PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Our property and equipment is comprised of the following asset classifications as of the dates indicated:


	September 30, 2023		December 31, 2022		Estimated Useful Lives (Years)
	(in thousands)
Land	$	2,807	$	10,110	N/A
Trackage and facilities	84,018		108,325		10-30
Pipeline	—		12,759		20-30
Equipment	14,541		22,553		3-20

Furniture	63		84		5-10
Total property and equipment	101,429		153,831
Accumulated depreciation	(41,505)		(47,360)
Construction in progress (1)	175		423
Property and equipment, net	$	60,099	$	106,894

(1)The amounts classified as “Construction in progress” are excluded from amounts being depreciated. These amounts represent property that has not been placed into productive service as of the respective consolidated balance sheet date.

Depreciation expense associated with property and equipment totaled $1.3 million and $2.6 million for the three months ended September 30, 2023 and 2022, respectively, and $4.8 million and $7.9 million, for the nine months ended September 30, 2023 and 2022.

Stroud Terminal

During the second quarter of 2023 our board of directors of our general partner approved the sale of the Stroud Terminal and we classified it as held for sale in our consolidated balance sheets. We currently expect that a sale of the terminal could occur in late 2023 or early 2024. The Stroud Terminal is included in our Terminalling Services Segment.

As a result of classifying our Stroud Terminal as held for sale, we evaluated the terminal’s fair value. We measured the fair value of our Stroud Terminal long-lived assets using an income analysis approach. The significant unobservable inputs used in our analysis include the following:

•no capital expenditures for additional terminalling connectivity;

•incremental volumes expected at our Stroud Terminal of approximately 27,500 bpd on an annual basis for terminalling services;

•a weighted average cost of capital of 22%; and

•a capital structure consisting of approximately 45% debt and 55% equity.

The key assumptions listed above were based upon economic and other operational conditions existing at or prior to the May 31, 2023 valuation date. Our weighted average cost of capital is subject to variability and is dependent upon such factors as changes in benchmark rates of interest established by the Federal Open Market Committee of the Federal Reserve Board and other central banking regulatory authorities, as well as perceptions of risk and market uncertainty regarding our business, industry and those of our peers and our underlying capital structure. Each of the above assumptions are likely to change due to economic uncertainty surrounding global and North American energy markets that are highly correlated with crude oil, natural gas and other energy-related commodity prices and other market factors.

Assumptions we make under the income approach include our projections of future financial performance of the Stroud Terminal, which include our ability to enter into contracts with new customers. To the extent that our assumptions vary from what we experience in the future, our projections of future financial performance underlying the fair value derived from the income approach for the Stroud Terminal could yield results that are significantly different from those projected.

As indicated above, our estimate of fair value for the Stroud Terminal required us to use significant unobservable inputs representative of Level 3 fair value measurements, including assumptions related to the future performance of our Stroud Terminal. During the second quarter of 2023, we completed the fair value analysis and determined that the fair value of the Stroud Terminal exceeded its carrying value at May 31, 2023.

We re-evaluated the fair value of our Stroud Terminal at September 30, 2023 and determined that the fair value exceeded the carrying value and we continue to have no identified impairment.

Casper Terminal

In September 2022, we determined that recurring periods where cash flow projections were not met due to adverse market conditions at our Casper Terminal was an event that required us to evaluate our Casper Terminal asset group for impairment.

We measured the fair value of our Casper Terminal asset group by primarily relying on the cost approach. The income approach was considered in the context of our economic obsolescence analysis as part of the application of the cost approach. The sales comparison or market approach was used as the most appropriate methodology to derive the fair value of the land associated with the Casper Terminal asset group. Our estimate of fair value required us to use significant unobservable inputs representative of a Level 3 fair value measurement, including those discussed below.

The significant unobservable inputs used in our cost approach impairment analysis include the following:

1) a range of 5 to 45 years to estimate the valuation useful life of the assets; and

2) a hold factor ranging from 3% to 20% representing estimated appraisal depreciation floors that were used to establish a minimal value for assets remaining in use.

As a result of the impairment analysis discussed above, we determined that the carrying value of the Casper Terminal asset group exceeded the fair value of the Casper Terminal as of September 30, 2022, the date of our evaluation. As a result, we recognized a non-cash impairment loss of $36.0 million for the three and nine months ended September 30, 2022, to write down the property, plant and equipment of the terminal to its fair market value, the charge for which we included in “Impairment of intangible and long-lived assets” within our consolidated statements of operations. The Casper Terminal was included in our Terminalling services segment as reported in our segment results included in Note 14. Segment Reporting. Subsequently, on March 31, 2023, we sold our Casper Terminal as discussed in Note 3 . Acquisit i ons and Dispositions and removed the remaining balances recorded in property and equipment associated with the Casper Terminal.