Amplify Energy Corp.: Form 10-Q for the period ended Jun 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes in “Item 1. Financial Statements” contained herein and in “Item 1A. Risk Factors” of our 2024 Form 10-K. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in the front of this report.

Overview

We operate in one reportable segment engaged in the acquisition, development, exploitation and production of oil and natural gas properties. Our management evaluates performance based on the reportable business segment as the economic environments are not different within the operation of our oil and natural gas properties. Our business activities are conducted through OLLC, our wholly owned subsidiary, and its wholly owned subsidiaries. Our assets have historically consisted primarily of producing oil and natural gas properties located in Oklahoma, the Rockies (“Bairoil”), federal waters offshore Southern California (“Beta”), East Texas/North Louisiana and the Eagle Ford (non-op). Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs.

Industry Trends

We continue to monitor the impact of the actions of OPEC+ and other large producing nations, the Russia-Ukraine conflict, conflicts in the Middle East, the imposition of tariffs or other economic sanctions, global inventories of oil and natural gas and the uncertainty associated with recovering oil demand, inflation and future monetary policy and governmental policies aimed at transitioning towards lower carbon energy. In the first half of 2025, there has been continued volatility in oil, natural gas and NGL prices resulting from (i) trade tariff uncertainties driving concerns over an increase in inflation and (ii) OPEC+’s decision to increase production in May through July 2025, creating additional global supply and further downward pressure on oil prices. In July 2025, OPEC+ announced an additional production increase for August, which is expected to exacerbate these supply-side pressures on oil prices.

While U.S. inflation rates during the first half of 2025 have remained relatively stable, they continued to be slightly higher than historical averages. Such inflation, along with the effects of economic pressures from international military and trade conflicts, could, as a result, continue to raise the cost of borrowing, impact the demand for and price of oil and natural gas, increase the price of crucial supplies and raw materials and impact interest rates. Due to these factors, among others, we expect prices for some or all commodities to remain volatile. Thus, we cannot predict with reasonable certainty the extent to which these factors may impact our business, results of operations, financial condition and cash flows.

Recent Developments

Strategic Initiatives

On July 22, 2025, we announced the engagement of a third-party advisor to explore market interest for the complete divestiture of Amplify’s assets in East Texas and Oklahoma.

Separation of Chief Executive Officer and Director

On July 21, 2025, the Company, and Mr. Martyn Willsher, the Company’s former President, Chief Executive Officer and member of the Company’s board of directors (the “Board”), agreed that (i) Mr. Willsher’s roles as President and Chief Executive Officer of the Company and a member of the Board terminated effective July 22, 2025 (the “Transition Date”), and (ii) Mr. Willsher assumed the non-executive employee role of Special Advisor to the Company on the Transition Date.

In connection with the transition of Mr. Willsher’s role, the Company and Mr. Willsher entered into a Transition and Separation Agreement (the “Transition Agreement”), effective as of the Transition Date. Pursuant to the terms of the Transition Agreement, Mr. Willsher will serve as Special Advisor to the Company until December 31, 2025, unless earlier terminated in accordance with the terms of the Transition Agreement. The Transition Agreement is filed as Exhibit 10.4 to this Current Report on Form 10-Q.

Appointment of Chief Executive Officer and Director

On July 21, 2025, the Board appointed Mr. Daniel Furbee, previously the Company’s Senior Vice President and Chief Operating Officer, to Chief Executive Officer and as a member of the Board, effective as of the Transition Date. In connection with Mr. Furbee’s appointment as Chief Executive Officer, Mr. Furbee and the Company entered into a performance-based restricted stock units award agreement (the “Award Agreement”). The Award Agreement is filed as Exhibit 10.5 to this Current Report on Form 10-Q.

Appointment of President and Chief Financial Officer

On July 21, 2025, the Board appointed Mr. James Frew, previously the Company’s Senior Vice President and Chief Financial Officer, to President and Chief Financial Officer, effective as of the Transition Date.

Sale of Non-Operated Eagle Ford Assets and Borrowing Base Redetermination

On July 1, 2025, OLLC entered into a purchase and sale agreement with Buyer, the existing operator of the majority of OLLC’s Assets, pursuant to which OLLC sold to Buyer all of OLLC’s Assets, which include, among other things, OLLC’s right, title and interest in and to certain specified oil and gas Properties, Contracts, Equipment and Production within or related to certain designated lands in Karnes County, Texas, for an aggregate cash purchase price of $23.0 million, subject to certain post-closing adjustments, as further described in the Purchase and Sale Agreement. The Asset Sale closed simultaneously with the execution and delivery of the Purchase and Sale Agreement on July 1, 2025. The Purchase and Sale Agreement became effective as of June 15, 2025.

