Inventory

9 Months Ended

Sep. 30, 2020

The Company’s inventory includes equipment and materials and crude oil inventory. Equipment and materials consist primarily of well equipment, tanks and tubular goods to be used in the Company’s exploration and production activities and spare parts and equipment for the Company’s midstream assets. Crude oil inventory includes crude oil in tanks and linefill that is expected to be withdrawn within one year. Linefill that represents the minimum volume of product in a pipeline system that enables the system to operate is generally not available to be withdrawn from the pipeline system until the expiration of the transportation contract. Crude oil and NGL linefill in third-party pipelines that is not expected to be withdrawn within one year is included in long-term inventory on the Company’s Condensed Consolidated Balance Sheets.

Inventory, including long-term inventory, is stated at the lower of cost and net realizable value with cost determined on an average cost method. The Company assesses the carrying value of inventory and uses estimates and judgment when making any adjustments necessary to reduce the carrying value to net realizable value. Among the uncertainties that impact the Company’s estimates are the applicable quality and location differentials to include in the Company’s net realizable value analysis as well as the liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the three and nine months ended September 30, 2020, the Company recorded impairment charges of $0.6 million and $1.6 million, respectively, to write down the carrying value of certain equipment and materials inventory to the estimated net realizable value. In addition, during the nine months ended September 30, 2020, as a result of lower commodity prices, the Company recorded impairment losses related to the Company’s crude oil inventory and long-term linefill of $7.2 million and $1.3 million, respectively, to adjust the carrying value to the estimated net realizable value. No write-downs of crude oil inventory or long-term inventory were recorded during the three months ended September 30, 2020.

The Company’s total inventory consists of the following:


	September 30, 2020		December 31, 2019

	(In thousands)
Inventory
Equipment and materials	$	28,203	$	16,963
Crude oil inventory	7,533		18,296
Total inventory	$	35,736	$	35,259
Long-term inventory
Linefill in third party pipelines	$	14,210	$	13,924
Total long-term inventory	14,210		13,924
Total	$	49,946	$	49,183