Properties and Equipment

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Line Items]

Property, Plant and Equipment Disclosure

PROPERTIES AND EQUIPMENT

The following table presents the components of properties and equipment, net of accumulated depreciation, depletion and amortization ("DD&A"):

	June 30, 2020			December 31, 2019
	(in thousands)
Properties and equipment, net:
Crude oil and natural gas properties
Proved	$	7,369,104		$	6,241,780
Unproved	385,322			403,379
Total crude oil and natural gas properties	7,754,426			6,645,159
Equipment and other	64,898			41,888
Land and buildings	26,014			12,312
Construction in progress	492,497			408,428
Properties and equipment, at cost	8,337,835			7,107,787
Accumulated DD&A	(3,337,769		)	(3,012,585		)
Properties and equipment, net	$	5,000,066		$	4,095,202

Impairment Charges. During the three months ended March 31, 2020, we recorded impairment charges of $881.1 million. The impairment charges during the three months ended March 31, 2020 were due to a significant decline in crude oil prices, which was considered a triggering event that required us to assess our crude oil and natural gas properties for possible impairment. As a result of our assessment, we recorded impairment charges of $881.1 million to write-down our proved and unproved properties. Of these impairment charges, approximately $753.0 million was related to our Delaware Basin proved properties. These impairment charges represented the amount by which the carrying value of the crude oil and natural gas properties exceeded the estimated fair value. The estimated fair value was determined based on estimated future discounted net cash flows, a Level 3 input, using estimated production and realized prices at which we reasonably expect the crude oil and natural gas will be sold. In addition to our proved property impairment, we also recognized approximately $127.3 million of impairment charges for our unproved properties in the Delaware Basin. These impairment charges were recognized based on a review of our current drilling plans, estimated future cash flows for probable well locations and expected future lease expirations, primarily in areas where we have no development plans. During the three months ended June 30, 2020, we did not have any material impairments.

We recorded impairment charges of $29.0 million and $36.9 million, respectively, in the three and six months ended June 30, 2019, of which $2.2 million and $10.1 million, respectively, were related to leaseholds and leasehold expirations within our non-focus areas of the Delaware Basin where we were no longer pursuing plans to develop the properties. During the three and six months ended June 30, 2019, we also recorded impairments of $26.8 million related to certain midstream facility infrastructure in the Delaware Basin. We determined the fair value of the properties based upon estimated future discounted cash flow, a Level 3 input, using estimated production and prices at which we reasonably expect the crude oil and natural gas will be sold.

Midstream Asset Divestitures. During the second quarter of 2019, we completed the sales of our Delaware Basin produced water gathering and disposal, crude oil gathering and natural gas gathering assets (the "Midstream Asset Divestitures") for aggregate proceeds of $345.6 million. The proceeds were received upon closing, with the exception of

$82.0 million that we received in June 2020. Concurrent with the Midstream Asset Divestitures, we entered into agreements with the purchasers which provide us with certain gathering, processing, transportation and water disposal services. See footnote titled Other Accrued Expenses and Other Liabilities for further details regarding these agreements. Proceeds were allocated first to the assets sold based upon the fair values of the tangible assets sold, with the remainder of $179.6 million allocated to the acreage dedication agreements. We recorded an aggregate gain on the sale of $34.0 million based on the fair value of the tangible assets sold.

Suspended Well Costs. The following table presents the capitalized exploratory well cost pending determination of proved reserves and included in properties and equipment, net on the condensed consolidated balance sheets:

    

	Six Months Ended June 30,			Year Ended December 31, 2019
	(in thousands, except for number of wells)
Beginning balance	$	16,078		$	12,188
Additions to capitalized exploratory well costs pending the determination of proved reserves	11,556			31,901
Reclassifications to proved properties	(20,431		)	(28,011		)
Ending balance	$	7,203		$	16,078
Number of wells pending determination at period-end	2			4

During six months ended June 30, 2020, two wells classified as exploratory at December 31, 2019 were reclassified as productive and no new wells drilled were classified as exploratory.