Oil and Natural Gas Properties

12 Months Ended

Dec. 31, 2022

Oil and natural gas properties are summarized below:


	December 31, 2022		December 31, 2021


	(In thousands)
Proved	$	516,011	$	421,779
Unproved	12,770		18,839
Work-in-progress	45,169		13,534
	573,950		454,152
Accumulated depletion, amortization and impairment	(133,848)		(95,021)
Total oil and natural gas properties, net	$	440,102	$	359,131

At December 31, 2022 and 2021, the Company had one exploratory well drilled but uncompleted that was included in work-in-progress with associated well costs of $3.8 million and $3.7 million, respectively. At December 31, 2022, the Company had one exploratory well with costs of $3.8 million that has been capitalized for greater than two years. The Company is in the process of evaluating completion methods for this exploratory well.

Depletion and amortization expense for proved oil and natural gas properties was $31.5 million for the year ended December 31, 2022, $6.7 million for the three months ended December 31, 2021, and $25.2 million for the year ended September 30, 2021.

Exploration expense was $2.0 million for the year ended December 31, 2022, $0.6 million for the three months ended December 31, 2021, and $9.6 million for the year ended September 30, 2021. Exploration expense was primarily attributable to the expiration of oil and natural gas leases for the year ended December 31, 2022, the three months ended December 31, 2021 and year ended September 30, 2021.

Impairment of Proved Properties

Certain proved oil and natural gas properties were impaired during year ended December 31, 2022. Our impairment test involved a Step 1 assessment to determine if the net book value of our proved oil and natural gas properties is expected to be recovered from the estimated undiscounted future net cash flows. We calculated the expected undiscounted future net cash flows of our long-lived assets using management’s assumptions and expectations. See further discussion in Note 7 - Fair Value Measurements.

Certain oil and natural gas properties in our New Mexico operating area failed the Step 1 assessment. For these assets, we used a discounted cash flow analysis to estimate fair value. The expected future net cash flows were discounted using a rate of 10.25%, which we believe represents the estimated weighted average cost of capital of a market participant. Based on Step 2 of our long-lived assets impairment test, we recognized a $7.3 million impairment because the carrying value exceeded the estimated fair market value as of the year ended December 31, 2022. See further discussion of our fair value assumptions in Note 7 - Fair Value Measurements.