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AESI

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41828

 

Atlas Energy Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

93-2154509

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

5918 W. Courtyard Drive, Suite 500

Austin, Texas

78730

(Address of principal executive offices)

(Zip Code)

(512) 220-1200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

AESI

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 1, 2024, the registrant had 109,870,061 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders' and Members' Equity and Redeemable Noncontrolling Interest

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

50

 

 

 

PART II.

OTHER INFORMATION

51

 

 

 

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults Upon Senior Securities

51

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

52

SIGNATURES

53

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Atlas Energy Solutions Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 

 

June 30,

 

 

December 31,

 

 

2024

 

 

2023

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

104,723

 

 

$

210,174

 

Accounts receivable

 

 

197,072

 

 

 

71,170

 

Inventories

 

 

18,778

 

 

 

6,449

 

Spare part inventories

 

 

22,713

 

 

 

15,408

 

Prepaid expenses and other current assets

 

 

21,870

 

 

 

15,485

 

Total current assets

 

 

365,156

 

 

 

318,686

 

Property, plant and equipment, net

 

 

1,403,417

 

 

 

934,660

 

Operating lease right-of-use assets

 

 

15,794

 

 

 

3,727

 

Finance lease right-of-use assets

 

 

6,870

 

 

 

424

 

Goodwill

 

 

75,219

 

 

 

 

Intangible assets

 

 

112,422

 

 

 

1,767

 

Other long-term assets

 

 

3,451

 

 

 

2,422

 

Total assets

 

$

1,982,329

 

 

$

1,261,686

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

103,763

 

 

$

60,882

 

Accounts payable - related parties

 

 

114

 

 

 

277

 

Accrued liabilities

 

 

72,616

 

 

 

28,458

 

Current portion of long-term debt

 

 

30,553

 

 

 

 

Current portion of operating lease liabilities

 

 

6,515

 

 

 

1,249

 

Current portion of finance lease liabilities

 

 

3,274

 

 

 

158

 

Current portion of deferred revenue

 

 

7,093

 

 

 

 

Other current liabilities

 

 

15,405

 

 

 

1,568

 

Total current liabilities

 

 

239,333

 

 

 

92,592

 

Long-term debt, net of discount and deferred financing costs

 

 

447,450

 

 

 

172,820

 

Deferred tax liabilities

 

 

207,027

 

 

 

121,529

 

Operating lease liabilities

 

 

9,900

 

 

 

3,498

 

Finance lease liabilities

 

 

3,872

 

 

 

264

 

Deferred revenue

 

 

3,881

 

 

 

 

Asset retirement obligation

 

 

7,697

 

 

 

2,705

 

Other long-term liabilities

 

 

1,209

 

 

 

454

 

Total liabilities

 

 

920,369

 

 

 

393,862

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 500,000,000 authorized; no shares issued and outstanding as of June 30, 2024 and December 31, 2023.

 

 

 

 

 

 

Common Stock, $0.01 par value, 1,500,000,000 shares authorized, 109,863,098 and 100,025,584 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.

 

 

1,098

 

 

 

1,000

 

Additional paid-in-capital

 

 

1,060,493

 

 

 

908,079

 

Retained earnings (Accumulated deficit)

 

 

369

 

 

 

(41,255

)

Total stockholders' equity

 

 

1,061,960

 

 

 

867,824

 

Total liabilities and stockholders’ equity

 

$

1,982,329

 

 

$

1,261,686

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Product sales

 

$

128,210

 

 

$

125,216

 

 

$

241,642

 

 

$

253,358

 

Service sales

 

 

159,308

 

 

 

36,572

 

 

 

238,543

 

 

 

61,848

 

Total sales

 

 

287,518

 

 

 

161,788

 

 

 

480,185

 

 

 

315,206

 

Cost of sales (excluding depreciation, depletion and accretion expense)

 

 

202,136

 

 

 

63,504

 

 

 

308,882

 

 

 

126,059

 

Depreciation, depletion and accretion expense

 

 

25,027

 

 

 

9,433

 

 

 

42,202

 

 

 

17,952

 

Gross profit

 

 

60,355

 

 

 

88,851

 

 

 

129,101

 

 

 

171,195

 

Selling, general and administrative expense (including stock and unit-based compensation expense of $5,466, $1,624, $9,672, and $2,246, respectively)

 

 

27,266

 

 

 

12,183

 

 

 

55,274

 

 

 

20,687

 

Amortization expense of acquired intangible assets

 

 

3,768

 

 

 

 

 

 

4,829

 

 

 

 

Loss on disposal of assets

 

 

11,098

 

 

 

 

 

 

11,098

 

 

 

 

Insurance recovery (gain)

 

 

(10,000

)

 

 

 

 

 

(10,000

)

 

 

 

Operating income

 

 

28,223

 

 

 

76,668

 

 

 

67,900

 

 

 

150,508

 

Interest (expense), net

 

 

(10,458

)

 

 

(521

)

 

 

(15,436

)

