UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 8, 2022, the registrant had
TABLE OF CONTENTS
2
Introductory Note Regarding Definitions
The registrant, Aris Water Solutions, Inc. (“Aris Inc.”), was incorporated on May 26, 2021 as a Delaware corporation. Aris Inc. was formed to serve as the issuer in an initial public offering (“IPO” or the “Offering”) of equity, which was completed on October 26, 2021. Concurrent with the completion of the Offering, Aris Inc. became the new parent holding company of Solaris Midstream Holdings, LLC (“Solaris LLC”), a Delaware limited liability company. Except as otherwise indicated or required by the context, all references to the “Company,” “we,” “our,” and “us” or similar terms refer to (i) Solaris LLC and its consolidated subsidiaries before the completion of the Offering and (ii) Aris Inc. and its consolidated subsidiaries as of the completion of the Offering and thereafter.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10‑Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, without limitation, statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “guidance,” “preliminary,” “project,” “estimate,” “outlook,” “expect,” “continue,” “will,” “intend,” “plan,” “targets,” “believe,” “forecast,” “future,” “potential,” “should,” “may,” “possible,” “could” and variations of such words or similar expressions.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report”) and found elsewhere in this Quarterly Report, including, but not limited to, the following:
● | the impact of the current conflict between Russia and Ukraine on the global economy, including its impacts on financial markets and the energy industry; |
● | impacts of cost inflation on our operating margins; |
● | the impact of current and future laws, rulings and federal and state governmental regulations, including those related to hydraulic fracturing, accessing water, handling of produced water, carbon pricing, taxation of emissions, seismic activity, drilling and right-of-way access on federal lands, income taxes and various other matters; |
● | our reliance on a limited number of customers and a particular region for substantially all of our revenues; |
● | our ability to renew or replace expiring contracts on acceptable terms; |
● | risks related to acquisitions and organic growth projects, including our ability to realize their expected benefits; |
● | capacity constraints on regional oil, natural gas and water gathering, processing and pipeline systems that result in a slowdown or delay in drilling and completion activity, and thus a slowdown or delay in the demand for our services; |
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● | our ability to retain key management and employees and to hire and retain skilled labor; |
● | our health, safety and environmental performance; |
● | delays or restrictions in obtaining, utilizing or maintaining permits and/or rights-of-way by us or our customers; |
● | constraints in supply or availability of equipment used in our business; |
● | physical, electronic and cybersecurity breaches; and |
● | the other risks described in our 2021 Annual Report filed with the United States Securities and Exchange Commission (“SEC”). |
Many of the factors that will determine our future results are beyond the ability of management to control or predict. Should one or more of the risks or uncertainties described in this Quarterly Report or in our 2021 Annual Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, are expressly qualified in their entirety by this cautionary statement.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Aris Water Solutions, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except for share and per share amounts) |
| September 30, | December 31, | |||
| 2022 | 2021 | ||||
Assets |
|
| ||||
Cash | $ | | $ | | ||
Accounts Receivable, Net | | | ||||
Accounts Receivable from Affiliate | | | ||||
Other Receivables | | | ||||
Prepaids and Deposits | | | ||||
Total Current Assets | | | ||||
Fixed Assets | ||||||
Property, Plant and Equipment | | | ||||
Accumulated Depreciation | ( | ( | ||||
Total Property, Plant and Equipment, Net | | | ||||