On July 2, 2025, subsequent to the Asset Sale, our borrowing base was reduced to $135.0 million.

Business Environment and Operational Focus

We use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including: (i) production volumes; (ii) realized prices on the sale of our production; (iii) cash settlements on our commodity derivatives; (iv) lease operating expense; (v) gathering, processing and transportation; (vi) general and administrative expense; and (vii) Adjusted EBITDA (as defined below).

Sources of Revenues

Our revenues are derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from natural gas during processing. Production revenues are derived entirely from the continental United States. Natural gas, NGL and oil prices are inherently volatile and are influenced by many factors outside our control. In order to reduce the impact of fluctuations in natural gas and oil prices on revenues, we intend to periodically enter into derivative contracts that fix the future prices received. At the end of each period, the fair value of these commodity derivative instruments is estimated and because hedge accounting is not elected, the changes in the fair value of unsettled commodity derivative instruments are recognized in earnings at the end of each accounting period.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates, including a discussion regarding the estimation uncertainty and the impact that our critical accounting estimates have had, or are reasonably likely to have, on our financial condition or results of operations, are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K. Significant estimates include, but are not limited to, oil and natural gas reserves, fair value estimates, revenue recognition and contingencies and insurance accounting. These estimates, in our opinion, are subjective in nature, require the use of professional judgment and involve complex analysis.

When used in the preparation of our consolidated financial statements, such estimates are based on our current knowledge and understanding of the underlying facts and circumstances and may be revised as a result of actions we take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our consolidated financial position, results of operations and cash flows.

Results of Operations

The results of operations for the three and six months ended June 30, 2025 and 2024 have been derived from our unaudited condensed consolidated financial statements.

The following table summarizes certain of the results of operations for the periods indicated.

($ In thousands except per unit amounts)

For the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

We reported net income of $6.4 million compared to net income of $7.1 million for the three months ended June 30, 2025 and 2024, respectively.

Oil, natural gas and NGL revenues were $66.8 million and $72.3 million for the three months ended June 30, 2025 and 2024, respectively. Average net production volumes were approximately 19.1 MBoe/d and 20.3 MBoe/d for the three months ended June 30, 2025 and 2024, respectively. The average realized sales prices were $38.38 per Boe and $39.25 per Boe for the three months ended June 30, 2025 and 2024, respectively. The change in realized sales price was due to lower realized sales prices for oil, partially offset by higher realized sales prices for natural gas.

Other revenues were $1.6 million and $7.2 million for the three months ended June 30, 2025 and 2024, respectively. The decrease primarily related to the revenue suspense release of $4.8 million for the three months ended June 30, 2024.

Lease operating expenses were $38.6 million and $36.3 million for the three months ended June 30, 2025 and 2024, respectively. On a per Boe basis, lease operating expenses were $22.20 and $19.70 for the three months ended June 30, 2025 and 2024, respectively. The change in lease operating expense is primarily due to increased electricity costs for Bairoil.

Gathering, processing and transportation expenses were $4.7 million and $4.9 million for the three months ended June 30, 2025 and 2024, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.71 and $2.66 for the three months ended June 30, 2025 and 2024, respectively. The change in gathering processing and transportation expenses was primarily due to lower gas volumes.

Taxes other than income were $4.3 million and $4.6 million for the three months ended June 30, 2025 and 2024, respectively. On a per Boe basis, taxes other than income were $2.47 and $2.51 for the three months ended June 30, 2025 and 2024, respectively. The decrease was primarily related to a reduction in production taxes based on lower volumes partially offset by an increase in emission charges and ad valorem taxes.

DD&A expenses were $9.8 million and $7.8 million for the three months ended June 30, 2025 and 2024, respectively. The change was primarily driven by increased production at Beta and Eagle Ford.

Impairment expense was $8.4 million for the three months ended June 30, 2025. The Company recognized an impairment expense to reduce the net book value of our non-operated Eagle Ford assets to fair value less costs to sell. See Note 4 and Note 18 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information. No impairment expense was recorded for the three months ended June 30, 2024.

