Discontinued Operations

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

The OMP Merger represented a strategic shift for the Company and qualified as a discontinued operation in accordance with ASC 205-20.

Condensed Consolidated Statements of Operations

The results of operations reported as discontinued operations in connection with the OMP Merger were as follows for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Revenues
Oil and gas revenues	$	—	$	162	$	—	$	865
Purchased oil and gas sales(1)	—		(33,812)		(13,364)		(92,464)
Midstream revenues	—		66,712		23,271		183,807
Total revenues	—		33,062		9,907		92,208
Operating expenses
Lease operating expenses(1)	—		(15,582)		(4,535)		(47,485)
Midstream expenses	—		32,396		13,224		83,841
Gathering, processing and transportation expenses(1)	—		(13,628)		(3,555)		(38,324)
Purchased oil and gas expenses(1)	—		(31,948)		(12,506)		(88,044)
Depreciation, depletion and amortization	—		9,648		—		28,605
Impairment	—		—		—		2
General and administrative expenses(1)	—		(574)		3,314		(1,039)
Total operating expenses	—		(19,688)		(4,058)		(62,444)
Gain on sale of assets	—		—		518,900		—
Operating income	—		52,750		532,865		154,652
Other income (expense)
Interest expense, net of capitalized interest	—		(10,997)		(3,685)		(25,977)

Other expense	—		(176)		(93)		(64)
Total other expense	—		(11,173)		(3,778)		(26,041)
Income from discontinued operations before income taxes	—		41,577		529,087		128,611
Income tax expense(2)	(59,858)		—		(101,080)		—
Income (loss) from discontinued operations, net of income tax	(59,858)		41,577		428,007		128,611
Net income attributable to non-controlling interests	—		11,382		2,311		27,654
Income (loss) from discontinued operations attributable to Chord, net of income tax	$	(59,858)	$	30,195	$	425,696	$	100,957

__________________

(1)Includes discontinued intercompany eliminations.

(2)The Company applied the intraperiod tax allocation rules in accordance with FASB ASC 740-20, Intraperiod Tax Allocation (“ASC 740-20”) to determine the allocation of tax expense between continuing operations and discontinued operations. ASC 740-20 generally requires the allocation of tax expense to be based on a comparative calculation of tax expense with and without income from discontinued operations. Prior to the release of a portion of the Company’s valuation allowance in the third quarter of 2022 (see Note 15—Income Taxes for additional information), the Company recorded $41.2 million of income tax expense attributable to discontinued operations during the six months ended June 30, 2022. During the three months ended September 30, 2022, the Company released a portion of its valuation allowance and allocated the majority of the income tax benefit associated with the release of the valuation allowance to continuing operations. The total tax expense associated with the OMP Merger was partially offset by the release of the valuation allowance allocated to discontinued operations, resulting in an incremental tax expense of $59.9 million recorded in the three months ended September 30, 2022, since a smaller portion of the deferred tax liabilities reported in discontinued operations is being offset with deferred tax assets.

Condensed Consolidated Balance Sheet

The carrying amounts of the major classes of assets and liabilities related to the OMP Merger were as follows for the period presented (in thousands):


	December 31, 2021

ASSETS
Current assets
Cash and cash equivalents	$	2,669

Accounts receivable, net	6,509
Inventory	8,541
Prepaid expenses	456

Total current assets of discontinued operations	18,175
Property, plant and equipment
Oil and gas properties (successful efforts method)(1)	(3,207)
Other property and equipment	933,667
Less: accumulated depreciation, depletion and amortization	(32,102)
Total property, plant and equipment, net	898,358



Operating right-of-use assets	671
Intangible assets	40,277
Goodwill	70,534

Other assets	1,303
Total non-current assets of discontinued operations	1,011,143
Total assets of discontinued operations	$	1,029,318

LIABILITIES
Current liabilities
Accounts payable	$	43
Revenues and production taxes payable	1,635
Accrued liabilities	36,183
Accrued interest payable	9,296


Current operating lease liabilities	733
Other current liabilities	564
Total current liabilities of discontinued operations	48,454
Long-term debt	644,078

Asset retirement obligations	904

Other liabilities	6,217
Total non-current liabilities of discontinued operations	651,199
Total liabilities of discontinued operations	$	699,653

___________________________

(1) Includes discontinued intercompany eliminations.

Condensed Consolidated Statements of Cash Flows

There was no depreciation, depletion and amortization attributable to discontinued operations in “Cash flows from operating activities” for the nine months ended September 30, 2022. For the nine months ended September 30, 2021, depreciation, depletion and amortization attributable to discontinued operations in “Cash flows from operating activities” was $28.6 million. Capital expenditures attributable to discontinued operations included in “Cash flows used in investing activities” were $6.1 million for the nine months ended September 30, 2022 and $20.8 million for the nine months ended September 30, 2021. There were no significant non-cash activities from discontinued operations for the periods presented.