Intangible Assets, Net | | | ||||
Goodwill | | | ||||
Deferred Income Tax Assets, Net | | | ||||
Right-of-Use Assets | | — | ||||
Other Assets | | | ||||
Total Assets | $ | | $ | | ||
Liabilities and Stockholders' Equity | ||||||
Accounts Payable | $ | | $ | | ||
Payables to Affiliate | | | ||||
Accrued and Other Current Liabilities | | | ||||
Total Current Liabilities | | | ||||
Long-Term Debt, Net of Debt Issuance Costs | | | ||||
Asset Retirement Obligation | | | ||||
Tax Receivable Agreement Liability | | | ||||
Other Long-Term Liabilities | | | ||||
Total Liabilities | | | ||||
Commitments and Contingencies (see Note 10) | ||||||
Stockholders' Equity | ||||||
Preferred Stock $ | ||||||
Class A Common Stock $ | | | ||||
Class B Common Stock $ | | | ||||
Treasury Stock (at Cost), | ( | ( | ||||
Additional Paid-in-Capital | | | ||||
Accumulated Deficit | ( | ( | ||||
Total Stockholders' Equity Attributable to Aris Water Solutions, Inc. | | | ||||
Noncontrolling Interests | | | ||||
Total Stockholders' Equity | | | ||||
Total Liabilities and Stockholders' Equity | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements
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Aris Water Solutions, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
(in thousands, except for share and per share amounts) | September 30, | September 30, | ||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenue | ||||||||||||
Produced Water Handling | $ | | $ | | $ | | $ | | ||||
Produced Water Handling — Affiliates | | | | | ||||||||
Water Solutions | | | | | ||||||||
Water Solutions — Affiliates | | | | | ||||||||
Other Revenue | | — | | — | ||||||||
Total Revenue | | | | | ||||||||
Cost of Revenue | ||||||||||||
Direct Operating Costs | | | | | ||||||||
Depreciation, Amortization and Accretion | | | | | ||||||||
Total Cost of Revenue | | | | | ||||||||
Operating Costs and Expenses | ||||||||||||
Abandoned Well Costs | | | | | ||||||||
General and Administrative | | | | | ||||||||
Impairment of Long-Lived Assets | — | — | | — | ||||||||
Loss on Asset Disposal and Other | | | | | ||||||||
Total Operating Expenses | | | | | ||||||||
Operating Income (Loss) | | ( | | | ||||||||
Other Expense | ||||||||||||
Interest Expense, Net | | | | | ||||||||
Other | — | — | — | | ||||||||
Total Other Expense | | | | | ||||||||
Income (Loss) Before Income Taxes | | ( | ( | ( | ||||||||
Income Tax Expense (Benefit) | | ( | ( | ( | ||||||||
Net Income (Loss) | | ( | ( | ( | ||||||||
Equity Accretion and Dividend — Redeemable Preferred Units | — | — | — | | ||||||||
Net Income (Loss) Attributable to Stockholders'/Members' Equity | | $ | ( | ( | $ | ( | ||||||
Net Income (Loss) Attributable to Noncontrolling Interest | | ( | ||||||||||
Net Income (Loss) Attributable to Aris Water Solutions, Inc. | $ | | $ | ( | ||||||||
Net Income (Loss) Per Share of Class A Common Stock | ||||||||||||
Basic | $ | | $ | ( | ||||||||
Diluted | $ | | $ | ( | ||||||||
Weighted Average Shares of Class A Common Stock Outstanding | ||||||||||||
Basic | | | ||||||||||
Diluted | | |
The accompanying notes are an integral part of these condensed consolidated financial statements
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Aris Water Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands) | Nine Months Ended September 30, | |||||
| 2022 |
| 2021 | |||
Cash Flow from Operating Activities | ||||||
Net Loss | $ | ( | $ | ( | ||
Adjustments to reconcile Net Loss to Net Cash provided by Operating Activities: | ||||||
Deferred Income Tax Benefit | ( | — | ||||
Depreciation, Amortization and Accretion | | | ||||
Stock-Based Compensation | | — | ||||
Impairment of Long-Lived Assets | | — | ||||
Abandoned Well Costs | | | ||||
Loss on Disposal of Asset, Net | | | ||||
Abandoned Projects | | | ||||
Amortization of Debt Issuance Costs, Net | | | ||||
Loss on Debt Modification | — | | ||||
Other | | | ||||
Changes in Operating Assets and Liabilities: | ||||||
Accounts Receivable | ( | ( | ||||
Accounts Receivable from Affiliate | ( | ( | ||||
Other Receivables | ( | | ||||
Prepaids, Deposits and Other Current Assets | | | ||||
Accounts Payable | | ( | ||||
