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Debt

12 Months Ended

Dec. 31, 2019

Note 11. Debt

Our consolidated debt obligations consisted of the following at the dates indicated:

	December 31,		December 31,
	2019		2018
	(In thousands)
Revolving Credit Facility (1)	$	285,000	$	294,000
Long-term debt	$	285,000	$	294,000

(1)

The carrying amount of our Revolving Credit Facility and Emergence Credit Facility approximates fair value because the interest rates are variable and reflective of market rates.

Revolving Credit Facility

Amplify Energy Operating LLC, our wholly owned subsidiary (“OLLC”), is a party to a reserve-based revolving credit facility (the “Revolving Credit Facility”), subject to a borrowing base of $450.0 million as of December 31, 2019, which is guaranteed by us and all of our current subsidiaries. The Revolving Credit Facility matures on November 2, 2023 and has a semiannual borrowing base redetermination.

The terms and conditions under the Revolving Credit Facility include (but are not limited to) the following:

•

at OLLC’s option, borrowings under the New Credit Agreement will bear interest at the base rate, LIBOR Market Index rate or LIBOR plus an applicable margin. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the federal funds effective rate plus 50 basis points, (ii) the rate of interest in effect for each day as publicly announced from time to time by the Agent as its “prime rate”; and (iii) the adjusted LIBOR rate for a one-month interest period plus 100 basis points per annum. The applicable margin for base rate loans ranges from 100 to 200 basis points, and the applicable margin for LIBOR loans and LIBOR Market loans ranges from 200 to 300 basis points, in each case depending on the percentage of the borrowing base utilized;

•

the obligations under the Revolving Credit Facility are secured by mortgages on not less than 85% of the PV-9 value of oil and gas properties (and at least 85% of the PV-9 value of the proved, developed and producing oil and gas properties) included in the determination of the borrowing base. OLLC and its other subsidiaries entered into a pledge and security agreement in favor of the Agent for the secured parties, pursuant to which OLLC’s obligations under the New Credit Agreement are secured by a first priority security interest in substantially all of our assets (subject to permitted liens). Additionally, the Company entered into a non-recourse pledge agreement in favor of the Agent for the secured parties, pursuant to which OLLC’s obligations under the New Credit Agreement are secured by a pledge and security interest of 100% of the equity interests held by the Company in Amplify Acquisitionco Inc. (“Acquisitionco”);

•

certain financial covenants, including the maintenance of (i) as of the date of determination, a maximum total debt to EBITDAX ratio of 4.00 to 1.00, and (ii) a current ratio of not less than 1.00 to 1.00; and

•

certain events of default, including, without limitation: non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy.

On June 24, 2019, as discussed in Note 18, the Company received the release of $90.0 million from the Beta Decommissioning Trust Account and used the proceeds to reduce amounts outstanding under our Revolving Credit Facility.

Borrowing Base Redetermination

The borrowing base under the Company’s credit agreement is subject to redetermination on at least a semi-annual basis based on an engineering report with respect to our estimated oil, NGL and natural gas reserves, which will take into account the prevailing oil, NGL and natural gas prices at such time, as adjusted for the impact of commodity derivative contracts. Unanimous approval by the lenders is required for any increase to the borrowing base. On November 8, 2019, as part of the Company’s fall 2019 semiannual borrowing base redetermination, the borrowing base and lender commitments under the Company’s credit agreement among wholly owned subsidiaries of the Company, Bank of Montreal, as administrative agent, and other lenders party thereto were decreased from $530.0 million to $450.0 million, with the next such redetermination scheduled for spring 2020.

Joinder Agreement Amendment

In connection with the Merger, on August 6, 2019, Amplify Energy Operating LLC and Amplify Acquisitionco LLC entered into a Borrowing Base Redetermination, Commitment Increase and Joinder Agreement to Credit Agreement, with the guarantors party thereto, the lenders party thereto and Bank of Montreal, as administrative agent (the “Joinder Agreement”). The Joinder Agreement amended the Revolving Credit Facility to, among other things:

•

redetermine the borrowing base of the Revolving Credit Facility, by increasing the borrowing base from $425.0 million to $530.0 million;

•

increase the commitments of certain of the original lenders under the Revolving Credit Facility; and

•

add additional lenders as parties to the Revolving Credit Facility.

