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Segment Information
 9 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
Segment Information

Note 12 — Segment Information

The Company’s operations are managed through two operating segments: (i) Upstream Segment and (ii) CCS Segment. The Upstream Segment is the Company’s only reportable segment. The Company’s chief operating decision-maker (“CODM”) is the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. A reportable segment is an operating segment that meets materiality thresholds. The 10% tests, as prescribed by the segment reporting accounting guidance, are based on the reported measures of revenue, profit, and assets that are used by the CODM to assess performance and allocate resources. The CCS Segment currently does not meet any of the reportable segment quantitative thresholds. The profit or loss metric used to evaluate segment performance is Adjusted EBITDA, which is defined by the Company as net income (loss) plus interest expense; income tax expense (benefit); depreciation, depletion, and amortization; accretion expense; non-cash write-down of oil and natural gas properties; transaction and other (income) expenses; decommissioning obligations; the net change in the fair value of derivatives (mark to market effect, net of cash settlements and premiums related to these derivatives); (gain) loss on debt extinguishment; non-cash write-down of other well equipment inventory; and non-cash equity-based compensation expense.

Corporate general and administrative expense include certain shared costs such as finance, accounting, tax, human resources, information technology and legal costs that are not directly attributable to each of operating segment. A portion of these expenses are allocated based on the percentage of employees dedicated to each operating segment. The remaining expenses are included in the reconciliation of reportable segment Adjusted EBITDA to consolidated pre-tax net income (loss) as an unallocated corporate general and administrative expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The Company’s CODM does not review assets by segment as part of the financial information provided and therefore, no asset information is provided in the table below.

The following table presents selected segment information for the periods indicated (in thousands):

 

Upstream

 

All Other(1)

 

Total

 

Revenues from External Customers:

 

 

 

 

 

 

Three Months Ended September 30, 2023

$

383,135

 

$

—

 

$

383,135

 

Three Months Ended September 30, 2022

 

377,128

 

 

—

 

 

377,128

 

Nine Months Ended September 30, 2023

 

1,072,927

 

 

—

 

 

1,072,927

 

Nine Months Ended September 30, 2022

 

1,309,779

 

 

—

 

 

1,309,779

 

Equity in the Net Income (Loss) of Investees Accounted for by the Equity Method:

 

 

 

 

 

 

Three Months Ended September 30, 2023

$

118

 

$

(2,612

)

$

(2,494

)

Three Months Ended September 30, 2022

 

75

 

 

(497

)

 

(422

)

Nine Months Ended September 30, 2023

 

373

 

 

(6,023

)

 

(5,650

)

Nine Months Ended September 30, 2022

 

5

 

 

(694

)

 

(689

)

Adjusted EBITDA:

 

 

 

 

 

 

Three Months Ended September 30, 2023

$

255,228

 

$

(5,045

)

$

250,183

 

Three Months Ended September 30, 2022

 

199,675

 

 

(715

)

 

198,960

 

Nine Months Ended September 30, 2023

 

719,326

 

 

(13,562

)

 

705,764

 

Nine Months Ended September 30, 2022

 

669,103

 

 

(8,659

)

 

660,444

 

Segment Expenditures:

 

 

 

 

 

 

Nine Months Ended September 30, 2023

$

559,873

 

$

37,183

 

$

597,056

 

Nine Months Ended September 30, 2022

 

297,486

 

 

2,027

 

 

299,513

 

 

(1)
The CCS Segment is included in the “All Other” category. The CCS Segment is an emerging business in the start-up phase of operations and the business that does not currently generate any revenues. The CCS Segment’s business activities are conducted through both wholly owned subsidiaries and equity method investments with industry partners. Equity method investments is a business strategy that enables us to achieve favorable economies of scale relative to the level of investment and business risk assumed.

