Leases

12 Months Ended

Dec. 31, 2019

As of December 31, 2018, the Company was the deemed owner (for accounting purposes) of the Company's new corporate headquarters (the "Hidden Ridge Building") during the construction period and accounted for this deemed ownership following the build-to-suit accounting guidance under ASC 840. On January 1, 2019, upon implementation of ASC 842, the Company was no longer considered the deemed owner of the Hidden Ridge Building and the Company derecognized the build-to-suit asset of $217 million and liability of $219 million.

The Company had a variable interest in the entity responsible for constructing the Hidden Ridge Building. The Company was not the primary beneficiary of the variable interest entity and only had a profit sharing interest after certain economic returns were achieved. The Company had no exposure to the variable interest entity's losses or future liabilities, if any. In December 2019, the Company sold its interest in the variable interest entity for net cash proceeds of $56 million and recognized a net gain on the sale of the building of $56 million, which is recorded in interest and other in the consolidated statement of operations. The Company has no continuing involvement in entity subsequent to the sale. See Note 15 for additional information.

The Company recognized a finance lease upon commencement of the Hidden Ridge Building lease in October 2019, the balances of which are as follows:


	Consolidated Balance Sheet Location	As of December 31, 2019
		(in millions)
Finance lease right-of-use asset	Other property and equipment, net	$	556
Finance lease liability	Other liabilities - current	$	16
Finance lease liability	Other liabilities - noncurrent	$	556

In November 2019, the Company recorded accelerated amortization of $28 million in other expense in the consolidated statements of operations to fully amortize the remaining operating lease right-of-use asset associated with its former corporate headquarters. As of December 31, 2019, the consolidated balance sheet includes $27 million of operating lease liabilities related to its former corporate headquarters. See Note 16 for additional information.

The components of lease costs, including amounts recoverable from joint operating partners, are as follows:


	Year Ended December 31, 2019
	(in millions)
Finance lease cost:
Amortization of right-of-use asset (a)	$	7
Interest on lease liability	4
Operating lease cost (b)	200
Short-term lease cost (c)	33
Variable lease cost (d)	73
Total lease cost	$	317

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(a)Represents straight-line rent cost associated with the Company's finance lease right-of-use asset.

(b)Represents straight-line rent cost associated with the Company's operating lease right-of-use assets.

(c)Represents costs associated with short-term leases (those with a contractual term of 12 months or less) that are not included in the consolidated balance sheets.

(d)Variable lease costs are primarily comprised of the non-lease service component of drilling rig commitments above the minimum required payments. Both the minimum required payments and the non-lease service component of the drilling rig commitments are capitalized as additions to oil and gas properties.

For the year ended December 31, 2019, cash paid of $103 million for operating, short-term and variable leases and $4 million for finance leases is included in net cash provided by operating activities and $1 million of finance lease principal payments is included in net cash used in financing activities in the consolidated statements of cash flows. For the same period, the Company also incurred operating and variable lease costs associated with drilling operations of $180 million, which is capitalized as additions to oil and gas properties and is included in investing cash flows in the consolidated statements of cash flows.

The changes in lease liabilities are as follows:


	Year Ended December 31, 2019
	Operating		Finance
	(in millions)
Beginning lease liabilities (a)	$	325	$	—
Liabilities assumed in exchange for new right-of-use assets (b)	142		573
Contract modifications (c)	4		—
Dispositions	(1)		—
Liabilities settled	(177)		(5)
Accretion of discount (d)	13		4
Ending lease liabilities (e)	$	306	$	572

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(a)Represents January 1, 2019 balance upon adoption of ASC 842.

(b)Represents noncash leasing activity. The weighted-average discount rate used in 2019 to determine the present value of future operating and finance lease payments is 3.3 percent and 3.0 percent, respectively.

(c)Represents changes in lease liabilities due to modifications of original contract terms.

(d)Represents imputed interest on discounted future cash payments.

(e)As of December 31, 2019, the weighted-average remaining lease term of the Company's operating and finance leases is three and 20 years, respectively.

Maturities of lease obligations are as follows:


	As of December 31, 2019
	Operating		Finance
	(in millions)
2020	$	149	$	33
2021	92		33
2022	47		34
2023	13		35
2024	8		35
Thereafter	18		603
Total lease payments	327		773
Less present value discount	(21)		(201)
Present value of lease liabilities	$	306	$	572

At December 31, 2019, the Company has commitments for additional operating leases of approximately $38 million expected to commence in 2020 with lease terms of 4 years.