LEASES

The Company adopted ASU 2016-02 standard on a prospective basis on January 1, 2019 and used the effective date as the date of initial application. Therefore, prior period financial information has not been adjusted and continues to be reflected in accordance with the Company’s historical accounting policy. The standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The Company elected to adopt the "package of practical expedients" under ASU No. 2018-11, which allows the Company to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. The Company also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes.

The adoption of ASU 2016-02 had the effects specified in Note 1.

Accounting Policy for Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are operating leases and are included in ROU assets, accounts payable and operating lease liabilities in the Company's Condensed Consolidated Balance Sheet at March 31, 2019.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease. The lease term includes options to extend when we are reasonably certain to exercise the option. We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms.

Overview

We lease certain aircraft, facilities, and equipment used in our operations. The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and certain real estate leases also include renewal options. We generally pay all insurance, taxes, and maintenance expenses associated with these leases, and these costs are not included in the lease liability and are recognized in the period in which they are incurred.

Total operating lease expense was $10.5 million and $11.8 million for the three months ended March 31, 2019 and 2018, respectively. For the three months ended March 31, 2019, a portion of the total operating lease expense relating to short-term leases was $1.5 million.

Operating leases at March 31, 2019 were as follows (in thousands):



	March 31, 2019
	(Thousands of dollars)
Operating lease right-of-use-assets	$	144,198

Current portion of operating lease liabilities	26,544
Operating lease liabilities	118,436
Total operating lease liabilities	$	144,980

Cash paid for operating leases	10,535
ROU assets obtained in exchange for lease obligations	645

Weighted average remaining lease term	5 years
Weighted average discount rate	8.25%

Maturities of operating lease liabilities at March 31, 2019 are as follows (in thousands):



	Operating
Three Months Ending March 31,	Leases
	Thousands of dollars
Remainder of 2019	$	28,457
2020	35,020
2021	34,243
2022	32,272
2023	22,003
Thereafter	33,525
Total lease payments	185,520
Less imputed interest	(40,540		)
Total	$	144,980