 

 

(3,963

)

Other income

 

 

138

 

 

 

118

 

 

 

161

 

 

 

302

 

Income before income taxes

 

 

17,903

 

 

 

76,265

 

 

 

52,625

 

 

 

146,847

 

Income tax expense

 

 

3,066

 

 

 

5,054

 

 

 

11,001

 

 

 

12,731

 

Net income

 

$

14,837

 

 

$

71,211

 

 

$

41,624

 

 

$

134,116

 

Less: Pre-IPO net income attributable to Atlas Sand Company, LLC

 

 

 

 

 

 

 

 

 

 

 

54,561

 

Less: Net income attributable to redeemable noncontrolling interest

 

 

 

 

 

32,693

 

 

 

 

 

 

39,303

 

Net income attributable to Atlas Energy Solutions Inc.

 

$

14,837

 

 

$

38,518

 

 

$

41,624

 

 

$

40,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

0.67

 

 

$

0.39

 

 

$

0.70

 

Diluted

 

$

0.13

 

 

$

0.67

 

 

$

0.39

 

 

$

0.70

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

111,064

 

 

 

57,148

 

 

 

106,394

 

 

 

57,148

 

Diluted

 

 

112,023

 

 

 

57,420

 

 

 

107,171

 

 

 

57,420

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Stockholders' and Members' Equity and Redeemable Noncontrolling Interest

(Unaudited)

(In thousands)

 

 

 

Redeemable

 

 

Members'

 

 

Old Atlas

 

 

Old Atlas

 

 

New Atlas

 

 

Additional

 

 

 

 

 

Stockholders'

 

 

 

 

Noncontrolling

 

 

Equity

 

 

Class A

 

 

Class B

 

 

Common Stock

 

 

Paid-In-

 

 

Retained Earnings

 

 

and Members'

 

 

 

Interest

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

(Accumulated Deficit)

 

 

Equity

 

 

Balance at December 31, 2023

 

$

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

100,026

 

 

$

1,000

 

 

$

908,079

 

 

$

(41,255

)

 

$

867,824

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,624

 

 

 

41,624

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,173

)

 

 

 

 

 

(45,173

)

 

Dividend equivalent rights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,069

)

 

 

 

 

 

(1,069

)

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,672

 

 

 

 

 

 

9,672

 

 

Issuance of Common Stock upon vesting of RSUs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

126

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

Equity issued in connection with Hi-Crush Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,711

 

 

 

97

 

 

 

188,985

 

 

 

 

 

 

189,082

 

 

Balance at June 30, 2024

 

$

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

109,863

 

 

$

1,098

 

 

$

1,060,493

 

 

$

369

 

 

$

1,061,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

Members'

 

 

Old Atlas

 

 

Old Atlas

 

 

New Atlas

 

 

Additional

 

 

 

 

 

Stockholders'

 

 

 

 

Noncontrolling

 

 

Equity

 

 

Class A

 

 

Class B

 

 

Common Stock

 

 

Paid-In-

 

 

Retained Earnings

 

 

and Members'

 

 

 

Interest

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

(Accumulated Deficit)

 

 

Equity

 

 

Balance at December 31, 2022

 

$

 

 

$

511,357

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

511,357

 

 

Member distributions
 prior to IPO

 

 

 

 

 

(15,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,000

)

 

Net income prior
 to IPO and Reorganization

 

 

 

 

 

54,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54,561

 

 

Effect of Reorganization and reclassification to redeemable noncontrolling interest

 

 

771,345

 

 

 

(550,918

)

 

 

39,148

 

 

 

391

 

 

 

42,852

 

 

 

429

 

 

 

 

 

 

 

 

 

(221,247

)

 

 

 

 

 

(771,345

)

 

Issuance of Class A common stock in
IPO, net of offering costs

 

 

 

 

 

 

 

 

18,000

 

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

291,056

 

 

 

 

 

 

291,236

 

 

Deferred tax liability arising
from IPO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,537

)

 

 

 

 

 

(27,537

)

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,878

 

 

 

 

 

 

1,878

 

 

Net income after IPO
 and Reorganization

 

 

39,303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,252

 

 

 

40,252

 

 

$0.15/share Class A common stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,572

)

 

 

(8,572

)

 

$0.15/unit distribution to Atlas Sand Operating, LLC unitholders

 

 

(6,428

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend equivalent rights ($0.15 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(144

)

 

 

(144

)

 

Other distributions to redeemable non-controlling interest unitholders

 

 

(1,777

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2023

 

$

802,443

 

 

$

 

 

 

57,148

 

 

$

571

 

 

 

42,852

 

 

$

429

 

 

 

 

 

$

 

 

$

44,150

 

 

$

31,536

 

 

$

76,686

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended

 

 

June 30,

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net income

 

$

41,624

 

 

$

134,116

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion and accretion expense

 

 

43,893

 

 

 

18,622

 

Amortization expense of acquired intangible assets

 

 

4,829

 

 