General and administrative expenses were $11.2 million and $8.4 million for the three months ended June 30, 2025 and 2024, respectively. The change in general and administrative expenses was primarily related to an increase of $2.3 million in acquisition and divestiture costs incurred during the second quarter and an increase of $0.2 million in stock compensation expense.

Net loss (gain) on commodity derivative instruments of ($22.2) million were recognized for the three months ended June 30, 2025, consisting of a $17.4 million increase in the fair value of open positions and $4.8 million of cash settlements received on expired positions. Net loss on commodity derivative instruments of $1.2 million was recognized for the three months ended June 30, 2024, consisting of a $4.9 million decrease in the fair value of open positions, partially offset by $3.7 million of cash settlements received on expired positions.

Pipeline incident loss was $0.2 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

(Gain) loss on sale of properties was ($1.5) million for the six months ended June 30, 2025. This primarily related to the sale of certain units with rights in the Haynesville basin in Panola and Shelby Counties, Texas. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements under “Item 1. Financial Statements” of this quarterly report for additional information. There was no (gain) loss on sale of properties for the three months ended June 30, 2024.

Interest expense, net was $3.6 million for both the three months ended June 30, 2025 and 2024, respectively.

Average outstanding borrowings under our Revolving Credit Facility were $130.5 million and $121.8 million for the three months ended June 30, 2025 and 2024, respectively.

Current income tax benefit (expense) was ($0.5) million and ($0.6) million for the three months ended June 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Deferred income tax benefit (expense) was ($1.4) million and ($2.1) million for the three months ended June 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

For the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

We reported net income of $0.5 million compared to a net loss of $2.3 million for the six months ended June 30, 2025 and 2024, respectively.

Oil, natural gas and NGL revenues were $137.1 million and $147.7 million for the six months ended June 30, 2025 and 2024, respectively. Average net production volumes were approximately 18.5 MBoe/d and 20.2 MBoe/d for the six months ended June 30, 2025 and 2024, respectively. The average realized sales prices were $40.96 per Boe and $40.07 per Boe for the six months ended June 30, 2025 and 2024, respectively. The change in realized sales prices was due to higher natural gas and NGL prices, partially offset by lower realized sales prices for oil. In addition, oil production had a higher percentage of total production in the first half of 2025 when compared to the first half of 2024.

Other revenues were $3.3 million and $8.1 million for the six months ended June 30, 2025 and 2024, respectively. The decrease primarily related to the revenue suspense release of $4.8 million for the six months ended June 30, 2024.

Lease operating expenses were $76.0 million and $74.6 million for the six months ended June 30, 2025 and 2024, respectively. On a per Boe basis, lease operating expenses were $22.72 and $20.24 for the six months ended June 30, 2025 and 2024, respectively. The change in lease operating expense on a per Boe basis was primarily due to increased electricity costs for Bairoil.

Gathering, processing and transportation expenses were $9.0 million and $9.7 million for the six months ended June 30, 2025 and 2024, respectively. On a per Boe basis, gathering, processing and transportation expenses were $2.69 and $2.62 for the six months ended June 30, 2025 and 2024, respectively. The change in gathering, processing and transportation expense was primarily due to lower gas volumes.

Taxes other than income were $8.7 million and $9.5 million for the six months ended June 30, 2025 and 2024, respectively. On a per Boe basis, taxes other than income were $2.59 for each of the six months ended June 30, 2025 and 2024. The decrease was primarily related to a reduction in production taxes due to lower volumes partially offset by an increase in emissions charges and ad valorem tax.

DD&A expenses were $18.3 million and $16.1 million for the six months ended June 30, 2025 and 2024, respectively. The change is primarily due to an increase in our DD&A rate.

Impairment expense was $8.4 million for the six months ended June 30, 2025. The Company recognized an impairment expense to reduce the net book value of our non-operated Eagle Ford assets to fair value less costs to sell. See Note 4 and Note 18 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information. No impairment expense was recorded for the six months ended June 30, 2024.

General and administrative expenses were $22.0 million and $18.2 million for the six months ended June 30, 2025 and 2024, respectively. The change in general and administrative expenses was primarily related to (i) an increase of $4.0 million in acquisition and divestiture costs and (ii) an increase of $0.6 million in stock compensation expense, partially offset by (i) a decrease of $0.5 million in office lease expense related to the early termination of our Oklahoma office lease in 2024 and (ii) a decrease of $0.3 million for salaries and other payroll benefits.

