Leases

12 Months Ended

Dec. 31, 2023

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, 2023 were 5.92% and 4.55% 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 income information related to lease expenses, on a gross basis, for the years ended December 31, 2023 and 2022, 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,
	2023		2022
Operating leases
Lease operating	$	25,637	$	15,970
Plant and other midstream services	360		285
General and administrative	2,933		3,266
Total operating leases(1)	28,930		19,521
Short-term leases
Lease operating	27,252		17,437
Plant and other midstream services	5,590		4,359
General and administrative	63		34
Total short-term leases(2)(3)	32,905		21,830
Financing leases
Depreciation of assets	2,765		571
Interest on lease liabilities	410		143
Total financing leases	3,175		714
Total lease expense	$	65,010	$	42,065

_____________________

(1) Does not include gross payments related to drilling rig leases of $84.1 million and $58.7 million for the years ended December 31, 2023 and 2022, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the consolidated balance sheets at December 31, 2023 and 2022, 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 $159.7 million and $101.5 million for the years ended December 31, 2023 and 2022, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the consolidated balance sheets at December 31, 2023 and 2022, respectively.

The following table presents supplemental consolidated balance sheet information related to leases as of December 31, 2023 and 2022, respectively (in thousands).


	December 31,
	2023		2022
Operating leases
Other long-term assets	$	44,404	$	58,798
Other current liabilities	$	(36,946)	$	(43,921)
Other long-term liabilities	(10,800)		(19,532)
Total operating lease liabilities	$	(47,746)	$	(63,453)

Financing leases
Other property and equipment, at cost	$	11,316	$	7,425
Accumulated depreciation	(7,236)		(4,470)
Net property and equipment	$	4,080	$	2,955
Other current liabilities	$	(1,254)	$	(685)
Other long-term liabilities	(869)		(630)
Total financing lease liabilities	$	(2,123)	$	(1,315)

The following table presents supplemental consolidated cash flow information related to lease payments for the years ended December 31, 2023 and 2022, respectively (in thousands).


	Year Ended December 31,
	2023		2022
Cash paid related to lease liabilities
Operating cash payments for operating leases	$	28,766	$	19,290
Investing cash payments for operating leases	$	84,065	$	58,693
Financing cash payments for financing leases	$	1,082	$	620

Right of use assets obtained in exchange for lease obligations entered into during the period
Operating leases	$	87,042	$	80,254
Financing leases	$	3,891	$	1,511

The following table presents the maturities of lease liabilities at December 31, 2023 (in years).


Weighted-Average Remaining Lease Term						December 31, 2023
Operating leases						1.4
Financing leases						1.6

The following table presents a schedule of future minimum lease payments required under all lease agreements as of December 31, 2023 (in thousands).


	December 31, 2023
	Operating Leases		Financing Leases


2024	$	36,946	$	1,254
2025	8,939		842
2026	3,035		153
2027	296		—
2028	—		—
Thereafter	—		—
Total lease payments	49,216		2,249
Less imputed interest	(1,470)		(126)
Total lease obligations	47,746		2,123
Less current obligations	(36,946)		(1,254)
Long-term lease obligations	$	10,800	$	869

Leases