 

 

Amortization of debt discount

 

 

1,490

 

 

 

238

 

Amortization of deferred financing costs

 

 

196

 

 

 

191

 

Loss on disposal of assets

 

 

11,098

 

 

 

 

Insurance recovery (gain)

 

 

(10,000

)

 

 

 

Stock and unit-based compensation

 

 

9,672

 

 

 

2,246

 

Deferred income tax

 

 

10,279

 

 

 

9,627

 

Other

 

 

(749

)

 

 

185

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(19,509

)

 

 

(12,598

)

Accounts receivable - related party

 

 

 

 

 

868

 

Inventories

 

 

(8,094

)

 

 

2,313

 

Spare part inventories

 

 

(4,204

)

 

 

(2,737

)

Prepaid expenses and other current assets

 

 

(4,205

)

 

 

(3,929

)

Other long-term assets

 

 

(519

)

 

 

(918

)

Accounts payable

 

 

1,957

 

 

 

1,813

 

Accounts payable - related parties

 

 

(162

)

 

 

24

 

Deferred revenue

 

 

(2,275

)

 

 

 

Accrued liabilities and other liabilities

 

 

25,097

 

 

 

8,057

 

Net cash provided by operating activities

 

 

100,418

 

 

 

158,118

 

Investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(211,276

)

 

 

(146,835

)

Hi-Crush acquisition, net of cash acquired

 

 

(142,233

)

 

 

 

Net cash used in investing activities

 

 

(353,509

)

 

 

(146,835

)

Financing Activities:

 

 

 

 

 

 

Principal payments on term loan borrowings

 

 

(5,598

)

 

 

(16,573

)

Proceeds from borrowings

 

 

201,539

 

 

 

 

Issuance costs associated with debt financing

 

 

(1,146

)

 

 

(752

)

Payments under finance leases

 

 

(911

)

 

 

(1,700

)

Repayment of notes payable

 

 

(1,071

)

 

 

 

Dividends and distributions

 

 

(45,173

)

 

 

(15,000

)

Net proceeds from IPO

 

 

 

 

 

303,426

 

Payment of offering costs

 

 

 

 

 

(6,020

)

Member distributions

 

 

 

 

 

(15,000

)

Net cash provided by financing activities

 

 

147,640

 

 

 

248,381

 

Net increase (decrease) in cash and cash equivalents

 

 

(105,451

)

 

 

259,664

 

Cash and cash equivalents, beginning of period

 

 

210,174

 

 

 

82,010

 

Cash and cash equivalents, end of period

 

$

104,723

 

 

$

341,674

 

Supplemental cash flow information

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

16,932

 

 

$

7,426

 

Taxes

 

$

2,000

 

 

$

4,227

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Property, plant and equipment in accounts payable and accrued liabilities

 

$

55,826

 

 

$

51,088

 

Asset retirement obligations incurred

 

$

5,980

 

 

$

 

Hi-Crush acquisition consideration, equity issuance

 

$

189,082

 

 

$

 

Hi-Crush acquisition consideration, Deferred Cash Consideration Note

 

$

107,189

 

 

$

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Atlas Energy Solutions Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Business and Organization

Atlas Energy Solutions Inc., a Delaware corporation (f/k/a New Atlas HoldCo. Inc.) (“New Atlas” and together with its subsidiaries “we,” “us,” “our,” or the “Company”), was formed on June 28, 2023, pursuant to the laws of the State of Delaware, and is the successor to AESI Holdings Inc. (f/k/a Atlas Energy Solutions Inc.), a Delaware corporation (“Old Atlas”). New Atlas is a holding company and the ultimate parent company of Atlas Sand Company, LLC (“Atlas LLC”), a Delaware limited liability company formed on April 20, 2017. Atlas LLC is a producer of high-quality, locally sourced 100 mesh and 40/70 sand used as a proppant during the well completion process. Proppant is necessary to facilitate the recovery of hydrocarbons from oil and natural gas wells. One hundred percent of Atlas LLC’s sand reserves are located in Texas within the Permian Basin and operations consist of proppant production and processing facilities, including four facilities near Kermit, Texas (together, the “Kermit facilities”), a fifth facility near Monahans, Texas (the “Monahans facility”), and the OnCore distributed mining network.

We are currently building a logistics platform with the goal of increasing the efficiency, safety and sustainability of the oil and natural gas industry within the Permian Basin. This will include the Dune Express, an overland conveyor infrastructure solution currently under construction, coupled with our growing fleet of fit-for-purpose trucks and trailers.

We sell products and services primarily to oil and natural gas exploration and production companies and oilfield services companies primarily under supply agreements and also through spot sales on the open market.

Initial Public Offering

On March 13, 2023, Old Atlas completed its initial public offering (the “IPO”) of 18,000,000 shares of Class A common stock, par value $0.01 per share (the “Old Atlas Class A Common Stock”) at a price of $18.00 per share. The IPO generated $324.0 million of gross proceeds and net proceeds of approximately $291.2 million. The gross proceeds were offset by $20.6 million of underwriting discounts and commissions, $5.9 million of current offering costs in 2023, and $6.3 million in offering costs paid in 2022.

