Amplify Energy Corp. (NYSE: AMPY) — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Amplify is an independent oil and natural gas producer operating in Oklahoma, Wyoming, offshore Southern California (Beta), East Texas/North Louisiana, and the Eagle Ford. Its assets are managed as one reportable segment.
- Year-end proved reserves were 121.2 MMBoe, 98% proved developed; fourth-quarter average net production was 20.8 MBoe/d.
- Beta was shut in after the October 2, 2021 pipeline incident. No Beta operations were underway at the report date, and restart depended on regulatory approvals.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Oil and gas sales | $335.8 million | $200.9 million |
| Total revenues | $342.9 million | $202.1 million |
| Net loss | $32.1 million | $464.0 million |
| Adjusted EBITDA (non-GAAP) | $84.7 million | $85.2 million |
| Cash from operating activities | $63.0 million | $74.3 million |
| Capital expenditures | $29.8 million cash additions to oil and gas and other property | $35.9 million |
- Net loss per share was $0.84. FY 2021 results included a $142.4 million loss on commodity derivatives, versus a $60.7 million gain in 2020; the 2021 amount included $88.3 million of cash settlements paid on expired positions.
- Average production fell 14%, to 24.0 MBoe/d from 27.8 MBoe/d. Average realized price excluding derivatives rose to $38.39/Boe from $19.71/Boe. Oil and gas sales increased 67%, primarily reflecting higher commodity prices despite lower volumes.
- Average lease operating expense increased to $13.88/Boe from $11.75/Boe; gathering, processing and transportation was $2.38/Boe versus $2.02/Boe. The filing does not provide a single consolidated profit-margin percentage.
- Year-end cash was $18.8 million, working capital deficit was $39.4 million, and Revolving Credit Facility debt was $230.0 million. The $245.0 million borrowing base left approximately $15.0 million of availability at year-end; it was scheduled to decline by $5.0 million monthly beginning February 2022 pending the expected April redetermination.
- FY 2021 operating cash flow was below 2020, in part reflecting derivative cash payments. The company repaid $25.0 million net under its revolver during 2021 and had no letters of credit outstanding at year-end. It reported compliance with credit facility covenants at December 31, 2021.
- Asset retirement obligations were $103.4 million. The company also had substantial future funding commitments for Beta decommissioning, including $6.7 million in 2022 under its supplemental bonding trust arrangements.
Material changes and unusual items
- The 2021 net loss improved substantially from 2020, when the company recorded $476.9 million of impairment expense. No impairment expense was recorded in 2021.
- Proved reserves increased to 121.2 MMBoe from 113.8 MMBoe. Higher pricing contributed materially to the increase, while revised development plans removed 16.0 MMBoe of PUD locations; year-end PUDs were 2.2 MMBoe.
- Winter Storm Uri caused approximately two weeks of shut-ins in February 2021. Natural decline and the Beta shutdown also reduced production.
- The $5.5 million PPP loan was forgiven in 2021 and recorded as a gain on extinguishment of debt. The company also recognized $2.8 million of employee retention credits.
- The 2021 dividend remained suspended; the company said it did not intend to pay cash dividends currently.
Outlook, risks, and contingencies
- Management expected 2022 capital expenditures of approximately $20 million to $30 million, funded from operating cash flow, revolver borrowings and, potentially, debt or equity financing. The company said it would adjust spending as conditions change.
- The company estimated Beta incident response, remediation and certain legal costs at $90 million to $110 million. That estimate excludes lost Beta revenue, pipeline repair and restart costs, and costs or claims not then reasonably estimable; management cautioned total costs could increase.
- At December 31, 2021, Amplify reported $99.0 million in gross incident costs and $97.4 million in insurance recoveries received or considered probable, with a $1.6 million net charge. It had collected $48.3 million of those recoveries by year-end and reported further insurance receipts of $22.1 million through March 1, 2022. Separately, it recognized and subsequently received a $6.7 million loss-of-production-income insurance settlement.
- Beta’s pipeline could not restart until required approvals, including PHMSA approval of a written restart plan. The filing gave no assurance whether or when operations would resume. The incident also prompted federal and state investigations, a federal misdemeanor Clean Water Act indictment, and consolidated class-action litigation; potential liability could not be estimated clearly.
- Commodity-price volatility, reserve-based borrowing base reductions, covenant compliance, hedging outcomes, customer concentration, environmental regulation, decommissioning collateral needs, and access to financing are material risks. Three customers represented at least 10% of revenue each in 2021.
- Deloitte issued an unqualified opinion on the financial statements and internal controls; management also concluded disclosure controls and internal control over financial reporting were effective at year-end.
Most important facts for investors to verify
- Beta pipeline repair and restart approvals, expected timing, production impact, and any change in the company’s 2022 outlook.
- Final incident costs, uninsured exposures, litigation and enforcement outcomes, and the amount and timing of insurance collections. The filing’s narrative cites an approximately $49.1 million year-end insurance receivable, while the balance sheet note reports $55.8 million; reconcile this difference with the underlying statements and subsequent collections.
- Actual revolver borrowing base after the scheduled monthly reductions and subsequent redetermination, available liquidity, and ongoing covenant compliance.
- Hedge settlements and coverage relative to actual production, especially while Beta is shut in, and the resulting effect on cash flow.
- Whether planned capital spending, production, reserves, and decommissioning trust funding remain achievable under current operating and financing conditions.