Payables to Affiliate | | ( | ||||
Deferred Revenue | | ( | ||||
Accrued Liabilities and Other | | | ||||
Net Cash Provided by Operating Activities | | | ||||
Cash Flow from Investing Activities | ||||||
Property, Plant and Equipment Expenditures | ( | ( | ||||
Cash Paid for Acquisitions | ( | — | ||||
Proceeds from the Sale of Property, Plant and Equipment | | — | ||||
Net Cash Used in Investing Activities | ( | ( | ||||
Cash Flow from Financing Activities | ||||||
Dividends and Distributions Paid | ( | — | ||||
Proceeds from Senior-Sustainability Linked Notes | — | | ||||
Payments for Initial Public Offering Costs | — | ( | ||||
Payments of Debt Issuance Costs Related to Issuance of Senior- Sustainability Linked Notes | — | ( | ||||
Repayment of Credit Facility | — | ( | ||||
Redemption of Redeemable Preferred Units | — | ( | ||||
Payments of Debt Issuance Costs Related to Credit Facility | — | ( | ||||
Members' Contributions | — | | ||||
Net Cash (Used In) Provided by Financing Activities | ( | | ||||
Net (Decrease) Increase in Cash | ( | | ||||
Cash, Beginning of Period | | | ||||
Cash, End of Period | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements
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Aris Water Solutions, Inc.
Condensed Consolidated Statements of Stockholders’/Members’ Equity
(unaudited)
Three and Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||
(in thousands, except for share and per share amounts) | Class A | Class B | Additional | Non- | Total | ||||||||||||||||||||||
Common Stock |
| Common Stock | Paid-in | Treasury Stock | Accumulated | controlling | Stockholders' | ||||||||||||||||||||
Amount |
| Shares | Amount | Shares | Capital | Amount | Shares | Deficit | Interest | Equity | |||||||||||||||||
Balance at January 1, 2022 | $ | | | $ | |
| |
| $ | |
| $ | ( | |
| $ | ( |
| $ | |
| $ | | ||||
Redemption of Class B Shares for Class A Shares | | | ( | ( | | - | - | - | ( | - | |||||||||||||||||
Stock-based Compensation Expense | - | | - | - | | - | - | - | | | |||||||||||||||||
Increase in TRA Liability Related to Share Redemption | - | - | - | - | ( | - | - | - | - | ( | |||||||||||||||||
Deferred Tax Assets Acquired | - | - | - | - | | - | - | - | - | | |||||||||||||||||
Dividends and Distributions ($ | - | - | - | - | - | - | - | ( | ( | ( | |||||||||||||||||
Net Loss | - | - | - | - | - | - | - | ( | ( | ( | |||||||||||||||||
Balance at March 31, 2022 | | | | | | ( | | ( | | | |||||||||||||||||
Redemption of Class B Shares for Class A Shares | | | ( | ( | | - | - | - | ( | - | |||||||||||||||||
Stock-based Compensation Expense | - | - | - | - | | - | - | - | | | |||||||||||||||||
Increase in TRA Liability Related to Share Redemption | - | - | - | - | ( | - | - | - | - | ( | |||||||||||||||||
Deferred Tax Assets Acquired | - | - | - | - | | - | - | - | - | | |||||||||||||||||
Dividends and Distributions ($ | - | - | - | - | - | - | - | ( | ( | ( | |||||||||||||||||
Net Income | - | - | - | - | - | - | - | | | | |||||||||||||||||
Balance at June 30, 2022 | $ | | | $ | | | $ | | $ | ( | | $ | ( | $ | | $ | | ||||||||||
Class A Shares issued for Acquisition | | | - | - | | - | - | - | | | |||||||||||||||||
Redemption of Class B Shares for Class A Shares | | | ( | ( | | - | - | - | ( | - | |||||||||||||||||
Stock-based Compensation Expense | - | | - | - | | - | - | - | | | |||||||||||||||||
Increase in TRA Liability Related to Share Redemption | - | - | - | - | ( | - | - | - | - | ( | |||||||||||||||||
Deferred Tax Assets Acquired | - | - | - | - | | - | - | - | - | | |||||||||||||||||
Dividends and Distributions ($ | - | - | - | - | - | - | - | ( | ( | ( | |||||||||||||||||
Net Income | - | - | - | - | - | - | - | | | | |||||||||||||||||
Balance at September 30, 2022 | $ | | | $ | | | $ | | $ | ( | | $ | ( | $ | | $ | |
Three and Nine Months | |||
Members' | |||
| Equity | ||
Balance at January 1, 2021 | $ | | |
Capital Contributions | | ||
Accretion and Dividend—Redeemable Preferred Units | | ||
Net Income | | ||
Balance at March 31, 2021 | | ||
Accretion and Dividend—Redeemable Preferred Units | | ||
Net Income | | ||
Balance at June 30, 2021 | | ||
Net Loss | ( | ||