Reorganization

In connection with the IPO and pursuant to a master reorganization agreement dated March 8, 2023, by and among Old Atlas, Atlas Sand Management Company, LLC, a Texas limited liability company (“ASMC”), Atlas LLC, Atlas Sand Holdings, LLC, a Delaware limited liability company (“Holdings”), Atlas Sand Operating, LLC, a Delaware limited liability company (“Atlas Operating”), Atlas Sand Holdings II, LLC, a Delaware limited liability company (“Holdings II”), Atlas Sand Management Company II, LLC, a Delaware limited liability company (“ASMC II”), and Atlas Sand Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), Old Atlas and the parties thereto completed certain restructuring transactions (the “Reorganization”). As part of the Reorganization:

Merger Sub merged with and into Atlas LLC, with Atlas LLC surviving as a wholly-owned subsidiary of Atlas Operating;
Holdings, Holdings II and ASMC II were formed (collectively with ASMC, the “HoldCos”), through which certain holders who previously held membership interests in Atlas LLC (the “Legacy Owners”) were issued the membership interests in Atlas Operating, as represented by a single class of common units (“Operating Units”);
certain Legacy Owners, through the HoldCos, transferred all or a portion of their Operating Units and voting rights, as applicable, in Atlas Operating to Old Atlas in exchange for an aggregate of 39,147,501 shares of Old Atlas Class A Common Stock and, in the case of Legacy Owners that continued to hold Operating Units through the HoldCos, an aggregate of 42,852,499 shares of Class B Common Stock, par value $0.01 per share, of Old Atlas (the “Old Atlas Class B Common Stock,” and together with the Old Atlas Class A Common Stock, the “Old Atlas Common Stock”), so that such Legacy Owners that continued to hold Operating Units also held, through the HoldCos, one share of Old Atlas Class B Common Stock for each Operating Unit held by them immediately following the Reorganization;
the 1,000 shares of Old Atlas Class A Common Stock issued to Atlas LLC at the formation of Old Atlas were redeemed and canceled for nominal consideration; and
Old Atlas contributed all of the net proceeds received by it in the IPO to Atlas Operating in exchange for a number of Operating Units equal to the number of shares of Old Atlas Class A Common Stock outstanding after the IPO, and Atlas Operating further contributed the net proceeds received to Atlas LLC.

 

5


 

As a result of the Reorganization, (i) Old Atlas’s sole material asset consisted, and still consists, of Operating Units, (ii) Atlas Operating’s sole material asset consisted, and still consists, of 100% of the membership interests in Atlas LLC and (iii) Atlas LLC owned, and still owns, all of the Company’s operating assets. Old Atlas is the managing member of Atlas Operating and is responsible for all operational, management and administrative decisions relating to Atlas LLC’s business and consolidates the financial results of Atlas LLC and its subsidiaries.

As a result of the IPO and Reorganization:

the Legacy Owners collectively owned all of the outstanding shares of Old Atlas Class B Common Stock and 39,147,501 shares of Old Atlas Class A Common Stock, collectively representing 82.0% of the voting power and 68.5% of the economic interest of Old Atlas (and 82.0% of the economic interest of Atlas LLC, including both direct and indirect ownership interests) at the closing of the IPO and Reorganization;
Old Atlas owned an approximate 57.1% interest in Atlas Operating; and
the Legacy Owners that continued to hold Operating Units collectively owned an approximate 42.9% interest in Atlas Operating.

On March 13, 2023, the date on which Old Atlas closed the IPO, a corresponding deferred tax liability of approximately $27.5 million was recorded associated with the differences between the tax and book basis of the investment in Atlas LLC. The offset of the deferred tax liability was recorded to additional paid-in capital. As there was no change in control of Atlas Operating, Atlas LLC, or the businesses or subsidiaries held by Atlas LLC as a result of the Reorganization, purchase accounting was not required and the Legacy Owners’ interests in Operating Units were recognized as a noncontrolling interest in Atlas Operating.

On September 13, 2023, we distributed the Operating Units and shares of Old Atlas Common Stock previously held by the HoldCos to the Legacy Owners in accordance with the distribution provisions of each respective HoldCo operating agreement. Immediately following the distribution, the Legacy Owners held shares of Old Atlas Class A Common Stock or Old Atlas Class B Common Stock (and corresponding Operating Units) directly.

Up-C Simplification

On October 2, 2023, Old Atlas and the Company completed the Up-C Simplification (as defined below) contemplated by the Master Reorganization Agreement (the “Master Reorganization Agreement”), dated as of July 31, 2023, by and among the Company, Old Atlas, Atlas Operating, AESI Merger Sub Inc., a Delaware corporation (“PubCo Merger Sub”), Atlas Operating Merger Sub, LLC, a Delaware limited liability company (“Opco Merger Sub” and, together with PubCo Merger Sub, the “Merger Subs”), and Holdings, in order to, among other things, reorganize under a new public holding company (the “Up-C Simplification”).