Upon closing of the Merger on August 6, 2019, Midstates’ existing reserve-based revolving credit facility was terminated, and all remaining borrowings were repaid by the Company.

First Amendment to Revolving Credit Facility

On May 5, 2019, OLLC entered into the First Amendment to Credit Agreement (the “First Amendment”), among OLLC, Acquisitionco, Amplify Energy, the guarantors party thereto, the lenders party thereto and Bank of Montreal, as administrative agent. (the “Administrative Agent”).

The First Amendment amended the Revolving Credit Facility to, among other things, (i) modify certain defined terms in connection with the completion of the transactions contemplated by the Merger Agreement, including the Merger; (ii) allow certain structural changes for tax planning activities; and (iii) modify certain covenants in the Revolving Credit Facility that restrict Amplify Energy’s ability to take certain actions or engage in certain business such that, once the First Amendment is effective, the occurrence of such actions or business in connection with the Merger Agreement or completion of the transactions contemplated thereby, including the Merger, will not be so restricted.

Certain of the modifications to the Revolving Credit Facility, including those permitting pre-Merger tax restrictions, became effective upon the signing of the First Amendment. The remaining modifications become effective concurrently with the consummation of the Merger, subject to certain closing conditions.

The First Amendment also contains customary representations, warranties and agreements of OLLC and the guarantors. All other material terms and conditions of the Revolving Credit Facility were unchanged by the First Amendment.

The foregoing description of the First Amendment is qualified in its entirety by reference to the First Amendment, which is attached as Exhibit 10.1 to Legacy Amplify’s current report on Form 8-K filed on May 6, 2019.

Second Amendment to Revolving Credit Facility

On July 16, 2019, OLLC entered into the Second Amendment to Credit Agreement (the “Second Amendment”), among OLLC, Acquisitionco, Amplify Energy, the guarantors party thereto, the lenders party thereto and the Administrative Agent.

The Second Amendment amended the parties’ existing Credit Agreement, dated as of November 2, 2018, in connection with the completion of the Merger, following which Midstates may contribute, through a series of transactions, the equity interests it holds in Midstates Petroleum Company, LLC, a Delaware limited liability company, to the borrower (the “Contribution”), to, among other things, (i) provide that if the Merger and the Contribution are not consummated on or prior to August 31, 2019, the Administrative Agent and the lenders have the right (but not the obligation) to redetermine the borrowing base on or after September 1, 2019 and (ii) amend certain other provisions of the Revolving Credit Facility.

The Second Amendment also contains customary representations, warranties and agreements of OLLC and the guarantors. All other material terms and conditions of the Revolving Credit Facility were unchanged by the Second Amendment.

The foregoing description of the Second Amendment is qualified in its entirety by reference to the Second Amendment, which is attached as Exhibit 10.1 to Legacy Amplify’s current report on Form 8-K filed on July 17, 2019.

Letter Agreement

On December 21, 2018, Legacy Amplify entered into a letter agreement relating to the New Credit Agreement (the “Letter Agreement”). Pursuant to the Letter Agreement, the parties to the New Credit Agreement agreed, among other things, to:

•

extend the date by which OLLC was required to show compliance with certain minimum hedging requirements set forth in the New Credit Agreement from December 31, 2018 to February 28, 2019; and

•

subject to certain conditions, waive the requirement that OLLC deliver to the Agent within 60 days after the closing date of the New Credit Agreement control agreements with respect to certain deposit accounts held or maintained by each Loan Party (as defined in the New Credit Agreement) on the closing date of the New Credit Agreement.

