

 

 

 

(3,575

)

Share/unit-based compensation (see Note 12)

 

1,543

 

 

 

 

3,667

 

 

 

7,370

 

Settlement of asset retirement obligations

 

(174

)

 

 

 

(164

)

 

 

(1,099

)

Reorganization items, net

 

 

 

 

 

68,356

 

 

 

 

Other

 

 

 

 

 

56

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

1,182

 

 

 

 

1,024

 

 

 

20,873

 

Prepaid expenses and other assets

 

5,683

 

 

 

 

735

 

 

 

(833

)

Payables and accrued liabilities

 

(2,570

)

 

 

 

15,030

 

 

 

931

 

Restricted cash

 

7,561

 

 

 

 

(7,561

)

 

 

 

Other

 

(77

)

 

 

 

(266

)

 

 

3,253

 

Net cash provided by operating activities

 

57,874

 

 

 

 

117,937

 

 

 

199,147

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Additions to oil and gas properties

 

(27,661

)

 

 

 

(6,211

)

 

 

(50,534

)

Additions to other property and equipment

 

(48

)

 

 

 

(76

)

 

 

(7,611

)

Additions to restricted investments

 

(310

)

 

 

 

(209

)

 

 

(5,642

)

Proceeds from the sale of oil and natural gas properties, net of cash and cash equivalents sold

 

 

 

 

 

 

 

 

54,724

 

Net cash used in investing activities

 

(28,019

)

 

 

 

(6,496

)

 

 

(9,063

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Advances on revolving credit facilities

 

 

 

 

 

16,600

 

 

 

144,000

 

Payments on revolving credit facilities

 

(27,000

)

 

 

 

(98,252

)

 

 

(266,000

)

Deferred financing costs

 

(184

)

 

 

 

(8,575

)

 

 

(1,350

)

Payment to holders of the Notes

 

(8,193

)

 

 

 

(16,446

)

 

 

 

Payment to Predecessor common unitholders

 

(1,250

)

 

 

 

 

 

 

 

Contribution from management

 

1,500

 

 

 

 

 

 

 

 

Repurchase of senior notes

 

 

 

 

 

 

 

 

(41,261

)

Contributions related to sale of assets to NGP affiliate

 

 

 

 

 

 

 

 

26

 

Transfer of operating subsidiary from Memorial Resource

 

 

 

 

 

 

 

 

2,363

 

Proceeds from the issuance of Predecessor common units

 

 

 

 

 

 

 

 

2,385

 

Costs incurred in conjunction with issuance of Predecessor common units

 

 

 

 

 

 

 

 

(312

)

Distributions to partners

 

 

 

 

 

 

 

 

(13,300

)

Acquisition of Predecessor's general partner (see Note 1)

 

 

 

 

 

 

 

 

(750

)

Acquisition of incentive distribution rights from NGP (see Note 1)

 

 

 

 

 

 

 

 

(50

)

Restricted units returned to plan

 

 

 

 

 

(10

)

 

 

(589

)

Other

 

(9

)

 

 

 

9

 

 

 

 

Net cash used in financing activities

 

(35,136

)

 

 

 

(106,674

)

 

 

(174,838

)

Net change in cash and cash equivalents

 

(5,281

)

 

 

 

4,767