Amplify Energy Corp. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 11, 2021. This is an annual report, not a standalone fourth-quarter report. Amplify is an independent oil and natural gas producer operating in Oklahoma, the Rockies, offshore Southern California, East Texas/North Louisiana, and the Eagle Ford. Comparisons with 2019 are affected by the August 2019 reverse merger with Midstates and are not fully comparable.
Financial and operating performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $202.1 million | $275.6 million |
| Oil and natural gas sales | $200.9 million | $274.6 million |
| Operating income (loss) | $(441.9) million | $(12.0) million |
| Net income (loss) | $(464.0) million | $(35.2) million |
| Adjusted EBITDA (non-GAAP) | $85.2 million | $93.0 million |
| Cash from operating activities | $74.3 million | $47.3 million |
| Cash used in investing activities | $35.9 million | Cash provided: $35.3 million |
| Cash used in financing activities | $28.4 million | $132.3 million |
- Revenue fell about 27%, chiefly reflecting lower commodity prices. Average realized price declined to $19.71/Boe from $29.67/Boe, while average net production rose to 27.8 MBoe/d from 25.4 MBoe/d.
- Average 2020 realized prices were $35.58/Bbl for oil, $11.63/Bbl for NGLs, and $1.55/Mcf for natural gas. Lease operating expense was $11.75/Boe, down from $13.39/Boe; G&A was $2.73/Boe, down from $5.97/Boe.
- The $476.9 million impairment charge—$427.6 million on proved properties and $49.3 million on unproved properties—drove the sharp increase in net loss. Management attributed the proved-property impairment primarily to lower commodity prices.
- Year-end cash was $10.4 million. Working capital was a deficit of less than $0.1 million. Total debt was $260.5 million: $255.0 million under the revolving facility and a $5.5 million PPP loan.
- The revolving facility had a $260 million borrowing base and approximately $5 million of available borrowings at year-end; maturity is November 2, 2023. The company reported covenant compliance at December 31, 2020. Long-term asset retirement obligations were $96.7 million.
Material changes and notable items
- Proved reserves declined to 113.8 MMBoe from 163.0 MMBoe at year-end 2019. The filing attributes the reduction primarily to a 50.1 MMBoe downward pricing revision, partly offset by other revisions and 0.46 MMBoe of extensions and discoveries. Proved developed reserves were 85% of total.
- The SEC standardized measure of discounted future net cash flows fell to $297.8 million from $916.6 million, using year-end SEC benchmark prices of $39.57/Bbl for oil and $1.99/MMBtu for gas. The company cautions that this measure is not current market value and excludes derivative transactions.
- Commodity derivative results were a $60.7 million gain in 2020, including cash settlements on expired and terminated positions. The company monetized part of its 2021 crude oil hedges for approximately $18 million in April.
- Capital expenditures were approximately $29.3 million in 2020. The board suspended quarterly dividends after paying $3.8 million in March 2020. A December secondary offering of 8.55 million shares was by selling stockholders; Amplify received no proceeds.
- In June 2020, the company obtained special royalty relief for its Beta offshore properties, increasing its average net revenue interest from 75.2% to 87.6%, subject to commodity-price and capital-investment conditions.
Outlook, risks, and contingencies
- Management forecast 2021 capital expenditures of approximately $28 million to $39 million, expected to be funded from internally generated cash flow. Spending may be adjusted as commodity prices and other conditions change. The filing does not provide specific production or earnings guidance.
- Management emphasized disciplined, capital-efficient operations, maximizing cash flow, reducing debt, and monitoring COVID-19 and market conditions. It stated that hedging and liquidity measures helped mitigate the pandemic’s effects, while acknowledging uncertainty about its duration and impact.
- Key financial risks include volatile oil and gas prices, further reserve-based borrowing-base reductions, limited borrowing availability, variable-rate debt, covenant restrictions, and the need to maintain production and replace reserves. Facility amendments reduced the borrowing base from $450 million to $260 million during 2020 and increased certain borrowing costs and hedging requirements.
- NYSE share-price compliance was regained in January 2021, but the company remained subject to a market-capitalization deficiency and a cure period, with potential suspension or delisting if it failed to regain compliance.
- Three customers accounted for 61% of 2020 revenue: Phillips 66 (23%), Sinclair Oil & Gas (21%), and BP America Production Company (17%). Minimum-volume commitments and CO₂ purchase commitments create additional fixed-cost exposure; the filing reports approximately $28.2 million of future midstream minimum-volume commitments and $7.0 million of CO₂ commitments.
- Beta decommissioning obligations are supported by $161.3 million in surety bonds and $0.3 million in cash. Sureties may demand additional collateral, which could pressure liquidity. The company reported no known litigation expected to have a material adverse effect and no environmental reserves at year-end.
- The company expects a substantial majority of its $5.5 million PPP loan to be forgiven; forgiveness was not stated as completed. Financial statements received an unqualified audit opinion. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an ICFR attestation because of the smaller-reporting-company exemption.
Important facts for investors to verify
- Current borrowing-base availability, spring 2021 redetermination results, covenant headroom, and the company’s ability to fund planned capital spending while reducing debt.
- Realized commodity prices, production trends, hedge volumes and settlements, and the sensitivity of cash flow to commodity-price changes.
- Reserve revisions and impairment assumptions, including the large 2020 reduction in reserves and standardized measure.
- Status of PPP loan forgiveness, Beta royalty-relief conditions, and potential collateral demands tied to offshore decommissioning.
- Progress toward NYSE market-capitalization compliance and any changes in customer concentration or minimum-volume obligations.