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:

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Accrued PP&E additions totaled $31.2 million and $26.4 million at September 30, 2023 and December 31, 2022, respectively.

Asset Exchanges

No asset exchanges were completed during the nine months ended September 30, 2023.

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 $3.8 million. The acquired assets were recorded at a total fair value of $3.2 million, which resulted in a total pre-tax loss of $0.6 million.

Assets Sold and Asset Impairment

During the second quarter of 2023, management entered into a non-binding letter of intent with a third party to sell certain of our assets. These assets met the criteria for classification as assets held for sale as of June 30, 2023, and we closed the sale of these assets during the third quarter of 2023. We received cash consideration of $20.1 million and recorded a gain of $2.6 million, which is included in “Other Operating (Income) Expense” in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023.

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 $15.6 million during the first quarter of 2022. We estimated the fair value of the assets using indicative bids, which were representative of a Level 2 fair value measurement, and we ceased recording depreciation on the assets. During the third quarter of 2022, we closed the sale of these assets for proceeds of $7.4 million and recorded a gain of $0.1 million.

Abandoned Assets

During the three months ended September 30, 2023, management determined a stand-alone produced water handling facility was no longer economically beneficial to the operations of the Company and should be shut-in and taken out of service. Accordingly, we removed the costs and the associated accumulated depreciation and recognized a $1.2 million charge for the remaining book value of the asset. This charge is included in

“Abandoned Well Costs” in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023.

During the third quarter of 2022, a stand-alone produced water handling facility was taken out of service, and $9.2 million in abandoned well costs are included in the condensed consolidated statements of operations for the three months ended September 30, 2022. Total abandonment expense of $14.6 million was recorded during the nine months ended September 30, 2022 and included the facility discussed above, as well as additional abandonment expense related to two previously acquired facilities that were no longer economically beneficial to the operations of the Company and the abandonment of a well under construction.

Delaware Energy Asset Acquisition

On August 1, 2022, we acquired from Delaware Energy, LLC (“Delaware Energy”) certain produced water handling facilities and other related assets and rights in Lea County and Eddy County, New Mexico. In connection with the closing and as consideration for the assets, we issued to the seller 3,365,907 shares of our Class A common stock and included volumetric-based contingent consideration. We estimated the fair value of the contingent consideration using a discounted cash flow model based on estimated royalty payments to be made over a five-year contractual period. Allocation of the purchase price to the acquired assets was based on relative fair values.

The following table sets forth our purchase price allocation as of December 31, 2022:

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Contemporaneously with the issuance of the shares of Class A common stock, Solaris LLC issued 3,365,907 Solaris LLC units to Aris Inc.

Other Asset Acquisition

During the third quarter of 2022, we purchased five ponds from ConocoPhillips, a related party, for a cash purchase price of $3.4 million.