Pursuant to the Master Reorganization Agreement, (a) PubCo Merger Sub merged with and into Old Atlas (the “PubCo Merger”), as a result of which (i) each share of Old Atlas Class A Common Stock then issued and outstanding was exchanged for one share of Common Stock of New Atlas, par value $0.01 per share (the “New Atlas Common Stock” or the “Common Stock”), (ii) all of the shares of Old Atlas Class B Common Stock then issued and outstanding were surrendered and cancelled for no consideration and (iii) Old Atlas survived the PubCo Merger as a direct, wholly-owned subsidiary of the Company; and (b) Opco Merger Sub merged with and into Atlas Operating (the “Opco Merger” and, together with the PubCo Merger, the “Mergers”), as a result of which (i) each Operating Unit then issued and outstanding, other than those Operating Units held by Old Atlas, was exchanged for one share of New Atlas Common Stock and (ii) Atlas Operating became a wholly-owned subsidiary of New Atlas.

In connection with the Up-C Simplification:

each share of Old Atlas Class A Common Stock issued and outstanding immediately prior to the effective time of the Mergers (the “Effective Time”) was exchanged for one share of New Atlas Common Stock and the holders of Old Atlas Class A Common Stock became stockholders of New Atlas;
all of the Old Atlas Class B Common Stock issued and outstanding immediately prior to the Effective Time was surrendered and cancelled for no consideration;
each Operating Unit issued and outstanding immediately prior to the Effective Time, other than Operating Units held by Old Atlas, was exchanged for one share of New Atlas Common Stock, and the holders of such Operating Units became stockholders of New Atlas;
Old Atlas continues to hold all of the issued and outstanding Operating Units it held as of immediately prior to the Effective Time, such Operating Units were otherwise unaffected by the Up-C Simplification (including the Opco Merger), and such Operating Units, together with the Operating Units received by New Atlas in connection with the Opco Merger, constitute all of the Operating Units currently issued and outstanding;
Old Atlas became a direct, wholly-owned subsidiary of New Atlas, and all of the Old Atlas Class A Common Stock then held by New Atlas was recapitalized into a single share;

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as of the Effective Time, New Atlas assumed (a) the Atlas Energy Solutions Inc. Long Term Incentive Plan (the “LTIP”), (b) all awards of restricted stock units and performance share units, in each case, whether vested or unvested, that were then outstanding under the LTIP, (c) the grant notices and agreements evidencing such awards, and (d) the then remaining unallocated share reserve issuable under the LTIP; and the terms and conditions that were in effect immediately prior to the Up-C Simplification under each outstanding award assumed by New Atlas continue in full force and effect after the Up-C Simplification, with certain exceptions to reflect the completion of the Up-C Simplification, such as each award denominated with reference to shares of New Atlas Common Stock instead of Old Atlas Class A Common Stock and the performance share unit awards being in reference to performance of New Atlas instead of performance of Old Atlas (with respect to the portion of the applicable performance period following the Up-C Simplification);
as of the Effective Time, (a) New Atlas assumed Old Atlas’s existing Management Change in Control Severance Plan (and each participation agreement thereunder that was then outstanding) and (b) the terms and conditions of the director compensation program applicable to members of the board of directors of Old Atlas (and any committees thereof) were applied instead to members of the board of directors of New Atlas (the “Board”) (and, any committees thereof) (and any portion of such compensation to be granted in the form of equity-based awards will be granted in awards denominated with reference to shares of New Atlas Common Stock instead of Old Atlas Class A Common Stock); and
Old Atlas changed its name from “Atlas Energy Solutions Inc.” to “AESI Holdings Inc.,” and New Atlas changed its name from “New Atlas HoldCo Inc.” to “Atlas Energy Solutions Inc.” New Atlas was approved to have the shares of New Atlas Common Stock listed on the New York Stock Exchange under the ticker symbol “AESI,” the trading symbol previously used by Old Atlas.

After completion of the Up-C Simplification, New Atlas replaced Old Atlas as the publicly held entity and, through its subsidiaries, conducts all of the operations previously conducted by Old Atlas, and Old Atlas remains the managing member of Atlas Operating.

The Up-C Simplification was a common control transaction; therefore, the redeemable noncontrolling interest was acquired as an equity transaction. The redeemable noncontrolling interest was adjusted to the maximum redemption amount based on the 10-day volume-weighted average closing price of shares of Old Atlas Class A Common Stock at the redemption date. The carrying amount of the redeemable noncontrolling interest was reclassified to reflect the change in the Company’s ownership interest with an offsetting entry to additional paid-in capital. On October 2, 2023, the date the Up-C Simplification was completed, a corresponding deferred tax liability of approximately $62.7 million was recorded associated with the exchange of the redeemable noncontrolling interest in Old Atlas for shares of New Atlas Common Stock. The offset of the deferred tax liability was recorded to additional paid-in capital. As there was no change in control of Old Atlas, or the businesses or subsidiaries held by Old Atlas as a result of the Up-C Simplification, purchase accounting was not required and the carrying amount of the redeemable noncontrolling interest was removed to reflect the change in the Company’s ownership interest.