Net loss (gain) on commodity derivative instruments of ($7.8) million was recognized for the six months ended June 30, 2025, consisting of a $2.6 million increase in the fair value of open positions and $5.3 million of cash settlements received on expired positions. A net loss on commodity derivative instruments of $17.8 million was recognized for the six months ended June 30, 2024, consisting of a $25.8 million decrease in the fair value of open positions, partially offset by $8.0 million of cash settlements received on expired positions.

Pipeline incident loss was $0.6 million and $1.2 million for the six months ended June 30, 2025 and 2024, respectively. The costs reflect certain expenses not expected to be recovered under an insurance policy. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

(Gain) loss on sale of properties was ($7.8) million for the six months ended June 30, 2025. This primarily related to the sale of certain units with rights in the Haynesville basin in Harrison County, Texas. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements under “Item 1. Financial Statements” of this quarterly report for additional information. There was no (gain) loss on sale of properties for the six months ended June 30, 2024.

Interest expense, net was $7.1 million and $7.2 million for the six months ended June 30, 2025 and 2024, respectively.

Average outstanding borrowings under our Revolving Credit Facility were $128.9 million and $118.5 million for the six months ended June 30, 2025 and 2024, respectively.

Current income tax benefit (expense) was ($0.5) million and ($2.0) million for the six months ended June 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Deferred income tax benefit (expense) was $0.1 million and $2.6 million for the six months ended June 30, 2025 and 2024, respectively. See additional information discussed in Note 17 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Non-GAAP Financial Measures

We include in this report the non-GAAP financial measure of Adjusted Net Income (Loss) and Adjusted EBITDA and provide our reconciliation of net income (loss) to Adjusted Net Income (Loss), Adjusted EBITDA to net income (loss), and net cash flows from operating activities, our most directly comparable financial measures calculated and presented in accordance with GAAP.

Adjusted Net Income (Loss)

We define Adjusted Net Income (Loss) as net income (loss) adjusted for unrealized loss (gain) on commodity derivative instruments, acquisition and divestiture-related expenses, impairment expense, unusual and infrequent items, and the income tax expense or benefit of these adjustments using our federal statutory tax rate. This measure is not meant to disassociate these items from management’s performance but rather is intended to provide helpful information to investors interested in comparing our performance between periods. Adjusted Net Income (Loss) is not considered to be an alternative to net income (loss) reported in accordance with GAAP.

The following tables present our reconciliation of the Company’s net income (loss) to Adjusted Net Income (Loss), our most directly comparable GAAP financial measures, for each of the periods indicated.

(In thousands)

(1) The federal statutory rates were utilized for all periods presented.

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. We define Adjusted EBITDA as net income (loss):

Plus:

• Interest expense;
• Income tax expense;
• DD&A;
• Impairment of goodwill and long-lived assets (including oil and natural gas properties);
• Accretion of AROs;
• Loss on commodity derivative instruments;
• Cash settlements received on expired commodity derivative instruments;
• Amortization of gain associated with terminated commodity derivatives;
• Losses on sale of assets;
• Share-based compensation expenses;
• Exploration costs;
• Acquisition and divestiture related expenses;
• Reorganization items, net;
• Severance payments; and
• Other non-routine items that we deem appropriate.

Less:

• Interest income;
• Income tax benefit;
• Gain on commodity derivative instruments;
• Cash settlements paid on expired commodity derivative instruments;
• Gains on sale of assets and other, net; and
• Other non-routine items that we deem appropriate.

We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.

In addition, we use Adjusted EBITDA as an additional measure to evaluate actual cash flow available to develop existing reserves or acquire additional oil and natural gas properties.