Emergence Credit Facility

On May 4, 2017, OLLC, as borrower, entered into the Amended and Restated Credit Agreement (the “Emergence Credit Agreement”) among Acquisitionco, as parent guarantor, the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. Pursuant to the Emergence Credit Agreement the lenders party thereto agreed to provide OLLC with the Emergence Credit Facility (the loans thereunder, the “Loans”).

On November 2, 2018, in connection with our entrance into the Revolving Credit Facility, the Emergence Credit Facility was terminated and repaid in full. At December 31, 2018, $3.0 million of deferred financing costs related to the Emergence Credit Facility was written off resulting in a loss on extinguishment of debt.

Predecessor’s Revolving Credit Facility

Our Predecessor was a party to a $2.0 billion revolving credit facility, which was guaranteed by us and all of our current and future subsidiaries (other than certain immaterial subsidiaries).

On the Effective Date, the holders of claims under the Predecessor’s revolving credit facility received a full recovery, which included a $24.8 million pay down and their pro rata share of the Emergence Credit Facility. See Note 2 for additional information.

Weighted-Average Interest Rates

The following table presents the weighted-average interest rates paid on variable-rate debt obligations for the periods presented:

Successor

Predecessor

For the

Period from

Year Ended

May 5, 2017

January 1, 2017

December 31,

through

2019

2018

December 31, 2017

May 4, 2017

Revolving Credit Facility

4.76%

4.96%

n/a

Emergence Credit Facility

n/a

5.75%

5.08%

n/a

Predecessor's revolving credit facility

n/a

4.18%

Senior Notes

On April 17, 2013, May 23, 2013 and October 10, 2013, our Predecessor and Finance Corp. (collectively, the “Issuers”) issued $300.0 million, $100.0 million and $300.0 million, respectively, of the 2021 Senior Notes. The 2021 Senior Notes were fully and unconditionally guaranteed (subject to customary release provisions) on a joint and several basis by the Guarantor Subsidiaries and by certain subsidiaries of the Predecessor. The 2021 Senior Notes would have matured on May 1, 2021 with interest accruing at a rate of 7.625% per annum and were payable semi-annually in arrears on May 1 and November 1 of each year. The 2021 Senior Notes were governed by an indenture and were subject to optional redemption at prices specified in the indenture plus accrued and unpaid interest, if any.

On July 17, 2014, the Issuers completed a private placement of $500.0 million aggregate principal amount of the 2022 Senior Notes. The 2022 Senior Notes were issued at 98.485% of par and were fully and unconditionally guaranteed (subject to customary release provisions) on a joint and several basis by the Guarantor Subsidiaries and by certain subsidiaries of the Predecessor. The 2022 Senior Notes would have matured on August 1, 2022 with interest accruing at 6.875% per annum and were payable semi-annually in arrears on February 1 and August 1 of each year. The 2022 Senior Notes were governed by an indenture and were subject to optional redemption at prices specified in the indenture plus accrued and unpaid interest, if any.

The Company’s voluntary petitions as described in Note 2 constituted an event of default that accelerated the obligations under the Notes. For the period from January 17, 2017 through May 4, 2017 our contractual interest that was not recorded on the Notes was approximately $24.2 million.

On the Effective Date, the Notes were cancelled and the Predecessor’s liability thereunder discharged, and the holders of the Notes received their pro rata share of the New Common Shares. Additionally, the holders of the Notes received their pro rata share of a $24.6 million cash distribution.

Letters of credit

At December 31, 2019, we had $1.7 million letters of credit outstanding, all related to operations at our Wyoming properties.

Unamortized Deferred Financing Costs

Unamortized deferred financing costs associated with our Revolving Credit Facility was $4.7 million at December 31, 2019. The unamortized deferred financing costs are amortized over the remaining life of our Revolving Credit Facility using the straight-line method which generally approximate the effective interest method.

On November 2, 2018, in connection with our entrance into the Revolving Credit Facility, the Emergence Credit Facility was terminated and repaid in full. The remaining deferred financing costs of $3.0 million was written off resulting in a loss on extinguishment of debt.