Hi-Crush Transaction

On March 5, 2024 (“Closing Date”), the Company completed the acquisition of the Permian Basin proppant production and logistics businesses and operations of Hi-Crush Inc., a Delaware corporation (“Hi-Crush”), in exchange for mixed consideration totaling $455.8 million, subject to customary post-closing adjustments (the “Hi-Crush Transaction”), pursuant to that certain Agreement and Plan of Merger, dated February 26, 2024 (the “Merger Agreement”), by and among the Company, Atlas LLC, Wyatt Merger Sub 1 Inc., a Delaware corporation and direct, wholly-owned subsidiary of Atlas LLC, Wyatt Merger Sub 2, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Atlas LLC, Hi-Crush, each stockholder that had executed the Merger Agreement or a joinder thereto (each a “Hi-Crush Stockholder” and, collectively, the “Hi-Crush Stockholders”), Clearlake Capital Partners V Finance, L.P., solely in its capacity as the Hi-Crush Stockholders’ representative and HC Minerals Inc., a Delaware corporation (collectively, the “Parties”). Refer to Note 3 - Hi-Crush Transaction for further discussion.

The foregoing description of the Hi-Crush Transaction and the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2024.

Kermit Facility Operational Update

On April 14, 2024, a mechanical fire occurred at one of the Company's plants in Kermit, Texas. The fire primarily impacted the feed system of the processing facility, which transports sand from the dryers and separators to storage silos. During the second quarter of 2024, the Company utilized temporary loadout equipment at the plant to continue production. The Company was able to transition to the temporary loadout within 11 days of the fire incident. Reconstruction of the feed system was completed in June 2024 and the plant was operational by June 30, 2024.

 

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The Company performed an impairment analysis on the Kermit asset group as a result of the fire and determined that no impairment was required. The disposal of the damaged assets from the fire had a net book value of $11.1 million that was recorded as a loss on disposal of assets on the condensed consolidated statements of operations. The Company has filed an insurance claim and is in the process of recovering replacement costs for returning the plant to production. The Company has recorded $10.0 million of insurance recovery in connection with this incident as this recovery amount is deemed collectable and legally enforceable as of June 30, 2024. The proceeds are recorded as insurance recovery (gain) on the condensed consolidated statements of operations and within accounts receivable on the condensed consolidated balance sheets.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the requirements of the SEC. All adjustments necessary for a fair presentation of the Financial Statements have been included. Such adjustments are of a normal, recurring nature. These Financial Statements include the accounts of New Atlas, Old Atlas, Atlas Operating, Atlas LLC, and Atlas LLC’s wholly-owned subsidiaries: Atlas Sand Employee Company, LLC; Atlas OLC Employee Company, LLC; Atlas Construction Employee Company, LLC; Atlas Sand Employee Holding Company, LLC; Fountainhead Logistics Employee Company, LLC; Atlas Sand Construction, LLC; OLC Kermit, LLC; OLC Monahans, LLC; Fountainhead Logistics, LLC; Fountainhead Transportation Services, LLC; and Fountainhead Equipment Leasing, LLC.

The Company acquired Hi-Crush and certain of its wholly-owned subsidiaries on March 5, 2024. These Financial Statements include the accounts of Hi-Crush Operating, LLC (“Hi-Crush Operating”) (f/k/a Hi-Crush Inc.) and the following wholly-owned subsidiaries of Hi-Crush Operating: Hi-Crush LMS LLC; Hi-Crush Investments LLC; OnCore Processing LLC; Hi-Crush Permian Sand LLC; Hi-Crush PODS LLC; NexStage LLC; FB Logistics LLC; BulkTracer Holdings LLC; PropDispatch LLC; Pronghorn Logistics Holdings, LLC; and Pronghorn Logistics, LLC. Refer to Note 3- Hi-Crush Transaction for further discussion.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other period. The Financial Statements and these notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included within the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Reorganization

As discussed in Note 1 - Business and Organization, as a result of our IPO and the Reorganization and prior to the Up-C Simplification, Old Atlas became the managing member of Atlas Operating and consolidated entities in which it had a controlling financial interest. The Reorganization was considered a transaction between entities under common control. As a result, the Financial Statements for periods prior to the IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. However, Old Atlas and Atlas Operating had no operations or assets and liabilities prior to our IPO. As such, for periods prior to the completion of our IPO, the Financial Statements represent the historical financial position and results of operations of Atlas LLC and its subsidiaries. For periods after the completion of our IPO through the end of the reporting period, the financial position and results of operations include those of Old Atlas and New Atlas.

