Leases

12 Months Ended

Dec. 31, 2021

LEASES

The Company determines if an arrangement is a lease at inception of the contract. If an arrangement is a lease, the present value of the related lease payments is recorded as a liability, and an equal amount is capitalized as a right of use asset on the Company’s consolidated balance sheets. The Company elected to include payments for non-lease components associated with certain leases when determining the present value of the lease payments. Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s estimated incremental borrowing rate, determined at the lease commencement date using the Company’s average secured borrowing rate, is used to calculate present value. The weighted average estimated incremental borrowing rates used for the year ended December 31, 2021 were 2.73% and 1.99% for operating leases and financing leases, respectively. For these purposes, the lease term includes options to extend the lease when it is reasonably certain that the Company will exercise such option. Leases with terms of 12 months or less at inception are not recorded on the consolidated balance sheets unless there is a significant cost to terminate the lease, including the cost of removal of the leased asset. As the Company is the responsible party under these arrangements, the Company records the resulting assets and liabilities on a gross basis in its consolidated balance sheets.

The following table presents supplemental consolidated statement of operations information related to lease expenses, on a gross basis, for the years ended December 31, 2021 and 2020, respectively (in thousands). Lease payments represent gross payments to vendors, which, for certain of the Company’s operating assets, are partially offset by amounts received from other working interest owners in the Company’s operated wells.


	Year Ended December 31,
	2021		2020
Operating leases
Lease operating	$	11,393	$	12,994
Plant and other midstream services	36		28
General and administrative	3,645		3,698
Total operating leases(1)	15,074		16,720
Short-term leases
Lease operating	11,234		12,890
Plant and other midstream services	4,037		5,689
General and administrative	37		47
Total short-term leases(2)(3)	15,308		18,626
Financing leases
Depreciation of assets	566		747
Interest on lease liabilities	138		123
Total financing leases	704		870
Total lease expense	$	31,086	$	36,216

_____________________

(1) Does not include gross payments related to drilling rig leases of $31.9 million and $33.6 million for the years ended December 31, 2021 and 2020, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the consolidated balance sheets at December 31, 2021 and 2020, respectively.

(2) These costs are related to leases that are not recorded as right of use assets or lease liabilities in the consolidated balance sheets as they are short-term leases.

(3) Does not include gross payments related to short-term drilling rig leases and other equipment rentals of $61.7 million and $65.3 million for the years ended December 31, 2021 and 2020, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the consolidated balance sheets at December 31, 2021 and 2020, respectively.

The following table presents supplemental consolidated balance sheet information related to leases as of December 31, 2021 and 2020, respectively (in thousands).


	December 31,
	2021		2020
Operating leases
Other long-term assets	$	29,519	$	51,528
Other current liabilities	$	(19,649)	$	(35,716)
Other long-term liabilities	(15,340)		(21,598)
Total operating lease liabilities	$	(34,989)	$	(57,314)

Financing leases
Other property and equipment, at cost	$	5,914	$	3,673
Accumulated depreciation	(3,485)		(2,134)
Net property and equipment	$	2,429	$	1,539
Other current liabilities	$	(378)	$	(621)
Other long-term liabilities	(45)		(256)
Total financing lease liabilities	$	(423)	$	(877)

The following table presents supplemental consolidated cash flow information related to lease payments for the year ended December 31, 2021 and 2020, respectively (in thousands).


	Year Ended December 31,
	2021		2020
Cash paid related to lease liabilities
Operating cash payments for operating leases	$	14,430	$	15,664
Investing cash payments for operating leases	$	31,967	$	33,556
Financing cash payments for financing leases	$	629	$	790

Right of use assets obtained in exchange for lease obligations entered into during the period
Operating leases	$	18,454	$	12,474
Financing leases	$	2,241	$	996

The following table presents the maturities of lease liabilities at December 31, 2021 (in years).


Weighted-Average Remaining Lease Term						December 31, 2021
Operating leases						2.5
Financing leases						1.7

The following table presents a schedule of future minimum lease payments required under all lease agreements as of December 31, 2021 (in thousands).


	December 31, 2021
	Operating Leases		Financing Leases


2022	$	19,649	$	378
2023	6,830		180
2024	4,217		37
2025	4,287		—
2026	1,553		—
Thereafter	—		—
Total lease payments	36,536		595
Less imputed interest	(1,547)		(172)
Total lease obligations	34,989		423
Less current obligations	(19,649)		(378)
Long-term lease obligations	$	15,340	$	45

Leases