Leases

3 Months Ended

Mar. 31, 2022

12.

Leases

Lessee arrangements

Finance leases

Certain enforceable vessel charters and pipeline capacity agreements are classified as finance leases, and the right-of-use assets are included in property and equipment. Lease obligations are recognized based on the rate implicit in the lease or the Company’s incremental borrowing rate at lease commencement.

As of March 31, 2022, the Company was a lessee in finance lease arrangements on two vessels (with related parties), one pipeline capacity agreement and one tugboat. These arrangements were determined to be finance leases due to their terms representing the majority of the economic lives of the assets.

Finance lease liabilities as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):


	March 31, 2022			December 31, 2021
External leases:
Finance lease liabilities	$	246,314		$	251,658
Less current portion of finance lease liabilities		(21,278	)		(21,903	)
Finance lease liabilities, long-term	$	225,036		$	229,755

Related party leases:
Finance lease liabilities	$	223,707		$	226,619
Less current portion of finance lease liabilities		(17,118	)		(15,627	)
Finance lease liabilities, long-term	$	206,589		$	210,992

Operating leases

The Company is a lessee in a bareboat charter contract and terminal use lease, accounted for as operating leases. Pursuant to a bareboat charter, the vessel owner provides the use of the vessel to the Company in exchange for a fixed charter hire rate. However, the Company is responsible for the operation and maintenance of the vessel with its own crew, fuel costs, and other related expenses. As such, the bareboat charter includes a lease component only for the lessee to control the use of the vessel and does not contain non-lease components.

Additionally, the Company has operating leases for offices in various locations in which operations are performed. Such leases will often include options to extend the lease and the Company will include option periods that, on commencement date, it is reasonably certain the Company will exercise. Variable lease costs relate to certain lease agreements, which include payments that vary for items such as inflation adjustments, or common area charges. Variable lease costs that are not dependent on an index are excluded from the lease payments that comprise the operating lease liability and are expensed in the period in which they are incurred. None of the Company's operating leases contain any residual value guarantees.

A maturity analysis of the Company’s operating and finance lease liabilities (excluding short-term leases) at March 31, 2022 is as follows (in thousands):


Year	Operating			Finance
2022	$	27,718		$	59,429
2023		36,884			75,399
2024		28,375			75,412
2025		17,825			63,999
2026		796			61,343
Thereafter		1,829			430,554
Total lease payments	$	113,427		$	766,136
Less: imputed interest		(10,282	)		(296,116	)
Carrying value of lease liabilities		103,145			470,020
Less: current portion		(31,884	)		(38,396	)
Carrying value of long-term lease liabilities	$	71,261		$	431,624

As of March 31, 2022, the Company’s weighted average remaining lease term for operating and finance leases was 3.2 years and 11.9 years, respectively, with a weighted average discount rate of 5.8% and 9.8%, respectively. As of December 31, 2021, the Company’s weighted average remaining lease term for operating and finance leases was 3.4 years and 12.1 years, respectively, with a weighted average discount rate of 5.8% and 9.8%, respectively.

The Company's total lease costs for the three months ended March 31, 2022 and 2021 recognized in the consolidated statements of income consisted of the following (in thousands):


	For the three months ended March 31,
	2022		2021
Amortization of finance lease right-of-use assets – related party	$	1,226	$	1,226
Amortization of finance lease right-of-use assets – external		652		3,336
Interest on finance lease liabilities – related party		7,006		7,422
Interest on finance lease liabilities – external		3,919		992
Operating lease expense		9,475		7,128
Short-term lease expense		387		65
Total lease costs	$	22,665	$	20,169

Other information related to leases for the three months ended March 31, 2022 and 2021 are as follows (in thousands):


	For the three months ended March 31,
	2022		2021
Cash paid for amounts included in measurement of finance lease liabilities – related party	$	7,006	$	11,220
Cash paid for amounts included in measurement of finance lease liabilities – external		3,919		5,224
Cash paid for amounts included in measurement of operating lease liabilities		7,300		5,343
Financing cash flows related to finance leases – related party		2,912		3,798
Financing cash flows related to finance leases – external		5,345		8,846
Right-of-use assets obtained in exchange for new operating lease liabilities		219		—