Up-C Simplification

As discussed in Note 1 - Business and Organization, as a result of the Up-C Simplification, New Atlas replaced Old Atlas as the publicly held entity and, through its subsidiaries, conducts all of the operations previously conducted by Old Atlas, and Old Atlas remains the managing member of Atlas Operating. The Up-C Simplification was considered an acquisition of noncontrolling interest transaction between entities under common control. As such, the condensed consolidated financial statements and results of operations of Old Atlas are included in the Financial Statements of New Atlas on the same basis as previously presented except for the acquisition of noncontrolling interest which was accounted for as an equity transaction.

Consolidation

The Financial Statements include the accounts of the Company and controlled subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.

 

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Use of Estimates

The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these Financial Statements include, but are not limited to: the proppant reserves and their impact on calculating the depletion expense under the units-of-production method; the depreciation and amortization associated with property, plant and equipment; stock-based and unit-based compensation; asset retirement obligations; business combinations; valuation of goodwill and acquired intangible assets; and certain liabilities. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Business Combination

Business combinations are accounted for using the acquisition method of accounting in accordance with the Accounting Standards Codification (“ASC”) 805, “Business Combinations.” The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, “Fair Value Measurement.” Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill. Any acquisition-related costs incurred by the Company are expensed as incurred. Operating results of an acquired business are included in the Company’s results of operations from the date of acquisition. We use all available information to estimate fair values, including quoted market prices, the carrying value of acquired assets and assumed liabilities and valuation techniques such as discounted cash flows, relief-from-royalty method, with or without method, or multi-period excess earnings method. We engage third-party appraisal firms to assist in the fair value determination of identifiable long-lived assets, identifiable intangible assets, as well as any contingent consideration that provides for additional consideration to be paid to the seller if certain future conditions are met. These estimates are reviewed during the 12-month measurement period and adjusted as soon as the necessary information becomes available but no later than one year from the acquisition date. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our financial condition or results of operations. The purchase price in the Hi-Crush Transaction includes a holdback, which is measured at fair value. The holdback is subject to changes from estimated to actual net working capital amounts and other customary purchase price adjustments. The holdback amount is based on management's best estimate as of the date of this filing and may be subject to further adjustments. This amount is recorded in other current liabilities on our condensed consolidated balance sheets.

Since the Closing Date, the acquired companies have adopted all of the Company's accounting policies.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments that are readily convertible into cash and have original maturities of three months or less when purchased. As of June 30, 2024, we have deposits of $19.7 million in an Insured Cash Sweep (“ICS”) Deposit Placement Agreement within IntraFi Network LLC facilitated by our bank. The ICS program provides the Company with access to FDIC insurance for our total cash held within the ICS. We had an additional $27.2 million in 3-month United States Treasury Bills which are fully backed by the United States as of June 30, 2024. We place our remaining cash deposits with high-credit-quality financial institutions. At times, a portion of our cash may be uninsured or in deposit accounts that exceed or are not covered under the Federal Deposit Insurance Corporation limit.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at cost when earned and represent claims against third parties that will be settled in cash. These receivables generally do not bear interest. The carrying value of our receivables, net of allowance for credit losses, represents the estimated collectable amount. If events or changes in circumstances indicate specific receivable balances may be impaired, further consideration is given to our ability to collect those balances and the allowance is adjusted accordingly. We perform credit evaluations of new customers, and sometimes require deposits and prepayments, to mitigate credit risk. When it is probable that all or part of an outstanding balance will not be collected, we establish an allowance for credit losses.

On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments,” which replaced the prior incurred loss impairment model with an expected credit loss impairment model for financial instruments, including accounts receivable. The adoption of ASU 2016-13 did not result in a material cumulative-effect adjustment to retained earnings on January 1, 2023.

We are exposed to credit losses primarily through sales of products and services. We analyze accounts receivable on an individual customer and overall basis through review of historical collection experience and current aging status of our customer accounts. We also consider the financial condition and economic environment of our customers in evaluating the need for an allowance. As of June 30, 2024 and December 31, 2023, we had $0.3 million and de minimis in allowance for credit losses, respectively. Allowance for credit losses is included in accounts receivable on the condensed consolidated balance sheets. For the three and six months ended June 30, 2024 and 2023, we recognized de minimis bad debt expense.

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As of June 30, 2024, three customers represented 16%, 13% and 11% of the Company’s outstanding accounts receivable trade balance. As of June 30, 2023, two customers represented 19% and 10% of the Company’s outstanding accounts receivable trade balance.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment annually during the fourth quarter or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of our business. We may assess our goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that a reporting unit’s carrying value is greater than its fair value, and if such conditions are identified, then a quantitative analysis will be performed to determine if there is any impairment.

The Company amortizes the cost of definite-lived intangible assets on a straight-line basis over their estimated useful lives of 3 to 10 years. An impairment assessment is performed if events or circumstances occur and may result in the change of the useful lives of the intangible assets.

