Leases Leases (Notes)

9 Months Ended

Sep. 30, 2022

(3) LeasesThe Company follows the Financial Accounting Standards Board's Accounting Standards Update 2016-02 and elected the package of practical expedients that allows an entity to carry forward historical accounting treatment relating to lease identification and classification for existing leases upon adoption and the practical expedient related to land easements that

allows an entity to carry forward historical accounting treatment for land easements on existing agreements. The Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the Consolidated Balance Sheets. We have elected to not account for lease and non-lease components separately.

The Company has contractual agreements for its corporate office lease, vehicle fleet, compressors, treating equipment, and for surface use rights. For leases with a primary term of more than 12 months, a right-of-use (“ROU”) asset and the corresponding lease liability is recorded. The Company determines at inception if an arrangement is an operating or financing lease. As of September 30, 2022, all of the Company’s leases were operating leases.

The initial asset and liability balances are recorded at the present value of the payment obligations over the lease term. If lease terms include options to extend the lease and it is reasonably certain that the Company will exercise that option, the lease term used for capitalization includes the expected renewal periods. Most leases do not provide an implicit interest rate. Unless the lease contract contains an implicit interest rate, the Company uses its incremental borrowing rate at the time of lease inception to compute the fair value of the lease payments. The ROU asset balance and current and non-current lease liabilities are reported separately on the accompanying Condensed Consolidated Balance Sheets. Certain leases have payment terms that vary based on the usage of the underlying assets. Variable lease payments are not included in ROU assets and lease liabilities. The Company recognizes lease expense on a straight-line basis over the lease term.

Lease costs represent the straight-line lease expense of ROU assets and short-term leases. The components of lease cost are classified as follows (in thousands):


	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Lease Costs Included in the Asset Additions in the Condensed Consolidated Balance Sheets
Property, plant and equipment acquisitions - short-term leases	$	5,850	$	1,189	$	9,883	$	3,009
Property, plant and equipment acquisitions - operating leases	—		—		—		—
Total lease costs in property, plant and equipment additions	$	5,850	$	1,189	$	9,883	$	3,009


	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Lease Costs Included in the Condensed Consolidated Statements of Operations
Lease operating expenses - short-term leases	$	1,714	$	314	$	3,677	$	1,399
Lease operating expenses - operating leases	2,163		1,504		6,118		3,774
General and administrative, net - operating leases	186		303		568		653
Total lease cost expensed	$	4,063	$	2,121	$	10,363	$	5,826

The lease term and the discount rate related to the Company's leases are as follows:


	September 30, 2022
Weighted-average remaining lease term (in years)	2.6
Weighted-average discount rate	4.4	%

As of September 30, 2022, the Company's future undiscounted cash payment obligation for its operating lease liabilities are as follows (in thousands):


	As of September 30, 2022
2022 (Remaining)	$	2,474
2023	8,675
2024	1,600
2025	839
2026	699
Thereafter	524
Total undiscounted lease payments	14,811
Present value adjustment	(853)
Net operating lease liabilities	$	13,958

Supplemental cash flow information related to leases was as follows (in thousands):


	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities;
Operating cash flows from operating leases	$	6,643	$	4,289

Non-cash Investing and Financing Activities
Additions to ROU assets obtained from new operating lease liabilities	$	4,453	$	6,541