Amplify Energy Corp. — filing identity requires verification
The supplied filing is a Form 10-Q for Midstates Petroleum Company, Inc., not Amplify Energy Corp. It covers the quarter and six months ended June 30, 2017, and was signed August 9, 2017. The company operated in Oklahoma and Texas, focused on the Mississippian Lime and Anadarko Basin. It emerged from Chapter 11 on October 21, 2016 and adopted fresh-start accounting, so 2017 Successor results are not directly comparable with 2016 Predecessor results.
Financial performance and position
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 |
|---|---|---|
| Total revenue | $60.7 million, including $7.5 million in derivative gains | $125.7 million, including $12.4 million in derivative gains |
| Operating income | $15.0 million | $34.4 million |
| Net income | $13.7 million; $0.53 per share | $32.2 million; $1.25 per share |
| Operating cash flow | Not separately presented | $63.2 million |
| Capital spending | $28.4 million total incurred | $62.9 million total incurred |
- At June 30, cash was $86.0 million; current assets were $131.6 million and current liabilities $59.5 million. Net working capital was $72.1 million.
- Long-term debt was $128.1 million. The reserve-based Exit Facility had a $170.0 million borrowing base, $40.0 million available capacity, and $1.9 million in letters of credit. The company reported compliance with covenants.
- Six-month net cash increased $9.2 million: operating cash flow of $63.2 million, investing outflow of $53.0 million, and financing outflow of $1.0 million.
- No income tax expense or benefit was recorded for the six months. A $148.2 million valuation allowance remained against deferred tax assets.
Changes versus prior comparable periods
- For Q2, total revenue was down 3% from $62.6 million in 2016; however, the comparison includes $7.5 million of 2017 derivative gains and no such gains in 2016. Product sales excluding derivatives were $52.3 million versus $61.0 million.
- Six-month product sales were approximately flat at $111.6 million versus $112.2 million, while 2017 reported total revenue was higher due to derivative gains.
- Production declined year over year: Q2 combined output was 22,490 Boe/day versus 30,163 Boe/day, a decline of about 25%. Management attributed lower volumes to natural decline and reduced drilling during 2016 and through Q2 2017.
- 2017 recorded no oil and gas property impairment, compared with $63.0 million in Q2 2016 and $190.7 million in the first half of 2016. Prior-period results also included bankruptcy-related items and restructuring costs, limiting earnings comparisons.
- Six-month operating cash flow increased from $51.6 million to $63.2 million, while investing outflow decreased from $100.4 million to $53.0 million. The 2016 period included $249.4 million of revolving-credit borrowings; 2017 had no facility proceeds.
Outlook, management commentary and risks
- Management expected a two-rig 2017 program to require $130–$140 million of capital for exploration, development, lease and seismic acquisition, and to drill 36–44 gross wells. Two rigs were operating in the Mississippian Lime at quarter-end.
- The May 2017 credit-facility amendment moved the next borrowing-base redetermination to October 2017, removed a $40 million cash-collateral requirement and a minimum-liquidity requirement, and relaxed certain leverage, interest-coverage and capital-expenditure terms. Covenant compliance was reported at June 30.
- On July 26, 2017, the company completed a sale of certain Lincoln County, Oklahoma properties for $7.0 million gross, or $2.9 million net, subject to post-closing adjustments; proceeds were to be retained for general corporate purposes.
- Oklahoma regulators had required reductions in wastewater injection into the Arbuckle formation. The company said it was complying and diverting about 40% of produced salt water to other formations, but future disposal limits or permitting constraints could raise costs or reduce production.
- Commodity prices, natural production decline, drilling results, access to capital, infrastructure and saltwater disposal were identified as material business risks. Derivative gains included unrealized mark-to-market gains; derivative counterparty default exposure, after netting arrangements, was stated as up to $9.1 million.
- Management was considering material divestitures and potential acquisitions or business combinations; no transaction outcome or proceeds were assured. The filing gave no specific earnings or commodity-price guidance.
- Six-month G&A included $4.3 million of noncash share-based compensation and $2.6 million of trailing Chapter 11 costs. A $1.9 million insurance reimbursement reduced lease operating expense.
Investor verification priorities
- Confirm issuer identity: the supplied filing names Midstates Petroleum Company, Inc., not Amplify Energy Corp.
- Review the October 2017 borrowing-base redetermination, facility availability, and covenant headroom after the amendment.
- Assess whether drilling investment can offset falling production, particularly in the Mississippian Lime, and compare actual results with the 2017 capital and well-count plan.
- Separate realized derivative cash settlements from unrealized fair-value gains when evaluating revenue, earnings and cash generation; review hedge volumes, prices and counterparty exposure.
- Track Oklahoma wastewater-disposal rules, related operating costs and any production effects, as well as the realized net proceeds from the July asset sale.
- Account for fresh-start accounting and the resulting lack of direct comparability between Successor and Predecessor periods.