Other Intangible Assets

Other intangible assets consist of internal-use software. The Company applies the provisions of ASC 350, “Intangibles-Goodwill and Other.” Costs associated with the acquisition of an internal-use software are capitalized when incurred and amortized over the estimated useful life of the license or application, which is generally 1 to 5 years. As of June 30, 2024 and December 31, 2023, the balance of other intangible assets was $2.2 million and $1.8 million, respectively. On the condensed consolidated balance sheets, the December 31, 2023 intangible assets balance was reclassified out of other long-term assets to intangible assets for comparable presentation with the current period.

Amortization associated with the other intangibles was $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively. Amortization associated with the other intangibles was $0.1 million for both the three and six months ended June 30, 2023. The amortization expense is recorded in depreciation, depletion and accretion expense in the condensed consolidated statements of operations and condensed consolidated statements of cash flows.

Property, Plant and Equipment, Including Depreciation and Depletion

Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives using either the straight-line method or the units of production method. Construction in progress is comprised of assets which have not been placed into service and is not depreciated until the related assets or improvements are ready to be placed into service.

Costs of improvements that extend economic life or improve service potential are capitalized and depreciated over the remaining useful life of the asset, with routine repairs and maintenance expensed as incurred.

Fixed assets are carried at historical cost. Fixed assets, other than plant facilities associated with productive, depletable properties, are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

 

Plant facilities and equipment

 

1 – 40 years

Furniture and office equipment

 

3 – 15 years

Computer and network equipment

 

3 – 7 years

Buildings and leasehold improvements

 

5 – 40 years

Logistic equipment

 

4 – 7 years

Mine development project costs are capitalized once the deposit is classified as a proven and probable reserve. Mine development costs include engineering, mineralogical studies, drilling and other related costs to develop the mine and remove the overburden to initially expose the mineral and allow for the construction of an access way. Exploration costs are expensed as incurred and classified as exploration expense.

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Mining property and development costs are amortized using the units of production method on estimated recoverable tonnage, which equals estimated proven and probable reserves. The impact to reserve estimates is recognized on a prospective basis. Drilling and related costs are capitalized for deposits where proven and probable reserves exist. These activities are directed at obtaining additional information on the deposit or converting non-reserve minerals to proven and probable reserves, with the benefit being realized over a period greater than one year.

Impairment or Disposal of Property, Plant and Equipment

The Company periodically evaluates whether current events or circumstances indicate that the carrying value of our property, plant and equipment assets may not be recoverable. If circumstances indicate that the carrying value may not be recoverable, the Company estimates future undiscounted net cash flows using estimates, including but not limited to estimates of proven and probable sand reserves, estimated future sales prices (considering historical and current prices, price trends and related factors), operating costs and anticipated capital expenditures. If the undiscounted cash flows are less than the carrying value of the assets, the Company recognizes an impairment loss equal to the amount by which the carrying value exceeds the fair value of the assets.

The recoverability of the carrying value of the Company’s mining property and development costs are dependent upon the successful development and commercial production of the Company’s mineral deposit and the related processing facilities. The Company’s evaluation of mineral properties for potential impairment primarily includes evaluating changes in the mineral reserves, or the underlying estimates and assumptions, including estimated production costs. Assessing the economic feasibility requires certain estimates including the prices of products to be produced and processing recovery rates, as well as operating and capital costs.

Asset Retirement Obligations

In accordance with ASC 410-20, Asset Retirement Obligations, the Company records a liability for asset retirement obligations at the fair value of the estimated costs to retire a tangible long-lived asset at the time the liability is incurred, when there is a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the obligation can be made. The Company has asset retirement obligations with respect to certain assets due to various contractual obligations to clean and/or dispose of those assets at the time they are retired.

A liability for the fair value of an asset retirement obligation, with a corresponding increase to the carrying value of related long-lived assets, is recognized at the time of an obligating event. The asset is depreciated using the straight-line method, and the discounted liability is increased through accretion over the expected timing of settlement.

The estimated liability is based on third-party estimates of costs to abandon, including estimated economic lives and external estimates as to the cost to bring the land to a state required by the lease agreements. The Company utilized a discounted rate reflecting management’s best estimate of the credit-adjusted risk-free rate. Revisions to the liability could occur due to changes in the estimated costs, changes in the economic life or if federal or state regulators enact new requirements regarding the abandonment. Accretion expense was $0.2 million and $0.3 million for the three and six months ended June 30, 2024, respectively. Accretion expense was de minimis for the three and six months ended June 30, 2023. Accretion is recorded on the condensed consolidated statement of operations in depreciation, depletion and accretion expense. The current portion of the asset retirement obligation, $0.9 million, is recorded within other current liabilities and the long-term portion, $7.7 million, is recorded within asset retirement obligations on the Company's condensed consolidated balance sheets. On the condensed consolidated balance sheets, the December 31, 2023 asset retirement obligation balance was reclassified out of other long-term liabilities to asset retirement obligations for comparable presentation with the current period.

Changes in the asset retirement obligations are as follows (in thousands):