Long-Term Incentive Plans

3 Months Ended

Mar. 31, 2024

Long-Term Incentive Plans

Long-Term Incentive Plans

Note 10. Long-Term Incentive Plans

In May 2021, the shareholders approved a new Equity Incentive Plan (“EIP”) which replaced the Legacy Amplify Management Incentive Plan (the “Legacy Amplify MIP”). As such, no further awards have been granted under the Legacy Amplify MIP.

In April 2024, the board of directors of the Company (the “Board”) approved and adopted the Amplify Energy Corp. 2024 Equity Incentive Plan (the “2024 Plan”), subject to stockholder approval at the Company’s Annual Meeting of Stockholders to be held on May 15, 2024.

EIP awards are, and, under the Legacy Amplify MIP, were, granted in the form of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, stock awards and other incentive awards. To the extent that an award under the EIP or Legacy Amplify MIP is expired, forfeited or canceled for any reason without having been exercised in full, the unexercised award would then be available again for future grants under the EIP. The EIP is administered by the Board.

Restricted Stock Units

Restricted Stock Units with Service Vesting Condition

Restricted stock units with service vesting conditions (“TSUs”) are accounted for as either equity-classified awards or liability-classified awards. The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur. Compensation costs for equity-classified awards are recorded as general and administrative expense. The fair value of liability-classified awards is determined on a quarterly basis beginning at the grant date until final vesting. Changes in the fair value of liability-classified awards are recorded to general administrative expense and are remeasured at fair value each reporting period.

The Company granted contingent cash-settlement awards in the form of TSUs (the “Contingent TSUs”) under the EIP in February 2024 that will be settled in shares of stock, subject to stockholder approval of the 2024 Plan. In the event the Company’s stockholders do not approve the 2024 Plan, the Contingent TSUs will be settled in cash pursuant to the terms of the applicable award agreement. The Contingent TSUs are accounted for as liability-classified awards and vest in substantially equal installments over a three-year period.

The unrecognized cost associated with the TSUs was $7.8 million at March 31, 2024. The Company expects to recognize the unrecognized compensation cost for these awards over a weighted average period of approximately 2.3 years. Of the unrecognized share-based compensation expense for TSUs, $4.1 million relates to liability-classified awards and will be subsequently remeasured at each reporting period. The Company recognized $0.3 million in liability-classified share-based compensation expense at March 31, 2024 for the Contingent TSUs.

The following table summarizes information regarding the TSUs activity for the period presented:

		Weighted-
		Average Grant-
	Number of	Date Fair Value
	Units	per Unit (1)
TSUs outstanding at December 31, 2023	1,331,456	$	5.77
Granted (2)	709,402	$	6.09
Forfeited	(5,922)	$	5.04
Vested	(604,684)	$	4.95
TSUs outstanding at March 31, 2024 (3)	1,430,252	$	6.28

(1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued.

(2) The aggregate grant-date fair value of TSUs issued for the three months ended March 31, 2024 was $4.3 million based on a grant-date market price of $6.09 per share.

(3) As of March 31, 2024, 709,402 of the unvested TSUs were accounted for as liability awards in “accrued liabilities” in the Unaudited Condensed Consolidated Balance sheet.

Restricted Stock Units with Market and Service Vesting Conditions

Restricted stock units with market and service vesting conditions (“PSUs”) are accounted for as either equity-classified or liability-classified awards. The grant-date fair value is recognized as compensation cost on a graded-vesting basis. The fair value of the awards is estimated on their grant dates using a Monte Carlo simulation. The Company recognizes compensation cost over the requisite service or performance period. The Company accounts for forfeitures as they occur. Vesting of PSUs can range from zero to 200% of the target awards granted based on the Company’s relative total shareholder return as compared to the total shareholder return of the Company’s performance peer group over the applicable performance period.

The 2022 and 2023 PSU awards are accounted for as equity-classified awards and were issued with a three-year vesting period beginning on the grant date and ending on the third anniversary of the grant date. The three-year performance period for the 2022 awards is January 1, 2022 through December 31, 2024. The three-year performance period for the 2023 awards is January 1, 2023 through December 31, 2025.

The Company granted contingent cash-settlement awards in the form of PSUs (the “Contingent PSUs”) in February 2024 that will be settled in shares of stock, subject to stockholder approval of the 2024 Plan. In the event the Company’s stockholders do not approve the 2024 Plan, the Contingent PSUs will be settled in cash pursuant to the terms of the applicable award agreement. The Contingent PSUs are accounted for as liability-classified awards and were issued with a three-year vesting period beginning on the grant date and ending on the third anniversary of the grant date. The three-year performance period for the Contingent PSUs is January 1, 2024 through December 31, 2026.

Compensation costs related to the awards are recorded as general and administrative expense. The unrecognized cost associated with these awards was $4.3 million at March 31, 2024. The Company expects to recognize the unrecognized compensation cost for these awards over a weighted-average period of approximately 2.3 years. Of the unrecognized share-based compensation expense, $2.3 million relates to liability-classified awards and will be subsequently remeasured at each reporting period. The Company recognized $0.2 million in liability-classified share-based compensation expense at March 31, 2024 for the Contingent PSUs.

The below table reflects the ranges for the assumptions used in the Monte Carlo model for the Contingent PSU awards:

	February 2024
Expected volatility	75.8	%
Dividend yield	0.00	%
Risk-free interest rate	4.19	%

The following table summarizes information regarding the PSUs activity for the period presented:

		Weighted-
		Average Grant-
	Number of	Date Fair Value
	Units	per Unit (1)
PSUs outstanding at December 31, 2023	402,701	$	9.31
Granted (2)	312,843	$	8.28
Forfeited	—	$	—
Vested	(107,044)	$	2.63
PSUs outstanding at March 31, 2024 (3)	608,500	$	9.95

(1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued.

(2) The aggregate grant-date fair value of PSUs issued for the three months ended March 31, 2024 was $2.6 million based on a calculated fair value price ranging from $2.63 to $9.18 per share.

(3) As of March 31, 2024, 269,897 of the unvested PSUs were accounted for as liability awards in “accrued liabilities” in the Unaudited Condensed Consolidated Balance sheet.

Compensation Expense

The following table summarizes the amount of recognized compensation expense associated with the EIP, which are reflected in the accompanying Unaudited Condensed Consolidated Statements of Operations for the periods presented (in thousands):

	For the Three Months Ended
	March 31,
	2024		2023
Share-based compensation costs
Share-based compensation - equity awards	$	1,120	$	941
Share-based compensation - liability awards		411		—
	$	1,531	$	941