Balance at September 30, 2021 | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements
8
Aris Water Solutions, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(unaudited)
1.Organization and Background of Business
Aris Water Solutions, Inc. (“Aris Inc.”, the “Company”, “we”, “our, or “us”) is an independent, environmentally-focused company headquartered in Houston, Texas, that, through its controlling interest in Solaris Midstream Holdings, LLC, a Delaware limited liability company (“Solaris LLC”), provides sustainability-enhancing services to oil and natural gas operators. We strive to build long-term value through the development, construction and operation of integrated produced water handling and recycling infrastructure that provides high-capacity, comprehensive produced water management, recycling and supply solutions for operators in the Permian Basin.
We were incorporated on May 26, 2021 as a Delaware corporation and were formed to serve as the issuer in an initial public offering of equity (the “IPO” or “Offering”) that closed on October 26, 2021.
Concurrent with the completion of the IPO, we became the new parent holding company of Solaris LLC. As the sole managing member of Solaris LLC, we operate and control the business and affairs of Solaris LLC, and through Solaris LLC and its subsidiaries, conduct our business. We consolidate the financial results of Solaris LLC and report noncontrolling interest related to the portion of Solaris LLC units not owned by us.
In these condensed consolidated financial statements, periods prior to IPO closing reflect the financial statements of Solaris LLC and its subsidiaries. Periods subsequent to IPO closing on October 26, 2021 reflect the financial statements of the consolidated Company including Aris Inc., Solaris LLC and Solaris LLC’s subsidiaries.
2.Basis of Presentation and Significant Accounting Policies
Basis of Presentation
All dollar amounts, except per share amounts, in the condensed consolidated financial statements and tables in the notes are stated in thousands of dollars unless otherwise indicated.
Interim Financial Statements
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These financial statements have not been audited by our independent registered public accounting firm.
These condensed consolidated financial statements include the adjustments and accruals, all of which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Consolidation
We have determined that the members with equity at risk in Solaris LLC lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact Solaris LLC’s economic performance; therefore, Solaris LLC is considered a variable interest entity (“VIE”). As the managing member
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of Solaris LLC, we operate and control the business and affairs of Solaris LLC as well as have the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Solaris LLC.
Noncontrolling Interests
As of September 30, 2022, we own approximately
Use of Estimates
Management has made certain estimates and assumptions that affect reported amounts in these condensed consolidated financial statements and disclosures of contingencies. These critical estimates include, among others, determining the fair values of assets acquired, liabilities assumed, and/or contingent consideration paid in acquisitions or nonmonetary exchanges or disposed through sale, determining the fair value and related impairment of assets held for sale, determining the fair value of performance-based restricted stock units (“PSUs”), useful lives of property, plant and equipment and amortizable intangible assets, the fair value of asset retirement obligations (“ARO”), accruals for environmental matters, the income tax provision, valuation allowances for deferred tax assets, and the liability associated with our Tax Receivable Agreement (the “TRA liability”). Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including current economic and industry conditions. Actual results could differ from management’s estimates as additional information or actual results become available in the future, and those differences could be material.
