Amplify Energy Corp. current report, 31 July 2023

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Business Context and Reporting Period

Company: Amplify Energy Corp. (NYSE: AMPY)
Filing Type: Form 8-K (Current Report)
Date of Report: July 31, 2023
Event: Entry into a Material Definitive Agreement regarding the amendment and restatement of the Company's reserve-based revolving credit facility.

Key Financial Metrics and Debt Structure

This filing details the terms of a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period. Key debt metrics include:

  • Outstanding Principal: $120 million as of July 31, 2023.
  • Initial Borrowing Base: $150 million.
  • Elected Commitments: $135 million.
  • Interest Rates: Adjusted SOFR or Base Rate plus a margin ranging from 2.00% to 4.00% based on utilization.
  • Commitment Fee: 0.50% on unused commitments.
  • Maturity Date: July 31, 2027.
  • Collateral: First priority security interest in substantially all of the Company's assets.

Material Changes Versus Prior Period

The New Credit Facility replaces the prior Revolving Credit Facility in full. Material changes include:

  • Borrowing Base Reduction: The borrowing base was reduced from $180 million under the prior facility to $150 million under the new facility.
  • Commitment Reduction: Elected commitments are now $135 million.
  • Lenders: KeyBanc Capital Markets Inc., Cadence Bank, N.A., and Citizens Bank, N.A. serve as joint lead arrangers, with KeyBank National Association as the administrative agent.
  • Covenant Commencement: Financial covenants (Net Debt Leverage Ratio and Current Ratio) commence with the fiscal quarter ending December 31, 2023.

Guidance, Risks, and Management Commentary

Covenants and Restrictions:

  • Net Debt Leverage Ratio: Must not exceed 3.00 to 1.00.
  • Current Ratio: Must not be less than 1.00 to 1.00.
  • Hedging Requirements: Minimum hedging of 75% of projected monthly production for the first 24 months, and 50% for the subsequent 12 months.
  • Restrictions: Customary limitations on incurring additional indebtedness, granting liens, and making distributions.
Risks and Contingencies:
  • Oil Incident: Ongoing impact of an oil incident off the coast of Southern California related to pipeline operations at the Beta field.
  • Strategic Alternatives: The Company is evaluating and implementing strategic alternatives.
  • Market Volatility: Risks related to oil, natural gas, and NGL price volatility.
  • Geopolitical and Economic Factors: Tensions between Russia and Ukraine, inflation, and regulatory changes regarding climate change and hydraulic fracturing.
Forward-Looking Statements:

The filing includes standard disclaimers that actual results may differ materially from expectations due to the risks listed above. The Company undertakes no obligation to update these statements.

Investor Verification Checklist

  • Verify the impact of the reduced borrowing base ($150 million) on the Company's liquidity and ability to fund operations or acquisitions.
  • Review the status and financial implications of the oil incident at the Beta field mentioned in the risk factors.
  • Monitor the Company's progress in meeting the new hedging requirements (75% for 24 months) to ensure compliance with the credit agreement.
  • Assess the timeline and details of the "strategic alternatives" currently being evaluated by management.
  • Confirm the Company's ability to meet the Net Debt Leverage Ratio covenant (3.00 to 1.00) starting with the quarter ending December 31, 2023.