The following tables present our reconciliation of the Company’s net income (loss) to Adjusted EBITDA and cash flows from operating activities to Adjusted EBITDA, our most directly comparable GAAP financial measures, for each of the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(In thousands)

Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA

(In thousands)

Liquidity and Capital Resources

Overview. Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness obligations, to refinance our indebtedness or to meet our collateral requirements will depend on our ability to generate cash in the future. Our primary sources of liquidity and capital resources have historically been cash flows generated by operating activities, borrowings under our Revolving Credit Facility and equity and debt capital markets. We plan to monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. Based on our current oil and natural gas price expectations, we believe our cash flows provided by operating activities and availability under our Revolving Credit Facility will provide us with the financial flexibility necessary to meet our cash requirements, including normal operating needs, and to pursue our currently planned 2025 development activities. However, future cash flows are subject to a number of variables, including the level of our oil and natural gas production and the prices we receive for our oil and natural gas production, and significant additional capital expenditures will be required to more fully develop our properties. We cannot assure you that operations and other needed capital will be available on acceptable terms, or at all. For the remainder of 2025, we anticipate funding our 2025 capital program from internally generated cash flow but retain the flexibility to utilize borrowings under our Revolving Credit Facility, to access the debt and equity capital markets and continue to evaluate opportunities to optimize our portfolio to reduce debt and accelerate Beta development. We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under our Revolving Credit Facility will be sufficient to support working capital, capital expenditures and other cash requirements for at least the next 12 months and, based on our current expectations, for the foreseeable future thereafter.

Termination of Contemplated Merger with Juniper Capital. In connection with the Contemplated Mergers, on April 25, 2025, pursuant to Section 8.1(a) of the Merger Agreement, the Company and the Acquired Companies entered into the Termination Agreement to terminate the Merger Agreement, effective immediately. In accordance with the terms of the Termination Agreement, the Company made a cash payment to the Acquired Companies in lieu of any termination fee which might have otherwise been payable pursuant to the Merger Agreement in the amount of $800,000 as payment for certain of the Acquired Companies’ expenses. The Company incurred professional fees and expenses of approximately $3.4 million in connection with the Contemplated Mergers and the Termination. For additional information regarding the Termination, see Notes 4 and 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Capital Markets. We do not currently anticipate any near-term capital markets activity, but we will continue to evaluate the availability of public debt and equity for funding capital needs.

Hedging. Commodity hedging has been and remains an important part of our strategy to reduce cash flow volatility. Our hedging activities are intended to support oil, NGL and natural gas prices at targeted levels and to manage our exposure to commodity price fluctuations. We intend to enter into commodity derivative contracts at times and on terms desired to maintain a portfolio of commodity derivative contracts covering at least 50% - 75% of our estimated production from total proved developed producing reserves over a one-to-three-year period at any given point of time. We may, however, from time to time, hedge more or less than this approximate amount. Additionally, we may take advantage of opportunities to modify our commodity derivative portfolio to change the percentage of our hedged production volumes when circumstances suggest that it is prudent to do so. Market conditions may also impact our ability to enter into future commodity derivative contracts.

We evaluate counterparty risks related to our commodity derivative contracts and trade credit. Should any of these financial counterparties not perform, we may not realize the benefit of some of our hedges under lower commodity prices. We sell our oil and natural gas to a variety of purchasers. Non-performance by a customer could also result in a loss.

Capital Expenditures. Our total capital expenditures were approximately $48.6 million for the six months ended June 30, 2025, which were primarily related to the development program at Beta and non-operated drilling and completion activities in East Texas and the Eagle Ford.

Working Capital. Working capital is the amount by which current assets exceed current liabilities. Our working capital requirements are primarily driven by changes in accounts receivable and accounts payable, as well as the classification of our debt outstanding. These changes are impacted by changes in the prices of commodities that we buy and sell. In general, our working capital requirements increase in periods of rising commodity prices and decrease in periods of declining commodity prices. However, our working capital needs do not necessarily change at the same rate as commodity prices because both accounts receivable and accounts payable are impacted by the same commodity prices. In addition, the timing of payments received by our customers or paid to our suppliers can also cause fluctuations in working capital because we settle with most of our larger customers on a monthly basis and often near the end of the month. We expect that our future working capital requirements will be impacted by these same factors. From time-to-time, our working capital will reflect a deficit, while at other times it will reflect a surplus. This fluctuation is not unusual.

As of June 30, 2025, we had a working capital deficit (excluding commodity derivatives) of $23.2 million primarily due to accrued liabilities of $41.2 million, revenues payable of $11.7 million, and accounts payable of $30.3 million, partially offset by accounts receivable of $34.7 million and prepaid expenses of $25.4 million.

Debt Agreement

Revolving Credit Facility. On July 31, 2023, OLLC and Acquisitionco entered into the Revolving Credit Facility. The aggregate principal amount of loans outstanding under the Revolving Credit Facility as of June 30, 2025, was $130.0 million.