Significant Accounting Policies
See Note 2. Significant Accounting Policies to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 for the discussion of our significant accounting policies. Other than the updates noted below in Recently Adopted Accounting Pronouncements, there were no significant updates or revisions to our accounting policies during the nine months ended September 30, 2022.
Fair Value Information
The fair value of our
(in thousands) | September 30, 2022 | December 31, 2021 | ||||||||||
Carrying | Fair | Carrying | Fair | |||||||||
| Amount |
| Value |
| Amount |
| Value | |||||
Senior Sustainability-Linked Notes | $ | | $ | | $ | | $ | |
The carrying values of our financial instruments, consisting of cash, accounts receivable, and accounts payable, approximate their fair values due to the short maturity of such instruments.
Intangible Assets
Intangible assets are net of accumulated amortization of $
10
Related Parties
We and ConocoPhillips, one of our principal owners, are parties to a long-term water gathering and handling agreement, pursuant to which ConocoPhillips dedicates all the produced water generated from its current and future acreage in a defined area of mutual interest in New Mexico and Texas. As of September 30, 2022 and December 31, 2021, we had accounts receivable from ConocoPhillips of $
(in thousands) | Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenues from ConocoPhillips | $ | | $ | | $ | | $ | | ||||
Operating Expenses Reimbursed to ConocoPhillips | | | | |
Operating expenses reimbursed to ConocoPhillips are related to ConocoPhillips’ costs for operating certain assets on our behalf between closing and the transfer of the acquired assets and other ongoing operating expenses.
Recently Adopted Accounting Pronouncements
Leases. Effective January 1, 2022, we adopted Accounting Standards Update (“ASU”) No. 2016-02: Leases and its subsequent amendments (collectively, “ASC Topic 842”). ASC Topic 842 supersedes prior accounting guidance for leases and requires, among other things, lessees to recognize substantially all right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Certain practical expedients are allowed for leases with terms of 12 months or less. ASC Topic 842 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Our adoption and implementation of ASC Topic 842 as of January 1, 2022 resulted in the recognition of right-of-use assets of $
We made policy elections not to capitalize short-term leases for all asset classes and not to separate non-lease components from lease components for all asset classes, except for real estate leases. We also did not elect the package of practical expedients that allowed for certain considerations under the original “Leases (Topic 840)” accounting standard to be carried forward upon adoption of ASU 2016-02.
ASU No. 2018-11, “Targeted Improvements,” provides a transition election not to restate comparative periods for the effects of applying the new lease standard. This transition election permits entities to change the date of initial application to the beginning of the year of adoption and to recognize the effects of applying the new standard as a cumulative-effect adjustment to the opening balance of retained earnings. We elected this transition approach; however, the cumulative impact of adoption in the opening balance of retained earnings as of January 1, 2022 was
Our accounting policy for leases is as follows:
We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains an operating or financing lease, at the commencement date, we record a right-of-use asset and a corresponding lease liability based on the present value of the minimum lease payments.
As most of our leases do not provide an implicit borrowing rate, to determine the present value of lease payments, we use our hypothetical secured borrowing rate based on information available at lease commencement. Further, we make a number of estimates and judgments regarding the lease term and lease payments.
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Lease Term ─ Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, it is reasonably likely that we will exercise the option.
Lease Payments ─ Certain of our lease agreements include rental payments that are adjusted periodically for inflation or passage of time. These step payments are included within our present value calculation as they are known adjustments at commencement. Some of our lease agreements include variable payments that are excluded from our present value calculation.
Additionally, we have lease agreements that include lease and non-lease components, such as equipment maintenance, which are generally accounted for as a single lease component. For these leases, lease payments include all fixed payments stated within the contract. For real estate lease agreements, we account for lease and non-lease components separately. Our lease agreements do not contain any material residual value guarantees that would impact our lease payments.