Reconciliations

The following table presents the reconciliation of Adjusted EBITDA to the Company’s consolidated totals (in thousands):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

2023

 

2022

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Total for reportable segments

$

255,228

 

$

199,675

 

$

719,326

 

$

669,103

 

All other

 

(5,045

)

 

(715

)

 

(13,562

)

 

(8,659

)

Unallocated corporate general and administrative expense

 

(1,366

)

 

(1,400

)

 

(4,161

)

 

(3,894

)

Interest expense

 

(45,637

)

 

(29,265

)

 

(128,850

)

 

(91,531

)

Depreciation, depletion and amortization

 

(163,359

)

 

(92,323

)

 

(480,476

)

 

(295,174

)

Accretion expense

 

(21,256

)

 

(13,179

)

 

(63,430

)

 

(42,400

)

Transaction and other income (expenses)(1)

 

64,321

 

 

(3,219

)

 

38,799

 

 

38,856

 

Decommissioning obligations(2)

 

(7,972

)

 

(20

)

 

(9,454

)

 

(10,553

)

Derivative fair value gain (loss)(3)

 

(98,802

)

 

114,180

 

 

(13,668

)

 

(231,133

)

Net cash (received) paid on settled derivative instruments (3)

 

6,313

 

 

81,162

 

 

10,474

 

 

368,483

 

Non-cash equity-based compensation expense

 

(393

)

 

(4,310

)

 

(9,080

)

 

(11,677

)

Income (loss) before income taxes

$

(17,968

)

$

250,586

 

$

45,918

 

$

381,421

 

 

(1)
For the three and nine months ended September 30, 2023, transaction expenses includes $1.5 million and $39.4 million, respectively, in costs related to the EnVen Acquisition, inclusive of $0.9 million and $24.9 million, respectively, in severance expense. For the three and nine months ended September 30, 2022, transaction expenses includes $4.3 million and $5.0 million, respectively, in costs related to the EnVen Acquisition. See further discussion in Note 2 — Acquisitions and Divestitures and Note 7 — Employee Benefits Plans and Share-Based Compensation. Other income (expense) includes other miscellaneous income and expenses that we do not view as a meaningful indicator of our operating performance. For the three and nine months ended September 30, 2023, the amount includes a $66.2 million gain on the Mexico Divestiture. See further discussion in Note 2 — Acquisitions and Divestitures. The amount includes a gain on the funding of the capital carry of our investment in Bayou Bend by Chevron of $8.6 million for the nine months ended September 30, 2023 and a $1.4 million for the three and nine months ended September 30, 2022. Additionally, it includes a $13.9 million gain on the partial sale of its investment in Bayou Bend to Chevron for the nine months ended September 30, 2022. See further discussion in Note 10 — Related Party Transactions. For the nine months ended September 30, 2022, the amount includes $27.5 million gain as a result of the settlement agreement to resolve previously pending litigation that was filed in October 2017 that is further discussed in Note 11 — Commitments and Contingencies.
(2)
Estimated decommissioning obligations were a result of working interest partners or counterparties of divestiture transactions that were unable to perform the required abandonment obligations due to bankruptcy or insolvency. See Note 11 — Commitments and Contingencies for additional information on decommissioning obligations.
(3)
The adjustments for the derivative fair value (gains) losses and net cash receipts (payments) on settled commodity derivative instruments have the effect of adjusting net loss for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within Adjusted EBITDA on an unrealized basis during the period the derivatives settled.

The following table presents the reconciliation of Segment Expenditures to the Company’s consolidated totals (in thousands):

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

Segment Expenditures:

 

 

 

 

Total reportable segments

$

559,873

 

$

297,486

 

All other

 

37,183

 

 

2,027

 

Change in capital expenditures included in accounts payable and accrued liabilities

 

15,085

 

 

(32,430

)

Plugging & abandonment

 

(71,097

)

 

(60,304

)

Decommissioning obligations settled

 

(40,415

)

 

—

 

Investment in CCS intangibles and equity method investees

 

(37,168

)

 

(2,027

)

Deferred payments

 

(841

)

 

—

 

Non-cash well equipment inventory transfers

 

(24,476

)

 

3,403

 

Other

 

362

 

 

1,437

 

Exploration, development and other capital expenditures

$

438,506

 

$

209,592