As of June 30, 2025, we had approximately $15.0 million of available borrowings under our Revolving Credit Facility.

The Company is required to maintain a minimum current ratio of 1.00 to 1.00, which is measured on the last day of each quarter. On June 30, 2025, the Company’s current ratio was 0.90 to 1.00. On July 31, 2025, the Company received a letter agreement from its lenders waiving any default or event of default as a result of such noncompliance related to the minimum current ratio requirement for the quarter ended June 30, 2025. As a result, the Company was in compliance with all financial covenants as of June 30, 2025. The Company expects to maintain a current ratio of 1.0 to 1.0 in future quarters.

On July 2, 2025, subsequent to the divestiture of our non-op Eagle Ford assets, our borrowing base was reduced to $135.0 million.

For additional information regarding our Revolving Credit Facility, see Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Material Cash Requirements

Contractual Commitments. We have contractual commitments under our debt agreements, including interest payments and principal payments. See Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Lease Obligations. We have operating leases for office and warehouse spaces, office equipment, compressors and surface rentals related to our business obligations. See Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Sinking Fund Payments. We have a funding requirement to fund two trust accounts to comply with supplemental regulatory bonding requirements related to our decommissioning obligations for the Beta production facilities. As of June 30, 2025, our future commitments under these agreements were $4.5 million for the remainder of 2025 and $9.0 million per year until the escrow accounts are fully funded. See Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated. The cash flows for the six months ended June 30, 2025 and 2024 have been derived from our Unaudited Condensed Consolidated Financial Statements. For information regarding the individual components of our cash flow amounts, see our Unaudited Condensed Consolidated Statements of Cash Flows included under “Item 1. Financial Statements” of this quarterly report.

(In thousands)

Operating Activities. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities was $49.2 million and $23.1 million for the six months ended June 30, 2025 and 2024, respectively.

Production volumes were approximately 18.5 MBoe/d and 20.2 MBoe/d for the six months ended June 30, 2025 and 2024, respectively. The average realized sales price was $40.96 per Boe and $40.07 per Boe for the six months ended June 30, 2025 and 2024, respectively. The change in realized sales prices was due to higher natural gas and NGL prices, partially offset by lower realized sales prices for oil. In addition, oil production had a higher percentage of total production in the first half of 2025 when compared to the first half of 2024.

Net cash provided by operating activities for the six months ended June 30, 2025 included $5.3 million of cash received on expired commodity derivative instruments compared to $8.0 million of cash received on expired commodity derivatives for the six months ended June 30, 2024. For the six months ended June 30, 2025, we had a net gain on commodity derivative instruments of $7.8 million compared to a net loss of $17.8 million for the six months ended June 30, 2024.

In addition, the six months ended June 30, 2025 included an impairment expense of $8.4 million for the loss on assets held for sale.

Investing Activities. Net cash used in investing activities for the six months ended June 30, 2025 was $50.2 million, of which $52.2 million was used for additions to oil and natural gas properties and $0.6 million for additions to other property and equipment. Net cash used in investing activities for the six months ended June 30, 2024 was $44.6 million, of which $38.6 million was used for additions to oil and natural gas properties and $1.0 million for additions to other property and equipment.

During 2025, we purchased and sold certain rights, title and interest in assets in East Texas from a third party, whereby we received net proceeds of $7.8 million. See additional information discussed in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report.

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with our Beta properties. Additions to restricted investments were $5.1 million and $5.0 million for the six months ended June 30, 2025 and 2024, respectively.

Financing Activities. We had net borrowings of $3.0 million for the six months ended June 30, 2025 related to our Revolving Credit Facility compared to net borrowings of $3.0 million for the six months ended June 30, 2024. Shares withheld for taxes were $2.0 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively.

Off–Balance Sheet Arrangements

As of June 30, 2025, we had no off–balance sheet arrangements.

Recently Issued Accounting Pronouncements

For a discussion of recent accounting pronouncements that will affect us, see Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements included under “Item 1. Financial Statements” of this quarterly report for additional information.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025. We believe that our internal controls and procedures are still functioning as designed and were effective for the most recent quarter.

Change in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits 31.1 and 31.2, respectively, to this quarterly report.

Our business faces many risks. Any of the risks discussed elsewhere in this quarterly report and our other SEC filings could have a material impact on our business, financial position or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. There have been no material changes to the risk factors disclosed in Part I, Item 1A in our 2024 Form 10-K.