Amplify Energy (AMPY) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01If commodity prices decline for a prolonged period, a significant portion of our development projects may become uneconomic and result in write downs of the value of our oil and natural gas properties, which may adversely affect our financial condition and our ability to fund our operations
2. 02Our business could be adversely affected by a decline in general economic conditions or a weakening of the broader energy industry, and inflation may adversely affect our financial position and operating results
3. 03Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business
4. 04We may be unable to maintain compliance with the covenants in the Revolving Credit Facility, which could result in an event of default thereunder that, if not cured or waived, would have a material adverse effect on our business and financial condition
5. 05Restrictive covenants in our Revolving Credit Facility could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests
6. 06Our lenders periodically redetermine the amount we may borrow under our Revolving Credit Facility, which may materially impact our operations
7. 07Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
8. 08Our hedging strategy may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains
9. 09An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production could significantly reduce our cash flow and adversely affect our financial condition
10. 10Our estimated reserves and future production rates are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the quantities and present value of our estimated reserves
11. 11The process also requires economic assumptions about matters such as natural gas and oil prices, drilling and operating expenses, capital expenditures and availability of funds
12. 12The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil and natural gas reserves
13. 13The failure to replace our proved oil and natural gas reserves could adversely affect our business, financial condition, results of operations, production and cash flows
14. 14Developing and producing oil and natural gas are costly and high-risk activities with many uncertainties that may result in a total loss of investment or otherwise adversely affect our business, financial condition, results of operations and cash flows
15. 15Expenses not covered by our insurance could have a material adverse effect on our financial position and results of operations
16. 16The production from our Bairoil properties could be adversely affected by the cessation or interruption of the supply of CO2 to those properties
17. 17Many of our properties are in areas that may have been partially depleted or drained by offset wells
18. 18Our expectations for future development activities are planned to be realized over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of such activities
19. 19Part of our strategy may involve using horizontal drilling and completion techniques, which involve risks and uncertainties in their application
20. 20Our potential use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations
21. 21SEC rules could limit our ability to book additional PUDs in the future
22. 22The unavailability or high cost of rigs, equipment, supplies and crews could delay our operations, increase our costs and delay forecasted revenue
23. 23We may incur losses as a result of title defects in the properties in which we invest
24. 24Development and production of oil and natural gas in offshore waters have inherent and historically higher risk than similar activities onshore
25. 25Adverse developments in our operating areas could adversely affect our business, financial condition, results of operations and cash flows
26. 26We are dependent upon a small number of significant customers for a substantial portion of our production sales. The loss of those customers, if not replaced, could reduce our revenues and have a material adverse effect on our financial condition and results of operations
27. 27The inability of our significant customers to meet their obligations to us may adversely affect our financial results
28. 28We are exposed to trade credit risk in the event of nonperformance by our vendors and other counterparties in the ordinary course of our business activities
29. 29We may be unable to compete effectively with larger companies
30. 30Our business depends in part on pipelines, gathering systems and processing facilities owned by us or others. Any limitation in the availability of those facilities could interfere with our ability to market our oil and natural gas production
31. 31We have limited control over the activities on properties we do not operate
32. 32We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations
33. 33See “Item 1. Business — Environmental, Occupational Health and Safety Matters and Regulations” and “— Other Regulation of the Oil and Natural Gas Industry” for a description of the more significant laws and regulations that affect us
34. 34Increasing scrutiny and changing stakeholder expectations in respect of environmental, social and governance (“ESG”) and sustainability practices may have an adverse effect on our business, financial condition and results of operations and damage our reputation
35. 35The listing of a species as either “threatened” or “endangered” under the federal Endangered Species Act could result in increased costs, new operating restrictions, or delays in our operations, which could adversely affect our results of operations and financial condition
36. 36The third parties on whom we rely for gathering and transportation services are subject to complex federal, state and other laws that could adversely affect the cost, manner or feasibility of conducting our business
37. 37Oil and natural gas producers’ operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids. Restrictions on the ability to obtain water or dispose of waste may impact our operations
38. 38Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays and adversely affect our production
39. 39The cost of decommissioning is uncertain
40. 40Certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and production may be eliminated as a result of future legislation
41. 41Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions
42. 42We may be subject to increased permitting obligations and regulatory scrutiny as a result of the Incident

Risks Related to the Mergers

1. 43The Mergers are subject to closing conditions and may not be completed, the Merger Agreement may be terminated in accordance with its terms, and we may be required to pay a termination fee or reimburse expenses upon termination
2. 44The consideration payable under the Merger Agreement is fixed and will not be adjusted based on our performance
3. 45We will be subject to business uncertainties and contractual restrictions, including the risk of litigation, while the Mergers are pending that may cause disruption and may make it more difficult to maintain relationships with employees, suppliers or customers
4. 46Until the completion of the Mergers or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our stockholders
5. 47The Merger Agreement limits our ability to pursue alternatives to the Mergers and may discourage a potential competing acquirer of Amplify Energy, including the payment by Amplify Energy of a termination fee
6. 48Affiliates of Amplify Energy may have interests in the Mergers that are different from, or in addition to, the interests of Amplify Energy’s other stockholders
7. 49Current Amplify Energy stockholders will have a reduced ownership and voting interest in Amplify Energy after the Mergers compared to their current ownership and will exercise less influence over management
8. 50The Mergers will involve substantial costs
9. 51Securities class action and derivative lawsuits may be filed against us, or against our directors, challenging the Mergers, and an adverse ruling in any such lawsuit may prevent the Mergers from becoming effective or from becoming effective within the expected time frame
10. 52We expect to refinance substantial indebtedness of the Acquired Companies in connection with the Mergers, which combined with our current debt may limit our financial flexibility and adversely affect our financial results
11. 53Any of these risks could materially impact our ability to fund our operations or limit our ability to expand the combined business, which could have a material adverse effect on the combined company, its financial condition and results of operations
12. 54The Acquired Companies are currently not U.S. public reporting companies, and the obligations associated with integrating into a public company may require significant resources and management attention