See Note 7. Leases.
Financial Instruments – Credit Losses. Effective January 1, 2022, we adopted ASU 2016-13, Financial Instruments – Credit Losses and its subsequent amendments (collectively, “ASC Topic 326”). ASC Topic 326
requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The adoption of ASC Topic 326 did not have a material impact on our financial statements.
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3.Additional Financial Statement Information
Balance Sheet
Other balance sheet information is as follows:
(in thousands) |
| September 30, | December 31, | |||
| 2022 | 2021 | ||||
Other Receivables | ||||||
Insurance and Third Party Receivables for Remediation Expenses | $ | | $ | | ||
Reimbursable Projects and Other | | | ||||
Total Other Receivables | $ | | $ | | ||
Prepaids and Deposits | ||||||
Prepaid Insurance and Other | $ | | $ | | ||
Deposits | | | ||||
Total Prepaids and Deposits | $ | | $ | | ||
Accrued and Other Current Liabilities | ||||||
Accrued Operating Expense | $ | | $ | | ||
Accrued Capital Costs | | | ||||
Accrued Interest | | | ||||
Accrued Compensation | | | ||||
Dividends and Distributions Payable | | | ||||
| — | |||||
Other | | | ||||
Total Accrued and Other Current Liabilities | $ | | $ | |
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Statement of Operations
Other statement of operations information is as follows:
(in thousands) | Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Depreciation, Amortization and Accretion Expense | ||||||||||||
Depreciation - Property, Plant and Equipment | $ | | $ | | $ | | $ | | ||||
Amortization - Intangible Assets | | | | | ||||||||
Accretion of Asset Retirement Obligations | | | | | ||||||||
Total Depreciation, Amortization and Accretion Expense | $ | | $ | | $ | | $ | | ||||
Loss on Asset Disposal and Other | ||||||||||||
(Gain) Loss on Asset Disposal, Net | $ | ( | $ | | $ | | $ | | ||||
Transaction Costs | | | | | ||||||||
Abandoned Projects (1) | — | | | | ||||||||
Total Loss on Asset Disposal and Other | $ | | $ | | $ | | $ | | ||||
Interest Expense | ||||||||||||
Interest on Debt Instruments | $ | | $ | | $ | | $ | | ||||
Amortization of Debt Issuance Costs | | | | | ||||||||
Total Interest Expense | | | | | ||||||||
Less: Amounts Capitalized | ( | ( | ( | ( | ||||||||
Interest Expense, Net | $ | | $ | | $ | | $ | |
(1) | Abandoned Projects expense is primarily related to expirations of legacy permits and rights-of-way for projects that were not ultimately constructed. |
4.Property, Plant and Equipment
Property, plant and equipment (“PP&E”) is stated at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful service life of the asset.
PP&E consists of the following:
(in thousands) |
| September 30, | December 31, | |||
| 2022 | 2021 | ||||
Wells, Facilities, Water Ponds, and Related Equipment | $ | | $ | | ||
Pipelines | | | ||||
Land | | | ||||
Vehicles, Equipment, Computers and Office Furniture | | | ||||
Assets Subject to Depreciation | | | ||||
Projects and Construction in Progress | | | ||||
Total Property, Plant and Equipment | | | ||||
Accumulated Depreciation | ( | ( | ||||
Total Property, Plant and Equipment, Net | $ | | $ | |
14
Asset Exchanges
During the nine months ended September 30, 2022, we completed multiple nonmonetary transactions. The transactions included exchanges of wells, facilities, permits and other assets. The total net book value of the divested assets and liabilities was $
Assets Sold
During the first quarter of 2022, management committed to a plan to sell certain of our assets located in the Midland Basin and determined that these assets met all the criteria for classification as assets held for sale. These assets were re-measured at their fair values less costs to sell, which resulted in the recognition of pre-tax impairment expense of $
Abandoned Assets
In June 2022, management determined that