Oil and Natural Gas Properties

12 Months Ended

Dec. 31, 2024

Oil and natural gas properties are summarized below:


	December 31,
	2024		2023

	(In thousands)
Proved	$	1,027,183	$	895,783
Unproved	100,974		100,216
Work-in-progress	21,318		57,004
	$	1,149,475	$	1,053,003
Accumulated depletion, amortization and impairment	(288,678)		(206,102)
Total oil and natural gas properties, net	$	860,797	$	846,901

As of December 31, 2024, and 2023, the Company had no exploratory wells included in work-in-progress.

Depletion and amortization expense for proved oil and natural gas properties was $71.3 million and $62.5 million for the years ended December 31, 2024, and 2023, respectively.

Exploration costs were $2.6 million and $4.2 million for the years ended December 31, 2024, and 2023, respectively, and were primarily attributable to expiration of oil and natural gas leases in 2024 and exploratory well expense and the expiration of oil and natural gas leases in 2023.

Impairment of Proved Properties

Certain proved oil and natural gas properties were impaired during the year ended December 31, 2024. Our impairment test involved a step 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.

Certain oil and natural gas properties in Texas and New Mexico outside of the Company's acreage in the Champions and Red Lake fields failed the initial step assessment, which looks at the carrying value compared to undiscounted cash flows for these properties. 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 10.0%, which we believe represents the estimated weighted average cost of capital of a market participant. Based on this assessment of our long-lived assets impairment test, the carrying value exceeded the estimated fair market value, and we recognized an $11.3 million non-cash impairment of proved properties comprised of a $9.5 million impairment in Texas, outside of the Champions field, and $1.8 million impairment in New Mexico, outside of the Red Lake field related to historical properties, for the year ended December 31, 2024. The impairments were primarily driven by a reduction in reserve volume due to lower well performance assessments based on historical trends. The affected areas included nine operated producing wells. The Company recognized an impairment of $9.8 million on proved properties in Texas, outside of the Champions field, for the year ended December 31, 2023. These impairments are included in our consolidated statements of operations as impairments of oil and natural gas properties. See further discussion of our fair value assumptions in Note 7 - Fair Value Measurements.

Impairment of Enhanced Oil Recovery (EOR) Project

The cost of proved and unproved oil and natural gas properties are assessed for impairment at least annually or whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. We compare the undiscounted future cash flows of the oil, natural gas and NGL properties to the carrying amount of the oil, natural gas and NGL properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we adjust the carrying amount of the oil, natural gas and NGL properties to their estimated fair value which is considered a Level 3 measurement. As part of the impairment review during the third quarter 2024, the Company made the decision to discontinue our EOR Project, which was in work-in-process, in favor of redeploying the required future capital and salvaging the assets for use in our conventional vertical and horizontal development programs. As a result of this decision, the remaining fair value for the EOR Project was determined to be zero and the Company recorded a non-cash impairment loss of $28.9 million and a cash impairment loss of $1.3 million related to the termination of the Kinder Morgan CO2 contract. The total $30.2 million impairment is included in other impairments in our consolidated statements of operations.