5.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 $13.1 million, $26.4 million and $5.5 million at December 31, 2023, 2022 and 2021, respectively.

Asset Exchanges

No asset exchanges were completed during the year ended December 31, 2023.

During the year ended December 31, 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 third quarter of 2023, we closed the sale of certain assets and received cash consideration of $20.1 million. We recorded a gain of $2.6 million, which is included in “Other Operating (Income) Expense” in the consolidated statements of operations for the year ended December 31, 2023.

During the first quarter of 2022, management committed to a plan to sell certain 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.

For the year ended December 31, 2022, we disposed of other assets. We received $7.3 million in cash and recognized a de minimis gain on disposal of assets. The asset cost and accumulated depreciation related to these assets were $8.0 million and $0.8 million, respectively, at the time of disposal.

For the year ended December 31, 2021, we recognized a loss on disposal of assets of $0.2 million. The asset cost and accumulated depreciation related to these assets were $0.8 million and $0.3 million, respectively, at the time of disposal, and the salvage value received was $0.3 million.

Abandoned Assets

Total abandonment expense for the years ended December 31, 2023, 2022 and 2021 was $1.3 million, $15.8 million and $28.5 million, respectively, and primarily related to the following:

In the third quarter of 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 consolidated statements of operations for the year ended December 31, 2023.

In the second quarter of 2022, management determined that two previously acquired facilities were no longer economically beneficial to the operations of the Company due to required workover costs and should be shut-in and taken out of service. Management also determined that a well under construction in Texas needed to be abandoned after the well had encountered technical difficulties during the drilling phase and progress on the well had ceased. Management’s evaluation of these assets determined that abandoning the assets was the most prudent course of action. Accordingly, we removed the costs and the associated accumulated depreciation of the assets and recognized an abandonment charge of $5.8 million for the remaining book value.

In the third quarter of 2022, we recognized an abandonment charge of $9.2 million related to a stand-alone produced water handling facility that was taken out of service.

In the fourth quarter of 2022, we commenced the retirement work on several salt water disposal (“SWD”) wells that had previously been taken out of service and had their costs removed. In connection with this work, we revised the asset retirement obligation related to these SWD wells to reflect the estimated cost of the retirement work. The resulting charge of $1.1 million was recorded to abandoned well costs.

In the third quarter of 2021, management completed its evaluation of the performance of a SWD well, located in Eddy County, New Mexico and concluded that the well should be shut-in and taken out of service. We drilled this well in the second quarter of 2017 and encountered technical difficulties requiring significant incremental capital expenditure. The asset was put into service in May of 2018. During July 2021, we re-

entered the well bore to address anomalies. After technical testing, management concluded that it was probable that abandoning the asset was the most prudent course of action as the well was unable to remain in service in its then current condition. Accordingly, we removed the costs and the associated accumulated depreciation and recognized a charge of $28.5 million for the remaining net book value of the well.

Abandoned Projects

We recognized $0.2 million, $0.1 million and $1.6 million of abandoned project expense during the years ended December 31, 2023, 2022 and 2021, respectively, which is included in “Other Operating (Income) Expense” in the consolidated statements of operation. The amount of expense recorded during each year was equal to the recorded cost for each of the assets. No accumulated depreciation was recorded related to these assets.