Business Context and Reporting Period
This Form 8-K, dated August 6, 2019, reports the completion of a merger between Midstates Petroleum Company, Inc. ("Midstates") and Amplify Energy Corp. ("Legacy Amplify"). Effective August 6, 2019, Midstates changed its name to "Amplify Energy Corp." (the "Combined Company"). The Combined Company is headquartered in Houston, Texas, and began trading on the New York Stock Exchange under the ticker symbol "AMPY" on August 7, 2019.
Key Financial Metrics and Capital Structure
This filing is a current report regarding corporate events and does not contain specific revenue, profit, or cash flow figures for the reporting period. However, it details significant changes to the capital structure and debt obligations:
- Debt Obligations: The Combined Company assumed Legacy Amplify's Revolving Credit Facility. On the Effective Date, the borrowing base was redetermined and increased from $425.0 million to $530.0 million.
- Debt Termination: Midstates terminated its Senior Secured Credit Agreement dated October 21, 2016. All outstanding borrowings and unpaid fees under this agreement were paid in full.
- Equity Issuance: Approximately 21.2 million shares of Combined Company common stock were issued to former Legacy Amplify shareholders.
- Exchange Ratio: Legacy Amplify shareholders received 0.933 shares of Combined Company common stock for each share of Legacy Amplify common stock held.
- Warrants: The Combined Company assumed Legacy Amplify warrants to purchase up to 2,173,913 shares. These warrants are exercisable at $42.60 per share for a five-year period commencing May 4, 2017.
Material Changes Versus Prior Period
The primary material change is the consolidation of two entities into a single operating company. Key changes include:
- Corporate Identity: Midstates Petroleum Company, Inc. ceased to exist as a public entity, renamed to Amplify Energy Corp.
- Management and Board: The board of directors was reconstituted with eight members, combining directors from both legacy companies. Midstates' former CEO, David J. Sambrooks, and other officers were terminated without cause. Kenneth Mariani (formerly CEO of Legacy Amplify) was appointed President and CEO of the Combined Company.
- Accounting Firm: Grant Thornton LLP was dismissed as the independent registered public accountant, and KPMG LLP was engaged to serve in that capacity.
- Debt Profile: The company shifted from Midstates' credit facility to Legacy Amplify's credit facility, which now serves as the primary revolving credit source with an increased borrowing base.
Guidance, Outlook, and Risks
The filing includes a cautionary note regarding forward-looking statements. Management anticipates the need to make accretive acquisitions or substantial capital expenditures to maintain a declining asset base. Key risks identified include:
- Continued low or declining commodity prices for oil, natural gas, and natural gas liquids.
- The Combined Company's level of indebtedness and its ability to satisfy debt obligations.
- The ability to access funds on acceptable terms.
- General political and economic conditions, including regulations related to climate change and hydraulic fracturing.
- The risk that hedging strategies may be ineffective or reduce income.
Management has not provided specific numerical guidance for future revenue or earnings in this document.
Important Facts for Investor Verification
- Trading Symbol: Verify the ticker symbol change to "AMPY" on the NYSE effective August 7, 2019.
- Debt Capacity: Confirm the new borrowing base of $530.0 million under the Revolving Credit Facility and the terms of the Joinder Agreement.
- Executive Compensation: Review the assumed employment agreements for new executives (e.g., CEO Kenneth Mariani's $600,000 base salary and 100% bonus target) and potential severance obligations.
- Warrant Liability: Note the assumption of 2,173,913 warrants with an exercise price of $42.60, which may impact future dilution.
- Financial Statements: Refer to the incorporated exhibits (Exhibits 99.2, 99.4, and 99.5) for the audited financial statements of Legacy Amplify and the unaudited pro forma combined financial information.